Record Q3 results for Northern Property



    10 cent per unit distribution increase announced

    CALGARY, Nov. 8 /CNW/ - Northern Property Real Estate Investment Trust
(the "REIT") (NPR.UN- TSX) announced its financial results for the three
months ended September 30, 2007.

    
    HIGHLIGHTS:

    -   Distributions to increase from $1.38 to $1.48 per unit annually
    -   Q3 distributable income per unit reaches $0.50 for the first time
    -   Closings on 406 residential units and 307,748 square feet of
        commercial during Q3
    -   Strong rental market conditions continue
    -   Debt to gross book value 53.6%
    -   Same door NOI growth of 4% Q3 to Q3
    -   Payout ratio of 74.3% of distributable income for 9 months of 2007
    

    Northern Property REIT enjoyed an outstanding third quarter from both an
operational and financial standpoint. The REIT's results were buoyed by solid
same door growth of 4% relative to the same quarter of 2006. Q3 was a stellar
quarter for acquisitions with closings taking place on $142 million of
accretive acquisitions bought at an average 8 cap rate. These factors combined
with the low operating costs associated with the summer season, enabled the
REIT to post quarterly distributable income per unit of $0.50 for the first
time. Through the first three quarters of 2007 the REIT's payout ratio was
76.1% of distributable income and debt at September 30, 2007 was 53.6% of
gross book value.
    In a separate announcement, the REIT advised of its intention to increase
unit-holder distributions by 10 cents per unit to $1.48 annually. The 7.25%
increase becomes effective with the November 2007 distribution.
    NPREIT President and CEO Jim Britton said, "Business conditions have been
excellent for our REIT in 2007. Occupancy rates are high and rent increases
during the year are keeping us well ahead of operating cost increases. We are
also enjoying an excellent year in our acquisition and development programs
having acquired almost $175 million of high quality real estate in our
markets, on terms which are immediately accretive."
    Total property revenue in Q3 of 2007 was $28.4 million up 26.9% compared
with the same quarter a year earlier. For the nine months of 2007, total
revenue was $75.4 million, 22.2% ahead of 2006. Quarterly net operating income
increased to $19.5 million from $15.2, a 27.9% increase. For the nine months
of 2007 NOI was 26.3% above the same period of 2006.
    Combined multifamily market and vacancy loss declined from 4.8% to 4.6%
for the nine months of 2007 compared to the same period a year earlier. The
improvement took place notwithstanding relatively high temporary vacancy
conditions associated with the absorption and renovation of newly acquired
property in northern B.C. Rental market conditions in Yellowknife, Nunavut and
Newfoundland have improved throughout the year. This, coupled with strong
conditions in Alberta and most of British Columbia contributed to the REIT's
same door growth and overall strong results.
    The REIT continued its theme of investing principally in residential
properties in high growth areas of the country. A total of $142 million was
invested during Q3 to acquire additional properties. 263 residential rental
units were acquired in Fort McMurray, possession taken on 78 newly developed
units in Fort St. John and 65 seniors' residential units were added in
Newfoundland. The seniors' residential units are rented on a long term basis
to third party operating concerns. In July, the REIT also acquired a
237,453 square foot office/retail complex in a key location in downtown
Yellowknife which is 70% leased to government tenants. Two industrial
properties subject to long term 20 year leases also closed during Q3, one in
northern B.C. and the second in Alberta.
    NPREIT went on to announce that subsequent to September 30, 2007
commitments have been made to purchase 156 units in Newfoundland for $13.3 
million and two small office buildings in Yellowknife immediately adjacent to
its property acquired in July, for $3.1 million. Funds for the REIT's
acquisition activity were provided by a $105 million offering of units which
closed in early July and by the assumption of long term debt.
    "Our growth and development strategy is paying off," said Mr. Britton. 
"We are able to increase distributions by a dime per unit yet still maintain
our conservative financial practices."
    Mr. Britton concluded by saying, "The trading price of NPREIT units in
2007 has been disappointing. The price simply fails to reflect the financial
strength of our business, the vitality of market areas and our growth
prospects. Management intends to devote additional time and resources to
informing investors about these facts in the coming months."


    
    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Balance Sheets
    (Thousands of dollars)
    -------------------------------------------------------------------------
                                                   September 30, December 31,
                                                       2007          2006
                                                    Unaudited      Audited
                                                        $             $
    -------------------------------------------------------------------------

    ASSETS

      Rental properties and other capital assets
       (Note 4)                                         750,405      576,375
      Capital improvements in progress                    3,212        3,092
      Capital assets under development                        -        4,621
      Prepaid expenses and other assets (Note 5)          9,641        8,020
      Accounts receivable                                 7,116        6,665
      Tenant security deposits                            3,426        2,942
      Deferred rent receivable                            1,696          797
      Loans receivable                                      495          552
      Intangible assets (Note 6)                          6,790          732
      Assets held for sale (Note 17)                          -          337
    -------------------------------------------------------------------------
                                                        782,781      604,133
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES

      Mortgages payable (Note 7)                        390,882      318,330
      Bank indebtedness (Note 8)                         21,735       22,307
      Loans payable (Note 9)                                680          710
      Accounts payable and accrued liabilities
       (Note 10)                                         13,817       12,432
      Distributions payable                               2,872        2,332
      Future income tax liability
       (Note 13)                                         33,945       10,184
      Intangible liabilities
       (Note 6)                                             700          267
      Financial instrument (Note 20)                        337            -
      Liabilities related to assets held for sale
       (Note 17)                                              -          391
    -------------------------------------------------------------------------
                                                        464,968      366,953
    -------------------------------------------------------------------------

    UNITHOLDERS' EQUITY                                 317,813      237,180
    -------------------------------------------------------------------------
                                                        782,781      604,133
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    APPROVED BY THE BOARD

                               Trustee
    -------------------------
                               Trustee
    -------------------------


    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Statements of Earnings and Comprehensive Earnings
    (Thousands of dollars, except per unit amounts)
    -------------------------------------------------------------------------
                              Three Months ended         Nine Months ended
                                September 30               September 30
                              2007         2006          2007        2006
                            Unaudited    Unaudited    Unaudited   Unaudited
                                $            $            $           $
    -------------------------------------------------------------------------
    REVENUE
      Rental revenue           27,765       22,169       73,816      60,894
      Other property income       660          231        1,628         865
      Operating expenses       (8,939)      (7,165)     (25,730)    (22,393)
    -------------------------------------------------------------------------
    Net operating income       19,486       15,235       49,714      39,366
    -------------------------------------------------------------------------

    EXPENSES
      Interest on mortgages    (5,351)      (4,545)     (14,709)     (11,796)
      Amortization             (6,048)      (4,508)     (15,751)     (12,238)
    -------------------------------------------------------------------------
                              (11,399)      (9,053)     (30,460)     (24,034)
    -------------------------------------------------------------------------
    EARNINGS FROM CONTINUING
     OPERATIONS BEFORE OTHER
     ITEMS AND INCOME TAXES     8,087        6,182       19,254       15,332
    -------------------------------------------------------------------------
    OTHER ITEMS
      Interest on operating
       facility                  (246)        (401)      (1,158)      (1,105)
      Interest and other
       income                     197          153          617          480
      Trust administration
       costs                   (1,443)      (1,091)      (4,069)      (3,350)
      Gain on settlement
       of debt                    146            -        1,350            -
      Gain on sale of
       rental properties            -            -           76            -
    -------------------------------------------------------------------------
                               (1,346)      (1,339)      (3,184)      (3,975)
    -------------------------------------------------------------------------
    EARNINGS FROM CONTINUING
     OPERATIONS BEFORE
     INCOME TAXES               6,741        4,843       16,070       11,357
    -------------------------------------------------------------------------

    INCOME TAXES
      Current                     116           74          347          277
      Future (recovery)
       (Note 13)                  (72)        (107)      15,761         (296)
    -------------------------------------------------------------------------
                                   44          (33)      16,108          (19)
    -------------------------------------------------------------------------

    EARNINGS (LOSS) FROM
     CONTINUING OPERATIONS      6,697        4,876          (38)      11,376
    EARNINGS (LOSS) FROM
     DISCONTINUED OPERATIONS
     (NOTE 17)                      -           39           (5)          74
    -------------------------------------------------------------------------
                                6,697        4,915          (43)      11,450
    Other comprehensive
     earnings (loss)              (78)           -          (78)           -
    -------------------------------------------------------------------------
    COMPREHENSIVE EARNINGS
     (LOSS)                     6,619        4,915         (121)      11,450
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Comprehensive earnings
     (loss) per unit (Note 15)
      Basic and Diluted:
        Continuing operations   $0.27        $0.24       $(0.00)       $0.61
        Discontinued
         operations                 -            -            -            -
    -------------------------------------------------------------------------
                                $0.27        $0.24       $(0.00)       $0.61
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Statements of Unitholders' Equity
    (Thousands of dollars)
    -------------------------------------------------------------------------
                             Cumulative                Cumulative  Cumulative
                              Capital     Contributed     Net        Distri-
                             (Note 14)      Surplus     Earnings     butions
    -------------------------------------------------------------------------

    December 31, 2006         261,730        1,249       55,664      (81,463)
    -------------------------------------------------------------------------
      Comprehensive earnings
       (loss)                       -            -          (43)           -
      Distributions to
       unitholders                  -            -            -      (22,654)
      Issuance of units       109,031            -            -            -
      Issuance costs           (4,598)           -            -            -
      Long term incentive
       plan units issued                    (1,025)           -            -
    -------------------------------------------------------------------------
    September  30, 2007       366,163          224       55,621     (104,117)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    --------------------------------------------------
                                Accumulated
                                   Other
                                  Compre-
                                  hensive
                                 Earnings       Total
                                  (loss)
    --------------------------------------------------

    December 31, 2006                  -      237,180
    --------------------------------------------------
      Comprehensive earnings
       (loss)                        (78)        (121)
      Distributions to
       unitholders                     -      (22,654)
      Issuance of units                -      109,031
      Issuance costs                   -       (4,598)
      Long term incentive
       plan units issued               -       (1,025)
    --------------------------------------------------
    September  30, 2007              (78)     317,813
    --------------------------------------------------
    --------------------------------------------------



    -------------------------------------------------------------------------
                             Cumulative                Cumulative  Cumulative
                              Capital     Contributed     Net        Distri-
                             (Note 14)      Surplus     Earnings     butions
    -------------------------------------------------------------------------
    December 31, 2005         176,904        1,513       39,401      (56,010)
    -------------------------------------------------------------------------
      Comprehensive earnings        -            -       11,450            -
      Distributions to
       unitholders                  -            -            -      (18,693)
      Issuance of units        87,535            -            -            -
      Issuance costs           (3,653)           -            -            -
      Long term incentive
       plan units issued          856         (860)           -            -
    -------------------------------------------------------------------------
    September 30, 2006        261,642          653       50,851      (74,703)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    --------------------------------------------------
                                Accumulated
                                   Other
                                  Compre-
                                  hensive
                                 Earnings       Total
    --------------------------------------------------
    December 31, 2005                  -      161,808
    --------------------------------------------------
      Comprehensive earnings           -       11,450
      Distributions to                 -      (18,693)
       unitholders
      Issuance of units                -       87,535
      Issuance costs                   -       (3,653)
      Long term incentive
       plan units issued               -           (4)
    --------------------------------------------------
    September 30, 2006                 -      238,443
    --------------------------------------------------
    --------------------------------------------------



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Statements of Cash Flows
    (Thousands of dollars)
    -------------------------------------------------------------------------
                              Three Months ended         Nine Months ended
                                September 30               September 30
                              2007         2006          2007        2006
                            Unaudited    Unaudited    Unaudited   Unaudited
                                $            $            $           $
    -------------------------------------------------------------------------
    CASH FLOWS RELATED TO THE
    FOLLOWING ACTIVITIES:
    OPERATING
      Net earnings (loss)from
       continuing operations    6,697        4,876          (38)      11,376
      Adjustments for:
        Deferred rental
         revenue                 (328)        (199)        (885)        (487)
        Amortization of
         capital assets         6,011        4,466       15,639       12,113
        Amortization of fair
         value of debt             95            9         211            11
        Amortization of
         leasing costs             37           42          112          125
        Amortization of above
         and below market
         leases                  (115)         (48)        (181)        (144)
        Gain on settlement of
         debt                    (146)           -       (1,350)           -
        Gain on sale of
         rental properties          -            -          (76)           -
        Future income taxes
         (recovery)               (72)        (107)      15,761         (296)
        Long-term incentive
         plan                     200          188          588          562
        Other comprehensive
         earnings (loss)          (78)           -          (78)           -
    -------------------------------------------------------------------------
      Cash flows from
       continuing
       operations              12,301        9,227       29,703       23,260
      Cash flows from (used
       in) discontinued
       operations                   -           75           (5)         182
      Changes in non-cash
       working capital         10,982       (6,830)       3,275       (9,749)
    -------------------------------------------------------------------------
                               23,283        2,472       32,973       13,695
    -------------------------------------------------------------------------
    FINANCING
      Proceeds of public
       offering (net of
       issue costs)           100,426         (264)     100,395       71,158
      Proceeds of mortgages
       and loans               31,388       14,172       60,508       40,600
      Proceeds of acquisition
       facility                     -            -        9,058       13,683
      Repayment of capital
       lease liability            (13)         (13)         (39)         (37)
      Proceeds from sale of
       rental properties            -            -          538            -
      Repayment of mortgages
       and loans payable       (8,564)     (15,887)     (31,396)     (27,809)
      Repayment of acquisition
       facility                (9,058)      (3,031)      (9,058)      (9,783)
      Distributions to
       unitholders             (8,094)      (6,661)     (22,114)     (18,231)
    -------------------------------------------------------------------------
                              106,085      (11,684)     107,892       69,581
    -------------------------------------------------------------------------
    INVESTING
      Acquisition of properties
       and other assets      (109,252)      (3,854)    (132,160)     (64,370)
      Capital assets under
       development             (1,977)      (7,059)      (4,803)     (12,795)
      Building capital
       maintenance             (1,343)      (1,257)      (3,330)      (2,605)
    -------------------------------------------------------------------------
                             (112,572)     (12,170)    (140,293)     (79,770)
    -------------------------------------------------------------------------
    NET DECREASE (INCREASE)
     IN BANK INDEBTEDNESS,
     END OF PERIOD             16,796      (21,382)         572        3,506

    BANK INDEBTEDNESS,
     BEGINNING OF PERIOD      (38,531)       1,451      (22,307)     (37,993)
    -------------------------------------------------------------------------

    BANK INDEBTEDNESS, END
     OF PERIOD                (21,735)     (19,931)     (21,735)     (34,487)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SUPPLEMENTARY INFORMATION
      Interest paid             5,464        5,332       15,488       13,644
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Interest received           191           33          250           92
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Income taxes paid           103           31          103          419
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Notes to the Consolidated Financial Statements (unaudited)
    Three and Nine Months Ended September 30, 2007
    (Columnar amounts expressed in thousands of dollars except where
    indicated)
    -------------------------------------------------------------------------

    1.  DESCRIPTION OF THE TRUST

        Northern Property Real Estate Investment Trust ("NPREIT" or the
        "REIT") is an unincorporated open-ended real estate investment trust
        that invests in and owns a portfolio of residential and commercial
        income producing properties. NPREIT's 100% owned properties are held
        either directly by, or through wholly-owned single purpose
        subsidiaries of, Northern Property R.E.I.T. Holdings Inc., Northern
        Property Holdings Corp., in its capacity as general partner of
        Northern Property Limited Partnership, or Urbco Inc. One property in
        Inuvik is held directly by 5147 NWT. Ltd., in its capacity as general
        partner of Inuvik Capital Suites Zheh Gwizhu Limited Partnership
        ("ICS"), and properties in Inuvik are directly held by 5147 NWT Ltd.,
        in its capacity as general partner of Inuvik Commercial Properties
        Zheh Gwizhu Limited Partnership ("ICP"). The land and buildings of
        the seniors' facilities ("seniors' properties") are held by NPR
        Health Property General Partner Ltd., in its capacity as general
        partner of NPR Health Property Limited Partnership.

    2.  BASIS OF PRESENTATION

        These unaudited interim consolidated financial statements of NPREIT
        have been prepared in accordance with the recommendations of the
        Handbook of the Canadian Institute of Chartered Accountants ("CICA")
        and are consistent with those used in the audited consolidated
        financial statements as at and for the period ended December 31,
        2006, except as disclosed in Note 3. These unaudited interim
        consolidated financial statements do not include all of the
        disclosures required by Canadian generally accepted accounting
        principles ("Canadian GAAP") applicable to annual financial
        statements; therefore, they should be read in conjunction with the
        December 31, 2006 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 reported period. Actual results may differ from
        those estimates.

    3.  CHANGE IN ACCOUNTING POLICY AND RECENT ACCOUNTING PRONOUNCEMENTS

        Change in Accounting Policy

        Effective January 1, 2007, NPREIT adopted CICA Handbook Section 1530,
        Comprehensive, CICA Handbook Section 3855, Financial Instruments -
        Recognition and Measurement and CICA Handbook Section 3861, Financial
        Instruments - Disclosure and Presentation. These new Handbook
        Sections provide comprehensive requirements for the recognition and
        measurement of financial instruments. Handbook Section 1530 also
        introduces a new component of equity referred to as comprehensive
        income. Under these new standards, all financial instruments,
        including derivatives, are included on the consolidated balance sheet
        and are measured either at fair market value or, in limited
        circumstances, at cost or amortized cost. Management has determined
        that the majority of the NPREIT's financial assets are designated as
        loans and receivables, as defined by Section 3855 of the CICA
        Handbook, and are carried at amortized cost. Management has also
        determined that all of its financial liabilities have been designated
        as other financial liabilities and are carried at amortized cost
        utilizing the effective interest method.

        In accordance with the provisions of these new standards, NPREIT
        reclassified $2.9 million from Prepaid expenses and other assets to
        Mortgages payable in the consolidated balance sheet relating to
        deferred financing fees.

        The adoption of these new standards had no impact on NPREIT's
        consolidated statement of earnings and comprehensive earnings.

        Recent Accounting Pronouncements

        NPREIT has also adopted Section 1506 - Accounting Changes the only
        impact of which is to provide disclosure of when an entity has not
        applied a new source of GAAP that has been issued but is not yet
        effective. This is the case with Section 3862 - Financial Instruments
        Disclosures and Section 3863 Financial Instruments Presentations
        which are required to be adopted for fiscal years beginning on or
        after October 1, 2007. NPREIT will adopt these standards on
        January 1, 2008 and it is expected the only effect on NPREIT will be
        incremental disclosures regarding the significance of financial
        instruments for the entity's financial position and performance; and
        the nature, extent and management of risks arising from financial
        instruments to which the entity is exposed.

    4.  RENTAL PROPERTIES AND OTHER CAPITAL ASSETS

        ---------------------------------------------------------------------
                          September 30, 2007           December 31, 2006
        ---------------------------------------------------------------------
                             Accumulated   Net             Accumulated  Net
                              Amortiz-     Book             Amortiz-    Book
                      Cost      ation     Value     Cost      ation    Value
                        $         $         $         $         $        $
        ---------------------------------------------------------------------

        Land         81,022         -    81,022   49,233          -   49,233
        Buildings   706,294    50,614   655,680  553,615     37,832  515,783
        Furniture,
         fixtures
         and
         equipment    6,598     2,453     4,145    5,341      1,835    3,506
        Vehicles        990       507       483      860        404      456
        Capital and
         leasehold
         improve-
         ments       15,047     6,049     8,998   11,495      4,223    7,272
        Equipment
         under
         capital
         lease          212       135        77      212         87      125
        ---------------------------------------------------------------------
                    810,163    59,758   750,405  620,756     44,381  576,375
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        NPREIT acquired properties in 2007 for a total purchase price of
        $179.7 million (2006 - $167.1 million). The acquisitions, including
        the construction of the warehouse in Ft. St. John, B.C. in the first
        quarter of 2007, were financed as follows:

        ---------------------------------------------------------------------
                               Three Months ended         Nine Months ended
                                 September 30               September 30
        ---------------------------------------------------------------------
                               2007         2006          2007        2006
                                 $            $            $           $
        ---------------------------------------------------------------------
        Property
         acquisitions -
         (included in above
         totals):
          Mortgages, debt
           assumed and
           mezzanine repaid    41,158            -       47,553       92,395
          Class B LP Units
           issued                   -            -        3,000       12,484
          Cash paid           100,432        3,614      129,173       62,225
        ---------------------------------------------------------------------
                              141,590        3,614      179,726      167,104
        Fair value adjustment
         to debt                  252            -          331           39
        ---------------------------------------------------------------------
        Total purchase price
         of property
         acquisitions         141,842        3,614      180,057      167,143
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Residential - units
          Rental                  341            -          623          445
          seniors'                 65            -          247          960
        ---------------------------------------------------------------------
                                  406            -          870        1,405
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Commercial square
         feet                 307,748            -      361,449        8,199
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    5.  PREPAID EXPENSES AND OTHER ASSETS

        ---------------------------------------------------------------------
                                                   September 30, December 31,
                                                           2007         2006
                                                              $            $
        ---------------------------------------------------------------------
        Refundable deposits on acquisitions               3,420        3,455
        Prepaid equity leases                             2,379        2,508
        Prepaid expenses                                  3,024        1,388
        Other                                               818          669
        ---------------------------------------------------------------------
                                                          9,641        8,020
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    6.  INTANGIBLE ASSETS AND LIABILITIES

        Intangible assets are comprised of the value of above-market leases
        and lease origination costs for rental property acquisitions
        completed after September 12, 2003. Intangible liabilities are
        comprised of the value of below-market leases for rental property
        acquisitions completed after September 12, 2003.

        ---------------------------------------------------------------------
                          September 30, 2007           December 31, 2006
        ---------------------------------------------------------------------
                             Accumulated   Net             Accumulated  Net
                              Amortiz-     Book             Amortiz-    Book
                      Cost      ation     Value     Cost      ation    Value
                        $         $         $         $         $        $
        ---------------------------------------------------------------------

        Above-market
         leases         312        82       230        94        63       31
        Lease
         origination
         costs        7,119       559     6,560       913       212      701
        ---------------------------------------------------------------------
                      7,431       641     6,790     1,007       275      732
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Below-market
         leases       1,203       503       700       584       317      267
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    7.  MORTGAGES PAYABLE

        ---------------------------------------------------------------------
                                                   September 30, December 31,
                                                           2007         2006
                                                              $            $
        ---------------------------------------------------------------------
        Mortgages payable                               404,641      327,739
        Fair value adjustment                            (8,342)      (6,472)
        Deferred financing costs                         (5,417)      (2,937)
        ---------------------------------------------------------------------
                                                        390,882      318,330
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Mortgages payable bear interest at rates ranging from 3.83% to 12.13%
        and have a weighted average rate of 5.41% as at September 30, 2007
        (December 31, 2006 - 5.55%). The mortgages are payable in monthly
        instalments of blended principal and interest of approximately
        $2.8 million. The mortgages mature between 2007 and 2021. All
        mortgages are secured by charges against specific properties.

        The fair value of mortgages payable at September 30, 2007 is
        approximately $400.6 million (December 31, 2006 - $329.3 million).

    8.  BANK INDEBTEDNESS

        NPREIT has a revolving line of credit in the amount of $40.0 million
        for acquisition and operating purposes, bearing interest at prime or
        bankers acceptance rate with a maturity of May 31, 2008. Specific
        properties have been pledged as collateral security for the line of
        credit. At September 30, 2007, NPREIT has utilized $21.7 million
        (December 31, 2006 - $22.3 million).

        NPREIT has an acquisition facility in the amount of $30.0 million for
        acquisition and general corporate purposes to a maximum of 75% of the
        appraised value of the acquisition, bearing interest at prime with a
        maturity date of July 31, 2008. Specific properties have been pledged
        as collateral security for the acquisition facility. At September 30,
        2007, NPREIT has utilized $ nil (December 31, 2006 - $ nil).

    9.  LOANS PAYABLE

        ---------------------------------------------------------------------
                                                   September 30, December 31,
                                                           2007         2006
                                                              $            $
        ---------------------------------------------------------------------
        Inuvik Commercial Properties Zheh Gwizhu
         Limited Partnership - 50% ownership

        CIBC demand loan bearing interest at prime
         plus 0.5%, repayable in monthly principal
         and interest instalments, secured by
         specific properties pledged as collateral
         due 2016.                                          216          229

        CIBC demand loan bearing interest at prime
         plus 0.75%, repayable in monthly principal
         and interest instalments, secured by
         specific properties pledged as collateral
         due 2015.                                          464          481
        ---------------------------------------------------------------------
                                                            680          710
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

        ---------------------------------------------------------------------
                                                   September 30, December 31,
                                                           2007         2006
                                                              $            $
        ---------------------------------------------------------------------
        Security deposits and other                       5,021        4,680
        Trade payables and accrued liabilities            8,690        7,607
        Capital lease liability                             106          145
        ---------------------------------------------------------------------
                                                         13,817       12,432
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    11. LONG-TERM INCENTIVE PLAN AND UNIT OPTION PLAN

        NPREIT has a long-term incentive plan ("LTIP") for the executives of
        NPREIT, based on the results of each fiscal year. Units granted and
        issued under the LTIP are as follows:

        ---------------------------------------------------------------------
                                                                      Number
                                                                    of Units
        ---------------------------------------------------------------------
        TOTAL - December 31, 2006                                     55,476
        Units vested and issued - January, 2007                      (19,858)
        Units vested and issued - February, 2007                      (8,139)
        Units vested and issued - May, 2007                           (1,597)
        Units vested and issued - June, 2007                         (16,317)
        Units vested and issued - July, 2007                            (750)
        ---------------------------------------------------------------------
        TOTAL - September 30, 2007                                     8,815
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        The total amount of LTIP awards are determined at the end of each
        fiscal year by the Board of Trustees based on an assessment of the
        performance of the REIT and the individual performance of the
        executives. The number of units issued is based on the trading price
        on December 31 of each year. Pursuant to the policy, rights to units
        vest in 1/3 tranches: immediately upon award, then 12 and 24 months
        following. As at September 30, 2007, a total of 125,663 LTIP units
        have vested and been issued (December 31, 2006 - 79,002) and $587,500
        has been accrued for estimated 2007 LTIP awards.

        On, May 10, 2007 unitholders approved the implementation of a Unit
        Option Plan (the "Option Plan"), which is subject to the rules of the
        Toronto Stock Exchange ("TSX"). In accordance with the Option Plan,
        the REIT may grant options to acquire units up to a total of
        1,830,429 units. All options to acquire units expire after 5 years
        and vest as determined by the Governance and Compensation Committee
        of the REIT. No options to acquire units have been granted under the
        Option Plan.

    12. EMPLOYEE UNIT PURCHASE PLAN

        Under the terms of the Employee Unit Purchase Plan (the "EUPP"),
        employees may invest a maximum of 5% of their salary in NPREIT trust
        units and the REIT will contribute one unit for every three units
        acquired by an employee. The units are purchased on the TSX at market
        prices. During the nine months ended September 30, 2007, employees
        invested a total of $66,754 (2006 - $68,274) and the REIT contributed
        $23,488 (2006 - $22,757). During the nine months ended September, 30,
        2007, 4,070 units (2006 - 4,449 units) were purchased at an average
        cost of $24.36 per unit (2006 - $21.11 per unit).

    13. INCOME TAXES

        On June 22, 2007, the Budget Implementation Act, 2007, Bill C-52
        ("Bill C-52") received Royal Assent. Bill C-52 will not apply to an
        entity that qualifies for the real estate investment trust exemption
        (the "REIT Exemption"). Where an entity does not qualify for the REIT
        Exemption certain distributions will not be deductible in computing
        income for tax purposes and will be subject to tax on such
        distributions at a rate comparable to the general corporate income
        tax rate. Bill C-52 provides for a transition period for publicly
        traded entities that existed prior to November 1, 2006 and is not
        expected to apply to NPREIT until 2011.

        GAAP requires NPREIT to recognize future income tax assets and
        liabilities based on estimated temporary differences expected as at
        January 1, 2011. Under the current legislation, NPREIT does not
        appear to qualify for the REIT Exemption and as a result, a future
        income tax provision of $16.0 million was recorded in the second
        quarter of 2007. The future income tax provision arises from
        temporary differences between the estimated accounting and tax values
        of NPREIT's assets and liabilities at January 1, 2011 and has been
        calculated using the expected tax rate of 31.5%.

        NPREIT has certain corporate subsidiaries which are subject to income
        tax on their respective taxable income at the applicable legislated
        tax rates.

        NPREIT has certain capital assets which have a lower tax value than
        their applicable accounting value. NPREIT has therefore recorded a
        future tax liability of $9.9 million (December 31, 2006 -
        $10.2 million) using an expected income tax rate of 19.68%. During
        the third quarter, NPREIT completed a business combination as part of
        the acquisition of rental properties. A future tax liability of
        $8.0 million was recorded as a result of temporary differences
        between the estimated accounting and tax values of the related assets
        and liabilities using an expected income tax rate of 31.5%.

        The future tax liabilities arise from the temporary differences
        summarized below:

        ---------------------------------------------------------------------
                                                   September 30, December 31,
                                                           2007         2006
                                                              $            $
        ---------------------------------------------------------------------
        Future tax liabilities arising from
         temporary differences between accounting
         and tax basis of:
          Rental property assets in corporate
           subsidiaries                                   9,945       10,184
          Acquisition of rental property assets in
           a business combination                         8,000            -
          Rental property assets                         15,500            -
          Other assets and liabilities                      500            -
        ---------------------------------------------------------------------
                                                         33,945       10,184
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Income tax expense consists of the following:

        ---------------------------------------------------------------------
                             Three months ended        Nine months ended
                                September 30              September 30
                                 2007         2006         2007         2006
                                    $            $            $            $
        ---------------------------------------------------------------------
        Current income taxes      116           74          347          277
        Future income
         taxes - corporate
         subsidiaries             (72)        (107)        (239)        (296)
        Future income taxes
         relating to Bill-C52       -            -       16,000            -
        ---------------------------------------------------------------------
                                   44          (33)      16,108          (19)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    14. UNITHOLDERS' CAPITAL

        Total NPREIT trust units and Class B LP units issued as the result of
        an exchange of Class B limited partnership units of Northern Property
        Limited Partnership (the "Class B LP Units", outstanding and eligible
        for distributions at September 30, 2007 is 24,971,970 (December 31,
        2006 - 20,276,290), representing net proceeds of $265.7 million net
        of issue costs of $14.9 million (December 31, 2006 - $261.7 million
        net of issue costs of $14.9 million). The number of units issued and
        outstanding is as follows:

        ---------------------------------------------------------------------
                                                          Issue        Class
                                             Trust        price         B LP
        Date          Description            Units     per unit        Units
        ---------------------------------------------------------------------
        December 31,
         2006                           17,852,667                 2,423,623
        January 04,    LTIP units
          2007          issued              19,858       $17.70            -
        February 16,   LTIP units
         2007           issued               8,139       $27.95            -
        May 01, 2007   Property
                        acquisition              -            -       78,033
        May 08, 2007   Property
                        acquisition              -            -       38,986
        May 08, 2007   Issue costs               -            -            -
        May 16, 2007   LTIP units
                        issued               1,597       $27.95            -
        June 21, 2007  LTIP units
                        issued              16,317       $24.00            -
        July 7, 2007   LTIP units
                        issued                 750       $11.99            -
        July 11, 2007  Public offering   4,532,000       $23.17            -
        July 11, 2007  Issue costs               -            -            -
        Class B LP units exchanged         105,325            -     (105,325)
        ---------------------------------------------------------------------
        September 30,
         2007                           22,536,653            -    2,435,317
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                                                              TOTAL
                                             Issue   ------------------------
                                             price                Cumulative
        Date          Description         per unit        Units      Capital
        ---------------------------------------------------------------------
        December 31,
         2006                                        20,276,290      261,730
        January 04,    LTIP units
          2007          issued                   -       19,858          353

        February 16,   LTIP units
         2007           issued                   -        8,139          227
        May 01, 2007   Property
                        acquisition         $25.63       78,033        2,000
        May 08, 2007   Property
                        acquisition         $25.65       38,986        1,000
        May 08, 2007   Issue costs               -            -          (13)
        May 16, 2007   LTIP units
                        issued                   -        1,597           45
        June 21, 2007  LTIP units
                        issued                   -       16,317          393
        July 7, 2007   LTIP units
                        issued                   -          750            9
        July 11, 2007  Public offering           -    4,532,000      105,006
        July 11, 2007  Issue costs               -            -       (4,587)
        Class B LP units exchanged               -            -            -
        ---------------------------------------------------------------------
        September 30,
         2007                                    -   24,971,970      366,163
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Trust units

        Total number of trust units of the REIT outstanding as at
        September 30, 2007 is 22,536,653 (December 31, 2006 - 17,852,667)
        representing a net book value of $334.7 million (December 31, 2006 -
        $231.8 million), net of issue costs.

        Class B Exchangeable Limited Partnership Units and Special Voting
        Units

        Total number of Class B LP Units and special voting units of Northern
        Property Limited Partnership, a controlled limited partnership
        outstanding as at September 30, 2007, is 2,435,317 (December 31, 2006
        - 2,423,623) representing a net book value of $31.5 million
        (December 31, 2006 - $30.0 million).

    15. COMPREHENSIVE EARNINGS (LOSS) PER UNIT INFORMATION

        ---------------------------------------------------------------------
                             Three months ended        Nine months ended
                                September 30              September 30
                                 2007         2006         2007         2006
                                    $            $            $            $
        ---------------------------------------------------------------------
        Earnings (loss)
         from continuing
         operations             6,697        4,876          (38)      11,376
        Comprehensive
         earnings (loss)          (78)           -          (78)           -
        ---------------------------------------------------------------------
                                6,619        4,876         (116)      11,376
        Earnings (loss)
         from discontinued
         operations
         (Note 17)                  -           39           (5)          74
        ---------------------------------------------------------------------
        Comprehensive
         earnings (loss)        6,619        4,915         (121)      11,450
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Weighted average
         units for basic
         earnings per
         unit              24,479,329   20,271,404   21,735,685   18,722,647
        Effect of
         dilutive units
         to be issued
         in respect of
         the long-term
         incentive plan        26,762       36,729       21,923       36,729
        ---------------------------------------------------------------------
        Weighted average
         units for diluted
         earnings per
         unit              24,506,091   20,308,133   21,757,608   18,759,376
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Basic and Diluted
         Comprehensive
         Earnings (loss)
         per unit:
          Continuing
           operations           $0.27        $0.24       $(0.00)       $0.61
          Discontinued
           operations               -            -            -            -
        ---------------------------------------------------------------------
                                $0.27        $0.24       $(0.00)       $0.61
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    16. GUARANTEES, COMMITMENTS AND CONTINGENCIES

        In the ordinary course of business, NPREIT may provide
        indemnification commitments to counterparties in transactions such as
        credit facilities, leasing transactions, service arrangements,
        director and officer indemnification agreements and sales of assets.
        These indemnification agreements may require NPREIT to compensate the
        counterparties for costs incurred as a result of changes in laws and
        regulations (including tax legislation) or as a result of litigation
        claims or statutory sanctions that may be suffered by counterparties
        as a consequence of the transaction. The terms of these
        indemnification agreements may vary based on the contract and do not
        provide any limit on the maximum potential liability. To date, NPREIT
        has not made any significant payments under such indemnifications and
        no amount has been accrued in the financial statements with respect
        to these indemnification commitments.

        During the normal course of operations, NPREIT provided guarantees
        for mortgages and loans payable relating to investments in
        corporations and joint ventures where NPREIT owns less than 100%. The
        mortgages and loans payable are secured by specific charges against
        the properties owned by the corporations and joint ventures. In the
        event of a default of the corporation or joint venture, NPREIT may be
        liable for 100% of the outstanding balances of these mortgages and
        loans payable. At September 30, 2007, NPREIT has provided guarantees
        totalling $14.6 million (December 31, 2006 - $15.2 million). Of this
        amount, $7.3 million has been included in mortgages and loans payable
        (December 31, 2006 - $7.6 million). The mortgages bear interest at
        rates ranging from 4.54% to 7.50% and mature June, 2008 to January,
        2012 (December 31, 2006 - 4.54% to 7.50% and mature June, 2008 to
        September, 2011).

        During 2007, NPREIT has entered into agreements for the development
        of the following projects:

        -  A 48 unit multi-family residential apartment building located in
           Dawson Creek, British Columbia on land previously acquired by
           NPREIT. Construction commenced in September 2007 and
           expected to be completed in 2008. The estimated total cost of
           construction, including the original cost of the land is
           approximately $5.1 million.

        -  A 79 unit multi-family residential property building located in
           Fort St. John, British Columbia on land previously acquired by
           NPREIT. Construction commenced in September 2007 and is expected
           to be completed in 2008. The estimated total cost of construction,
           including the original cost of land, is approximately
           $11.4 million.

        -  A 79 unit multi-family residential property building located in
           Fort St. John, British Columbia on land previously acquired by
           NPREIT. Construction commenced in September 2007 and is expected
           to be completed in 2008. The estimated total cost of construction,
           including the original cost of land, is approximately
           $11.4 million.

        -  NPREIT commenced the development of a commercial property in
           Yellowknife, NWT for a national retail tenant in September, 2007
           and is expected to be completed in 2008. The total cost of
           construction is approximately $4.1 million.

        -  The development of a 189 unit multi-family residential apartment
           building located in Grande Prairie, Alberta on land previously
           acquired by NPREIT is expected to begin in 2008. The total cost of
           construction, including the original cost of land, is
           approximately $22.9 million.

        In the normal course of operations, NPREIT becomes subject to various
        legal and other claims. Management and its legal counsel evaluate
        these claims and where required, accrue its best estimate of costs
        relating to these claims. Management believes the outcome of these
        claims will not have a material impact on NPREIT.

    17. DISCONTINUED OPERATIONS

        The results from discontinued operations include the financial
        results of a residential property located in Fort St. John, B.C.
        which was sold in 2006 and the financial results of a commercial
        property located in Inuvik, NWT which was sold in the first quarter
        of 2007. The following tables set forth the results of operations and
        the assets and liabilities associated with the discontinued
        operations:

        ---------------------------------------------------------------------
                             Three months ended        Nine months ended
                                September 30              September 30
                                 2007         2006         2007         2006
                                    $            $            $            $
        ---------------------------------------------------------------------
          Rental revenue            -          177            -          418
          Other property
           income                   -            -            -            -
          Operating expenses        -          (51)          (2)        (129)
        ---------------------------------------------------------------------
        Net operating income        -          126           (2)         289
        EXPENSES
          Interest on
           mortgages                -           51           (3)         107
          Amortization              -           36            -          108
        ---------------------------------------------------------------------
                                    -           87           (3)         215
        ---------------------------------------------------------------------
        EARNINGS (LOSS)
         FROM DISCONTINUED
         OPERATIONS                 -           39           (5)          74
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                                                   September 30, December 31,
                                                           2007         2006
                                                              $            $
        ---------------------------------------------------------------------
        Assets held for sale                                  -          337
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Liabilities relating assets held for sale             -          391
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    18. SEGMENTED INFORMATION

        NPREIT considers residential, execusuites, commercial and seniors'
        income producing properties to be separate segments operating in five
        provinces/territories in Canada. The accounting policies of the
        segments are as described in Note 2. Discontinued operations are not
        allocated to individual segments. NPREIT has not provided a
        reconciliation from Earnings from continuing operations before other
        items to Net Earnings as all other items included in the Consolidated
        Statement of Earnings are related only to the REIT and are not
        allocated to the defined segments. Segmented information for NPREIT
        is provided below:

        ---------------------------------------------------------------------
        September 30,   Alberta    B.C.     Nfld     NWT    Nunavut   Total
        2007               $        $        $        $        $        $
        ---------------------------------------------------------------------
        Residential
          Rental        114,971   58,771   54,696   88,585  119,778  436,801
          Execusuites         -        -    9,813    7,709   10,297   27,819
          Seniors'      126,452   14,262   23,935        -        -  164,649
        ---------------------------------------------------------------------
                        241,423   73,033   88,444   96,294  130,075  639,269
        Commercial       12,065   25,394    1,281   83,438   21,780  143,958
        Trust             9,554        -        -        -        -    9,554
        ---------------------------------------------------------------------
        TOTAL ASSETS    263,042   98,427   89,725  179,732  151,855  782,781
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
        December 31,    Alberta    B.C.     Nfld     NWT    Nunavut   Total
        2007               $        $        $        $        $        $
        ---------------------------------------------------------------------
        Residential
          Rental         62,492   33,315   56,675   88,865  122,495  363,842
          Execusuites         -        -    9,125    8,496   10,425   28,046
          Seniors'      128,041   14,383        -        -        -  142,424
        ---------------------------------------------------------------------
                        190,533   47,698   65,800   97,361  132,921  534,313
        Commercial        3,261   11,068        -   22,706   23,279   60,314
        Trust             9,507        -        -        -        -    9,507
        ---------------------------------------------------------------------
        TOTAL ASSETS    203,301   58,766   65,800  120,067  156,199  604,133
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        GEOGRAPHIC SEGMENTS FOR THE THREE MONTHS ENDED SEPTEMBER 30

        ---------------------------------------------------------------------
                        Alberta    B.C.     Nfld     NWT    Nunavut   Total
            2007           $        $        $        $        $        $
        ---------------------------------------------------------------------
        Rental revenue    7,458    2,663    3,576    8,019    6,049   27,765
        Other income        171       73       91      255       70      660
        Operating
         expenses        (1,255)  (1,368)  (1,464)  (3,384)  (1,468)  (8,939)
        ---------------------------------------------------------------------
        Net operating
         income           6,374    1,368    2,203    4,890    4,651   19,486
        Interest on
         mortgages       (2,010)    (530)    (496)  (1,150)  (1,165)  (5,351)
        Amortization     (1,676)    (537)    (670)  (1,464)  (1,701)  (6,048)
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            2,688      301    1,037    2,276    1,785    8,087
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                        Alberta    B.C.     Nfld     NWT    Nunavut   Total
            2006           $        $        $        $        $        $
        ---------------------------------------------------------------------
        Rental revenue    5,588    1,685    2,955    5,970    5,971   22,169
        Other income         65       47       65       55       (1)     231
        Operating
         expenses          (995)    (580)  (1,760)  (2,477)  (1,353)  (7,165)
        ---------------------------------------------------------------------
        Net operating
         income           4,658    1,152    1,260    3,548    4,617   15,235
        Interest on
         mortgages       (1,587)    (461)    (396)    (968)  (1,133)  (4,545)
        Amortization     (1,122)    (364)    (379)    (976)  (1,667)  (4,508)
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            1,949      327      485    1,604    1,817    6,182
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        GEOGRAPHIC SEGMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30

        ---------------------------------------------------------------------
                        Alberta    B.C.     Nfld     NWT    Nunavut   Total
            2007           $        $        $        $        $        $
        ---------------------------------------------------------------------
        Rental revenue   19,688    7,222    8,931   19,813   18,162   73,816
        Other income        408      230      310      495      185    1,628
        Operating
         expenses        (3,585)  (3,364)  (4,442)  (9,340)  (4,999) (25,730)
        ---------------------------------------------------------------------
        Net operating
         income          16,511    4,088    4,799   10,968   13,348   49,714
        Interest on
         mortgages       (5,761)  (1,201)  (1,354)  (3,008)  (3,385) (14,709)
        Amortization     (4,384)  (1,409)  (1,654)  (3,755)  (4,549) (15,751)
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            6,366    1,478    1,791    4,205    5,414   19,254
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        GEOGRAPHIC SEGMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30

        ---------------------------------------------------------------------
                        Alberta    B.C.     Nfld     NWT    Nunavut   Total
            2006           $        $        $        $        $        $
        ---------------------------------------------------------------------
        Rental revenue   13,605    4,262    7,467   17,607   17,953   60,894
        Other income        207      127      170      222      139      865
        Operating
         expenses        (3,060)  (1,915)  (4,696)  (8,291)  (4,431) (22,393)
        ---------------------------------------------------------------------
        Net operating
         income          10,752    2,474    2,941    9,538   13,661   39,366
        Interest on
         mortgages       (3,410)  (1,072)  (1,159)  (2,763)  (3,392) (11,796)
        Amortization     (2,746)    (787)  (1,147)  (3,111)  (4,447) (12,238)
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            4,596      615      635    3,664     5,822  15,332
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        BUSINESS SEGMENTS FOR THE THREE MONTHS ENDED SEPTEMBER 30

        ---------------------------------------------------------------------
                                                    Total
                                 Execu-            Residen- Commer-
                        Rental   suites   Seniors'   tial    cial     Total
            2007           $        $        $        $        $        $
        ---------------------------------------------------------------------
        Rental revenue   17,014    2,375    3,761   23,150    4,615   27,765
        Other income        543       43        -      586       74      660
        Operating
         expenses        (6,463)    (957)      (9)  (7,429)  (1,510)  (8,939)
        ---------------------------------------------------------------------
        Net operating
         income          11,094    1,461    3,752   16,307    3,179   19,486
        Interest on
         mortgages       (3,094)    (192)  (1,543)  (4,829)    (522)  (5,351)
        Amortization     (3,734)    (273)    (955)  (4,962)  (1,086)  (6,048)
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            4,266      996    1,254    6,516    1,571    8,087
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                                                    Total
                                 Execu-            Residen- Commer-
                        Rental   suites   Seniors'   tial    cial     Total
            2006           $        $        $        $        $        $
        ---------------------------------------------------------------------
        Rental revenue   14,936    1,921    3,074   19,931    2,238   22,169
        Other income        208       14        -      222        9      231
        Operating
         expenses        (5,678)    (785)     (15)  (6,478)    (687)  (7,165)
        ---------------------------------------------------------------------
        Net operating
         income           9,466    1,150    3,059   13,675    1,560   15,235
        Interest on
         mortgages       (2,593)    (207)  (1,312)  (4,112)    (433)  (4,545)
        Amortization     (3,070)    (216)    (821)  (4,107)    (401)  (4,508)
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            3,803      727      926    5,456      726    6,182
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        BUSINESS SEGMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30

        ---------------------------------------------------------------------
                                                    Total
                                 Execu-            Residen- Commer-
                        Rental   suites   Seniors'   tial    cial     Total
            2007           $        $        $        $        $        $
        ---------------------------------------------------------------------
        Rental revenue   47,930    6,023   10,289   64,242    9,574   73,816
        Other income      1,452       90        -    1,542       86    1,628
        Operating
         expenses       (19,786)  (2,775)     (14) (22,575)  (3,155) (25,730)
        ---------------------------------------------------------------------
        Net operating
         income          29,596    3,338   10,275   43,209    6,505   49,714
        Interest on
         mortgages       (8,428)    (597)  (4,580) (13,605)  (1,104) (14,709)
        Amortization    (10,210)    (557)  (2,656) (13,423)  (2,328) (15,751)
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS           10,958    2,184    3,039   16,181    3,073   19,254
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                                                    Total
                                 Execu-            Residen- Commer-
                        Rental   suites   Seniors'   tial    cial     Total
            2006           $        $        $        $        $        $
        ---------------------------------------------------------------------
        Rental revenue   43,274    5,268    5,606   54,148    6,746   60,894
        Other income        789       61        -      850       15      865
        Operating
         expenses       (17,632)  (2,524)     (15) (20,171)  (2,222) (22,393)
        ---------------------------------------------------------------------
        Net operating
         income          26,431    2,805    5,591   34,827    4,539   39,366
        Interest on
         mortgages       (7,680)    (620)  (2,398) (10,698)  (1,098) (11,796)
        Amortization     (9,048)    (626)  (1,386) (11,060)  (1,178) (12,238)
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            9,703    1,559    1,807   13,069    2,263   15,332
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    19. RELATED PARTY TRANSACTIONS

        A trustee of NPREIT leases space from NPREIT under normal commercial
        terms. NPREIT earned rental revenue of $338,513 for the nine months
        ended September 30, 2007 (2006 - $316,581). Amounts outstanding in
        accounts receivable pertaining to this lease were $ nil at
        September 30, 2007 (December 31, 2006 - $ nil).

        A trustee of NPREIT is a senior partner of a law firm that provides
        legal services to NPREIT in the ordinary course of business. Fees
        paid for the nine months ended September 30, 2007 were $204,747 (2006
        - $253,268).

        A trustee of NPREIT is the Chairman of AgeCare Investments Ltd.
        ("AgeCare"), which leases six seniors' properties from NPREIT. For
        the nine months ended September 30, 2007, NPREIT earned rental income
        from Agecare totalling $8,625,000 (2006 - $5,407,000). Amounts
        outstanding in accounts receivable pertaining to this lease were
        $ nil at September 30, 2007 (December 31, 2006 - $ nil). In addition,
        AgeCare is paid an annual advisory fee of $120,000 for advisory
        services provided to NPREIT respecting prospective acquisitions of
        seniors' properties. For the nine months ended September 30, 2007,
        NPREIT paid $90,000 for these services (2006 - $50,000).

    20. FINANCIAL INSTRUMENTS

        Financial instruments include loans receivable, prepaid expenses and
        other assets, accounts receivable, tenant security deposits,
        mortgages payable, loans payable, accounts payable and accrued
        liabilities, income taxes payable and bank indebtedness. Unless
        otherwise specified, the fair value of these instruments approximates
        their carrying values.

        As part of an acquisition of rental properties completed in the third
        quarter, NPREIT acquired a fixed price utility contract. This
        financial liability is carried at fair value. The adjustment to
        current market price for the remaining commitment under this
        financial liability is included in other comprehensive income.

        Interest rate risk

        Interest rate risk is minimized through management's strategy of
        ensuring that the substantial portion of its mortgage portfolio is in
        fixed terms arrangements.

        Utility cost risk

        NPREIT has a utility cost management program under which its rental
        properties are retrofitted with energy efficient appliances, fixtures
        and windows. In addition, NPREIT's management closely monitors the
        effect of oil prices on earnings. A portion of the increase in the
        price of utilities can be recovered pursuant to lease terms,
        particularly in Nunavut. However, in much of NPREIT's residential
        portfolio rising utility rates will negatively affect earnings until
        rent increases can be implemented.

        As part of the acquisition of rental properties completed in the
        third quarter, the REIT acquired financial instruments relating to
        fixed price utility contracts.

        Credit risk

        Credit risk arises from the possibility that tenants may not be able
        to fulfill their lease commitments. NPREIT mitigates this risk
        through conducting thorough credit checks on prospective tenants,
        obtaining security deposits from tenants where legislation permits,
        and geographic diversification in its portfolio.

    21. SUBSEQUENT EVENTS

        Subsequent to September 30, 2007, NPREIT completed or entered into
        agreements for the following:

        a) An 11 unit multifamily residential property located in
           Yellowknife, NWT for a purchase price of approximately
           $1.1 million on October 1, 2007;

        b) A residential property comprised of 59 seniors' units located in
           Clarke's Beach, Newfoundland for a purchase price of $6.9 million
           October 23, 2007.

        c) A residential property comprised of 38 seniors' units located in
           Bonavista, Newfoundland for a purchase price of $3.9 million
           October 26, 2007.

        d) A 48 unit multifamily residential property located in Gander,
           Newfoundland for a purchase price of approximately $1.4 million on
           November 1, 2007;

        e) Two commercial properties adjacent to the commercial portfolio in
           Yellowknife, NWT purchased in July, 2007, totalling 25,000 sq ft
           for a purchase price of $3.1 million on November 1, 2007.

        f) Vista Village Limited Partnership, which is 40% owned by NPREIT,
           entered into an agreement to sell a 60 residential unit complex
           located in Red Deer, Alberta. This sale was completed on
           November 1, 2007 with NPREIT's share of the sale proceeds
           approximately $3.4 million.

        Subsequent to September 30, 2007, NPREIT completed 5 mortgage
        financings totalling $6.7 million with interest rates from 5.035% to
        5.33% and terms to maturity ranging from 6 months to 10 years.
        Proceeds from the financings were used to repay existing debt and a
        portion of the operating facility.
    




For further information:

For further information: Mr. Todd Cook, Chief Financial Officer, at
(403) 531-0720

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Northern Property Real Estate Investment Trust

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