N@N

Northern Property reports Q1 2009 results

^{Published on 2009-05-12 15:06:35, Last Modified on 2009-05-12 15:22:16 - Market Wire}
 

 CALGARY, May 12 /CNW/ - Northern Property REIT (NPR.UN - TSX) announced its financial results for the 3 months ended March 31, 2009. HIGHLIGHTS: - Revenue increased by 11.6% to 34.0 million - Net earnings increased to $7.1 million from $5.9 million in Q1 2008 - Q1, 2009 FFO of $0.54 compared to $0.47 in Q1, 2008 - Increased vacancy, seasonal costs contribute to negative same door growth of 0.6% - Weighted average interest rate declines to 5.02% - Low payout ratio remains intact - Positive interest coverage position of 2.98 times FINANCIAL PERFORMANCE AT A GLANCE ------------------------------------------------------------------------- Three Three Months Months Ended Ended In $000's except per unit amounts March 31 March 31 ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- Total revenue 34,039 30,510 Net operating income ("NOI") 21,304 19,753 Net earnings 7,101 5,881 Distributable Income ("DI") 13,321 11,501 DI per unit(*) $0.532 $0.460 Distribution to unitholders 9,266 9,254 Distributions per unit $0.370 $0.370 DI Payout ratio 69.6% 80.5% Funds from Operations ("FFO") 13,514 11,783 FFO per unit $0.539 $0.471 FFO payout ration 68.6% 78.6% ------------------------------------------------------------------------- ------------------------------------------------------------------------- "Northern Property continued to post very satisfactory financial results in Q1, 2009," reported President and CEO Jim Britton, "although we have begun to experience increased vacancy in some markets related to the recession. Notwithstanding our concerns about the business environment, the REIT is operating on a fundamentally sound basis with a payout ratio for the quarter of 69.6% of distributable income." Rental market conditions were stable for the REIT in its commercial and master leased seniors housing portfolio in Q1. However, apartment vacancy loss increased by 1.5% to 6.1%. Most of this change is related to higher vacancy loss in Fort McMurray (up to 4.2% from 1.4% in Q4, 2008) and Yellowknife (up to 4.3% from 3.0% the previous quarter). Executive suite sales declined in the quarter in both Inuvik and Yellowknife Capital Suites. NPR's apartment and execusuites results continued to be strong in Newfoundland and Nunavut. "It can be no surprise that our residential occupancy in the West is starting to reflect the sharp decline in oil prices and the current weakness in natural gas, mining and forestry resources," Mr. Britton went on to say. "We have come off exceptionally tight rental market conditions to more normal levels of occupancy. We will use this period to carry out some of the needed capex work which has been difficult to get done in the last couple of years while buildings were 100% occupied and skilled labour difficult to find due to labour shortages." The REIT experienced a challenging Q1 relative to operating costs, with harsh winter weather conditions contributing to utility and snow clearing overruns, particularly in the West and Far North. Fuel costs were especially high in Nunavut as a result of the government's procurement of the winter's heating fuel at the peak oil prices in the summer of 2008. Acquisition activity was limited to $7.4 million of additional property during the quarter and included a 40 suite apartment building and 52 master leased seniors units in Newfoundland. Development continued on the 189 apartment unit Westmore Estates project in Grande Prairie. One of three buildings was completed near the end of April with the remaining two expected by the end of May. Acquisition and development activity has been curtailed by NPR as a result of rental market uncertainties and the high cost of raising new capital. The weighted average interest cost continued to decline to 5.02% compared to 5.13% in Q4, 2008. Debt to Gross Book value was up slightly to 58.1% from 57.7% at the end of 2008 because acquisition and development activity has taken place without issuing additional equity. Northern Property REIT's payout ratio was 69.6% of distributable income for Q1. "NPR's focus in the next few months is to ensure that the value and service that we offer is at the highest possible level. This involves continued investment in our property and making sure that our leasing efforts are as effective as they can be," Mr. Britton said. "The buffer between the cash we generate and the unit-holder distributions we pay enables us to do so and also prepares the REIT to succeed when conditions of economic growth return." NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST Unaudited Consolidated Balance Sheets (Thousands of dollars) ------------------------------------------------------------------------- March 31, December 31, 2009 2008 ------------------------------------------------------------------------- ASSETS Rental properties and other capital assets (Note 4) 837,636 833,967 Capital improvements in progress 2,733 3,773 Capital assets under development 15,070 8,996 Prepaid expenses and other assets (Note 5) 5,566 5,664 Cash - 731 Accounts receivable (Note 17) 5,930 5,085 Tenant security deposits 3,707 3,575 Deferred rent receivable 3,551 3,248 Loans receivable 4,308 1,742 Intangible assets (Note 6) 5,824 6,141 ------------------------------------------------------------------------- 884,325 872,922 ------------------------------------------------------------------------- ------------------------------------------------------------------------- LIABILITIES Mortgages and loans payable (Note 7) 484,458 482,800 Operating facilities (Note 8) 34,700 26,600 Bank indebtedness 2,326 - Accounts payable and accrued liabilities 17,591 15,111 Distributions payable 3,092 3,092 Future income tax liability (Note 11) 38,474 39,489 Intangible liabilities (Note 6) 224 279 Non-controlling interest 431 441 ------------------------------------------------------------------------- 581,296 567,812 ------------------------------------------------------------------------- UNITHOLDERS' EQUITY 303,029 305,110 ------------------------------------------------------------------------- 884,325 872,922 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes to the consolidated financial statements. Guarantees, commitments and contingencies (Note 14) APPROVED BY THE BOARD Trustee Trustee NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST Unaudited Consolidated Statements of Earnings and Comprehensive Earnings Three Months Ended March 31 (Thousands of dollars, except per unit amounts) ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- REVENUE Rental revenue 32,992 29,852 Other property income 1,047 658 ------------------------------------------------------------------------- 34,039 30,510 Operating expenses (12,735) (10,757) ------------------------------------------------------------------------- 21,304 19,753 ------------------------------------------------------------------------- OTHER EXPENSES Interest on mortgages (6,556) (5,944) Amortization (7,114) (6,487) ------------------------------------------------------------------------- (13,670) (12,431) ------------------------------------------------------------------------- EARNINGS BEFORE THE UNDERNOTED 7,634 7,322 ------------------------------------------------------------------------- Trust administration (1,395) (1,869) Interest on operating facilities (149) (450) Interest and other income 109 186 Gain on settlement of debt - 577 Gain on sale of rental properties - 136 Non-controlling interest (9) (15) ------------------------------------------------------------------------- EARNINGS BEFORE INCOME TAXES 6,190 5,887 ------------------------------------------------------------------------- Current taxes (Note 11) (104) (86) Future tax recovery (Note 11) 1,015 80 ------------------------------------------------------------------------- 911 (6) ------------------------------------------------------------------------- NET EARNINGS 7,101 5,881 Other comprehensive earnings (loss) (143) 182 ------------------------------------------------------------------------- COMPREHENSIVE EARNINGS 6,958 6,063 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net earnings per unit (Note 13) Basic $0.283 $0.235 Diluted $0.283 $0.235 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes to the consolidated financial statements. NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST Unaudited Consolidated Statements of Unitholders' Equity Three Months Ended March 31 (Thousands of dollars) ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- TRUST UNITS (Note 12) Balance, January 1 367,446 366,789 Issuance of units 65 - Issue costs (2) - Long term incentive plan units issued 666 398 ------------------------------------------------------------------------- Balance, March 31 368,175 367,187 ------------------------------------------------------------------------- CONTRIBUTED SURPLUS Balance, January 1 1,676 1,023 Unit-based compensation 164 - Long term incentive plan units granted - - Long term incentive plan units issued (666) (398) ------------------------------------------------------------------------- Balance, March 31 1,174 625 ------------------------------------------------------------------------- CUMULATIVE DEFICIT CUMULATIVE NET EARNINGS Balance, January 1 86,056 63,354 Net earnings 7,101 5,881 ------------------------------------------------------------------------- Balance, March 31 93,157 69,235 ------------------------------------------------------------------------- CUMULATIVE DISTRIBUTIONS TO UNITHOLDERS Balance, January 1 (150,191) (113,154) Distributions declared to unitholders (9,266) (9,254) ------------------------------------------------------------------------- Balance, January 1 (159,457) (122,408) ------------------------------------------------------------------------- CUMULATIVE DEFICIT, March 31 (66,300) (53,173) ------------------------------------------------------------------------- ACCUMULATED OTHER COMPREHENSIVE EARNINGS (LOSS) Balance, January 1 123 55 Other comprehensive earnings (loss) (143) 182 ------------------------------------------------------------------------- Balance, March 31 (20) 237 ------------------------------------------------------------------------- TOTAL UNITHOLDERS' EQUITY 303,029 314,876 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes to the consolidated financial statements. NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST Unaudited Consolidated Statements of Cash Flows Three Months Ended March 31 (Thousands of dollars) ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- CASH FLOWS RELATED TO THE FOLLOWING ACTIVITIES: OPERATING Net earnings from continuing operations 7,101 5,881 Adjustments for: Deferred rental revenue (304) (341) Amortization 7,114 6,487 Amortization of fair value of debt 160 118 Amortization of above and below market leases (49) (59) Gain on settlement of debt - (577) Gain on sale of rental properties - (136) Non-controlling interest 9 15 Unit-based compensation 314 208 Future income tax recovery (1,015) (80) ------------------------------------------------------------------------- 13,330 11,516 Changes in non-cash working capital 782 2,266 ------------------------------------------------------------------------- 14,112 13,782 ------------------------------------------------------------------------- FINANCING Issue costs (2) - Proceeds from mortgages and loans 8,001 38,958 Proceeds from operating facilities 8,100 11,500 Payments from non-controlling interest (20) 740 Repayment of mortgages and loans payable (8,179) (21,286) Distributions paid to unitholders (9,266) (9,252) ------------------------------------------------------------------------- (1,366) 20,660 ------------------------------------------------------------------------- INVESTING Acquisition of rental properties and other assets (6,338) (30,852) Proceeds from sale of rental properties - 395 Capital assets under development (6,073) (3,791) Building capital maintenance (1,389) (978) Capital improvements (2,003) (951) ------------------------------------------------------------------------- (15,803) (36,177) ------------------------------------------------------------------------- NET DECREASE IN CASH (3,057) (1,735) CASH (BANK INDEBTEDNESS), BEGINNING OF PERIOD 731 (104) ------------------------------------------------------------------------- BANK INDEBTEDNESS, END OF PERIOD (2,326) (1,839) ------------------------------------------------------------------------- ------------------------------------------------------------------------- SUPPLEMENTARY INFORMATION Interest paid 6,357 6,126 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest received 88 126 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Income taxes paid 146 80 ------------------------------------------------------------------------- ------------------------------------------------------------------------- See accompanying notes to the consolidated financial statements. NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUST Notes to the Consolidated Financial Statements (unaudited) Three Months Ended March 31, 2008 and 2007 (Columnar amounts expressed in thousands of dollars except where indicated) ------------------------------------------------------------------------- 1. DESCRIPTION OF THE TRUST Northern Property Real Estate Investment Trust ("NPR" 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. 2. BASIS OF PRESENTATION Basis of presentation These unaudited interim consolidated financial statements of NPR have been prepared in accordance with the recommendations of the Handbook of the Canadian Institute of Chartered Accountants ("CICA") that are consistent with those used in the audited consolidated financial statements as at and for the year ended December 31, 2008, 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, 2008 audited consolidated financial statements. The consolidated financial statements include the accounts of NPR and its wholly-owned subsidiary, together with the proportionate share of the assets, liabilities, revenues and expenses of joint ventures. 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 to make estimates and assumptions that affect 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, 2009, NPR adopted CICA Handbook Section 3064, Goodwill and Intangible Assets. The new Section 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. This new standard has no material impact on the REIT's consolidated financial statements beyond additional disclosure in the notes to the financial statements. Recent accounting pronouncements 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 NPR'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. Section 1582 - Business Combinations will replace the current Section 1581 - Business Combinations and Section 1601 - Consolidated Financial Statements and Section 1602 - Non-controlling Interests will replace the current section 1600 - Consolidated Financial Statements. These new Sections will be applicable to financial statements relating to fiscal years beginning on or after January 1, 2011. The new standards will require net assets, non-controlling interest and goodwill acquired in a business combination to be recorded at fair value and non-controlling interests will be reported as a component of equity. In addition, the definition of a business is expanded such that transactions currently accounted for as an asset acquisition may come within the scope of these Sections. Acquisition costs will no longer be accounted for as part of the consideration and will be expensed when incurred. Management expects that more acquisition transactions will be considered business combinations and acquisition costs will be expensed in the statement of net earnings when this section is adopted. 4. RENTAL PROPERTIES AND OTHER CAPITAL ASSETS ------------------------------------------------------------------------- March 31, December 31, 2009 2008 Accumulated Net Accumulated Net Amortiz- Book Amortiz- Book Cost ation Value Cost ation Value ------------------------------------------------------------------------- Land 91,116 - 91,116 90,676 - 90,676 Buildings 807,749 (81,698) 726,051 800,612 (76,187) 724,425 Furniture, fixtures and equipment 9,337 (4,041) 5,296 9,006 (3,757) 5,249 Vehicles 1,205 (766) 439 1,193 (732) 461 Capital and leasehold improvements 25,579 (10,845) 14,734 23,026 (9,870) 13,156 Equipment under capital lease 212 (212) - 212 (212) - ------------------------------------------------------------------------- 935,198 (97,562) 837,636 924,725 (90,758) 833,967 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NPR 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. No provision was recorded in 2008 or 2009. NPR acquired properties and completed development projects in the three months ended March 31, 2009 for a total purchase price of $7.4 million (2008 - $30.3 million). The acquisitions and development projects were financed as follows: ------------------------------------------------------------------------- Three Three Months Months Ended Ended March 31 March 31 ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- Cash paid 5,550 30,343 Mortgages and debt assumed 1,788 - Class B LP Units issued 65 - ------------------------------------------------------------------------- Total 7,403 30,343 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Residential rental units 40 263 Seniors' units 52 48 ------------------------------------------------------------------------- 92 311 ------------------------------------------------------------------------- Commercial square feet - 25,124 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 5. PREPAID EXPENSES AND OTHER ASSETS ------------------------------------------------------------------------- March 31, December 31, 2009 2008 ------------------------------------------------------------------------- Prepaid expenses 2,866 2,812 Prepaid equity leases 2,125 2,167 Other 500 500 Refundable deposits and mortgage proceeds held in trust 75 185 ------------------------------------------------------------------------- 5,566 5,664 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 6. INTANGIBLE ASSETS AND LIABILITIES ------------------------------------------------------------------------- March 31, December 31, 2009 2008 Accumulated Net Accumulated Net Amortiz- Book Amortiz- Book Cost ation Value Cost ation Value ------------------------------------------------------------------------- Above-market leases 173 (120) 53 173 (114) 59 In-place leases 6,565 (1,818) 4,747 6,565 (1,588) 4,977 Lease origination costs 1,669 (645) 1,024 1,669 (564) 1,105 ------------------------------------------------------------------------- 8,407 (2,583) 5,824 8,407 (2,266) 6,141 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Below-market leases 1,220 (996) 224 1,220 (941) 279 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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. 7. MORTGAGES AND LOANS PAYABLE ------------------------------------------------------------------------- March 31, December 31, 2009 2008 ------------------------------------------------------------------------- Mortgages and loans payable 503,888 502,277 Fair value adjustment (8,416) (8,574) Deferred financing costs (11,014) (10,903) ------------------------------------------------------------------------- 484,458 482,800 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Mortgages and loans payable bear interest at rates ranging from 3.06% to 12.13% and have a weighted average rate of 5.02% as at March 31, 2009 (December 31, 2008 - 5.13%). Mortgages and loans are payable in monthly installments of blended principal and interest of approximately $3.4 million. The mortgages mature between 2009 and 2025 and are secured by charges against specific properties. Land and buildings with a carrying value of $681.3 million have been pledged to secure mortgages and loans payable of the REIT. The fair value of mortgages payable at March 31, 2009 is approximately $518.9 million (December 31, 2008 - $517.7 million). Minimum required future principal payments are as follows: ------------------------------------------------------------------------- ------------------------------------------------------------------------- 2009 42,545 2010 40,713 2011 37,239 2012 46,097 2013 90,437 Subsequent 246,857 ------------------------------------------------------------------------- 503,888 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 8. OPERATING FACILITIES NPR has revolving credit facilities totaling $57.5 million (December 31, 2008 - $50.0 million) for acquisition and operating purposes, bearing interest at prime or bankers' acceptance rate with a maturity dates between May 21, 2009 and July 31, 2009. Specific properties with a carrying value of $97.7 million have been pledged as collateral security for the credit facilities. At March 31, 2009 NPR had utilized $34.7 million (December 31, 2008 - $26.6 million). 9. LONG-TERM INCENTIVE PLAN AND UNIT OPTION PLAN NPR has a Long-Term Incentive Plan ("LTIP") for the executives of NPR, based on the results of each fiscal year. Units granted and issued under the LTIP are as follows: ------------------------------------------------------------------------- Number of Units ------------------------------------------------------------------------- Balance - December 31, 2008 56,440 Units vested and issued - January, 2009 (8,408) Units vested and issued - February, 2009 (28,509) ------------------------------------------------------------------------- Balance - March 31, 2009 19,523 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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 generally vest in 1/3 tranches: immediately upon award, then 12 and 24 months following. As at March 31, 2009, a total of 192,136 LTIP units had vested and been issued (December 31, 2008 - 155,219). The REIT has 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. The exercise price is determined using the weighted average trading price of the units on the five days prior to the options being granted. The following table summarized the outstanding unit options as at March 31, 2009: ------------------------------------------------------------------------- Weighted- average Number Remaining Weighted- Number Weighted- Outstanding Contractual Average Exercisable Average Exercise at March Life In Exercise at March Exercise Price 31, 2009 Years Price 31, 2009 Price ------------------------------------------------------------------------- $23.12 735,000 4.1 $23.12 245,002 $23.12 $15.05 157,500 5.0 $15.05 52,507 $15.05 ------------------------------------------------------------------------- 892,500 4.3 $21.70 297,509 $21.70 ------------------------------------------------------------------------- ------------------------------------------------------------------------- On May 20, 2008, 735,000 options with an exercise price of $23.12 and expiring on May 20, 2013 were granted to trustees and officers. 245,002 options vested immediately, 245,001 options will vest on May 20, 2009 and 244,997 will vest on May 20, 2010. All options remain outstanding at March 31, 2009. On March 12, 2009, 157,500 options with an exercise price of $15.05 and expiring on March 12, 2014 were granted to trustees and officers. 52,507 options vested immediately, 52,497 options will vest on March 12, 2010 and 52,496 will vest on March 12, 2011. All options remain outstanding at March 31, 2009. The REIT accounts for its Option Plan using the fair value method, under which compensation expense is measured at the date the options are granted using the Black-Scholes model and recognized over the vesting period. The following assumptions were used in calculating the fair value of the options granted on May 20, 2008; expected annual dividend rate of 6.40%, expected volatility of 18%, risk-free rate of return of 3.10% and expected life of 5 years. The following assumptions were used in calculating the fair value of the options granted on March 12, 2009; expected annual dividend rate of 9.83%, expected volatility of 28.8%, risk-free rate of return of 1.75% and expected life of 5 years. Compensation expense for the three months ended March 31, 2009 relating to options granted was $164,000 (2008 - $nil). 10. 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 NPR trust units and NPR contributes one unit for every three units acquired by an employee. The units are purchased on the TSX at market prices. During the three months ended March 31, 2009, employees invested a total of $25,400 (2008 - $25,900) and NPR contributed $8,500 (2008 - $8,600). During the three months ended March 31, 2009, 1,800 units (2008 - 1,795 units) were purchased at an average cost of $16.32 per unit (2008 - $20.57 per unit). 11. INCOME TAXES NPR has certain corporate subsidiaries which are subject to income tax on their respective taxable income at the applicable legislated tax rates. On October 31, 2006, a "Distribution Tax" on publicly traded investment trusts and publicly listed partnerships was announced by the federal Minister of Finance. The announcement created a new tax regime for Specified Invest Flow Throughs ("SIFTs"), which include certain publicly listed income trusts and publicly listed partnerships. These entities will be taxed in effect as corporations (at a rate comparable to the general combined federal/provincial corporate income tax rate). Certain real estate investment trusts are excluded from the SIFT definition and therefore are not subject to the new regime. The legislation provides for a transition period for publicly traded entities that existed prior to November 1, 2006 and is not expected to apply to NPR until 2011, The new tax regime, does not apply to an entity that qualifies for 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. GAAP requires NPR to recognize future income tax assets and liabilities based on estimated temporary differences expected as at January 1, 2011. Under the current legislation, NPR does not appear to qualify for the REIT Exemption. The future income tax provision arises from temporary differences between the estimated accounting and tax values of NPR's assets and liabilities at January 1, 2011 and has been calculated using the expected tax rates of 19.13% to 28.4% (December 31, 2008 - 19.63% to 29.5%). NPR has certain capital assets which have a lower tax value than their applicable accounting value. NPR has therefore recorded a future tax liability of $38.5 million (December 31, 2008 - $39.5 million) using an expected income tax rate ranging from 19.13% to 28.4% (2008 - 19.63% to 29.5%). The future tax liabilities arise from the temporary differences summarized below: ------------------------------------------------------------------------- March 31, December 31, 2009 2008 ------------------------------------------------------------------------- Future tax liabilities arising from temporary differences between accounting and tax basis of: Rental property assets in corporate subsidiaries 9,499 9,614 Rental properties 23,904 24,963 Prepaid mortgages 1,138 981 Other assets 3,933 3,931 ------------------------------------------------------------------------- 38,474 39,489 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 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 provision for income taxes is comprised of the following: ------------------------------------------------------------------------- Three Three Months Months Ended Ended March 31 March 31 ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- Current income taxes 104 86 Future income taxes (recovery) (1,015) (80) ------------------------------------------------------------------------- Total income tax expense (recovery) (911) 6 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 12. UNITHOLDERS' CAPITAL The total number of NPR 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 March 31, 2009 is 25,074,395 (December 31, 2008 - 25,033,645), representing net proceeds of $368.2 million, net of issue costs of $19.6 million (December 31, 2008 - $367.5 million, net of issue costs of $19.6 million). The number of units issued and outstanding is as follows: ------------------------------------------------------------------------- Trust Issue Class B Date Description Units Price LP Units ------------------------------------------------------------------------- December 31, 2008 22,755,010 2,278,635 January 2, LTIP units 2009 issued 8,408 $24.20 - January 6, Property 2009 acquisition - - 3,833 February 5, LTIP units 2009 issued 28,509 $16.21 - Issue costs - - - Class B LP units exchanged 74,083 - (74,083) ------------------------------------------------------------------------- March 31, 2009 22,866,010 2,208,385 ------------------------------------------------------------------------- ------------------------------------------------------------------------- ------------------------------------------------------------------------- Issue Date Description Price Total Units $(000's) ------------------------------------------------------------------------- December 31, 2008 25,033,645 367,446 January 2, LTIP units 2009 issued - 8,408 204 January 6, Property 2009 acquisition $16.91 3,833 65 February 5, LTIP units 2009 issued - 28,509 462 Issue costs - - (2) Class B LP units exchanged - - - ------------------------------------------------------------------------- March 31, 2009 25,074,395 368,175 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Trust units The total authorized number of trust units is unlimited. The total number of trust units of the REIT outstanding as at March 31, 2009 is 22,866,010 (December 31, 2008 - 22,755,010) representing a net book value of $340.3 million (December 31, 2008 - $338.3 million), net of issue costs. Class B Exchangeable Limited Partnership Units and Special Voting Units The Class B Units can be exchanged for trust units at any time at the option of the holder of the Class B units. Each Class B units has a "Special Voting Unit" attached to it, which entitles the holder to one vote, either in person or by proxy at the meeting of unitholders of the trust as if he or she was a unitholders of the trust. Total number of Class B LP Units and special voting units of Northern Property Limited Partnership, a controlled limited partnership, outstanding as at March 31, 2009, is 2,208,385 (December 31, 2008 - 2,278,635) representing a net book value of $27.9 million (December 31, 2008 - $29.1 million). Distributions to unitholders Pursuant to the Trust Declaration, holders of Trust units and Class B units are entitled to receive distributions made on each Distribution Date as approved by the Trustees. Distributions for the year are required to be at least equal to the Net Income as determined in accordance with the Income Tax Act. 13. NET EARNINGS PER UNIT ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- Net earnings 7,101 5,881 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average units for basic earnings per unit 25,063,002 25,016,934 Dilutive effect of units to be issued under the LTIP 30,703 30,741 Dilutive effect of Option Plan 41,855 - ------------------------------------------------------------------------- Weighted average units for diluted Earnings per unit 25,135,560 25,047,675 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net Earnings per unit: Basic $0.283 $0.235 Diluted $0.283 $0.235 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 14. GUARANTEES, COMMITMENTS AND CONTINGENCIES In the ordinary course of business, NPR 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 NPR 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, NPR 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, NPR becomes subject to various legal and other claims. Management and its legal counsel evaluate these claims and where required, accrue the best estimate of costs relating to these claims. Management believes the outcome of claims of this nature at March 31, 2009 will not have a material impact on NPR. During the normal course of operations, NPR provided guarantees for mortgages and loans payable relating to investments in corporations and joint ventures where NPR 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, NPR may be liable for 100% of the outstanding balances of these mortgages and loans payable. At March 31, 2009, NPR has provided guarantees totaling $10.3 million (December 31, 2008 - $10.4 million). Of this amount, $5.1 million has been included in mortgages and loans payable (December 31, 2008 - $5.2 million). The mortgages bear interest at rates ranging from 3.06% to 6.1% and mature June 2009 to December 2013 (December 2008 - 4.54% to 7.90% and mature June 2009 to December 2013). As at March 31, 2009, land and buildings with a carrying value of $6.6 million have been pledged to secure these mortgage and loans payable (December 2008 - $6.5 million). NPR commenced the development of 189 multi-family residential rental units located in Grande Prairie, Alberta. The estimated total cost of construction is approximately $22.9 million. Costs incurred to March 31, 2009 are $17.9 million. In connection with the acquisition of certain seniors' properties in Newfoundland, the tenants have agreed to expand or renovate certain properties purchased by NPR. NPR has entered into agreements to purchase these capital improvements and expansions once completed. In total, NPR has commitments totalling $6.2 million, which are expected to be completed in 2009. 15. SEGMENTED INFORMATION NPR considers residential multi-family, execusuites, seniors' and commercial income producing properties to be separate segments operating in five provinces and territories in Canada. The accounting policies of the segments are as described in Note 2. All 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. As such, NPR has not provided a reconciliation of Earnings Before Other Items to Net Earnings. In 2008, gain on sale of rental properties was earned in the residential rental and commercial business segments in Nunavut and the Northwest Territories, respectively. Gain on settlement of debt was earned in the residential business segments in all geographic segments. Segmented information for NPR is provided below: Total Assets ------------------------------------------------------------------------- March 31, 2009 Alberta BC Nfld NWT Nunavut Total ------------------------------------------------------------------------- Residential Multi-family 166,879 90,553 58,383 88,484 120,445 524,744 Execusuites - - 9,444 7,832 9,785 27,061 Seniors' 123,192 16,014 45,917 - - 185,123 ------------------------------------------------------------------------- 290,071 106,567 113,744 96,316 130,230 736,928 Commercial 9,287 21,313 1,212 90,092 21,689 143,593 Trust 3,804 - - - - 3,804 ------------------------------------------------------------------------- TOTAL ASSETS 303,162 127,880 114,956 186,408 151,919 884,325 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Total Assets ------------------------------------------------------------------------- December 31, 2008 Alberta BC Nfld NWT Nunavut Total ------------------------------------------------------------------------- Residential Multi-family 161,176 90,384 56,109 86,323 115,131 509,123 Execusuites - - 9,495 8,019 9,853 27,367 Seniors' 123,794 15,710 40,965 - - 180,469 ------------------------------------------------------------------------- 284,970 106,094 106,569 94,342 124,984 716,959 Commercial 8,912 21,409 1,222 97,868 20,992 150,403 Trust 5,560 - - - - 5,560 ------------------------------------------------------------------------- TOTAL ASSETS 299,442 127,503 107,791 192,210 145,976 872,922 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Geographic Segments ------------------------------------------------------------------------- Three months ended March 31, 2009 Alberta BC Nfld NWT Nunavut Total ------------------------------------------------------------------------- Rental revenue 9,085 4,052 4,189 9,018 6,648 32,992 Other income 255 115 121 328 228 1,047 Operating expenses (2,467) (1,602) (1,695) (4,524) (2,447) (12,735) ------------------------------------------------------------------------- 6,873 2,565 2,615 4,822 4,429 21,304 Interest on mortgages (2,686) (728) (766) (1,359) (1,017) (6,556) Amortization (1,906) (965) (858) (1,947) (1,438) (7,114) ------------------------------------------------------------------------- EARNINGS BEFORE OTHER ITEMS 2,281 872 991 1,516 1,974 7,634 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Geographic Segments ------------------------------------------------------------------------- Three months ended March 31, 2008 Alberta BC Nfld NWT Nunavut Total ------------------------------------------------------------------------- Rental revenue 7,943 3,202 3,618 8,909 6,180 29,852 Other income 166 81 100 266 45 658 Operating expenses (1,692) (1,381) (1,421) (4,449) (1,814) (10,757) ------------------------------------------------------------------------- Net operating income 6,417 1,902 2,297 4,726 4,411 19,753 Interest on mortgages (2,290) (521) (600) (1,362) (1,171) (5,944) Amortization (1,709) (789) (789) (1,758) (1,442) (6,487) ------------------------------------------------------------------------- EARNINGS BEFORE OTHER ITEMS 2,418 592 908 1,606 1,798 7,322 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Business Segments ------------------------------------------------------------------------- Three months ended Total March 31, Multi- Execu- Residen- Commer- 2009 family suites Seniors' tial cial Total ------------------------------------------------------------------------- Rental revenue 21,253 1,788 4,292 27,333 5,659 32,992 Other income 864 113 - 977 70 1,047 Operating expenses (9,233) (1,089) (6) (10,328) (2,407) (12,735) ------------------------------------------------------------------------- 12,884 812 4,286 17,982 3,322 21,304 Interest on mortgages (4,044) (265) (1,560) (5,869) (687) (6,556) Amortization (4,453) (287) (1,096) (5,836) (1,278) (7,114) ------------------------------------------------------------------------- EARNINGS BEFORE OTHER ITEMS 4,387 260 1,630 6,277 1,357 7,634 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Business Segments ------------------------------------------------------------------------- Three months ended Total March 31, Multi- Execu- Residen- Commer- 2008 family suites Seniors' tial cial Total ------------------------------------------------------------------------- Rental revenue 18,505 1,929 3,979 24,413 5,439 29,852 Other income 529 32 - 561 97 658 Operating expenses (7,578) (1,016) (5) (8,599) (2,158) (10,757) ------------------------------------------------------------------------- 11,456 945 3,974 16,375 3,378 19,753 Interest on mortgages (3,468) (208) (1,603) (5,279) (665) (5,944) Amortization (3,990) (281) (1,030) (5,301) (1,186) (6,487) ------------------------------------------------------------------------- EARNINGS BEFORE OTHER ITEMS 3,998 456 1,341 5,795 1,527 7,322 ------------------------------------------------------------------------- ------------------------------------------------------------------------- 16. RELATED PARTY TRANSACTIONS A company owned by a Trustee of NPR leases commercial space from NPR under normal commercial terms. NPR earned rental revenue from that arrangement of $113,500 for the three months ended March 31, 2009 (2008 - $119,200). Amounts outstanding in accounts receivable pertaining to this lease were $nil at March 31, 2009 (December 31, 2008 - $nil). A Trustee of NPR is the Chairman of AgeCare, which leases six seniors' properties from NPR. For the three months ended March 31, 2009, NPR earned rental income, including rental revenue earned on a straight-line basis over the term of the lease, totaling $3.2 million (2008 - $3.2 million) from AgeCare. Amounts outstanding in accounts receivable pertaining to this lease were $nil at March 31, 2009 (December 31, 2008 - $nil). In addition, AgeCare is paid an annual fee for advisory services provided to NPR respecting prospective acquisitions of seniors' properties. For the three months ended March 31, 2009, NPR paid $30,000 for these services (2008 - $30,000). During the first quarter of 2009, the REIT completed renovations totaling $2.15 million to a seniors' facility in BC which is leased to AgeCare. At March 31, 2009, In accordance with the lease agreement, AgeCare is repaying this amount over 15 years. Interest revenue of $15,000 was earned for the three months ended March 31, 2009 (2008 - $nil) relating to this receivable. A Trustee of NPR is a senior partner of a law firm that provides legal services to NPR in the ordinary course of business. Fees paid for the three months ended March 31, 2009 were $9,000 (2008 - $9,000). 17. FINANCIAL INSTRUMENTS Management has determined that the majority of the NPR'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. Financial instruments include loans receivable, accounts receivable, tenant security deposits, mortgages payable, loans payable, accounts payable and accrued liabilities and bank indebtedness. Unless otherwise specified, the fair value of these instruments approximates their carrying values. Utility cost risk NPR is exposed to utility cost risk, which results from the fluctuation in utility prices for fuel oil, natural gas and electricity, the primary utilities used to heat the REITs properties. The exposure to utility cost risk is restricted primarily to the REIT's residential rental and execusuites portfolio. The leases in the remainder of the portfolio generally provide for recovery of operating costs, including utilities. Because of the northern location of a portion of NPR's portfolio, the exposure to utility price fluctuations is more pronounced in the first and last fiscal quarter of the year. NPR manages its exposure to utility risk through a number of preventative measures, including retrofitting properties with energy efficient appliances, fixtures and windows. With the exception of a fixed price utility contract in place on certain residential rental units in Alberta, NPR does not utilize hedges or forward contracts to manage exposure to utility cost risk. Over the last two years, NPR converted heating systems for certain properties in Yellowknife from fuel oil based boilers to wood pellet boilers. The investment in these environmentally friendly boilers continues to reduce NPR's exposure to volatile heating oil prices. Management continues to review the feasibility of converting more buildings in Yellowknife to wood pellet boilers. Heating oil is the primary source of fuel for heating properties located in Nunavut and the Northwest Territories. Exposure to increases in the cost of heating oil is partially offset by the ability to recover these increases from a significant proportion of its commercial and some residential tenants. Natural gas is the significant source of fuel for heating properties located in Alberta, BC and Inuvik, NWT. NPR has fixed price contracts for certain of its properties which accounts for approximately 27% of the REIT's usage in Alberta. The Alberta provincial government's Natural Gas Rebate Program provides for refunds of $1.50 per gigajoule to consumers when natural gas prices exceed $5.50 per gigajoule from October through March. During the first quarter of 2009, NPR received $40,000 in rebates. Recently, the Alberta provincial government has indicated that the Natural Gas Rebate Program will not be renewed for the 2009-2010 heating season. Natural gas prices in Inuvik and BC are not subject to regulated price control and the REIT does not use financial instruments to manage the exposure to the price risk. Management prepared a sensitivity analysis on the impact of price changes in the cost of heating oil and natural gas. A 10% change over the average price of heating oil and natural gas would impact NPR's net earnings by $115,000 for the three months ended March 31, 2009. Electricity is the primary source of fuel for heating properties located in Newfoundland as well as parts of north eastern BC. In Newfoundland, electricity is purchased from the provincially regulated utility and is directly paid by the tenants for a significant portion of the REIT's multi-family rental units. As there is not a significant direct risk to NPR regarding the price of electricity, a sensitivity analysis has not been prepared. Liquidity risk Ultimate responsibility for liquidity risk management lies with management and the Board of Trustees of the REIT. The REIT manages liquidity risk by managing mortgage and loan maturities to ensure a relatively even amount of mortgage maturities in each year. At March 31, 2009 the REIT has revolving credit facilities totaling $57.5 million (December 31, 2008 - $50.0 million). At March 31, 2009, $34.7 million of the credit facilities were utilized (December 31, 2008 - $26.6 million). Cash flow projections are completed on a regular basis to ensure there will be adequate liquidity to maintain operating and investment activities in addition to making monthly distributions to unitholders. The Board of Trustees reviews the current financial results and the annual business plan in determining appropriate distribution levels. Credit risk Credit risk arises from the possibility that tenants may not be able to fulfill their lease commitments. The REIT's credit risk is primarily attributable to tenant receivables. Tenant receivables are comprised of a large number of tenants spread across the geographic areas in which the REIT operates. There are no significant exposures to single tenants with the exception of AgeCare Investments Ltd, which leases seniors' properties in Alberta and BC from the REIT, and the Governments of Canada, the Northwest Territories and Nunavut, which leases a large number of rental units in the Northwest Territories and Nunavut. NPR mitigates this risk through conducting thorough credit checks on prospective tenants, requiring rental payments on the first of the month, obtaining security deposits approximating one month's rent from tenants where legislation permits, and geographic diversification in its portfolio. Tenants are required to pay rent on the first of each month, with the exception of certain government leases where rent is due at the end of the month and certain commercial tenants where operating cost recoveries are billed in arrears. As such, the majority of tenant receivables are past due at the balance sheet date. The following is an aging of current tenant and other receivables: ------------------------------------------------------------------------- March 31, December 31, 2009 2008 ------------------------------------------------------------------------- 0-30 days 1,702 987 31-60 days 479 267 61-90 days 82 130 Over 90 days 582 722 ------------------------------------------------------------------------- Tenant receivables 2,845 2,106 Other receivables 3,435 3,329 Allowance for doubtful accounts (350) (350) ------------------------------------------------------------------------- 5,930 5,085 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NPR classifies tenants as past tenants on the date of their move out from a residential unit. Effective January 1, 2008 NPR began recording a specific bad debt provision on all balances owed by past tenants. Any subsequent recovery of balances owed from past tenants is recorded as a reduction in the bad debt provision for the period. In addition, NPR records an allowance for bad debt from current tenants and other receivables where the expected amount to be collected is less than the actual accounts receivable. The amounts disclosed on the balance sheet are net of allowances for uncollectible accounts from current tenants and other receivables, estimated by Management based on prior experience and current economic conditions. The reconciliation of changes in allowance for doubtful accounts is as follows: ------------------------------------------------------------------------- Three Three Months Months Ended Ended March 31 March 31 ------------------------------------------------------------------------- 2009 2008 ------------------------------------------------------------------------- Balance, January 1 350 250 Accounts receivable written off (44) (33) Accounts recovered 84 92 Additional allowance (40) (59) ------------------------------------------------------------------------- 350 250 ------------------------------------------------------------------------- ------------------------------------------------------------------------- The following is an aging of accounts payable and accrued liabilities: ------------------------------------------------------------------------- March 31, December 31, 2009 2008 ------------------------------------------------------------------------- 0-6 months 12,269 9,916 6 months to 1 year 1,371 1,251 Over 1 year 338 51 ------------------------------------------------------------------------- 13,978 11,218 Tenant security deposits 3,613 3,893 ------------------------------------------------------------------------- 17,591 15,111 ------------------------------------------------------------------------- ------------------------------------------------------------------------- NPR has operating facilities to ensure it has sufficient available funds to meet current and foreseeable financial requirements. Management believes that future cash flows from operations and availability under the current credit facilities will be adequate to support these financial liabilities. Interest rate risk The REIT is exposed to interest rate risk on mortgages and loans payable and does not hold any financial instruments to mitigate that risk. The REIT utilizes both fixed and floating rate debt. Interest rate risk related to floating interest rates is limited primarily to the utilization of the credit facilities. Management mitigates interest rate risk by utilizing fixed rate mortgages, ensuring access to a number of sources of funding and staggering mortgage maturities with the objective of achieving relatively even annual debt maturities. To the extent possible, the REIT maximizes the amount of mortgages on residential rental properties where it is possible to lower interest rates through Canada Mortgage and Housing Corporation mortgage insurance. The sensitivity analysis for floating rate debt has been completed based on the exposure to interest rates at the balance sheet date. Floating rate debt includes all mortgage and loans payable which are not subject to fixed interest rates and the revolving line of credit. If interest rates changed by 0.50% and all other variables remained constant, the REIT's net earnings for the three months ended March 31, 2009 would have changed by $51,000. 18. CAPITAL MANAGEMENT The REIT's objective when managing its capital is to safeguard its assets while maximizing the growth of its business, returns to unitholders and maintaining the sustainability of cash distributions. The REIT's capital consists of mortgages and loans payable, operating and acquisition facilities, Trust Units and Class B LP Units. Management monitors the REIT's capital structure on an ongoing basis to determine the appropriate level of mortgage debt and loans payable to be placed on specific properties at the time of acquisition or when existing debt matures. The REIT follows conservative guidelines which are set out in the Trust Declaration. In determining the most appropriate debt, consideration is given to strength of cash flow generated from the specific property, interest rate, amortization period, maturity of the debt in relation to the existing debt of the REIT, interest and debt service ratios, and limits on the amount of floating rate debt. The REIT has operating facilities which is used to fund acquisitions and capital expenditures until specific mortgage debt is placed or additional equity is raised. Consistent with others in the industry, the REIT monitors capital on the basis of debt to gross book value ratio. The Declaration of Trust provides for a maximum debt to gross book value ratio of 70%. The REIT does not anticipate operating above a debt to gross book value ratio of 60%. The REIT's debt to gross book value is as follows: ------------------------------------------------------------------------- Three Three Months Months Ended Ended March 31 December 31 2009 2008 ------------------------------------------------------------------------- Bank indebtedness (cash) 2,326 (731) Operating facilities 34,700 26,600 Mortgages and loans payable 503,888 502,277 ------------------------------------------------------------------------- Debt 540,914 528,146 ------------------------------------------------------------------------- Rental properties and other capital assets 837,636 833,967 Capital assets improvements in progress 2,733 3,773 Capital assets under development 15,070 8,996 Refundable deposits and mortgage proceeds held in trust 75 185 Accumulated amortization 97,562 90,758 Future income taxes on acquisitions (21,625) (21,625) ------------------------------------------------------------------------- Gross Book Value 931,451 916,054 ------------------------------------------------------------------------- Debt to Gross Book Value 58.1% 57.7% ------------------------------------------------------------------------- ------------------------------------------------------------------------- NPR is subject to three principal financial covenants in its mortgage and loans payable and operating facilities. The financial covenants are described as follows: - Debt Service Coverage Ratio - calculated as Net earnings before interest, taxes and amortization divided by the debt service payments (interest expense and principal repayments); - Interest Coverage Ratio - calculated as Net earnings before interest, taxes and amortization divided by the interest expense; - Debt to Gross Book Value as calculated above. ------------------------------------------------------------------------- Three Three Months Months Ended Ended March 31 December 31 2009 2008 ------------------------------------------------------------------------- Earnings from continuing operations before taxes 6,190 26,417 Amortization 7,114 26,447 Interest on mortgages 6,556 24,499 Interest on operating facilities 149 1,286 ------------------------------------------------------------------------- Net earnings before interest, taxes and amortization 20,009 78,649 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest on mortgages 6,556 24,499 Interest on operating facilities 149 1,286 ------------------------------------------------------------------------- Total Interest 6,705 25,785 Principal repayments 3,961 14,983 ------------------------------------------------------------------------- Debt Service Payments 10,666 40,768 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Interest Coverage Ratio 2.98 3.05 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Debt Service Coverage Ratio 1.88 1.93 ------------------------------------------------------------------------- ------------------------------------------------------------------------- As at and during the three months ended March 31, 2009, the REIT complied with all externally imposed capital requirements and all covenants relating to its debt facilities. 

For further information: Mr. Todd R. Cook, CFO, at (403) 531-0720