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Northern Property REIT (www.npreit.com) announced its financial results for the three and 12 months ended December 31, 2009.

Highlights

• 2009 FFO of $2.20 per unit up 3.5% from $2.12 for 2008
• Q4 2009 FFO declined 6.0% from same quarter of 2008 to $0.52
• 2.9% same door revenue decline between full year 2008 to 2009
• higher vacancy, lower rents, accelerated maintenance and capex costs in Alberta apartments
• NPR’s western apartment rental markets improving in late 2009
• 2009 DIPU payout ratio 68.3%

FINANCIAL PERFORMANCE AT A GLANCE:

“As we expected, NPR’s Q4 results declined as the full financial impact of recessionary conditions was experienced. A weak rental market in northern Alberta was the principal culprit. Higher vacancy, lower rents and extraordinary costs associated with a push to catch up with needed maintenance and capex investment took place in these markets during the year,” said Jim Britton, NPR’s President and CEO.

“Fortunately, outside of Alberta our portfolios weathered the recession very well. We were helped by lower heating oil costs, lower mortgage interest rates and decreased trust administration expense. And the REIT is now experiencing apartment rental market improvement across our system.”

Multi-family rental market conditions for NPR began to weaken early in 2009. Apartment vacancy rates increased every month between January and August. The increase was most evident in the northern Alberta cities of Fort McMurray, Grande Prairie and Lloydminster which suffered employment losses due to the sharp decline in activity in the oil and natural gas industries. Business conditions were also more challenging in the NWT, particularly execusuite operations in Yellowknife and Inuvik.

NPR’s residential rental operations in Nunavut and Newfoundland showed strength throughout the year. Northeastern British Columbia operations also performed above expectations. Seniors’ property leases remained in good standing in 2009 and commercial property occupancy remained consistent with prior years.

The REIT continued to operate in a fiscally conservative fashion during 2009 maintaining a payout ratio of 68.3% of distributable income. Weighted average interest rates decreased to 4.87% compared to 5.13% at the end of 2008. Debt to gross book value was 57.7%, the same as a year ago. Interest service coverage was among the best of Canadian REITs at 3.01 times.

NPR made a sharply higher sustaining capex investment of $11.8 million in 2009, double that of 2008. Much of this investment was directed to improving apartment buildings in northern Alberta, work which had been impossible to carry out in the low vacancy, boom conditions of the years prior to 2009. The accelerated capex investment was accompanied by a marked increase in building maintenance activity which had been deferred because of labour shortages during the boom years. The higher level of capex investment has been expensed for tax purposes in 2009 but amortized for accounting purposes over 5 years resulting in a non-cash, future tax charge of $4.2 million. 2009 cash distributions on trust units will be subject to lower taxation as a result of the temporarily higher capex expense. Approximately 68% of trust unit distributions are tax deferred for 2009, compared to 53% for 2008.

“While 2009 was challenging both operationally and financially, so far 2010 has been a much brighter story,” Mr. Britton went on to say. “Apartment occupancy has strengthened every month since September. We are experiencing robust rental market performance in Nunavut, Newfoundland and recently in Yellowknife. Fort McMurray is beginning to improve. We also expect to conclude a modest amount of accretive apartment purchasing activity as the year goes on. We are pleased that NPR’s low payout ratio has enabled us to get through a difficult year without conducting a dilutive equity issue.”