Strong Q2 for Northern Property



    CALGARY, Aug. 14 /CNW/ - Northern Property REIT (NPR.UN) announced its
financial results for the three months ended June 30, 2007.

    
    HIGHLIGHTS:

    -   Closed on 281 residential units and 182 seniors' units during Q2
    -   263 residential units in Fort McMurray, 53 seniors' units in
        Newfoundland and 237,000 square feet of commercial space in
        Yellowknife closed early in Q3
    -   $105 million offering of trust units arranged
    -   Distributable Income Per Unit increases by 11.3%
    -   Payout ratio declines to 80.9% of DIPU
    -   Bill C-52 results in $16 million charge to net earnings
    

    NPREIT recorded a net loss for the quarter ended June 30, 2007 of
$10.9 million as compared to net earnings of $4.1 million for the three months
ended June 30, 2006. For the six months ended June 30, 2007 the REIT recorded
a net loss of $6.7 million compared to net earnings of $6.5 million for the
comparable period in 2006.
    The net loss for the three and six months ended June 30, 2007 is the
result of a non-cash charge to earnings of $16 million relating to NPREIT's
share of the temporary differences between the accounting and tax basis of
NPREIT's assets and liabilities. The charge has no impact on the REIT's cash
flows or distributions. The charge relates to Northern Property's future
income tax liabilities as a result of Bill C-52, the Budget Implementation
Act, 2007. Bill C-52 provides for a transition period for publicly traded
concerns that existed prior to October 31, 2006 and is not expected to apply
to NPREIT until 2011. The Bill contains a "REIT Exemption" and ultimately
should not apply to entities which qualify as real estate investment trusts.
During the transition period Northern Property Real Estate Investment Trust
plans to take every possible step to obtain the REIT Exemption.
    Notwithstanding the above noted future tax charge, Northern Property
enjoyed strong Q2 financial results in each of its property asset classes.
Results were buoyed by positive rental market conditions and the usual Q2
seasonal declines in operating costs. Total property rental revenue increased
by 13.4% to $24.2 million from $21.4 million in the same quarter a year
earlier. During the same period Net Operating Income increased to $16 million,
up by 16%.
    President and CEO Jim Britton observed, "We are very pleased with the
trends we are observing in Q2. Residential rental operations are working very
well with improvements taking place in Yellowknife and St. John's. Furnished
executive suites enjoyed a great quarter and our growing head-leased seniors'
portfolio is making an accretive contribution to our results. From a business
standpoint, we are continuing to experience robust opportunities to both
acquire and develop property."
    Distributable income increased from $8.1 million in Q2, 2006 to
$9.4 million for the same quarter of 2007, up 16.4%. Distributable income per
unit for the same period was $0.464, up 11.3% from $0.417. The REIT maintained
its conservative financial style with debt at 58.7% of Gross Book Value (prior
to its issuance of trust units in July). A payout ratio of 80.6% of
distributable income was experienced in the first 6 months of 2007 compared to
81.8% for the first six months of 2006.
    NPREIT had a busy quarter on the acquisitions front closing during Q2 on
a 281 unit, $12 million apartment portfolio in Fort Nelson, B.C. and on
182 retirement units for $18.2 million in Newfoundland. The REIT also
successfully negotiated the purchase of several properties which closed after
the end of the quarter in mid-July. A 263 unit apartment portfolio in Fort
McMurray closed July 12 for $53.5 million and a 53 unit seniors' building in
St. John's for $4.0 million on July 16. On July 12 the REIT also closed its
acquisition of a 237,000 square foot office/retail complex in downtown
Yellowknife for $56.6 million.
    To fund the acquisition activity the REIT carried out a $105 million
public offering of trust units. 4,532,000 trust units were issued at
$23.17 per unit in a bought deal which closed July 11, 2007.
    "The results of our efforts in Q2 should produce favorable results for
unit holders this fall as these properties are absorbed", said Mr. Britton.
"All of the acquisitions are expected to be immediately accretive. Moreover,
the adjustment of our property mix to a better balance between net and gross
leases better protects NPREIT unit holder distributions from inflation in
operating costs". Northern Property revenues now consist of approximately 60%
gross leases and 40% triple net arrangements.
    For a full copy of the Management Discussion and Analysis and Financial
Statements please log on to www.sedar.com or www.npreit.com.


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

    ASSETS

      Rental properties and other capital
       assets (Note 4)                                  609,844      576,375
      Capital improvements in progress                    1,796        3,092
      Capital assets under development                        -        4,621
      Prepaid expenses and other assets (Note 5)         13,834        8,020
      Accounts receivable                                 5,675        6,665
      Tenant security deposits                            3,088        2,942
      Deferred rent receivable                            1,368          797
      Loans receivable                                      515          552
      Intangible assets (Note 6)                            853          732
      Assets held for sale (Note 17)                          -          337
    -------------------------------------------------------------------------
                                                        636,973      604,133
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES

      Mortgages payable (Note 7)                        328,739      318,330
      Bank indebtedness (Note 8)                         38,531       22,307
      Acquisition facility (Note 8)                       9,058            -
      Loans payable (Note 9)                                690          710
      Accounts payable and accrued
       liabilities (Note 10)                             11,954       12,432
      Distributions payable                               2,351        2,332
      Future income tax liability (Note 13)              26,051       10,184
      Intangible liabilities (Note 6)                       210          267
      Liabilities related to assets held for
       sale (Note 17)                                         -          391
    -------------------------------------------------------------------------
                                                        417,584      366,953

    UNITHOLDERS' EQUITY                                 219,389      237,180
    -------------------------------------------------------------------------
                                                        636,973      604,133
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    APPROVED BY THE BOARD

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



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Statements of Earnings and Comprehensive Earnings
    (Thousands of dollars, except per unit amounts)
    -------------------------------------------------------------------------
                                  Three Months ended       Six Months ended
                                        June 30                 June 30
                                   2007        2006        2007        2006
                                Unaudited   Unaudited   Unaudited   Unaudited
                                    $           $           $           $
    -------------------------------------------------------------------------
    REVENUE
      Rental properties revenue   23,706      21,032      46,051      38,725
      Laundry and other income       524         342         968         634
      Rental properties
       operating expenses         (8,186)     (7,557)    (16,791)    (15,228)
    -------------------------------------------------------------------------
    Net operating income          16,044      13,817      30,228      24,131
    -------------------------------------------------------------------------

    EXPENSES
      Interest on mortgages       (4,720)     (4,229)     (9,358)     (7,251)
      Amortization                (4,978)     (4,182)     (9,703)     (7,730)
    -------------------------------------------------------------------------
                                  (9,698)     (8,411)    (19,061)    (14,981)
    -------------------------------------------------------------------------
    EARNINGS FROM CONTINUING
     OPERATIONS BEFORE OTHER
     ITEMS AND INCOME TAXES        6,346       5,406      11,167       9,150
    -------------------------------------------------------------------------

    OTHER ITEMS
      Interest on operating
       facility                     (572)       (239)       (912)       (704)
      Interest and other income      266         149         420         327
      Trust administration costs  (1,436)     (1,216)     (2,626)     (2,259)
      Gain on settlement of debt     510           -       1,204           -
      Gain on sale of rental
       properties                      -           -          76           -
    -------------------------------------------------------------------------
                                  (1,232)     (1,306)     (1,838)     (2,636)
    -------------------------------------------------------------------------
    EARNINGS FROM CONTINUING
     OPERATIONS BEFORE INCOME
     TAXES                         5,114       4,100       9,329       6,514
    -------------------------------------------------------------------------

    INCOME TAXES
      Current                        114         108         231         203
      Future (recovery)
       (Note 13)                  15,924        (107)     15,833        (189)
    -------------------------------------------------------------------------
                                  16,038           1      16,064          14
    -------------------------------------------------------------------------

    EARNINGS (LOSS) FROM
     CONTINUING OPERATIONS       (10,924)      4,099      (6,735)      6,500
    EARNINGS (LOSS)) FROM
     DISCONTINUED OPERATIONS
     (NOTE 17)                         -          29          (5)         35
    -------------------------------------------------------------------------
                                 (10,924)      4,128      (6,740)      6,535
    -------------------------------------------------------------------------
    Other comprehensive earnings       -           -           -           -
    -------------------------------------------------------------------------
    COMPREHENSIVE EARNINGS
     (LOSS)                      (10,924)      4,128      (6,740)      6,535
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Comprehensive earnings (loss)
     per unit (Note 15)
      Basic and Diluted:
        Continuing operations     $(0.54)      $0.21      $(0.33)      $0.36
        Discontinued operations        -           -           -           -
    -------------------------------------------------------------------------
                                  $(0.54)      $0.21      $(0.33)      $0.36
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Statements of Unitholders' Equity
    (Thousands of dollars)
    -------------------------------------------------------------------------
                               Cumulative              Cumulative  Cumulative
                                 Capital   Contributed     Net       Distri-
                                (Note 14)    Surplus     Earnings    butions
    -------------------------------------------------------------------------
    December 31, 2006            261,730       1,249      55,664     (81,463)
    -------------------------------------------------------------------------
      Comprehensive earnings
       (loss)                          -           -      (6,740)          -
      Distributions to
       unitholders                     -           -           -     (14,038)
      New units issued             3,000           -           -           -
      Issuance costs                 (13)          -           -           -
      Long term incentive plan
       units issued                1,018      (1,018)          -           -
    -------------------------------------------------------------------------
    June 30, 2007                265,735         231      48,924     (95,501)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                Accumulated
                                   Other
                                  Compre-
                                  hensive
                                 Earnings     Total
    -------------------------------------------------
    December 31, 2006                  -     237,180
    -------------------------------------------------
      Comprehensive earnings
       (loss)                          -      (6,740)
      Distributions to
       unitholders                     -     (14,038)
      New units issued                 -       3,000
      Issuance costs                   -         (13)
      Long term incentive plan
       units issued                    -           -
    -------------------------------------------------
    June 30, 2007                      -     219,389
    -------------------------------------------------
    -------------------------------------------------



    -------------------------------------------------------------------------
                               Cumulative              Cumulative  Cumulative
                                 Capital   Contributed     Net       Distri-
                                (Note 14)    Surplus     Earnings    butions
    -------------------------------------------------------------------------
    December 31, 2005            176,904       1,513      39,401     (56,010)
    -------------------------------------------------------------------------
      Comprehensive earnings           -           -       6,535           -
      Distributions to
       unitholders                     -           -           -     (12,032)
      New units issued            87,532           -           -           -
      Issuance costs              (3,626)          -           -           -
      Long term incentive
       plan units issued             851        (851)          -           -
    -------------------------------------------------------------------------
    June 30, 2006                261,661         662      45,936     (68,042)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

                                Accumulated
                                   Other
                                  Compre-
                                  hensive
                                 Earnings     Total
    -------------------------------------------------
    December 31, 2006                  -     161,808
    -------------------------------------------------
      Comprehensive earnings
       (loss)                          -       6,535
      Distributions to
       unitholders                     -     (12,032)
      New units issued                 -      87,532
      Issuance costs                   -       (3626)
      Long term incentive plan
       units issued                    -           -
    -------------------------------------------------
    June 30, 2007                      -     240,217
    -------------------------------------------------
    -------------------------------------------------



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Consolidated Statements of Cash Flows
    (Thousands of dollars)
    -------------------------------------------------------------------------
                                  Three Months ended       Six Months ended
                                        June 30                 June 30
                                   2007        2006        2007        2006
                                Unaudited   Unaudited   Unaudited   Unaudited
                                    $           $           $           $
    -------------------------------------------------------------------------
    CASH FLOWS RELATED TO THE
     FOLLOWING ACTIVITIES:
     OPERATING
      Net earnings (loss) from
       continuing operations     (10,924)      4,099      (6,735)      6,500
      Adjustments for:
        Deferred rental revenue     (282)       (289)       (557)       (287)
        Amortization of capital
         assets                    4,939       4,142       9,628       7,660
        Amortization of fair
         value of debt                80          (4)        111         (13)
        Amortization of lease
         origination costs            39          44          75          83
        Amortization of above
         and below market leases     (29)        (44)        (63)        (96)
        Gain on settlement of
         debt                       (510)          -      (1,204)          -
        Gain on sale of rental
         properties                    -           -         (76)          -
        Future income taxes
         (recovery)               15,924        (107)     15,833        (189)
        Long-term incentive plan     200         188         388         375
    -------------------------------------------------------------------------
      Cash flows from
       continuing operations       9,437       8,029      17,400      14,033
      Cash flows from
       discontinued operations         -          71          (5)        107
      Changes in non-cash
       working capital             4,084       4,293      (7,707)     (2,916)
    -------------------------------------------------------------------------
                                  13,521      12,393       9,688      11,224
    -------------------------------------------------------------------------
    FINANCING
      Proceeds of public
       offering (net of issue
       costs)                        (30)     71,439         (30)     71,422
      Proceeds of mortgages and
       loans                       1,089      12,767      29,120      26,671
      Proceeds of acquisition
       facility                    9,058           -       9,058      13,438
      Repayment of capital
       lease liability               (13)        (13)        (26)        (25)
      Proceeds from sale of
       rental properties               -           -         538           -
      Repayment of mortgages
       and loans payable          (9,989)     (6,778)    (22,832)     (9,672)
      Repayment of acquisition
       facility                        -           -           -      (9,000)
      Distributions to
       unitholders                (7,019)     (6,242)    (14,019)    (11,570)
    -------------------------------------------------------------------------
                                  (6,904)     71,173       1,809      81,264
    -------------------------------------------------------------------------
    INVESTING
      Acquisition of properties
       and other assets          (21,706)    (52,454)    (22,908)    (60,516)
      Capital assets under
       development                  (629)     (4,155)     (2,826)     (5,737)
      Building capital
       maintenance                (1,458)       (618)     (1,987)     (1,347)
    -------------------------------------------------------------------------
                                 (23,793)    (57,227)    (27,721)    (67,600)
    -------------------------------------------------------------------------

    NET DECREASE (INCREASE) IN
     BANK INDEBTEDNESS, END OF
     PERIOD                      (17,176)     26,339     (16,224)     24,888

    BANK INDEBTEDNESS, BEGINNING
     OF PERIOD                   (21,355)    (39,444)    (22,307)    (37,993)
    -------------------------------------------------------------------------

    BANK INDEBTEDNESS,
     END OF PERIOD               (38,531)    (13,105)    (38,531)    (13,105)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    SUPPLEMENTARY INFORMATION
      Interest paid                5,149       5,010      10,024       8,579
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Interest received               84          37         159          59
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
      Income taxes paid                2         272           2         358
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST
    Notes to the Consolidated Financial Statements (unaudited)
    Three and Six Months Ended June 30, 2007
    (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-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 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 properties in Inuvik are
        directly held by 5147 NWT Ltd., in its capacity as general partner of
        Inuvik Commercial Properties Zheh Gwizhu Limited Partnership ("ICP").
        The land and buildings of the seniors' facilities ("seniors'
        properties") are held by NPR Health Property General Partner Ltd., in
        its capacity as general partner of NPR Health Property Limited
        Partnership.

    2.  BASIS OF PRESENTATION

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

        The preparation of financial statements in accordance with Canadian
        GAAP requires management to make estimates and assumptions that
        affect the reported amounts of assets and liabilities, and to make
        disclosure of contingent assets and liabilities at the date of the
        financial statements, and the reported amounts of revenues and
        expenses during the reported period. Actual results may differ from
        those estimates.

    3.  CHANGE IN ACCOUNTING POLICY AND RECENT ACCOUNTING PRONOUNCEMENTS

        Change in Accounting Policy

        Effective January 1, 2007, NPREIT adopted CICA Handbook Section 1530,
        Comprehensive Income and CICA Handbook Section 3855, Financial
        Instruments-Recognition and Measurement. 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 effect on NPREIT will be
        incremental disclosures regarding the significance of financial
        instruments for the entity's financial position and performance; and
        the nature, extent and management of risks arising from financial
        instruments to which the entity is exposed.

    4.  RENTAL PROPERTIES AND OTHER CAPITAL ASSETS

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

        Land        51,345         -    51,345    49,233         -    49,233
        Buildings  591,807    45,801   546,006   553,615    37,832   515,783
        Furniture,
         fixtures
         and
         equipment   6,026     2,226     3,800     5,341     1,835     3,506
        Vehicles       926       466       460       860       404       456
        Capital and
         leasehold
         improvem-
         ents       13,514     5,374     8,140    11,495     4,223     7,272
        Equipment
         under
         capital
         lease         212       119        93       212        87       125
        ---------------------------------------------------------------------
                   663,830    53,986   609,844   620,756    44,381   576,375
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        NPREIT acquired properties in 2007 for a total purchase price of
        $38.4 million (2006 - $163.5 million). The acquisitions, including
        the construction of the warehouse in Ft. St. John, B.C. in the first
        quarter of 2007, were financed as follows:

        ---------------------------------------------------------------------
                                           Three months         Six months
                                           ended June 30       ended June 30
        ---------------------------------------------------------------------
                                          2007      2006      2007      2006
                                            $         $         $         $
        ---------------------------------------------------------------------
        Property acquisitions -
         (included in above totals):
          Mortgages, debt assumed
           and mezzanine repaid           6,395    92,112    6,395    92,395
          Class B LP Units issued         3,000     2,486    3,000    12,484
          Cash paid                      21,818    51,364   28,923    58,610
        ---------------------------------------------------------------------
                                         31,213   145,962   38,318   163,489
        Fair value adjustment
         to debt                             79        16       79        39
        ---------------------------------------------------------------------
        Total purchase price of
         property acquisitions           31,292   145,978   38,397   163,528
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Residential units                   281        50      282       445
        Seniors' facilities - units         182       960      182       960
        Commercial square feet           10,000         -   53,701     8,199
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    5.  PREPAID EXPENSES AND OTHER ASSETS
        ---------------------------------------------------------------------
                                                        June 30, December 31,
                                                          2007         2006
                                                            $            $
        ---------------------------------------------------------------------

        Refundable deposits and mortgage proceeds
         held in trust                                    8,855        3,455
        Prepaid equity leases                             2,422        2,508
        Prepaid expenses                                  1,978        1,388
        Other                                               579          669
        ---------------------------------------------------------------------
                                                         13,834        8,020
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    6.  INTANGIBLE ASSETS AND LIABILITIES

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

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

        Above-
         market
         leases         95        68        27        95        63        31
        Lease
         origina-
         tion
         costs       1,110       284       826       912       212       701
                     1,205       352       853     1,007       275       732

        Below
        market
        leases         584       374       210       584       317       267


    7.  MORTGAGES PAYABLE

        ---------------------------------------------------------------------
                                                        June 30, December 31,
                                                          2007         2006
                                                            $            $
        ---------------------------------------------------------------------

        Mortgages payable                               340,726      327,739
        Fair value adjustment                            (7,643)      (6,472)
        Deferred financing costs                         (4,344)      (2,937)
        ---------------------------------------------------------------------
                                                        328,739      318,330
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Mortgages payable bear interest at rates ranging from 3.83% to 13.5%
        and have a weighted average rate of 5.43% as at June 30, 2007
        (December 31, 2006 - 5.55%). The mortgages are payable in monthly
        instalments of blended principal and interest of approximately
        $2.5 million. The mortgages mature between 2007 and 2021. All
        mortgages are secured by charges against specific properties.

        The fair value of mortgages payable at June 30, 2007 is approximately
        $337.4 million (December 31, 2006 - $329.3 million).


    8.  BANK INDEBTEDNESS

        NPREIT has a revolving line of credit in the amount of $40.0 million
        for acquisition and operating purposes, bearing interest at prime or
        bankers acceptance rate with a maturity of May 31, 2008. Specific
        properties have been pledged as collateral security for the line of
        credit. At June 30, 2007, NPREIT has utilized $38.5 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 June 30,
        2007, NPREIT has utilized $9.1 million (December 31, 2006 - $ nil).


    9.  LOANS PAYABLE
        ---------------------------------------------------------------------
                                                        June 30, December 31,
                                                          2007         2006
                                                            $            $
        ---------------------------------------------------------------------
        Inuvik Commercial Properties Zheh Gwizhu
         Limited Partnership - 50% ownership

        CIBC demand loan bearing interest at prime
         plus 0.5%, repayable in monthly principal
         and interest instalments, secured by specific
         properties pledged as collateral due 2016.         221          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.         469          481
        ---------------------------------------------------------------------
                                                            690          710
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

        ---------------------------------------------------------------------
                                                        June 30, December 31,
                                                          2007         2006
                                                            $            $
        ---------------------------------------------------------------------

        Security deposits and other                       4,610        4,680
        Trade payables and accrued liabilities            7,225        7,607
        Capital lease liability                             119          145
        ---------------------------------------------------------------------
                                                         11,954       12,432
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    11. LONG-TERM INCENTIVE PLAN AND UNIT OPTION PLAN

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

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

        TOTAL - December 31, 2006                                     55,476
        Units vested and issued - January, 2007                      (19,858)
        Units vested and issued - February, 2007                      (8,139)
        Units vested and issued - May, 2007                           (1,597)
        Units vested and issued - June, 2007                         (16,317)
        ---------------------------------------------------------------------
        TOTAL - June 30, 2007                                          9,565
        ---------------------------------------------------------------------

        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 Trust 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 June 30, 2007, a total of 124,913 LTIP units have
        vested and been issued (December 31, 2006 - 79,002) and $388,000 has
        been accrued for estimated 2007 LTIP awards.

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


    12. EMPLOYEE UNIT PURCHASE PLAN

        Under the terms of the Employee Unit Purchase Plan (the "EUPP"),
        employees may invest a maximum of 5% of their salary in NPREIT Trust
        units and the Trust will contribute one unit for every three units
        acquired by an employee. The units are purchased on the TSX at market
        prices. During the six months ended June 30, 2007, employees invested
        a total of $47,955 (2006 - $45,246) and the trust contributed $15,985
        (2006 - $15,082). During the six months ended June, 30, 2007, 2,445
        units (2006 - 2,739 units) were purchased at an average cost of
        $25.47 per unit (2006 - $20.73 per unit).


    13. INCOME TAXES

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

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

        NPREIT has certain corporate subsidiaries which are subject to income
        tax on their respective taxable income at the applicable legislated
        tax rates. NPREIT has recorded a future tax liability of
        $10.1 million (December 31, 2006 - $10.2 million) using an expected
        income tax rate of 19.68%.

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

        ---------------------------------------------------------------------
                                                        June 30, December 31,
                                                          2007         2006
                                                            $            $
        ---------------------------------------------------------------------
        Future tax liabilities arising from temporary
         differences between accounting and tax
         basis of:
          Rental property assets in corporate
           subsidiaries                                  10,051       10,184
          Rental property assets                         15,500            -
          Other assets and liabilities                      500            -
        ---------------------------------------------------------------------
                                                         26,051       10,184
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Income tax expense consists of the following:

        ---------------------------------------------------------------------
                                           Three months         Six months
                                           ended June 30       ended June 30
        ---------------------------------------------------------------------
                                          2007      2006      2007      2006
                                            $         $         $         $
        ---------------------------------------------------------------------
        Current income taxes               114       108       231       203
        Future income taxes - corporate
        subsidiaries                       (76)     (109)     (167)     (189)
        Future income taxes relating to
         Bill-C52                       16,000         -    16,000         -
        ---------------------------------------------------------------------
                                        16,038         1    16,064        14
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    14. UNITHOLDERS' CAPITAL

        Total NPREIT Trust units and Class B LP units issued, outstanding and
        eligible for distributions at June 30, 2007 is 20,439,220
        (December 31, 2006 - 20,276,290), representing net proceeds of
        $265.7 million (net of issue costs of $14.9 million) (December 31,
        2006 - $261.7 million net of issue costs of $14.9 million). The
        number of units issued and outstanding is as follows:

        ---------------------------------------------------------------------
                                   Issue              Issue       TOTAL
                                   price    Class     price  ----------------
                 Desc-      Trust    per     B LP       per        Cumulative
        Date     ription    Units   unit     Units     unit   Units   Capital
        ---------------------------------------------------------------------
        December  LTIP
         31, 2006 units
                  issued 17,852,667      2,423,623         20,276,290 261,730

        January    LTIP
         04, 2007  units
                   issued    19,858 $17.70       -        -    19,858     353

        February   LTIP
         16, 2007  units
                   issued     8,139 $27.95       -        -     8,139     227

        May 01,    Property
         2007      acqui-
                   sition         -      -  78,033   $25.63    78,033   2,000

        May 08,    Property
         2007      acqui-
                   tion           -      -  38,986   $25.65    38,986   1,000

        May 08,    Issue
         2007      costs          -      -       -        -         -    (13)

        May 16,    LTIP
         2007      units
                   issued     1,597 $27.95       -        -     1,597      45

        June 21,   LTIP
         2007      units
                   issued    16,317 $24.00       -        -    16,317     393

                   Class
                   B LP
                   units
                   ex-
                   changed  104,247      -(104,247)       -         -       -
        ---------------------------------------------------------------------
        June 30,
         2007            18,002,825      -2,436,395       -20,439,220 265,735
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Trust units

        Total number of Trust units outstanding as at June 30, 2007 is
        18,002,825 (December 31, 2006 - 17,852,667) representing a net book
        value of $234.2 million (December 31, 2006 - $231.8 million), net of
        issue costs.

        Class B Exchangeable Limited Partnership Units and Special Voting
        Units

        Total number of Class B LP Units and Special Voting Units of a
        controlled limited partnership outstanding as at June 30, 2007, is
        2,436,395 (December 31, 2006 - 2,423,623) representing a net book
        value of $31.5 million (December 31, 2006 - $30.0 million).


    15. COMPREHENSIVE EARNINGS (LOSS) PER UNIT INFORMATION

        ---------------------------------------------------------------------
                                    Three months              Six months
                                    ended June 30            ended June 30
                                   2007        2006        2007        2006
                                     $           $           $           $
        ---------------------------------------------------------------------
        Earnings (loss) from
         continuing operations   (10,924)      4,099      (6,735)      6,500
        Earnings (loss)
         from discontinued
         operations                    -          29          (5)         35
        ---------------------------------------------------------------------
        Comprehensive earnings
         (loss)                  (10,924)      4,128      (6,740)      6,535
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Weighted average units
         for basic earnings
         per unit             20,343,524  19,443,980  20,341,126  17,934,983
        Effect of dilutive
         units to be issued
         in respect of the
         long-term incentive
         plan                     12,508      37,229      29,228      37,229
        ---------------------------------------------------------------------
        Weighted average units
         for diluted earnings
         per unit             20,356,032  19,481,209  20,370,354  17,972,212
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        Basic and Diluted Comp-
         rehensive
         Earnings (loss)
         per unit:
          Continuing operations   $(0.54)      $0.21      $(0.33)      $0.36
          Discontinued
           operations                  -           -           -           -
        ---------------------------------------------------------------------
                                  $(0.54)      $0.21      $(0.33)      $0.36
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    16. GUARANTEES, COMMITMENTS AND CONTINGENCIES

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

        During the normal course of operations, NPREIT provided guarantees
        for mortgages and loans payable relating to investments in
        corporations and joint ventures where NPREIT owns less than 100%. The
        mortgages and loans payable are secured by specific charges against
        the properties owned by the corporations and joint ventures. In the
        event of a default of the corporation or joint venture, NPREIT may be
        liable for 100% of the outstanding balances of these mortgages and
        loans payable. At June 30, 2007, NPREIT has provided guarantees
        totalling $14.8 million (December 31, 2006 - $15.2 million). Of this
        amount, $7.4 million has been included in mortgages and loans payable
        (December 31, 2006 - $7.6 million). The mortgages bear interest at
        rates ranging from 4.54% to 7.50% and mature June, 2008 to January,
        2012 (December 31, 2006 - 4.54% to 7.50% and mature June, 2008 to
        September, 2011).

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

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

        -  A 189 unit multi-family residential apartment building located in
           Grande Prairie, Alberta on land previously acquired by NPREIT.
           Construction is scheduled to begin in September 2007 and expected
           to be completed in 2009. The total cost of construction, including
           the original cost of land, is approximately $22.9 million.

        -  A 79 unit multi-family residential property building located in
           Fort St. John, British Columbia on land previously acquired by
           NPREIT. Construction is scheduled to begin in September 2007 and
           expected to be completed in 2009. The total cost of construction,
           including the original cost of land, is approximately
           $11.4 million.

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


    17. DISCONTINUED OPERATIONS

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

        ---------------------------------------------------------------------
                                    Three months              Six months
                                    ended June 30            ended June 30
                                   2007        2006        2007        2006
                                     $           $           $           $
        ---------------------------------------------------------------------
          Rental property
           revenue                     -         176           -         241
          Laundry and other
           income                      -           -           -           -
          Rental property
           operating expenses          -         (56)         (2)        (78)
        ---------------------------------------------------------------------
        Net operating income           -         120          (2)        163
        EXPENSES
          Interest on mortgages        -         (49)         (3)        (56)
          Amortization                 -         (42)          -         (72)
        ---------------------------------------------------------------------
                                       -         (91)         (3)       (128)
        ---------------------------------------------------------------------
        EARNINGS (LOSS) FROM
         DISCONTINUED
         OPERATIONS                    -          29          (5)         35
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

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


    18. SEGMENTED INFORMATION

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

        ---------------------------------------------------------------------
                         Alberta    B.C.     Nfld     NWT    Nunavut   Total
        June 30, 2007       $        $        $        $        $        $
        ---------------------------------------------------------------------
        Residential       62,711   45,392   54,575   89,021  120,656  372,355
        Execusuites            -        -    9,003    7,714   10,173   26,890
        Commercial         3,221   13,447    1,277   22,964   21,843   62,752
        Seniors'
         properties      126,931   14,303   18,286        -        -  159,520
        Trust             15,456        -        -        -        -   15,456
        ---------------------------------------------------------------------
        TOTAL ASSETS     208,319   73,142   83,141  119,699  152,672  636,973
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        ---------------------------------------------------------------------
        December 31,     Alberta    B.C.     Nfld     NWT    Nunavut   Total
         2006               $        $        $        $        $        $
        ---------------------------------------------------------------------
        Residential       62,492   33,315   56,675   88,865  122,495  363,842
        Execusuites            -        -    9,125    8,496   10,425   28,046
        Commercial         3,261   11,068        -   22,706   23,279   60,314
        Seniors'
         properties      128,041   14,383        -        -        -  142,424
        Trust              9,507        -        -        -        -    9,507
        ---------------------------------------------------------------------
        TOTAL ASSETS     203,301   58,766   65,800  120,067  156,199  604,133
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


        ---------------------------------------------------------------------
        Three months
         ended June 30,  Alberta    B.C.     Nfld     NWT    Nunavut   Total
         2007               $        $        $        $        $        $
        ---------------------------------------------------------------------

        Rental
         properties
         revenue          6,033    2,556    2,982    6,014    6,121   23,706
        Laundry and
         other income       116       89      117      153       49      524
        Rental
         properties
         operating
         expenses        (1,110)  (1,168)  (1,459)  (2,723)  (1,726)  (8,186)
        ---------------------------------------------------------------------
        Net operating
         income           5,039    1,477    1,640    3,444    4,444   16,044

        Interest on
         mortgages        1,890      341      456      898    1,135    4,720
        Amortization      1,425      529      545    1,130    1,349    4,978
        ---------------------------------------------------------------------
                          3,315      870    1,001    2,028    2,484    9,698
        ---------------------------------------------------------------------

        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            1,724      607      639    1,416    1,960    6,346
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        ---------------------------------------------------------------------
        Three months
         ended June 30,  Alberta   B.C.     Nfld     NWT    Nunavut   Total
         2006               $       $        $        $        $        $
        ---------------------------------------------------------------------

        Rental
         properties
         revenue          5,109    1,615    2,355    5,872    6,086   21,032
        Laundry and
         other income        90       44       60       99       49      345
        Rental
         properties
         operating
         expenses        (1,016)    (739)  (1,451)  (2,841)  (1,510)  (7,557)
        ---------------------------------------------------------------------
        Net operating
         income           4,178      920      964    3,130    4,625   13,817

        Interest on
         mortgages        1,374      457      396      918    1,142    4,229
        Amortization      1,027      252      370    1,115    1,418    4,255
        ---------------------------------------------------------------------
                          2,401      709      766    1,975    2,560    8,411
        ---------------------------------------------------------------------
        EARNINGS (LOSS)
         FROM CONTINUING
         OPERATIONS
         BEFORE
         OTHER ITEMS      1,777      211      198    1,155    2,065    5,406
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        ---------------------------------------------------------------------
        Six months
         ended June 30,   Alberta   B.C.     Nfld     NWT    Nunavut   Total
         2007                $       $        $        $        $        $
        ---------------------------------------------------------------------

        Rental
         properties
         revenue         12,230    4,559    5,355   11,794   12,113   46,051
        Laundry and
         other income       237      157      219      240      115      968
        Rental
         properties
         operating
         expenses        (2,330)  (1,996)  (2,978)  (5,956)  (3,531) (16,791)
        ---------------------------------------------------------------------
        Net operating
         income          10,137    2,720    2,596    6,078    8,697    30,228

        Interest on
         mortgages        3,751      671      858    1,858    2,220     9,358
        Amortization      2,708      872      984    2,291    2,848     9,703
        ---------------------------------------------------------------------
                          6,459    1,543    1,842    4,149    5,068    19,061
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            3,678    1,177      754    1,929    3,629    11,167
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        ---------------------------------------------------------------------
        Six months
         ended June 30,   Alberta   B.C.     Nfld     NWT    Nunavut   Total
         2006                $       $        $        $        $        $
        ---------------------------------------------------------------------

        Rental
         properties
         revenue          8,017    2,577    4,512   11,637   11,982   38,725
        Laundry and
         other income       142       80      105      167      140      634
        Rental
         properties
         operating
         expenses        (2,065)  (1,335)  (2,936)  (5,814)  (3,078) (15,228)
        ---------------------------------------------------------------------
        Net operating
         income           6,094    1,322    1,681    5,990    9,044   24,131
        Interest on
         mortgages        1,823      611      763    1,795    2,259    7,251
        Amortization      1,624      423      768    2,135    2,780    7,730
        ---------------------------------------------------------------------
                          3,447    1,034    1,531    3,930    5,039   14,981
        ---------------------------------------------------------------------
        EARNINGS (LOSS)
         FROM CONTINUING
         OPERATIONS
         BEFORE OTHER
         ITEMS            2,647      288      150    2,060    4,005    9,150
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        ---------------------------------------------------------------------
        Three months                    Execu-             Seniors'
         ended June       Residential   suites  Commercial Properties  Total
         30, 2007               $         $         $         $         $
        ---------------------------------------------------------------------

        Rental properties
         revenue              15,804     2,482     2,043     3,377    23,706
        Laundry and other
         income                  491         8        25         -       524
        Rental properties
         operating expenses   (6,512)     (816)     (856)       (2)   (8,186)
        ---------------------------------------------------------------------
        Net operating income   9,783     1,674     1,212     3,375    16,044

        Interest on
         mortgages             2,669       311       203     1,537     4,720
        Amortization           3,172       734       115       957     4,978
        ---------------------------------------------------------------------
                               5,841     1,045       318     2,494     9,698
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER ITEMS    3,942       629       894       881     6,346
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        ---------------------------------------------------------------------
        Three months                    Execu-             Seniors'
         ended June       Residential   suites  Commercial Properties  Total
         30, 2006               $         $         $         $         $
        ---------------------------------------------------------------------

        Rental properties
         revenue              14,357     2,358     1,785     2,532    21,032
        Laundry and other
         income                  328         -        14         -       342
        Rental properties
         operating expenses   (6,118)     (770)     (669)        -    (7,557)
        ---------------------------------------------------------------------
        Net operating income   8,567     1,588     1,130     2,532    13,817

        Interest on
         mortgages             2,602       418       123     1,086     4,229
        Amortization           3,044       363       210       565     4,182
        ---------------------------------------------------------------------
                               5,646       787       333     1,651     8,411
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER ITEMS    2,921       807       797       881     5,406
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        ---------------------------------------------------------------------
        Six months                      Execu-             Seniors'
         ended June       Residential   suites  Commercial Properties  Total
         30, 2007               $         $         $         $         $
        ---------------------------------------------------------------------

        Rental properties
         revenue               30,916     4,959     3,648     6,528   46,051
        Laundry and other
         income                   909        12        47         -      968
        Rental properties
         operating expenses   (13,323)   (1,645)   (1,818)       (5) (16,791)
        ---------------------------------------------------------------------
        Net operating income   18,502     3,326     1,877     6,523   30,228

        Interest on
         mortgages              5,334       582       405     3,037    9,358
        Amortization            6,476     1,242       284     1,701    9,703
        ---------------------------------------------------------------------
                               11,810     1,824       689     4,738   19,061
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER ITEMS     6,692     1,502     1,188     1,785   11,167
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------

        ---------------------------------------------------------------------
        Six months                      Execu-             Seniors'
         ended June       Residential   suites  Commercial Properties  Total
         30, 2006               $         $         $         $         $
        ---------------------------------------------------------------------

        Rental properties
         revenue              28,338     4,508     3,347     2,532    38,725
        Laundry and other
         income                  581         6        47         -       634
        Rental properties
         operating expenses  (11,954)   (1,535)   (1,739)        -   (15,228)
        ---------------------------------------------------------------------
        Net operating income  16,965     2,979     1,655     2,532    24,131

        Interest on
         mortgages             5,087       665       413     1,086     7,251
        Amortization           5,978       777       410       565     7,730
        ---------------------------------------------------------------------
                              11,065     1,442       823     1,651    14,981
        ---------------------------------------------------------------------
        EARNINGS FROM
         CONTINUING
         OPERATIONS
         BEFORE OTHER ITEMS    5,900     1,537       832       881     9,150
        ---------------------------------------------------------------------
        ---------------------------------------------------------------------


    19. RELATED PARTY TRANSACTIONS

        A trustee leases space from NPREIT under normal commercial terms.
        NPREIT earned rental revenue of $208,634 for the six months ended
        June 30, 2007 (2006 - $226,053). Amounts outstanding in accounts
        receivable pertaining to this lease were $ nil at June 30, 2007
        (December 31, 2006 - $ nil).

        A trustee of NPREIT is a senior partner of a law firm that provides
        legal services to NPREIT in the ordinary course of business. Fees
        paid for the six months ended June 30, 2007 were $28,706 (2006 -
        $249,833).

        A trustee of NPREIT is the Chairman of AgeCare Investments Ltd.
        ("AgeCare"), which leases six seniors' properties from NPREIT. For
        the six months ended June 30, 2007, NPREIT earned rental income from
        Agecare totalling $6,302,000 (2006 - $ 2,532,000). Amounts
        outstanding in accounts receivable pertaining to this lease were
        $ nil at June 30, 2007 (December 31, 2006 - $ nil). In addition,
        AgeCare is paid an annual advisory fee of $120,000 for advisory
        services provided to NPREIT respecting prospective acquisitions of
        seniors' properties. For the six months ended June 30, 2007, NPREIT
        paid $60,000 for these services (2006 - $20,000).

    20. FINANCIAL INSTRUMENTS

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

        Interest rate risk

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

        Utility cost risk

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

        Credit risk

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

    21. SUBSEQUENT EVENTS

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

        a) On July 11, 2007, NPREIT completed an offering of 4,532,000 trust
           units at $23.17 per unit on a bought deal basis. The net proceeds
           of this offering, which closed on July 11, 2007, were used to fund
           the following acquisitions which were completed in July, 2007.

           -  A 263 multifamily residential units located in Fort McMurray,
              Alberta for a purchase price of approximately $53.5 million;
           -  A commercial portfolio totalling 237,453 square feet located in
              Yellowknife, Northwest Territories for a purchase price of
              $56.6 million;
           -  A seniors' property comprised of 53 seniors' units located in
              Cornerbrook, Newfoundland for a purchase price of $4.0 million.
           The net proceeds from this offering were also used to repay a
           potion of the revolving credit facility.

        b) Vista Village Limited Partnership, which is 40% owned by NPREIT,
           entered into an agreement to sell a 60 residential unit complex
           located in Red Deer, Alberta. The proposed sale is subject to
           typical terms and conditions and is expected to close by
           December 31, 2007, with NPREIT's share of the sale proceeds
           expected to be approximately $3.4 million.

        c) The acquisition of 78 residential units located in Fort St. John,
           B.C. for a total purchase price of $12.1 million. This acquisition
           is expected to close in the third quarter of 2007 and will be
           financed through a combination of cash and mortgage debt.

        Subsequent to June 30, 2007, NPREIT completed 15 mortgages totalling
        $22.1 million with interest rates from 5.057% to 5.27% and terms to
        maturity ranging from 5 to 10 years. Proceeds from the refinancings
        were used to repay the acquisition facility and a portion of the
        operating facility.

    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: Todd Cook, CFO, at (403) 531-0720

Organization Profile

Northern Property Real Estate Investment Trust

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