Record year for Northern Property



    DIPU reaches $1.82 for 2007

    CALGARY, March 11 /CNW/ - Northern Property REIT (NPR.UN - TSX) announced
its financial results for the three and twelve months ended December 31, 2007.

    
    2007 HIGHLIGHTS:
    -   Annual DIPU up 10.4% over 2006 to $1.82 per unit
    -   Q4 2007 DIPU increases 15% compared to Q4 2006
    -   Same door growth of 5% in 2007, improves throughout the year
    -   Combined market and renovation vacancy declines to 4.7% from 4.9%
    -   Year end commercial vacancy 1.6%
    -   NPREIT confident it will qualify for the REIT exemption
    

    "2007 was a stellar year for Northern Property," reported Jim Britton,
President and CEO. "Rental market conditions were generally very positive in
our operating areas contributing to same door growth of 5%. The REIT was also
able to execute a record level of acquisition activity investing
$189.7 million on an accretive basis during 2007. 1,015 rental units and
386,449 square feet of commercial property were acquired during the year."
    Annual revenue exceeded the $100 million level for the first time
reaching a total of $104.4 million. Net operating income increased 28% to
$68.7 million. 2007 DIPU of $1.82 was up 10.4% from its 2006 level of $1.635.
Q4 2007 DIPU was up 15% to $0.45 from $0.39. The strong financial performance
of NPREIT during 2007 led to its Board of Trustees increasing cash
distributions 7% to $1.48 per unit annually which became effective last
November.
    Rental market conditions for the REIT were sound in 2007 with overall
multi-family market vacancy loss holding steady at 3.8% and vacancy loss
associated with renovation activity declining to 0.9% from 1.1% a year
earlier. Vacancy rates declined rapidly particularly in Yellowknife and Inuvik
late in the year. Nunavut and Newfoundland vacancy was lower and Fort McMurray
continued to be essentially full during the year. Vacancy was higher in
northern British Columbia and Grande Prairie reflecting softer conditions in
the forestry and natural gas industries. The REIT's furnished executive suites
posted very strong financial results and commercial vacancy was very low at
1.6% at year end. Rents were 100% current in NPREIT's master leased seniors'
buildings.
    During Q4 the REIT closed on $16.4 million of acquisitions - 135 rental
units in Newfoundland and 11 in Yellowknife. The REIT also acquired a
25,000 square foot commercial building in Yellowknife adjoining the downtown
commercial property it acquired last July. Going in, unlevered capitalization
rates on these properties were in the 9% range. The REIT sold its 40% interest
in Red Deer's Vista Village partnership and booked a gain of $3.2 million.
Subsequent to year end acquisition activity continued to be strong with
$36.4 million in closings planned for 360 residential units and two small
commercial buildings.
    Northern Property REIT's payout ratio was 77.2% of DIPU for the 2007
calendar year. The payout ratio increased slightly to 80.2% of DIPU for Q4
2007, reflecting the increased level of cash distributions and the lower
margins associated with early winter in the REIT's northern portfolios.
Weighted average interest costs declined to 5.39% from 5.55%. Debt to gross
book value at December 31, 2007 was 53.8%.
    "The advantages of our geographic diversification are very evident just
now," Mr. Britton went on to say. "The strength of our portfolio in 4 of our 5
operating locations is more than offsetting the softness we are experiencing
in northern B.C. We were pleased to learn about the re-opening of a closed
mill in Fort Nelson and are following with interest the surging natural gas
and coal industries throughout that area. Our fundamentals seem very positive
looking ahead."
    NPREIT continues to review the SIFT legislation with a view to adjusting
its operations to mitigate the impact of the new tax measures. Excluding a
$16.7 million charge for future income taxes booked in Q2 because of the SIFT
legislation, the REIT would have had net earnings of $24.4 million for the
year compared to $16.3 million for 2006. The REIT is confident it can take the
appropriate actions to ensure that it will qualify as a REIT under the
definitions in the legislation.


    
    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Balance Sheets
    At December 31
    (Thousands of dollars)
    -------------------------------------------------------------------------
                                                         2007         2006
                                                           $            $
    -------------------------------------------------------------------------

    ASSETS

      Rental properties and other capital
       assets (Note 4)                                  765,447      576,375
      Capital improvements in progress                    1,957        3,092
      Capital assets under development                    1,257        4,621
      Prepaid expenses and other assets (Note 5)         12,893        8,020
      Accounts receivable                                 5,059        6,665
      Tenant security deposits                            2,917        2,942
      Deferred rent receivable                            2,039          797
      Loans receivable                                      479          552
      Intangible assets (Note 6)                          7,062          732
      Assets held for sale (Note 16)                          -          337
    -------------------------------------------------------------------------
                                                        799,110      604,133
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES

      Mortgages payable (Note 7)                        401,239      318,330
      Bank indebtedness (Note 8)                         25,304       22,307
      Loans payable (Note 9)                                670          710
      Accounts payable and accrued liabilities           13,813       12,432
      Distributions payable                               3,083        2,332
      Future income tax liability (Note 12)              36,183       10,184
      Intangible liabilities (Note 6)                       571          267
      Financial instrument (Note 19)                        180            -
      Liabilities related to assets held
       for sale (Note 16)                                     -          391
    -------------------------------------------------------------------------
                                                        481,043      366,953
    -------------------------------------------------------------------------

    UNITHOLDERS' EQUITY                                 318,067      237,180
    -------------------------------------------------------------------------
                                                        799,110      604,133
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to the consolidated financial statements.


    APPROVED BY THE BOARD

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



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Statements of Earnings and Comprehensive Earnings
    Year Ended December 31
    (Thousands of dollars, except per unit amounts)
    -------------------------------------------------------------------------
                                                         2007         2006
                                                           $            $
    -------------------------------------------------------------------------
    REVENUE
      Rental revenue                                    102,223       82,763
      Other property income                               2,195        1,248
    -------------------------------------------------------------------------
                                                        104,418       84,011
      Operating expenses                                 35,752       30,500
    -------------------------------------------------------------------------
    Net operating income                                 68,666       53,511

    EXPENSES
      Interest on mortgages                              20,380       16,166
      Amortization                                       22,012       16,992
    -------------------------------------------------------------------------
                                                         42,392       33,158
    -------------------------------------------------------------------------
    EARNINGS FROM CONTINUING OPERATIONS
     BEFORE THE UNDERNOTED                               26,274       20,353
    -------------------------------------------------------------------------

    OTHER INCOME (EXPENSES)
      Trust administration costs                         (5,542)      (4,784)
      Interest on operating facility                     (1,565)      (1,532)
      Provision for impairment of rental
       properties (Note 4)                                    -         (225)
      Interest and other income                             817          703
      Gain on settlement of debt                          1,454            -
      Gain on sale of rental properties                   3,321          657
    -------------------------------------------------------------------------
                                                         (1,515)      (5,181)
    -------------------------------------------------------------------------
    EARNINGS FROM CONTINUING OPERATIONS
     BEFORE INCOME TAXES                                 24,759       15,172
    -------------------------------------------------------------------------

    INCOME TAXES
      Current                                               541          334
      Future expense (recovery) (Note 12)                16,523       (1,357)
    -------------------------------------------------------------------------
                                                         17,064       (1,023)

    -------------------------------------------------------------------------
    EARNINGS FROM CONTINUING OPERATIONS                   7,695       16,195
    -------------------------------------------------------------------------
    EARNINGS (LOSS) FROM DISCONTINUED
     OPERATIONS (Note 16)                                    (5)          68
    -------------------------------------------------------------------------
    NET EARNINGS                                          7,690       16,263
    Other comprehensive earnings                             55            -
    -------------------------------------------------------------------------
    COMPREHENSIVE EARNINGS                                7,745       16,263
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net Earnings per unit (Note 14)
      Basic and Diluted:
        Continuing operations                             $0.34        $0.85
        Discontinued operations                               -            -
    -------------------------------------------------------------------------
                                                          $0.34        $0.85
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to the consolidated financial statements.



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Statements of Unitholders' Equity
    (Thousands of dollars)
    -------------------------------------------------------------------------
                            Cumulative                Cumulative   Cumulative
                              Capital    Contributed      Net        Distri-
                             (Note 13)     Surplus     Earnings      butions
    -------------------------------------------------------------------------
    December 31, 2006         261,730        1,249       55,664      (81,463)
      Comprehensive earnings        -            -        7,690            -
      Distributions to
       unitholders                  -            -            -      (31,691)
      Issuance of units       108,750            -            -            -
      Issuance costs           (4,718)           -            -            -
      Long-term incentive
       units granted                -          801            -            -
      Long-term incentive
       plan units issued        1,027       (1,027)           -            -
    -------------------------------------------------------------------------
    December 31, 2007         366,789        1,023       63,354     (113,154)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -----------------------------------------------
                            Accumulated
                               Other
                              Compre-
                              hensive
                             Earnings       Total
    -----------------------------------------------
    December 31, 2006               -      237,180
      Comprehensive earnings       55        7,745
      Distributions to
       unitholders                  -      (31,691)
      Issuance of units             -      108,750
      Issuance costs                -       (4,718)
      Long-term incentive
       units granted                -          801
      Long-term incentive
       plan units issued            -            -
    -----------------------------------------------
    December 31, 2007              55      318,067
    -----------------------------------------------
    -----------------------------------------------



    -------------------------------------------------------------------------
                            Cumulative                Cumulative   Cumulative
                              Capital    Contributed      Net        Distri-
                             (Note 13)     Surplus     Earnings      butions
    -------------------------------------------------------------------------
    December 31, 2005         176,904        1,513       39,401      (56,010)
      Comprehensive earnings        -            -       16,263            -
      Distributions to
       unitholders                  -            -            -      (25,453)
      Issuance of units        87,532            -            -            -
      Issuance costs           (3,653)           -            -            -
      Long term incentive
       units granted                -          683            -            -
      Long term incentive
       plan units issued          947         (947)           -            -
    -------------------------------------------------------------------------
    December 31, 2006         261,730        1,249       55,664      (81,463)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    -----------------------------------------------
                            Accumulated
                               Other
                              Compre-
                              hensive
                             Earnings       Total
    -----------------------------------------------
    December 31, 2005               -      161,808
      Comprehensive earnings        -       16,263
      Distributions to
       unitholders                  -      (25,453)
      Issuance of units             -       87,532
      Issuance costs                -       (3,653)
      Long term incentive
       units granted                -          683
      Long term incentive
       plan units issued            -            -
    -----------------------------------------------
    December 31, 2006               -      237,180
    -----------------------------------------------
    -----------------------------------------------

    See accompanying notes to the consolidated financial statements.



    Northern Property Real Estate Investment Trust
    Consolidated Statements of Cash Flows
    Year Ended December 31
    (Thousands of dollars)
    -------------------------------------------------------------------------
                                                         2007         2006
                                                           $            $
    -------------------------------------------------------------------------
    CASH FLOWS RELATED TO THE FOLLOWING ACTIVITIES:
    OPERATING
    Net earnings from continuing operations               7,695       16,195
    Adjustments for:
      Deferred rental revenue                            (1,228)        (768)
      Amortization of capital assets                     21,882       16,831
      Amortization of leasing costs                         130          161
      Amortization of fair value of debt                    322           16
      Amortization of intangible assets
       and liabilities                                     (295)        (198)
      Gain on settlement of debt                         (1,454)           -
      Gain on sale of rental properties                  (3,321)        (657)
      Provision for impairment of rental assets               -          225
      Future income taxes (recovery)                     16,523       (1,357)
      Long-term incentive plan                              801          683
      Other comprehensive earnings                           55            -
    -------------------------------------------------------------------------
      Cash flows from continuing operations              41,110       31,131
      Cash flows from (used in) discontinued operations      (5)         195
      Changes in non-cash working capital                (5,736)      (7,465)
    -------------------------------------------------------------------------
                                                         35,369       23,861
    -------------------------------------------------------------------------
    FINANCING
      Proceeds from public offering
       (net of issue costs)                             100,276       71,394
      Proceeds from mortgages and loans                  73,844      151,616
      Proceeds from acquisition facility                  9,058       13,683
      Proceeds from sale of rental properties             3,904        4,455
      Repayment of mortgages and loans payable          (37,880)    (118,034)
      Repayment of acquisition facility                  (9,058)     (13,683)
      Distributions to unitholders                      (30,940)     (24,876)
    -------------------------------------------------------------------------
                                                        109,204       84,555
    -------------------------------------------------------------------------
    INVESTING
      Acquisition of rental properties
       and other assets                                (135,152)     (73,962)
      Capital assets under development and
       capital improvements                              (7,819)     (15,064)
      Building capital maintenance                       (4,599)      (3,704)
    -------------------------------------------------------------------------
                                                       (147,570)     (92,730)
    -------------------------------------------------------------------------
    NET DECREASE (INCREASE) IN BANK
     INDEBTEDNESS, END OF YEAR                           (2,997)      15,686
    BANK INDEBTEDNESS, BEGINNING OF YEAR                (22,307)     (37,993)
    -------------------------------------------------------------------------
    BANK INDEBTEDNESS, END OF YEAR                      (25,304)     (22,307)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SUPPLEMENTARY INFORMATION
      Interest paid                                      21,586       17,118
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Interest received                                     348          176
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Income taxes paid                                     206          387
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    See accompanying notes to the consolidated financial statements.



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Notes to the Consolidated Financial Statements
    Years ended December 31, 2007 and 2006
    (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.  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, capital improvements in progress and capital
        assets under development 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.

        Management allocates acquisition costs to land, building and
        intangible assets and liabilities based upon the best information
        available at the time of preparation of the financial statements. Any
        adjustments to these allocations will be reflected in the financial
        statements prospectively in subsequent financial statements.

        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 $ nil has been recorded for the year
        ended December 31, 2007 (December 31, 2006 - $225,000).

        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 using the effective interest
        method 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 REIT 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, in-place 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 values of above-market and below-market leases 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 values of in-place leases is calculated as the present value of
        the net operating income lost during a hypothetical expected lease-up
        period required to replace the existing leases at the date of
        purchase.

        Intangible assets and liabilities associated with the acquisition of
        real property are amortized over the remaining term of the associated
        lease.

    3.  CHANGE IN ACCOUNTING POLICY AND RECENT ACCOUNTING PRONOUNCEMENTS

        Change in accounting policy

        Effective January 1, 2007, NPREIT adopted the Canadian Institute of
        Chartered Accountants ("CICA") Handbook Section 1530, Comprehensive
        Income, CICA Handbook Section 3251, Equity, CICA Handbook Section
        3855, Financial Instruments - Recognition and Measurement, CICA
        Handbook Section 3861, Financial Instruments - Disclosure and
        Presentation and CICA Handbook Section 3865, Hedges. 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.

        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 impact 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.

        On December 1, 2006, the CICA issued Handbook Section 1535, Capital
        Disclosures. This section requires the disclosure of (i) an entity's
        objectives, policies and process for managing capital; (ii)
        quantitative data about an entity's managed capital; (iii) whether an
        entity has complied with capital requirements; and (iv) if an entity
        has not complied with such capital requirements, the consequences of
        such non-compliance. Section 1535 will be effective for NPREIT on
        January 1, 2008. The new standards will have no impact on the REIT's
        financial statements beyond the additional disclosure.

        New accounting standards are anticipated regarding the accounting for
        business combinations. The proposed CICA Exposure draft regarding
        business combinations may result in a decrease in NPREIT's earnings
        during periods in which acquisitions are completed as the proposed
        accounting standards would require the expensing of acquisition costs
        (such as legal costs) in connection with a business combination in
        the period in which they are incurred. Currently these costs are
        allocated to the cost of the assets acquired under the business
        combination and amortized over the expected useful life of the
        assets.

        In February 2008, the CICA issued Section 3064, Goodwill and
        Intangible Assets, replacing Section 3062, Goodwill and Other
        Intangible Assets and Section 3450, Research and Development Costs.
        Various changes have been made to other sections of the CICA Handbook
        for consistency purposes. The new Section will be applicable to
        financial statements relating to fiscal years beginning on or after
        October 1, 2008. Accordingly, the REIT will adopt the new standards
        for its fiscal year beginning January 1, 2009. It establishes
        standards for the recognition, measurement, presentation and
        disclosure of goodwill subsequent to its initial recognition and of
        intangible assets by profit-oriented enterprises. Standards
        concerning goodwill are unchanged from the standards included in the
        previous Section 3062. NPREIT is currently evaluating the impact of
        the adoption of this new Section on its consolidated financial
        statements. NPREIT does not expect that the adoption of this new
        Section will have a material impact on its consolidated financial
        statements.

    4.  RENTAL PROPERTIES AND OTHER CAPITAL ASSETS

        ---------------------------------------------------------------------
                                   2007                       2006
                               Accumulated  Net           Accumulated  Net
                                Amortiz-    Book           Amortiz-    Book
                         Cost     ation    Value    Cost     ation    Value
                           $        $        $        $        $        $
        ---------------------------------------------------------------------
        Land             82,332        -   82,332   49,233        -   49,233
        Buildings       724,355   55,525  668,830  553,615   37,832  515,783
        Furniture,
         fixtures
         and equipment    6,942    2,767    4,175    5,341    1,835    3,506
        Vehicles          1,050      561      489      860      404      456
        Capital and
         leasehold
         improvements    16,317    6,758    9,559   11,495    4,223    7,272
        Equipment under
         capital lease      212      150       62      212       87      125
        ---------------------------------------------------------------------
                        831,208   65,761  765,447  620,756   44,381  576,375
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        NPREIT periodically reviews the carrying value of 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 2007, NPREIT recorded a provision for
        impairment of rental properties of $ nil (2006 - $225,000)

        NPREIT acquired properties in 2007 for a total purchase price of
        $189.7 million (2006 - $183.0 million). The acquisitions were
        financed as follows:

        ---------------------------------------------------------------------
                                                         2007         2006
                                                           $            $
        ---------------------------------------------------------------------
        Property acquisitions:
          Mortgages, debt assumed and mezzanine
           repaid                                        51,788       92,395
          Class B LP Units issued                         3,728       12,484
          Cash paid                                     134,185       78,090
        ---------------------------------------------------------------------
        Total purchase price of property
         acquisitions                                   189,701      182,969
        Fair value adjustment to debt                       331       (6,499)
        Future tax liability capitalized on
         acquisition of rental properties                 9,475            -
        ---------------------------------------------------------------------
                                                        199,507      176,470
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Residential - units
          Rental                                            683          533
          Seniors'                                          332          960
        ---------------------------------------------------------------------
                                                          1,015        1,493
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Commercial square feet                          386,449       27,000
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    5.  PREPAID EXPENSES AND OTHER ASSETS

        ---------------------------------------------------------------------
                                                         2007         2006
                                                           $            $
        ---------------------------------------------------------------------
        Refundable deposits and mortgage proceeds
         held in trust                                    7,998        3,455
        Prepaid equity leases                             2,339        2,508
        Prepaid expenses                                  2,047        1,388
        Other                                               509          669
        ---------------------------------------------------------------------
                                                         12,893        8,020
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    6.  INTANGIBLE ASSETS AND LIABILITIES

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

        ---------------------------------------------------------------------
                                   2007                       2006
                               Accumulated  Net           Accumulated  Net
                                Amortiz-    Book           Amortiz-    Book
                         Cost     ation    Value    Cost     ation    Value
                           $        $        $        $        $        $
        ---------------------------------------------------------------------
        Above-market
         leases             313       97      216       94       63       31
        In-place leases   6,134      672    5,462      913      212      701
        Lease
         origination
         costs            1,570      186    1,384        -        -        -
        ---------------------------------------------------------------------
                          8,017      955    7,062    1,007      275      732
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Below-market
         leases           1,203      632      571      584      317      267
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    7.  MORTGAGES PAYABLE

        ---------------------------------------------------------------------
                                                         2007         2006
                                                           $            $
        ---------------------------------------------------------------------

        Mortgages payable                               415,664      327,739
        Fair value adjustment                            (8,379)      (6,472)
        Deferred financing costs                         (6,046)      (2,937)
        ---------------------------------------------------------------------
                                                        401,239      318,330
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Mortgages payable bear interest at rates ranging from 3.83% to 12.13%
        and have a weighted average rate of 5.39% as at December 31, 2007
        (December 31, 2006 - 5.55%). The mortgages are payable in monthly
        instalments of blended principal and interest of approximately
        $3.0 million. The mortgages mature between 2008 and 2021 and
        mortgages are secured by charges against specific properties.

        The fair value of mortgages payable at December 31, 2007 is
        approximately $408.9 million (December 31, 2006 - $329.3 million).

        Minimum future principal payments required are as follows:

                                                          $

        2008                                         65,624
        2009                                         49,841
        2010                                         26,822
        2011                                         23,660
        2012                                         40,552
        Subsequent                                  209,165
        ----------------------------------------------------
                                                    415,644
        ----------------------------------------------------
        ----------------------------------------------------

    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 December 31, 2007, NPREIT had utilized $25.3 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 December 31,
        2007, NPREIT had utilized $ nil (December 31, 2006 - $ nil).

    9.  LOANS PAYABLE

        ---------------------------------------------------------------------
                                                         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.                          211          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.                          459          481
        ---------------------------------------------------------------------
                                                            670          710
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    10. 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)
        Units granted - December 31, 2007                             34,771
        ---------------------------------------------------------------------
        TOTAL - December 31, 2007                                     43,586
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        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 December 31, 2007, a total of 125,663 LTIP units
        had vested and been issued (December 31, 2006 - 79,002).

        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.

    11. 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 year ended December 31, 2007, employees invested a
        total of $94,221 (2006 - $91,763) and the REIT contributed $32,644
        (2006 - $30,588). During the year ended December 31, 2007,
        5,749 units (2006 - 5,799 units) were purchased at an average cost
        of $23.77 per unit (2006 - $22.05 per unit).

    12. 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 $16.7 million was recorded. 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 rates
        of 28.0% to 29.5%.

        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 $36.2 million (December 31, 2006 -
        $10.2 million) using an expected income tax rate ranging from 19.63%
        to 29.5% (2006 - 19.68%). During 2007, $9.5 million was capitalized
        to buildings as a result of temporary differences between the book
        value and tax value of assets acquired during the year.

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

        ---------------------------------------------------------------------
                                                         2007         2006
                                                           $            $
        ---------------------------------------------------------------------
        Future tax liabilities arising from
         temporary differences between accounting
         and tax basis of:
          Rental property assets in corporate
           subsidiaries                                  10,007       10,184
          Acquisition of rental property assets
           in a business combination                      9,476            -
          Rental properties                              14,771            -
          Other assets                                    1,929            -
        ---------------------------------------------------------------------
                                                         36,183       10,184
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        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:

        ---------------------------------------------------------------------
                                                         2007         2006
                                                           $            $
        ---------------------------------------------------------------------

        Earnings from continuing operations before
         income taxes                                    24,759       15,172
        Net earnings (loss) from discontinued
         operations                                          (5)          68
        ---------------------------------------------------------------------
                                                         24,754       15,240

        Less income attributable to NPREIT not
         subject to future income tax                   (23,417)     (13,927)
        ---------------------------------------------------------------------

        Income in corporate subsidiaries                  1,337        1,313

        Income tax rate based on basic
         and weighted average rates                      20.75%       22.83%
        ---------------------------------------------------------------------

        Expected income tax expense from statutory
         income tax rate                                    277          300

        Increase (decrease) in current taxes
         resulting from:
          Non-deductible expenses                            (3)         (52)
          Sale of rental properties                         325            -
          Adjustment to tax losses utilized to
           carry forward and other tax assets                 -           60
          Other                                             (58)          26
        ---------------------------------------------------------------------
        Current income tax expense                          541          334
        ---------------------------------------------------------------------

        Increase (decrease) in future taxes
         resulting from:
          Future income taxes - corporate subsidiaries     (172)        (351)
          Decrease in future income tax rates              (567)      (1,006)
          Future income taxes relating to Bill-C52       16,700            -
          Adjustment to future income tax liabilities,
           and other                                        562            -
        ---------------------------------------------------------------------
        Future income tax expense (recovery)             16,523       (1,357)

        ---------------------------------------------------------------------
        Total income tax expense (recovery)              17,064       (1,023)
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    13. UNITHOLDERS' CAPITAL

        Total NPREIT Trust units and Class B 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 December 31, 2007 is 25,004,089
        (December 31, 2006 - 20,276,290), representing net proceeds of
        $366.8 million, net of issue costs of $19.6 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:

        ---------------------------------------------------------------------
                                             Trust        Issue      Class B
        Date           Description           Units        Price     LP Units
        ---------------------------------------------------------------------
        December 31,
         2005                           13,677,847                 2,368,834
        January 04,    LTIP units
         2006           issued              21,765       $15.13            -
        February 13,   LTIP units
         2006           issued                 250       $16.26            -
        February 26,   Property
         2006           acquisition              -            -      520,730
        February 26,
         2006          Issue costs               -            -            -
        April 01,      Property
         2006           acquisition              -            -        7,961
        April 21,
         2006          Offering          3,540,000       $21.20            -
        April 21,
         2006          Issue costs               -            -            -
        April 21,      Property
         2006           acquisition              -            -       79,758
        May 18, 2006   LTIP units
                        issued              30,208       $17.15            -
        June 01, 2006  Property
                        acquisition              -            -       23,600
        July 10, 2006  LTIP units
                        issued                 500       $17.63            -
        September 30,
         2006          Issue costs               -            -            -
        December 1,    LTIP units
         2006           issued               1,156       $18.52            -
        December 19,   LTIP units
         2006           issued               3,681       $18.22            -
                       LP units
                        exchanged          577,260            -     (577,260)
        ---------------------------------------------------------------------
        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               -            -            -
        November 1,    Property
         2007           acquisition              -            -       32,119
        November 1,
         2007          Issue costs               -            -            -
        Class B LP units exchanged         105,660            -     (105,660)
        ---------------------------------------------------------------------
        December 31,
         2007                           22,536,988                 2,467,101
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                                                                Total
                                             Issue
        Date           Description           Price        Units      $(000's)
        ---------------------------------------------------------------------
        December 31,
         2005                                        16,046,681      176,904
        January 04,    LTIP units
         2006           issued                   -       21,765          329
        February 13,   LTIP units
         2006           issued                   -          250            4
        February 26,   Property
         2006           acquisition         $19.20      520,730        9,998
        February 26,
         2006          Issue costs               -            -          (17)
        April 01,      Property
         2006           acquisition         $22.80        7,961          182
        April 21,
         2006          Offering                  -    3,540,000       75,048
        April 21,
         2006          Issue costs               -            -       (3,609)
        April 21,      Property
         2006           acquisition         $22.80       79,758        1,818
        May 18, 2006   LTIP units
                        issued                   -       30,208          518
        June 01, 2006  Property
                        acquisition         $22.60       23,600          486
        July 10, 2006  LTIP units
                        issued                   -          500            8
        September 30,
         2006          Issue costs               -            -          (27)
        December 1,    LTIP units
         2006           issued                   -        1,156           21
        December 19,   LTIP units
         2006           issued                   -        3,681           67
                       LP units
                        exchanged                -            -            -
        ---------------------------------------------------------------------
        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)
        November 1,    Property
         2007           acquisition         $23.17       32,119          744
        November 1,
         2007          Issue costs               -            -         (118)
        Class B LP units exchanged               -            -            -
        ---------------------------------------------------------------------
        December 31,
         2007                                        25,004,089      366,789
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Trust units

        Total number of trust units of the REIT outstanding as at
        December 31, 2007 is 22,536,988 (December 31, 2006 - 17,852,667)
        representing a net book value of $334.5 million (December 31, 2006 -
        $231.7 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 December 31, 2007, is 2,467,101 (December 31,
        2006 - 2,423,623) representing a net book value of $32.3 million
        (December 31, 2006 - $30.0 million).

    14. NET EARNINGS PER UNIT INFORMATION

        ---------------------------------------------------------------------
                                                         2007         2006
                                                           $            $
        ---------------------------------------------------------------------
        Earnings from continuing operations               7,695       16,195
        Earnings (loss) from discontinued
         operations (Note 16)                                (5)          68
        ---------------------------------------------------------------------
        Net Earnings                                      7,690       16,263
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Weighted average units for basic
         earnings per unit                           22,556,774   19,065,782
        Effect of dilutive units to be issued in
         respect of the long-term incentive plan         18,619       47,628
        ---------------------------------------------------------------------
        Weighted average units for diluted
         Net Earnings per unit                       22,575,393   19,113,410
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
        Basic and Diluted Net Earnings per unit:
          Continuing operations                           $0.34        $0.85
          Discontinued operations                             -            -
        ---------------------------------------------------------------------
                                                          $0.34        $0.85
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    15. 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.

        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.

        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 December 31, 2007, NPREIT has provided guarantees
        totalling $14.4 million (December 31, 2006 - $15.2 million). Of this
        amount, $7.2 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
        January, 2012).

        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, BC 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, BC 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 estimated 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 estimated
            total cost of construction, including the original cost of land,
            is approximately $22.9 million.

    16. DISCONTINUED OPERATIONS

        The results from discontinued operations include the financial
        results of a residential property located in Fort St. John, BC
        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:

        ---------------------------------------------------------------------
                                                         2007         2006
                                                           $            $
        ---------------------------------------------------------------------
          Rental revenue                                      -          474
          Other property income                               -            4
          Operating expenses                                 (2)        (157)
        ---------------------------------------------------------------------
        Net operating income                                 (2)         321
        EXPENSES
          Interest on mortgages                              (3)         126
          Amortization                                        -          127
        ---------------------------------------------------------------------
                                                             (3)         253
        ---------------------------------------------------------------------
        EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS         (5)          68
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------
          Assets held for sale                                -          337
          Liabilities relating assets held for sale           -          391
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    17. SEGMENTED INFORMATION

        NPREIT considers residential rental, execusuites, seniors' and
        commercial 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, except gain on
        sale of rental properties and gain on settlement of debt, included in
        the Consolidated Statement of Earnings are related only to the REIT
        and are not allocated to the defined segments. In 2007, gain on sale
        of rental properties was earned in the residential rental and
        commercial business segments in Alberta and the Northwest
        Territories, respectively. In 2006, gain on sale of rental properties
        was earned in the residential rental business segment in BC. Gain on
        settlement of debt was earned in the residential rental business
        segments in Nunavut and the Northwest Territories. Segmented
        information for NPREIT is provided below:

        ---------------------------------------------------------------------
        December 31,    Alberta     BC     Nfld      NWT    Nunavut   Total
        2007               $        $        $        $        $        $
        ---------------------------------------------------------------------
        Residential
          Rental        119,189   60,875   55,963   88,633  122,730  447,390
          Execusuites         -        -    9,921    7,438   10,015   27,374
          Seniors'      126,006   14,238   32,923        -        -  173,167
        ---------------------------------------------------------------------
                        245,195   75,113   98,807   96,071  132,745  647,931
        Commercial       11,423   21,872    1,273   87,980   23,281  145,829
        Trust             5,350        -        -        -        -    5,350
        ---------------------------------------------------------------------
        TOTAL ASSETS    261,968   96,985  100,080  184,051  156,026  799,110
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
        December 31,    Alberta     BC     Nfld      NWT    Nunavut   Total
        2006               $        $        $        $        $        $
        ---------------------------------------------------------------------
        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  132,920  534,312
        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

        ---------------------------------------------------------------------
                        Alberta     BC     Nfld      NWT    Nunavut   Total
        2007               $        $        $        $        $        $
        ---------------------------------------------------------------------
        Rental revenue   27,337   10,080   12,479   28,082   24,245  102,223
        Other income        562      293      381      727      232    2,195
        Operating
         expenses         5,205    4,642    5,725   13,302    6,878   35,752
        ---------------------------------------------------------------------
        Net operating
         income          22,694    5,731    7,135   15,507   17,599   68,666
        Interest on
         mortgages        8,026    1,584    1,969    4,301    4,500   20,380
        Amortization      5,934    2,088    2,301    5,702    5,987   22,012
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            8,734    2,059    2,865    5,504    7,112   26,274
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        GEOGRAPHIC SEGMENTS

        ---------------------------------------------------------------------
                        Alberta     BC     Nfld      NWT    Nunavut   Total
        2006               $        $        $        $        $        $
        ---------------------------------------------------------------------
        Rental revenue   19,950    5,598    9,781   23,439   23,995   82,763
        Other income        342      171      264      306      165    1,248
        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
        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
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            6,676      554      988    4,135    8,000   20,353
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        BUSINESS SEGMENTS

        ---------------------------------------------------------------------
                                                    Total
                                 Execu-            Residen-  Commer-
                        Rental   suites   Seniors'   tial     cial    Total
        2007               $        $        $        $        $        $
        ---------------------------------------------------------------------
        Rental revenue   65,834    7,920   14,159   87,913   14,310  102,223
        Other income      1,942      118        -    2,060      135    2,195
        Operating
         expenses        26,736    3,827       19   30,582    5,170   35,752
        ---------------------------------------------------------------------
        Net operating
         income          41,040    4,211   14,140   59,391    9,275   68,666
        Interest on
         mortgages       11,623      795    6,198   18,616    1,764   20,380
        Amortization     13,732    1,146    3,673   18,551    3,461   22,012
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS           15,685    2,270    4,269   22,224    4,050   26,274
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
                                                    Total
                                 Execu-            Residen-  Commer-
                        Rental   suites   Seniors'   tial     cial    Total
        2006               $        $        $        $        $        $
        ---------------------------------------------------------------------
        Rental revenue   58,307    7,057    8,757   74,121    8,642   82,763
        Other income      1,168       73        -    1,241        7    1,248
        Operating
         expenses       (23,756)  (3,729)     (29) (27,514)  (2,986) (30,500)
        ---------------------------------------------------------------------
        Net operating
         income          35,719    3,401    8,728   47,848    5,663   53,511
        Interest on
         mortgages      (10,218)    (955)  (3,781) (14,954)  (1,212) (16,166)
        Amortization    (11,817)  (1,248)  (2,082) (15,147)  (1,845) (16,992)
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS           13,684    1,198    2,865   17,747    2,606   20,353
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

    18. RELATED PARTY TRANSACTIONS

        A trustee of NPREIT owns a company that leases space from NPREIT
        under normal commercial terms. NPREIT earned rental revenue of
        $451,350 for the year ended December 31, 2007 (2006 - $407,250).
        Amounts outstanding in accounts receivable pertaining to this lease
        were $ nil at December 31, 2007 (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 year ended December 31, 2007 were $214,011 (2006 -
        $245,704).

        A trustee of NPREIT is the Chairman of AgeCare Investments Ltd.
        ("AgeCare"), which leases six seniors' properties from NPREIT. For
        the year ended December 31, 2007, NPREIT earned rental income,
        including rental income earned on a straight-line basis over the term
        of the lease, from AgeCare totalling $12.6 million (2006 -
        $8.8 million). Amounts outstanding in accounts receivable pertaining
        to this lease were $ nil at December 31, 2007 (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 year ended December 31,
        2007, NPREIT paid $120,000 for these services (2006 - $80,000).

    19. 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.

        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-term 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 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.

        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.

    20. SUBSEQUENT EVENTS

        Subsequent to December 31, 2007, NPREIT completed or entered into
        agreements for the acquisition of 274 residential rental units,
        86 long term care units and commercial space totalling 25,000 square
        feet for a total purchase price of $36.4 million. These acquisitions
        were or will be financed through a combination of mortgage financing,
        issuance of Class B Limited Partnership units and the operating
        facility.

        Subsequent to December 31, 2007, NPREIT completed mortgage financings
        totalling $26.0 million with interest rates from 4.42% to 6.48% and
        terms to maturity ranging from 2 to 17 years. Proceeds from the
        financings were used to repay existing debt and a portion of the
        operating facility.

        Subsequent to December 31, 2007, NPREIT obtained a temporary increase
        in its revolving line of credit of $5.0 million to $45.0 million to
        bridge the timing between the completion of acquisitions and
        obtaining mortgage financing.
    





For further information:

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

Organization Profile

Northern Property Real Estate Investment Trust

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