Record year for Northern Property



    CALGARY, March 19 /CNW/ - Northern Property REIT (NPR.UN - TSX) announced
its financial results for the three and twelve months ended December 31, 2006.

    2006 Highlights

    
    -   Positive rental market conditions, portfolio diversification
    -   Total assets up 43% during the year
    -   Distributable income of $31.3 million, up 28.7%
    -   DIPU increases to $1.64 compared to $1.52 in 2005
    

    "2006 was a year of growth and diversification", said Jim Britton,
President & CEO. "We enjoyed a stellar year from an acquisitions point of view
having secured the buildings and lands associated with a 960-bed seniors'
retirement portfolio early in the year. As well as being very accretive,
entering a new real estate asset class in the strong Alberta and BC markets
improves the quality of our earnings and opens up new investment
possibilities". The REIT also grew by a net 467 multifamily units and 27,000
square feet of commercial space during 2006.
    Year over year revenue jumped to $84 million in 2006 from $63.5 million
in 2005. Net operating income increased 36.6% to $53.5 million year over year.
 DIPU of $1.64 was up 7.9% over its 2005 level of $1.52. Financial
improvements were primarily due to acquisition activity with same door growth
and lower vacancy contributing as well.
    Rental market conditions for the REIT were sound in 2006 with
multi-family market vacancy declining slightly to 2.9% with an additional
vacancy loss of 0.8% associated with units being vacant during renovation.
Rental market conditions were extremely strong in most locations in Alberta
and northern British Columbia. Vacancy rates declined during the year in
Yellowknife and St. John's. Nunavut vacancies continued low. Inuvik
multi-family vacancy increased in the economic lull awaiting a Mackenzie
Valley pipeline decision. Business results in the seniors' facilities,
commercial properties and furnished execusuite properties were positive.
    During Q4 the REIT closed on an 88 unit staff housing facility at
Panorama, B.C. and a 27,000 square foot industrial building in Fort Nelson,
B.C. for a total of $8.68 million. Both properties were developed using
financing provided by the REIT and operate subject to lengthy triple net
leases. "Our acquisition pipeline continues to deliver", Mr. Britton went on
to say. "The REIT closed on a second industrial building for the same tenant
January 10, 2007 for $4.8 million. We have also entered into purchase
agreements for three seniors' independent living buildings in Newfoundland and
280 multi-family units in Fort Nelson, BC for $12 million. These transactions
are all in the unlevered 9 cap range and will be accretive additions to our
portfolios". Mr. Britton went on to say that while he expected these
transactions to close, some conditions have yet to be met by some of the
vendors. The REIT plans to invest $2 million in renovation and refurbishment
to the Fort Nelson portfolio.
    Northern Property REIT's 2006 payout ratio was 79.4% of FFO. Its 2006
Debt to Gross Book Value was 56.5%. Weighted average interests costs declined
to 5.55% from 5.76% in 2005. "Northern Property plans to continue to operate
in a financially conservative style," Jim Britton said. "As we approach our
fifth birthday, we are pleased that our markets, business model and
conservative style have enabled us to increase the rate of unit-holder
distributions each year".

    For a full copy of the Management Discussion & Analysis and Financial
Statements please log on to www.sedar.com or www.npreit.com.

    

    Earnings per unit
    -------------------------------------------------------------------------
                                         Three Months             Year Ended
                                       Ended December 31         December 31
    -------------------------------------------------------------------------
    ($000) except per Unit amounts        2006      2005      2006      2005
                                               (restated)          (restated)
    -------------------------------------------------------------------------
    Rental properties revenue           21,869    16,690    82,763    62,996
    Laundry and other income               383       125     1,248       477
    Rental properties operating
     expenses                           (8,107)   (7,131)  (30,500)  (24,309)
    -------------------------------------------------------------------------
    Net operating income (NOI)          14,145     9,684    53,511    39,164
    -------------------------------------------------------------------------
      Interest on mortgages             (4,370)   (2,648)  (16,166)  (10,412)
      Interest on operating
       facility                           (427)     (512)   (1,532)   (1,603)
      Amortization                      (4,718)   (3,254)  (16,831)  (12,615)
      Amortization of lease
       origination costs                   (36)       (5)     (161)      (45)
      Interest and other income            223       217       703       808
      Trust administration costs        (1,434)   (1,016)   (4,784)   (3,880)
      Gain (loss) on sale of assets        657        40       657        (4)
      Provision for impairment of
       rental properties                  (225)        -      (225)        -
       Gain on settlement of debt            -         -         -        66
      Current income taxes                 (57)      (93)     (334)     (381)
      Future income tax recovery         1,061       109     1,357       433
    -------------------------------------------------------------------------
    Earnings from continuing
     operations                          4,819     2,522    16,195    11,531
    Earnings from discontinued
     operations                             (6)       (1)       68        (1)
    -------------------------------------------------------------------------
    Net Earnings                         4,813     2,521    16,263    11,530
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings per unit
    Basic:
    Earnings from continuing
     operations                           0.24      0.15      0.85      0.72
    Earnings from discontinued
     operations                              -         -         -         -
    -------------------------------------------------------------------------
                                          0.24      0.15      0.85      0.72
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average number of Units
     outstanding - basic (000's)        20,272    16,047    19,066    16,005
    Diluted:
    Earnings from continuing
     operations                           0.24      0.15      0.85      0.72
    Earnings from discontinued
     operations                              -         -         -         -
    -------------------------------------------------------------------------
                                          0.24      0.15      0.85      0.72
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average number of Units
     outstanding - diluted (000's)      20,307    16,136    19,113    16,094
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Balance Sheets
    At December 31
    (Thousands of dollars)
    -------------------------------------------------------------------------
                                                              2006      2005
                                                                $         $
                                                         --------------------
                                                                   (restated
                                                                    - Note 3)

    ASSETS

      Rental properties and other capital assets
       (Note 4)                                            576,375   408,579
      Capital improvements in progress                       3,092     5,000
      Capital assets under development                       4,621         -
      Prepaid expenses and other assets (Note 5)            10,957     6,156
      Accounts receivable                                    6,665     3,993
      Tenant security deposits                               2,942     2,049
      Deferred rent receivable                                 797         -
      Loans receivable                                         552       317
      Intangible assets (Note 6)                               732       645
      Assets held for sale (Note 17)                           337       405
                                                         --------------------
                                                           607,070   427,144
                                                         --------------------
                                                         --------------------

    LIABILITIES

      Mortgages payable (Note 7)                           321,267   187,029
      Loans payable (Note 9)                                   710    15,317
      Accounts payable and accrued liabilities
       (Note 10)                                            12,432    10,803
      Distributions payable                                  2,332     1,756
      Future income tax liability (Note 13)                 10,184    11,541
      Bank indebtedness (Note 8)                            22,307    37,993
      Intangible liabilities (Note 6)                          267       491
      Liabilities related to assets held for sale
       (Note 17)                                               391       406
                                                         --------------------
                                                           369,890   265,336

    UNITHOLDERS' EQUITY                                    237,180   161,808
                                                         --------------------
                                                           607,070   427,144
                                                         --------------------
                                                         --------------------


    APPROVED BY THE BOARD

    ..................... Trustee
    ..................... Trustee



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Statements of Earnings
    Year ended December 31
    (Thousands of dollars, except for per unit amounts)
    -------------------------------------------------------------------------
                                                              2006      2005
                                                                $         $
                                                         --------------------
                                                                   (restated
                                                                    - Note 3)
    REVENUE

    Rental properties revenue                               82,763    62,996

    Laundry and other income                                 1,248       477

    Rental properties operating expenses                   (30,500)  (24,309)
                                                         --------------------
    Net operating income                                    53,511    39,164
                                                         --------------------

    EXPENSES
      Interest on mortgages                                 16,166    10,412
      Amortization                                          16,992    12,660
                                                         --------------------
                                                            33,158    23,072
                                                         --------------------

    INCOME FROM CONTINUING OPERATIONS BEFORE
     OTHER ITEMS                                            20,353    16,092
                                                         --------------------

    OTHER ITEMS
      Interest on operating facility                        (1,532)   (1,603)
      Interest and other income                                703       808
      Trust administration costs                            (4,784)   (3,880)
      Gain on settlement of debt                                 -        66
      Gain (loss) on sale of rental properties                 657        (4)
      Provision for impairment of rental properties
       (Note 4)                                               (225)        -
                                                         --------------------
                                                            (5,181)   (4,613)
                                                         --------------------

    EARNINGS FROM CONTINUING OPERATIONS BEFORE
     INCOME TAXES                                           15,172    11,479
                                                         --------------------

    INCOME TAXES (Note 13)
      Current                                                 (334)     (381)
      Future recovery                                        1,357       433
                                                         --------------------
                                                             1,023        52
                                                         --------------------

    EARNINGS FROM CONTINUING OPERATIONS                     16,195    11,531
    EARNINGS (LOSS) FROM DISCONTINUED
     OPERATIONS (Note 17)                                       68        (1)
                                                         --------------------

    NET EARNINGS                                            16,263    11,530
                                                         --------------------
                                                         --------------------

    Net earnings per unit (Note 15)
      Basic:
        Earnings from continuing operations                   0.85      0.72
        Earnings from discontinued operations                    -         -
                                                         --------------------
                                                              0.85      0.72
                                                         --------------------
                                                         --------------------
    Net earnings per unit (Note 15)
      Diluted:
        Earnings from continuing operations                   0.85      0.72
        Earnings from discontinued operations                    -         -
                                                         --------------------
                                                              0.85      0.72
                                                         --------------------
                                                         --------------------



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Statements of Unitholders' Equity
    (Thousands of dollars)
    -------------------------------------------------------------------------
                             Cumula-             Cumula-   Cumula-
                                tive   Contri-      tive      tive
                             Capital     buted       Net   Distri-
    (restated - Note 3)     (Note 14)  Surplus    Income   butions     Total
    -------------------------------------------------------------------------
    December 31, 2005        176,904     1,513    39,401   (56,010)  161,808
    -------------------------------------------------------------------------
      Net income                   -         -    16,263         -    16,263
      Distributions to
       unitholders                 -         -         -   (25,453)  (25,453)
      New units issued        87,532         -         -         -    87,532
      Issuance costs          (3,653)        -         -         -    (3,653)
      Long term incentive
       plan units granted
       (note 11)                   -       683         -         -       683
      Long term incentive
       plan units issued         947      (947)        -         -         -
    -------------------------------------------------------------------------
    Unitholders' Equity -
     December  31, 2006      261,730     1,249    55,664   (81,463)  237,180
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -------------------------------------------------------------------------
                             Cumula-             Cumula-   Cumula-
                                tive   Contri-      tive      tive
                             Capital     buted       Net   Distri-
    (restated - Note 3)     (Note 14)  Surplus    Income   butions     Total
    -------------------------------------------------------------------------
    Unitholders' Equity -
     December 31, 2004       137,803         -    27,773   (35,872)  129,704
    Adjust for accounting
     change                      (28)      995        98         -     1,065
    -------------------------------------------------------------------------
    December 31, 2004
     Restated (Note 3)       137,775       995    27,871   (35,872)  130,769
    -------------------------------------------------------------------------
      Net income                   -         -    11,530         -    11,530
      Distributions to
       unitholders                 -         -         -   (20,138)  (20,138)
      New units issued        40,879         -         -         -    40,879
      Issuance costs          (1,937)        -         -         -    (1,937)
      Long term incentive
       plan units granted
       (note 11)                   -       705         -         -       705
      Long term incentive
       plan units issued         187      (187)        -         -         -
    -------------------------------------------------------------------------
    Unitholders' Equity -
     December 31, 2005       176,904     1,513    39,401   (56,010)  161,808
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Statements of Cash Flows
    Years ended December 31
    (Thousands of dollars)
    -------------------------------------------------------------------------
                                                              2006      2005
                                                                $         $
                                                         --------------------
                                                                   (restated
    CASH FLOWS RELATED TO THE                                       - Note 3)
     FOLLOWING ACTIVITIES:
    OPERATING
      Net earnings                                          16,195    11,531
      Net earnings (loss) from discontinued operations          68        (1)
      Adjustments for:
        Straight line rental revenue                          (768)        -
        Amortization                                        16,831    12,616
        Amortization of lease origination costs                161        45
        Amortization of above and below market leases         (198)      (57)
        Amortization of fair value of loan receivable            8         -
        Amortization of deferred revenue                         8         -
        Gain (loss) on sale of rental properties              (657)        4
        Provision for impairment of rental properties          225         -
        Gain on fair value of debt                               -       (66)
        Future income taxes (recovery)                      (1,357)     (433)
        Long-term incentive plan                               683       705
                                                         --------------------
                                                            31,199    24,343
      Cash flows from discontinued operations                   91         1
      Changes in non-cash working capital                   (7,429)    5,428
                                                         --------------------
                                                            23,861    29,772
                                                         --------------------
    FINANCING
      Proceeds of public offering (net of issue costs)      71,394    38,149
      Proceeds of mortgages                                151,616    33,551
      Proceeds of loans payable                             13,683    11,890
      Proceeds of capital lease liability                        -       195
      Repayment of capital lease liability                     (50)        -
      Proceeds from sale of rental properties                4,455     1,581
      Repayment of mortgages and interim facilities        (36,265)  (12,418)
      Repayment of loan                                    (95,402)   (1,750)
      Distributions to unitholders                         (24,876)  (19,790)
                                                         --------------------
                                                            84,555    51,408
                                                         --------------------
    INVESTING
      Acquisition of properties and other assets           (73,962)  (69,476)
      Capital assets under development                     (15,064)  (10,319)
      Building capital maintenance                          (3,704)   (2,665)
                                                         --------------------
                                                           (92,730)  (82,460)
                                                         --------------------

    NET DECREASE (INCREASE) IN CASH AND BANK
     INDEBTEDNESS, END OF YEAR                              15,686    (1,280)

    BANK INDEBTEDNESS, BEGINNING OF YEAR                   (37,993)  (36,713)
                                                         --------------------
    BANK INDEBTEDNESS, END OF YEAR                         (22,307)  (37,993)
                                                         --------------------
                                                         --------------------
    SUPPLEMENTARY INFORMATION
      Interest paid                                         17,118    11,930
                                                         --------------------
                                                         --------------------
      Interest received                                        176       212
                                                         --------------------
                                                         --------------------
      Income taxes paid                                        387       433
                                                         --------------------
                                                         --------------------



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Notes to the Consolidated Financial Statements
    Twelve Months Ended December 31, 2006 and December 31, 2005
    (Columnar amounts expressed in thousands of dollars except where
     indicated)
    -------------------------------------------------------------------------

    1.  DESCRIPTION OF THE TRUST

        Northern Property Real Estate Investment Trust ("NPREIT") is an
        unincorporated "open-end" real estate investment trust that invests
        in and owns a portfolio of residential and commercial income
        producing properties. NPR'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 the 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 11 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 six senior living
        facilities ("long term care properties") are held by NPR Health
        Property General Partner Ltd., in its capacity as general partner of
        NPR Health Property Limited Partnership.

    2.  SIGNIFICANT ACCOUNTING POLICIES

    Basis of presentation

        NPREIT's consolidated financial statements are prepared in conformity
        with Canadian generally accepted accounting principles ("GAAP").

    Principles of consolidation

        The consolidated financial statements include the accounts of NPREIT
        and its wholly-owned subsidiary, together with the proportionate
        share of the assets, liabilities, revenue and expenses of joint
        ventures. Investments in significantly influenced companies are
        accounted for using the equity method.

        Use of estimates

        The preparation of consolidated financial statements in conformity
        with GAAP requires management to make estimates and assumptions that
        affect the reported amounts of assets and liabilities, and to make
        disclosure of contingent assets and liabilities at the date of the
        consolidated financial statements and revenue and expenses for the
        consolidated reported period. Actual results could differ from those
        estimates. Estimates include allowance for doubtful accounts,
        estimated useful lives of income producing properties, intangible and
        other assets and accrued liabilities. Actual amounts could differ
        from those estimates.

    Capital assets

      Rental properties are stated at the lower of cost less accumulated
      amortization and net recoverable amount. Cost of the properties
      includes the original acquisition costs of the property and other
      acquisition related costs. Costs associated with upgrading the
      existing facilities, other than ordinary repairs and maintenance, are
      capitalized as project improvements. The net recoverable amount
      represents the undiscounted, estimated future net cash flow expected
      to be received from the ongoing use of the property plus its residual
      worth and is intended to determine recovery of an investment and is
      not an expression of a property's fair market value.

      All capital assets are recorded at cost and are amortized using the
      following annual rates and methods:

           Buildings                 30 - 40 years     straight-line basis
           Furniture, fixtures       20% - 30%         declining-balance
            and equipment
           Vehicles                  20% - 30%         declining-balance
           Capital and leasehold     3 - 5 years       straight-line basis
            improvements

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

        NPREIT reviews its capital assets and, if it is determined that the
        carrying value of a building exceeds the undiscounted estimated
        future net cash flow expected to be received from the ongoing use and
        residual worth of the property, the carrying value of the building is
        reduced to its estimated fair value. Based on this review, a
        provision for impairment of $225,000 has been recorded for the year
        ended December 31, 2006 (December 31, 2005 - $nil).

        Disposal of long-lived assets

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

        Land equity leases

        Prepaid land equity leases are amortized over the remaining lives of
        the related leases ranging from 15 to 30 years.

        Deferred financing costs

        Deferred financing costs are amortized on a straight-line basis over
        the amortization period of the related loans.

        Income taxes

        NPREIT is taxed as a "mutual fund trust" for income tax purposes.
        Pursuant to the Declaration of Trust, the trustees of NPREIT will
        make distributions or designate all taxable income earned; including
        the taxable part of net realized capital gains by NPREIT, to
        unitholders and will deduct such distributions and designations for
        income tax purposes.

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

        Future income tax liabilities of NPREIT are primarily in relation to
        tax and accounting base differences in corporate subsidiaries of
        NPREIT.

        Revenue recognition

    Revenue from a rental property is recognized when a tenant commences
    occupancy of a property and rent is due. NPREIT retains all benefits and
    risk of ownership of its rental properties, and therefore, accounts for
    leases with its tenants as operating leases. Rental revenue includes rent
    and other sundry revenue recoveries. Rental revenue to be received from
    leases with rental rates varying over the term of the lease is recorded
    on a straight-line basis over the term of the associated lease.
    Accordingly, a receivable amount from the tenants for the difference
    between the rental revenue recorded on a straight line basis and the rent
    that is contractually due from the tenant has been recorded as deferred
    rent receivable for accounting purposes.


        Intangible assets and liabilities

        The Trust allocates the purchase price of real property to land,
        building, and intangible assets and liabilities, such as the value of
        above-market and below-market leases, and lease origination costs, if
        any. Intangible assets and liabilities are recorded at cost and
        amortized over their estimated useful lives ranging from 1 year to
        18 years.

        The above-market and below-market in-place lease values for acquired
        properties are determined based on the present value of the
        difference between the contractual base rentals under the lease and
        fair market lease rates for similar in-place leases, measured from
        the date of acquisition to the end of the remaining lease term.

        The value of above and below market leases are recorded and amortized
        over the remaining term of the associated lease. The value associated
        with lease origination costs is amortized over the lease term.

    3.  CHANGE IN ACCOUNTING POLICY

        CICA Handbook Section 3870, Stock-based Compensation and Other
        Stock-based Payments which established standards for the
        recognition, measurement, and disclosure of stock-based compensation
        and other stock-based payments was retroactively adopted by NPREIT.
        Historically, NPREIT accounted for the LTIP (Long Term Incentive
        Plan) as a liability at market rate when granted with an adjustment
        to current fair value at year end and upon issuance. LTIP grants,
        upon the application of Section 3870, are treated as unitholders'
        equity at market value when granted.

        The following table summarizes the changes to the financial
        statements as a result of retroactively adopting this change in
        accounting policy during the year ended December 31, 2006.

                                                Cumula-    Contri-
                                       LTIP        tive      buted      Net
                                       Payable   Capital   Surplus   Income
                                             $         $         $        $
                                      ---------------------------------------
    Balance - December 31, 2004,
     as previously reported              1,065   137,803         -     9,849
    Adjust for accounting change        (1,065)      (28)      995        98
                                      ---------------------------------------
    December 31, 2004, restated              -   137,775       995     9,947
                                      ---------------------------------------
                                      ---------------------------------------

    Balance - December 31, 2005,
     as previously reported                605   176,958         -    11,416
    Adjust for accounting change          (605)      (54)    1,513       114
                                      ---------------------------------------
    December 31, 2005, restated              -   176,904     1,513    11,530
                                      ---------------------------------------
                                      ---------------------------------------


        The effect of the change in accounting policy for the year ended
        December 31, 2006 has been reflected in the financial statements.

    4.  RENTAL PROPERTIES AND OTHER CAPITAL ASSETS

                             ------------------------------------------------
                                   December 31, 2006       December 31, 2005
                             ------------------------------------------------
                                     Accumu-                 Accumu-
                                       lated     Net           lated     Net
                                     Amorti-    Book         Amorti-    Book
                                Cost  zation   Value    Cost  zation   Value
                                   $       $       $       $       $       $
                             ------------------------------------------------
        Land                  49,233       -  49,233  30,536       -  30,536
        Buildings            553,615  37,832 515,783 392,356  23,914 368,442
        Furniture, fixtures
         and equipment         5,341   1,835   3,506   4,435   1,042   3,393
        Vehicles                 860     404     456     676     247     429
        Capital and
         leasehold
         improvements         11,495   4,223   7,272   7,965   2,371   5,594
        Equipment under
         capital lease           212      87     125     212      27     185
                             ------------------------------------------------
                             620,756  44,381 576,375 436,180  27,601 408,579
                             ------------------------------------------------
                             ------------------------------------------------

        NPREIT periodically reviews the carrying value if its rental
        properties and, if it is determined that the carrying value of a
        building exceeds the undiscounted estimated future net cash flow
        expected to be received from the ongoing use and residual worth of
        the property, the carrying value of the building is reduced to its
        estimated fair value. During 2006, NPREIT recorded a provision for
        impairment of rental properties of $225,000 (2005 - $nil).

        NPREIT acquired rental properties during 2006 for a total purchase
        price of 176.5 million (2005 - $80.0 million). The acquisitions were
        financed as follows:

                                                          -------------------
                                                              2006      2005
                                                                 $         $
                                                          -------------------
        Rental property acquisitions
          Mortgages and debt assumed                        92,395    13,462
          Units issued                                      12,484       790
          Repayment of mezzanine loan                            -     2,299
          Cash                                              78,090    62,282
                                                          -------------------
                                                           182,969    78,833
        Fair value adjustment to debt                       (6,499)      155
                                                          -------------------
        Total purchase price of rental property
         acquisitions                                      176,470    79,988
                                                          -------------------
                                                          -------------------

                                                          -------------------
        Residential units acquired                             533     1,536
        Long-term care beds                                    960         -
        Commercial square feet acquired                     27,000   135,485
                                                          -------------------
                                                          -------------------

    5.  PREPAID EXPENSES AND OTHER ASSETS


                                                          -------------------
                                                              2006      2005
                                                                 $         $
                                                          -------------------

        Refundable deposits                                  3,455         -
        Deferred financing fees                              2,937     1,592
        Prepaid equity leases                                2,508     2,582
        Prepaid expenses                                     1,388     1,313
        Other                                                  669       669
                                                          -------------------
                                                            10,957     6,156
                                                          -------------------
                                                          -------------------

    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, and are net of accumulated
        amortization of $274,950  (December 31, 2005 -$99,959).

        Intangible liabilities are comprised of the value of below-market
        leases for rental property acquisitions completed after
        September 12, 2003, and are net of accumulated amortization of
        $317,261 (December 31, 2005 - $116,136).

    7.  MORTGAGES PAYABLE

                                                          -------------------
                                                              2006      2005
                                                                 $         $
                                                          -------------------
        Mortgages payable                                  327,739   186,983
        Fair value adjustment                               (6,472)       46
                                                          -------------------
                                                           321,267   187,029
                                                          -------------------
                                                          -------------------

        Mortgages payable bear interest at rates ranging from 3.83% to 13.5%
        (weighted average rate of 5.55% as at December 31, 2006
        (5.76% - December 31, 2005) per annum, payable in principal and
        interest instalments of $2.56 million monthly, and maturing between
        2007 and 2021. All mortgages are secured by charges against specific
        properties.

        Minimum future principal payments required are as follows:

                                 ---------
                                         $
                                  ---------

                            2007    46,029
                            2008    42,520
                            2009    46,987
                            2010    21,768
                            2011    15,866
                      Subsequent   154,569
                                  ---------
                                   327,739
                                  ---------
                                  ---------

        The fair value of the mortgages at December 31, 2006 is approximately
        $329.3 million (2005 - $185.4 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, 2007 (prime plus
        0.25% with a maturity of May 31, 2006). Specific properties have been
        pledged as collateral security for the line of credit. At December
        31, 2006, NPREIT has utilized $22.3 million (2005 - $38.0 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.
        Specific properties have been pledged as collateral security for the
        acquisition facility. At December 31, 2006, NPREIT has utilized $ nil
        (December 31, 2005 - $ nil).

    9.  LOANS PAYABLE

                                                          -------------------
                                                              2006      2005
                                                                 $         $
                                                          -------------------
        Inuvik Commercial Properties Zheh Gwizhu
         Limited Partnership - 50% ownership

        CIBC demand loan, $490,000, bearing interest
         at prime plus 0.5%, repayable in monthly
         principal and interest instalments, secured
         by specific properties pledged as collateral
         due 2016.                                             229         -

        CIBC demand loan, $1,280,000, bearing interest
         at prime plus 0.75%, repaid in full in
         April, 2006.                                            -       640

        CIBC demand loan, $1,000,000, bearing interest
         at prime plus 0.75%, repayable in monthly
         principal and interest instalments, secured
         by specific properties pledged as collateral
         due 2015.                                             481       500

        Inuvik Capital Suites Zheh Gwizhu Limited
         Partnership - 50% Ownership

        CIBC demand loan, $6,369,354, bearing interest
         at prime plus 0.75%, repaid in full in
         October 2006.                                           -     3,292

        NPREIT

        CIBC demand loan, $9,000,000, bearing interest
         at prime plus 0.75%, repaid in full in
         March, 2006.                                            -     9,000

        Vendor take-back loan, $1,885,206, bearing
         interest at 5.25%, repaid in full in
         April, 2006.                                            -     1,885
                                                          -------------------
                                                               710    15,317
                                                          -------------------
                                                          -------------------

    10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

                                                          -------------------
                                                              2006      2005
                                                                 $         $
                                                          -------------------

        Security deposits and other                          4,680     3,654
        Trade payables and accrued liabilities               7,607     6,954
        Capital lease liability                                145       195
                                                          -------------------
                                                            12,432    10,803
                                                          -------------------
                                                          -------------------


    11. LONG-TERM INCENTIVE PLAN

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

                                                                    ---------
                                                                      Number
                                                                    of Units
                                                                    ---------

        TOTAL - December 31, 2005                                     88,616
        Units vested and issued - January, 2006                      (22,015)
        Units vested and issued - May, 2006                          (30,208)
        Units vested and issued - July, 2006                            (500)
        Units vested and issued - December, 2006                      (4,837)
        LTIP grants - December 31, 2006                               24,420
                                                                    ---------
        TOTAL - December 31, 2006                                     55,476
                                                                    ---------
                                                                    ---------

        The total amount of the LTIP award is determined at the end of each
        fiscal year by the Board of Trustees based on an assessment of the
        performance of the Trust and the individual performance of the
        executives. The number of units issued is based on the trading price
        on December 31st of each year. On May 17, 2006, unitholders approved
        the shortening of LTIP vesting periods. Previously, units vested in
        1/3 tranches, 12, 24 and 36 months following their initial grant.
        Pursuant to the policy change, rights to units now vest in
        1/3 tranches: immediately upon award, then 12 and 24 months
        following. All outstanding rights to units that had been subject to
        36 month vesting, vested with the units being provided to Plan
        participants by May 18, 2006. As at December 31, 2006, a total of
        79,002 LTIP units have vested and been issued (December 31, 2005 -
        22,717) and $682,539 has been accrued for estimated 2006 LTIP awards
        (December 31, 2005 - $704,600).

    12. EMPLOYEE UNIT PURCHASE PLAN

        NPREIT has an Employee Unit Purchase Plan (the "EUPP") for the
        employees of NPREIT, effective June 16, 2005. Under the terms of the
        EUPP, employees may invest a maximum of 5% of their salary in NPREIT
        units and the Trust will contribute one unit for every three units
        acquired by an employee. The units are purchased on the TSX at market
        prices. During 2006, employees invested a total of $91,763
        (2005 - $45,276) and the trust contributed $30,588 (2005 - $15,092).
        During 2006, 5,799 units (2005 - 3,633 units) were purchased at an
        average cost of $22.05 per unit (2005 - $18.02 per Unit).

    13. INCOME TAXES

        The provision for income taxes differs from the results which would
        be obtained by applying the combined federal and provincial income
        tax rate to net income before taxes. The difference results from the
        following:

                                                         -------------------
                                                              Year      Year
                                                             Ended     Ended
                                                          December  December
                                                          31, 2006  31, 2005
                                                                 $         $
                                                          -------------------
        Earnings from continuing operations before
         income taxes                                       15,172    11,479
        Net earnings from discontinued operations               68        (1)
                                                          -------------------
                                                            15,240    11,478

        Less income attributable to NPREIT not
         subject to future income tax                      (13,927)   (8,920)
                                                          -------------------

        Income in corporate subsidiaries                     1,313     2,558

        Income tax rate based on basic and weighted
         average rates                                       22.83%    21.12%
                                                          -------------------

        Expected income tax expense from statutory
         income tax rate                                       300       547

        Increase (decrease) in taxes resulting from:
          Large corporation tax                                  -        28
          Decrease in future income tax rates                 (770)        -
          Adjustment to tax losses utilized to carry
           forward and other tax assets                         60        78
          Non-deductible expenses                              (52)     (138)
          Adjustment to future income tax liabilities,
           and other                                          (561)     (567)
                                                          -------------------
        Income tax recovery                                 (1,023)      (52)
                                                          -------------------

        The balance of future income tax liability of $10,184,000
        (2005 - $11,541,000) relates to the rental properties of the
        corporate subsidiaries. It results from the differences in carrying
        values for accounting purposes versus those for tax purposes.

    14. UNITHOLDERS' CAPITAL

        Total NPREIT Trust units and Class B units issued, outstanding and
        eligible for distributions at December 31, 2006 is 20,276,290
        (2005 - 16,046,681), representing net proceeds of $261,730,134
        (net of issue costs of $14,927,071) (2005 - $176,958,424 net of issue
        costs of $11,272,569). The number of units issued and outstanding is
        as follows:

        Restated - Note 3
        ---------------------------------------------------------------------
                                    Trust       Issue  Class B LP       Issue
        Date      Description       Units       Price       Units       Price
        ---------------------------------------------------------------------
        December     Opening
         31, 2004     balance  10,399,120           -   3,099,637           -
        Change in accounting
         policy (Note 3)                            -           -           -
        ---------------------------------------------------------------------
        December 31, 2004 -
         restated
        January
         6, 2005    Offering    2,490,000      $16.10           -           -
        January
         6, 2005    Issue costs         -           -           -           -
        January     LTIP units
         10, 2005    issued        10,634      $14.72           -           -
        January     LTIP units
         14, 2005    issued           726      $15.25           -           -
        March 1,    Property
         2005        acquisition        -           -      45,000       17.56
        September   LTIP units
         29, 2005    issued         1,564      $12.12           -           -
                    LP units
                     exchanged    775,803           -    (775,803)          -
        ---------------------------------------------------------------------
         December
          31, 2005             13,677,847               2,368,834

        ----------------------------------------------
                                         TOTAL
                               -----------------------
        Date      Description       Units     $(000's)
        ----------------------------------------------
        December     Opening
         31, 2004     balance  13,498,757     137,803
        Change in accounting
         policy (Note 3)                -         (28)
        December 31, 2004 -
         restated                             137,775
        January
         6, 2005    Offering    2,490,000      40,089
        January
         6, 2005    Issue costs         -      (1,937)
        January      LTIP units
         10, 2005    issued        10,634         157
        January     LTIP units
         14, 2005    issued           726          11
        March 1,    Property
         2005        acquisition   45,000         790
       September    LTIP units
         29, 2005    issued         1,564          19
                    LP units
                     exchanged          -           -
        ----------------------------------------------
        December
         31, 2005              16,046,681     176,904


        Restated - Note 3
        ---------------------------------------------------------------------
                                    Trust       Issue  Class B LP       Issue
        Date      Description       Units       Price       Units       Price
        ---------------------------------------------------------------------

        January     LTIP units
         04, 2006    issued        21,765      $15.13           -           -
        February    LTIP units
         13, 2006    issued           250      $16.26           -           -
        February    Property
         26, 2006    acquisition        -           -     520,730      $19.20
        February
         26, 2006   Issue costs         -           -           -           -
        April       Property
         01, 2006    acquisition        -           -       7,961      $22.80
        April
         21, 2006   Offering    3,540,000      $21.20           -           -
        April
         21, 2006   Issue costs         -           -           -           -
        April       Property
         21, 2006    acquisition        -           -      79,758      $22.80
        May 18,     LTIP units
         2006        issued        30,208      $17.15           -           -
        June 01,    Property
         2006        acquisition        -           -      23,600      $22.60
        July 10,    LTIP units
         2006        issued           500      $17.63           -           -
        September
         30, 2006   Issue costs         -           -           -           -
        December    LTIP units
         1, 2006     issued         1,156      $18.52           -           -
        December    LTIP units
         19, 2006    issued         3,681      $18.22           -           -
                    LP units
                     exchanged    577,260           -    (577,260)          -
        ---------------------------------------------------------------------
        December
         31, 2006              17,852,667               2,423,623
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        ----------------------------------------------
                                         TOTAL
                               -----------------------
        Date      Description       Units     $(000's)
        ----------------------------------------------

        January     LTIP units
         04, 2006    issued        21,765         329
        February    LTIP units
         13, 2006    issued           250           4
        February    Property
         26, 2006    acquisition  520,730       9,998
        February
         26, 2006   Issue costs         -         (17)
        April       Property
         01, 2006    acquisition    7,961         182
        April
         21, 2006   Offering    3,540,000      75,048
        April
         21, 2006   Issue costs         -      (3,609)
        April       Property
         21, 2006    acquisition   79,758       1,818
        May 18,     LTIP units
         2006        issued        30,208         518
        June 01,    Property
         2006        acquisition   23,600         486
        July 10,    LTIP units
         2006        issued           500           8
        September
         30, 2006   Issue costs         -         (27)
        December    LTIP units
         1, 2006     issued         1,156          21
        December    LTIP units
         19, 2006    issued         3,681          67
                LP units
                 exchanged              -           -
        ----------------------------------------------
        December
         31, 2006              20,276,290     261,730
        ----------------------------------------------
        ----------------------------------------------


    Trust units

        Total number of units outstanding at December 31, 2006 is 17,852,667
        (2005 - 13,677,847) representing a net book value of $231,773,242
        (2005 - $150,733,094), net of issue costs.

        Class B Exchangeable Limited Partnership Units and Special Voting
        Units

        As at December 31, 2006, NPREIT has 2,423,623 Class B Units
        (2005 - 2,368,834) of a controlled limited partnership outstanding
        representing a value of $29,956,892 (2005 - $26,225,331).

    15. NET EARNINGS PER UNIT INFORMATION

                                                    ------------------------
                                                     Year Ended   Year Ended
                                                    December 31, December 31,
                                                           2006         2005
                                                              $            $
                                                     ------------------------
        Earnings from continuing operations              16,195       11,531
        Earnings from discontinued operations                68           (1)
                                                     ------------------------
        Net earnings                                     16,263       11,530
                                                     ------------------------
                                                     ------------------------

        Weighted average units for basic earnings
         per unit                                    19,065,782   16,005,204
        Effect of dilutive units to be issued in
         respect of the long-term incentive plan         47,628       89,452
                                                     ------------------------
        Weighted average units for diluted
         earnings per unit                           19,113,410   16,094,656
                                                     ------------------------
                                                     ------------------------

        Earnings per unit:

        Basic:
          Earnings from continuing operations              0.85         0.72
          Earnings from discontinued operations               -            -
                                                     ------------------------
                                                           0.85         0.72
                                                     ------------------------
                                                     ------------------------

        Diluted:
          Earnings from continuing operations              0.85         0.72
          Earnings from discontinued operations               -            -
                                                     ------------------------
                                                           0.85         0.72
                                                     ------------------------
                                                     ------------------------


    16. GUARANTEES AND COMMITMENTS

        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.

        Guarantees for equity accounted investments and proportionately
        consolidated joint ventures total $7.6 million at December 31, 2006
        (2005 - $1.3 million). Of this amount, $7.0 million has been included
        in the mortgage balance payable (2005 - $0.8 million). The mortgages
        bear interest at rates ranging from 4.54% to 7.50% and mature June,
        2008 to September, 2011 (December 31, 2005 - 5.10% to 7.50% and
        mature September, 2007 to January, 2012). The mortgages are secured
        by specific charges against the properties owned by the corporations
        and joint ventures. NPREIT would be liable in the event of a default
        of the corporation or joint venture.

        During 2006, NPREIT entered into an agreement for the construction of
        an industrial warehouse located in Fort St. John, B.C. for a total
        price of $5.2 million. At December 31, 2006, NPREIT has advanced
        $4.6 million and has an outstanding commitment of $0.6 million
        related to the construction of this rental property. The property was
        completed in January, 2007.

    17. DISCONTINUED OPERATIONS

        On November 1, 2006, NPREIT disposed of a rental property in Fort St.
        John's, B.C. comprised of 66 units. The following tables set forth
        the results of operations associated with these discontinued
        operations:

                                                          -------------------
                                                              Year      Year
                                                             Ended     Ended
                                                          December  December
                                                          31, 2006  31, 2005
                                                                 $         $
                                                          -------------------
        REVENUE
          Rental property revenue                              474         4
          Laundry and other income                               4         -
          Rental property operating expenses                  (157)       (2)
                                                          -------------------
        Net operating income                                   321         2

        EXPENSES
          Interest on mortgages                                126         2
          Amortization                                         127         1
                                                          -------------------
                                                               253         3
                                                          -------------------
        EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS            68        (1)
                                                          -------------------
                                                          -------------------


                                                              2006      2005
                                                                 $         $
                                                          -------------------
        Assets held for sale                                   337       405
                                                          -------------------
                                                          -------------------
        Liabilities relating assets held for sale              391       406
                                                          -------------------
                                                          -------------------


    18. SEGMENTED INFORMATION

        NPREIT considers residential, execusuites, commercial and long term
        care income producing properties to be separate segments operating in
        five provinces/ territories in Canada. Segmented information for
        NPREIT is provided below:

                                                New-
                                              found-
                            Alberta     B.C.    land     NWT Nunavut   Total
        December 31, 2006         $       $        $      $       $       $
                             ------------------------------------------------
          Residential         63,038  33,913  57,086  89,869 122,631 366,537
          Execusuites              -       -   9,164   8,496  10,475  28,134
          Commercial           3,261  11,068       -  22,755  23,311  60,395
          Long term care
           properties        128,114  14,383       -       -       - 142,497
          Trust                9,507       -       -       -       -   9,507
                             ------------------------------------------------
          TOTAL ASSETS       203,920  59,364  66,250 121,120 156,416 607,070
                             ------------------------------------------------
                             ------------------------------------------------


                                                New-
                                              found-
                             Alberta     B.C.   land     NWT Nunavut   Total
        December 31, 2005          $       $       $       $       $       $
                             ------------------------------------------------
          Residential         61,892  12,809  53,997  86,889 129,542 345,129
          Execusuites              -       -   8,330   6,228  10,640  25,198
          Commercial           3,355       -       -  22,358  23,207  48,920
          Long term care
           properties              -       -       -       -       -       -
          Trust                7,896       -       -       -       -   7,896
                             ------------------------------------------------
          TOTAL ASSETS        73,143  12,809  62,327 115,475 163,389 427,143
                             ------------------------------------------------
                             ------------------------------------------------

        NPREIT considers residential, execusuites, commercial and long term
        care income producing properties to be separate segments operating in
        five provinces/territories in Canada. The accounting policies of the
        segments are as described in the significant accounting policies 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 Trust and are not allocated to the defined segments.
        Segmented information for NPREIT is provided below:


                                             New-
         Year ended                        found-
         December 31,   Alberta     B.C.     land      NWT  Nunavut    Total
          2006                $        $        $        $        $        $
                        -----------------------------------------------------
        Rental
         properties
         revenue         19,950    5,598    9,781   23,439   23,995   82,763
        Laundry and
         other income       342      171      264      306      165    1,248
        Rental
         properties
         operating
         expenses        (4,287)  (2,870)  (5,904) (11,361)  (6,078) (30,500)
                        -----------------------------------------------------
        Net operating
         income          16,005    2,899    4,141   12,384   18,082   53,511
        EXPENSES
        Interest on
         mortgages        5,093    1,344    1,554    3,686    4,489   16,166
        Amortization      4,236    1,001    1,599    4,563    5,593   16,992
                        -----------------------------------------------------
                          9,329    2,345    3,153    8,249   10,082   33,158
                        -----------------------------------------------------
        INCOME FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            6,676      554      988    4,135    8,000   20,353


                                             New-
        Year ended                         found-
          December      Alberta     B.C.     land      NWT  Nunavut    Total
          31, 2005            $        $        $        $        $        $
                        -----------------------------------------------------


        Rental
         properties
         revenue         10,352      520    8,265   20,566   23,293   62,996
        Laundry and
         other income       162        4      112      172       27      477
        Rental
         properties
         operating
         expenses        (3,902)    (316)  (4,604)  (9,589)  (5,898) (24,309)
                        -----------------------------------------------------
        Net operating
         income           6,612      208    3,773   11,149   17,422   39,164

        EXPENSES
        Interest on
         mortgages        1,741       31      625    3,328    4,687   10,412
        Amortization      2,339      101    1,435    3,582    5,203   12,660
                        -----------------------------------------------------
                          4,080      132    2,060    6,910    9,890   23,072
                        -----------------------------------------------------

        INCOME FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            2,532       76    1,713    4,239    7,532   16,092


                                                          Long term
                                                               care
                                Residen-  Commer-   Execu-  proper-
        Year ended                  tial     cial   suites     ties    Total
        December 31, 2006              $        $        $        $        $
                                 --------------------------------------------
        Rental properties
         revenue                  58,307    8,642    7,057    8,757   82,763
        Laundry and other
         income                    1,168        7       73        -    1,248
        Rental properties
         operating expenses      (23,756)  (2,986)  (3,729)     (29) (30,500)
                                 --------------------------------------------
        Net operating income      35,719    5,663    3,401    8,728   53,511

        EXPENSES
        Interest on mortgages     10,218    1,212      955    3,871   16,166
        Amortization              11,817    1,845    1,248    2,082   16,992
                                 --------------------------------------------
                                  22,035    3,057    2,204    5,863   33,158
                                 --------------------------------------------

        INCOME FROM CONTINUING
          OPERATIONS BEFORE
          OTHER ITEMS             13,439    2,606    1,443    2,865   20,353


                                                          Long term
                                                               care
                                Residen-  Commer-   Execu-  proper-
        Year ended                  tial     cial   suites     ties    Total
        December 31, 2005              $        $        $        $        $
                                 --------------------------------------------

        Rental properties
         revenue                  51,445    4,509    7,042        -   62,996
        Laundry and other
         income                      414        -       63        -      477
        Rental properties
         operating expenses      (19,518)  (1,980)  (2,811)       -  (24,309)
                                 --------------------------------------------
        Net operating income      32,341    2,529    4,294        -   39,164

        EXPENSES
        Interest on mortgages      8,973      994      445        -   10,412
        Amortization               9,958    1,324    1,378        -   12,660
                                 --------------------------------------------
                                  18,931    2,318    1,823        -   23,072
                                 --------------------------------------------
        INCOME FROM CONTINUING
         OPERATIONS BEFORE
         OTHER ITEMS              13,146      211    2,735        -   16,092


    19. RELATED PARTY TRANSACTIONS

        A trustee leases space from NPREIT under normal commercial terms.
        The amounts paid during the period for the space were $407,250 for
        the twelve months ended December 31, 2006 (2005 - $414,989). Amounts
        outstanding in accounts receivable pertaining to this lease were
        $ nil at December 31, 2006 (2005 - $ nil).

        A trustee of NPREIT is a senior partner of a law firm that provides
        and continues to provide legal services to NPREIT in the ordinary
        course of business. Fees paid during the twelve month period ended
        December 31, 2006 were $245,704 (2005 - $140,029).

        A trustee of NPREIT is the Chairman of AgeCare Investments Ltd.
        (AgeCare), which leases six long term care facilities from NPREIT.
        For the year ended December 31, 2006, NPREIT earned rental income
        from Agecare totalling $8,757,000 (December 31, 2005 - $nil).
        Amounts outstanding in accounts receivable pertaining to this lease
        were $ nil at December 31, 2006 (2005 - $ nil). In addition, AgeCare
        is paid an annual advisory fee of $120,000 for advisory services
        provided to NPREIT respecting prospective acquisitions of long term
        care properties. For the year ended December 31, 2006, NPREIT paid
        $80,000 for these services (2005 - $ nil).

    20. FINANCIAL INSTRUMENTS

        Financial instruments include loans receivable, prepaid expenses and
        other assets, accounts receivable, tenant security deposits,
        mortgages payable, accounts payable and accrued liabilities, income
        taxes payable and bank indebtedness. Unless otherwise specified
        (see Note 7), the fair value of these instruments approximates their
        carrying values.

        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's management is closely monitoring the effect of oil prices on
        earnings. An energy conservation team has been established and each
        region reports weekly on measures being taken to conserve utilities.
        A program to install energy efficient lighting and low volume
        bathroom fixtures has been accelerated.

        Some of the price rises in 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.

    21. SUBSEQUENT EVENTS

        Subsequent to December 31, 2006, NPREIT completed or entered into
        agreements for the following acquisitions:

        a) The acquisition of 3 long term care facilities located in
           Newfoundland for a total purchase price of $17.7 million. These
           acquisitions are expected to close in the second quarter of 2007
           and will be financed through a combination of assumption of
           mortgages, issuance of limited partnership units and cash.

        b) The acquisition of 282 residential units located in Fort Nelson,
           British Colombia for a purchase price of $12.0 million. This
           acquisition is expected to close in the second quarter of 2007 and
           will be financed through a combination of assumption of mortgages
           and cash.

        On February 1, 2007, NPREIT completed the sale of a commercial
        property located in Inuvik, for gross proceeds of $1.1 million.
        NPREIT's interest in this rental property was 50% as this property
        was owned by Inuvik Commercial Properties Zheh Gwizhu Limited
        Partnership.

        Subsequent to December 31, 2006, NPREIT completed the refinancing of
        six mortgages totalling $19.1 million with interest rates from 4.65%
        to 4.66% and terms to maturity ranging from 9 to 11 years. Proceeds
        from the refinancings were used to repay existing mortgages payable
        totalling $9.5 million and a portion of the revolving line of credit.

        Subsequent to December 31, 2006, by mutual agreement, NPREIT and
        NewNorth Projects Ltd. agreed not to renew the Development Services
        Agreement which expires on May 20, 2007.

    22. COMPARATIVE FIGURES

        Certain of the prior year's figures have been reclassified to conform
        with the current presentation.
    





For further information:

For further information: Debra Boyle, Chief Financial Officer at (403)
531-0726 or B. James Britton, President & CEO at (403) 531-0725 or email
info@npreit.com.

Organization Profile

Northern Property Real Estate Investment Trust

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