The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from CNW Group

NPR REPORTS Q1 2011 RESULTS

Tuesday, June 14, 2011

NPR REPORTS Q1 2011 RESULTS19:23 EDT Tuesday, June 14, 2011CALGARY, June 14, 2011 /CNW/ - Northern Property REIT and NorSerCo Inc. (NPR.UN -TSX) announced its financial results for the 3 months ended March 31, 2011.  The Financial Statements and MD&A for the entities are reported on a condensed combined basis at SEDAR.com under Northern Property Real Estate Investment Trust.HIGHLIGHTS:Same door NOI growth of 8.9% compared to same quarter a year agoQ1 2011 vacancy loss of 4.9% compared to 7.3% for the same quarter on 2010Fractional increase in vacancy compared to year end 2010IFRS bump in property values of $207 millionAcquisition activity robustFINANCIAL PERFORMANCE AT A GLANCE                  (Thousands of dollars except per unit amounts)          Three MonthsEnded March 31     Three MonthsEnded March 31           2011     2010Total revenue          36,703     33,351Net operating income ("NOI") *          23,155     20,496Net and comprehensive earnings (loss)          12,000     (63,213)Net earnings per unit, basic **          $0.435     ($2.517)                  Funds from operations  ("FFO") *          14,682     12,069FFO per stapled unit, basic **          $0.534     $ 0.480FFO payout ratio          71.6%     77.1%"NPR's property portfolio continued to deliver improved financial results in Q1," said Jim Britton, President and CEO.  "In spite of enduring a very cold quarter and a small uptick in vacancy compared to 2010 year end, the REIT's financial results moved forward. Overall apartment vacancy loss at 4.9% for the quarter was much lower than the 7.3% we experienced in Q1 2010.  A sharp reduction in the cash burn associated with advisory costs for our 2010 SIFT reorganization also contributed to improved financial performance." After experiencing consistent improvements in apartment vacancy throughout 2010, results were mixed in early 2011 with vacancy increasing modestly in northern British Columbia, Newfoundland and Fort McMurray and improving in locations such as Grande Prairie and Yellowknife.  Commercial operations, seniors' facility rentals and executive rentals were steady overall.The pace of acquisition activity continued to grow with closings taking place on 151 residential units in Nanaimo and 230 in Jasper Park.  The REIT also announced a $71 million transaction whereby it would acquire a portfolio of apartment units, an office building, 2 hotels, and development lands in Iqaluit, the capital city of the Nunavut Territory.  A $58 million offering of Trust units was concluded in late May to facilitate the transactions."Northern Property remains in a very strong financial position," Mr. Britton went on to say.  "Funds from operations per unit at 53.4 cents are up 11% compared to the same period last year.  Over the same period our FFO payout ratio declined to 71.6% compared to 77.1%.  We are in a strong position in an improving economy."Northern Property has also announced its intention to consider strategic options respecting its master leased seniors' buildings.  The REIT owns 554 units in 10 properties in Newfoundland, 746 units in 5 buildings in Alberta and 214 units in a facility in British Columbia.  The REIT intends to retain advisors to assist in this process. NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUSTNorSerCo Inc.Unaudited Condensed Combined Statement of Financial Position(Thousands of Canadian dollars)           Note  March 31,2011 December 31,2010 January 1,2010         ASSETS        Non-current assets        Investment properties5  1,125,385 1,094,288 1,071,202Property, plant and equipment6  12,603 12,708 12,822Other long term assets7  8,003 7,807 5,270Investment in joint ventures8  5,574 5,343 4,674Loans receivable9  276 279 371    1,151,841 1,120,425 1,094,339Current assets        Cash   - 2,921 -Term deposits and short term investments   4,208 4,087 3,555Accounts receivable20  2,736 2,991 3,878Prepaid expenses and other assets10  1,813 2,409 2,526    8,757 12,408 9,959    1,160,598 1,132,833 1,104,298         LIABILITIES        Non-current liabilities        Trust and Limited Partnership Class B units11  - - 549,821Mortgages payable12  461,087 451,985 444,852Deferred taxes13  - - 57,291    461,087 451,985 1,051,964Current liabilities        Bank indebtedness14  1,676 - 1,713Operating facilities14  17,398 7,898 33,698Trade and other payables20  16,119 18,601 15,145Distributions payable   3,503 3,499 3,096Current portion of mortgages payable12  60,244 52,598 46,576Unit based payments15  4,280 4,334 1,498Forward utility contract   25 55 152    103,245 86,985 101,878    564,332 538,970 1,153,842EQUITY        Equity attributable to stapled unit holders17  594,218 591,843 (51,417)Non-controlling interests18  2,048 2,020 1,873TOTAL EQUITY   596,266 593,863 (49,544)    1,160,598 1,132,833 1,104,298See accompanying notes to the condensed combined financial statements.Guarantees, commitments and contingencies (Note 19)APPROVED BY THE BOARD              Trustee Trustee    NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUSTNorSerCo Inc.Unaudited Condensed Combined Statements of Income and Comprehensive IncomeThree months ended March 31(Thousands of Canadian dollars)         Note  2011  2010REVENUE       Rental revenue   35,710  32,417Other property income   993  934    36,703  33,351Operating expenses22  (13,548)  (12,855)    23,155  20,496OTHER EXPENSES       Mortgage interest   (6,623)  (6,547)Depreciation   (224)  (252)    (6,847)  (6,799)EARNINGS BEFORE THE UNDERNOTED   16,308  13,697Administration   (1,918)  (1,625)Interest on operating facilities   (127)  (270)Interest paid to unitholders 11  -  (9,301)Interest and other income   91  38Equity in earnings (loss) of joint ventures   231  (389)Unrealized fair value changes23  (2,585)  (64,730)INCOME (LOSS) BEFORE INCOME TAXES  12,000  (62,580)INCOME TAX EXPENSE 13      Current   -  (86)Deferred   -  (547)    -  (633)NET INCOME (LOSS)   12,000  (63,213)Net income loss attributable to:       Stapled unit holders   11,946  (63,265)Non-controlling interest   54  52Net income (loss)   12,000  (63,213)See accompanying notes to the condensed combined financial statements.NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUSTNorSerCo Inc.Unaudited Condensed Combined Statements of Changes in Equity (Deficiency)Three months ended March 31 (Thousands of Canadian dollars)              Three months ended Year ended  Note 2011 2010 2010STAPLED UNITS  17      Balance, January 1   696,887 - -Conversion of units from debt to equity  11 - - 577,610Exercise of unit options   - - 8,667Long term incentive plan units issued   938 - 2,618Issuance of units     - 49,508Issue costs  1,17 - - (2,505)Conversion of LP units to Trust Units on reorganization  1 - - 54,122Special distribution   - - 6,867Balance, March 31 (December 31)   697,825 - 696,887         DEFICIT         CUMULATIVE NET INCOME (DEFICIT)         Balance, January 1   (73,630) (51,417) (51,417) Net income (loss) attributable to stapled unit holders   11,946 (63,265) (22,213)Balance, March 31 (December 31)   (61,684) (114,682) (73,630)          CUMULATIVE DISTRIBUTIONS TO STAPLED UNIT HOLDERS       - Balance, January 1   (31,414) - - Distributions declared to stapled unit holders   (10,509) - (24,547) Special distribution 1 - - (6,867) Balance, March 31 (December 31)   (41,923) - (31,414)         CUMULATIVE DEFICIT, March 31 (December 31)   (103,607) (114,682) (105,044)EQUITY ATTRIBUTABLE TO STAPLED UNIT HOLDERS   594,218 (114,682) 591,843         NON-CONTROLLING INTERESTS 18      Balance, January 1   2,020 1,873 1,873Net income   54 52 333Net distributions to non-controlling interests   (26) (19) (186)Balance, March 31 (December 31)   2,048 1,906 2,020         TOTAL EQUITY (DEFICIENCY)   596,266 (112,776) 593,863See accompanying notes to the condensed combined financial statements.NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUSTNorSerCo Inc.Unaudited Condensed Combined Statements of Cash FlowsThree months ended March 31(Thousands of Canadian dollars)           Note  2011  2010CASH FLOWS RELATED TO THE FOLLOWING ACTIVITIES:         OPERATING         Net income and comprehensive loss    12,000  (63,213) Adjustments for:          Deferred rental revenue    (337)  (316)  Tenant inducements    58  (1,039)  Depreciation    224  252  Interest expense    6,750  6,817  Interest paid to unitholders    -  9,301  Interest income    (91)  (38)  Interest paid    (6,501)  (6,440)  Interest received    91  38  Distribution interest paid to unit holders    (239)  (9,294)  Deferred recoverable costs    82  (48)  Unrealized fair value changes 29  2,585  64,730  (Income) loss from joint ventures    (231)  389  Unit based compensation    294  323  Income tax expense    -  633  Income tax paid    (40)  (97)     14,645  1,998 Changes in non-cash working capital 24  (1,938)  (4,594)     12,707  (2,596) FINANCING         Proceeds from mortgages    18,739  18,974 Repayment of mortgages    (20,939)  (11,729) Proceeds from operating facilities, net    9,500  2,800 Payments to non-controlling interest    (26)  (19) Units issued under option plan    -  333 Distributions paid to unitholders    (10,266)  -     (2,992)  10,359 INVESTING         Acquisition of investment properties    (9,984)  - Capital improvements    (4,209)  (5,999) Acquisition of properties, plant and equipment    (119)  (283) Advances to joint ventures    -  (700)     (14,312)  (6,982) NET (DECREASE) INCREASE IN CASH    (4,597)  781 CASH (BANK INDEBTEDNESS), BEGINNING OF PERIOD    2,921  (1,713) BANK INDEBTEDNESS, END OF PERIOD    (1,676)  (932)See accompanying notes to the condensed combined financial statements.NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUSTNorSerCo INC.Notes to the Condensed Combined Financial Statements (unaudited)Three months ended March 31, 2011 and 2010(Columnar amounts expressed in thousands of Canadian dollars except where indicated) 1.DESCRIPTION OF THE COMBINED ENTITIESNorthern Property Real Estate Investment Trust (the "REIT"), an unincorporated open-ended real estate investment trust and NorSerCo Inc. ("NorSerCo"), a corporation incorporated under the Alberta Business Corporations Act on October 18, 2010 are both domiciled in Canada ("NPR" or the "Entities"). NPR's registered office is located at 110, 6131 6th Street SE, Calgary, Alberta.On December 31, 2010, NPR completed its internal reorganization pursuant to the Plan of Arrangement ("Arrangement") which was approved by unitholders at a special meeting held on November 25, 2010. The Arrangement was completed to ensure NPR meets the definition of a Real Estate Investment Trust as defined in the Income Tax Act.The Arrangement resulted in the following:i.    The creation of a taxable Alberta corporation, NorSerCo.  NorSerCo operates the three wholly owned execusuite properties under a lease arrangement with the REIT, whereby the REIT retained ownership of the real estate assets and leases the properties to NorSerCo under market commercial leases.  Following the transaction, NorSerCo holds and operates the business assets which produce non-qualifying revenue as defined under the Income Tax Act.   NorSerCo also holds the 50% interest in the execusuite operation in Inuvik, NWT;ii.    The Class B Limited Partnership units of Northern Property Limited Partnership were converted into REIT Trust Units;iii.    The Common Shares of NorSerCo were distributed to all REIT unitholders.  The REIT Trust Units and NorSerCo Common Shares ("Shares") are listed on the Toronto Stock Exchange ("TSX") together as a "Stapled Unit" under the trading symbol NPR.UN; andiv.    The simplification of NPR's organization structure through the elimination and amalgamation of certain wholly owned subsidiaries.These condensed combined financial statements are a result of the completion of the REIT's internal reorganization on December 31, 2010, pursuant to the Arrangement that was approved by unitholders at a special meeting held on November 25, 2010.  Each REIT unitholder received, for each REIT Trust Unit held, a NorSerCo Common Share.  Each issued and outstanding share of NorSerCo is stapled to a REIT unit on a one-for-one basis so as to form stapled units ("Stapled Units" or "Units") which are listed for trading on the TSX.  The Stapled Units of the REIT and NorSerCo may only be transferred together as Stapled Units unless a "separation event" has occurred.  A separation of the REIT Trust Units and NorSerCo Common Shares can occur under either of the following:  (a) the holders of REIT Trust Units vote in favour of the unstapling of REIT Trust Units and NorSerCo Common Shares; or (b) at the sole discretion of the trustees of the REIT or the directors of NorSerCo, upon an event of bankruptcy or insolvency of either the REIT or NorSerCo and/or their respective subsidiaries.The presentation of the condensed combined financial statements of the two entities is useful to stapled unit holders because of the following:(i)   The Trust Units of the REIT and the Common Shares of NorSerCo are stapled together, resulting in the two entities being under common ownership;(ii)    The sole activity of NorSerCo is to hold and operate the non-qualifying business assets which generate non-qualifying revenue as defined by the Income Tax Act ("Tax Act"), enabling the REIT to qualify under the REIT Exemption (the "Exemption") provisions applicable to publicly traded trusts; and(iii)    The combined financial information represents financial statements in a similar format as previously reported in NPR's consolidated financial statements.As a result of the Arrangement, NPR's financial statements are prepared on a combined basis as at January 1, 2010 and December 31, 2010 and March 31, 2011. Prior to December 31, 2010, NorSerCo did not have any assets, liabilities, equity or transactions.  Accordingly, the consolidated financial statements of the REIT, as previously reported, are presented as the combined financial statements for the dates and periods prior to December 31, 2010.2. BASIS OF PREPARATION AND STATEMENT OF COMPLIANCENPR has adopted International Financial Reporting Standards ("IFRS") for the year ending December 31, 2011. These condensed combined financial statements for the quarter ended March 31, 2011 have been prepared in accordance with IAS 34 - Interim Financial Reporting ("IAS 34"), and are within the scope of IFRS 1 - First-time adoption of IFRS ("IFRS 1"), because they are part of the period covered by the Entities' first IFRS financial statements for the year ending December 31, 2011. These are NPR's first IFRS condensed combined financial statements and these statements, including comparatives, have been prepared using IAS 34 and accounting policies that the Entities expect to adopt in its annual combined financial statements for the year ending December 31, 2011. The Entities applied IFRS 1 as at January 1, 2010 (the "Transition Date"). As a result of ongoing review and possible amendments by interpretive guidance from the International Accounting Standards Board (IASB) and International Financial Reporting Interpretations Committee ("IFRIC"), IFRS finally in effect at December 31, 2011 may differ from IFRS and interpretation statements applied in preparing the condensed combined financial statements.NPR's combined financial statements were prepared in accordance with Canadian Generally Accepted Accounting Principles ("Canadian GAAP" or "GAAP")) until December 31, 2010. In preparing the Entities' condensed combined financial statements for the first quarter of 2011, management has recorded transition adjustments on applying IFRS as disclosed in note 28. Reconciliations, descriptions and explanations of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Entities are provided in note 28. This note includes reconciliations of equity and profit or loss for comparative periods reported under Canadian GAAP to those reported for those periods under IFRS. The preparation of condensed financial statements in accordance with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying NPR's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the condensed combined interim financial statements are disclosed in note 3. The policies set out below have been consistently applied to all the periods presented.The condensed combined financial statements were authorized for release by the trustees of Northern Property Real Estate Investment Trust and the Board of Directors of NorSerCo Inc. (the "Trustees") on June 14, 2011.3. SIGNIFICANT ACCOUNTING POLICIESBasis of measurementThese condensed combined financial statements have been prepared on the historical cost basis except for certain investment properties and financial instruments that are measured at fair values, as explained in the accounting policies below.Basis of presentationThe condensed combined financial statements have been prepared by NPR in accordance with IAS 34. The preparation of these financial statements is based on accounting policies and practices in accordance with IFRS and should not be compared to those used in the preparation of the prior years' audited annual combined financial statements, as these financial statements were prepared under accounting policies and practices in accordance with Canadian GAAP. The accompanying interim financial statements should not be read in conjunction with the notes to the Entities' audited combined financial statements for the year ended December 31, 2010, since they do not contain all disclosures required by IFRS for annual financial statements. These financial statements reflect all normal and recurring adjustments which are, in the opinion of management, necessary for a fair presentation of the respective interim periods presented.The preparation of these condensed combined financial statements resulted in changes to the accounting policies as compared with the most recent annual financial statements prepared under Canadian GAAP. The accounting policies set out below have been applied consistently to all periods presented in these condensed combined financial statements.  They also have been applied in preparing an opening IFRS balance sheet as at January 1, 2010 for the purposes of the transition to IFRS, as required by IFRS 1. The impact of the transition from Canadian GAAP to IFRS is explained in note 28.Principles of combinationThe REIT and NorSerCo share common management and most trustees and directors.  All the trustees of the REIT are directors of NorSerCo; NorSerCo has one independent director who is not a trustee of the REIT.  The two entities share common management, employees, information technology and other systems and policies, procedures and processes.  NorSerCo was incorporated to hold and operate those assets whose activities generate revenue not qualifying under the Income Tax Act for the real estate investment trust exemption.The principles used to prepare combined financial statements are similar to those used to prepare consolidated financial statements.  The combined financial statements include the assets, liabilities and equity of the REIT and NorSerCo.  NorSerCo did not have any transactions in 2010 other than the initial transaction as described in note 1.  NorSerCo did not have any assets, liabilities, equity or transactions prior to December 31, 2010.  The combination of the two entities does not result in the elimination of the equity of NorSerCo as the REIT does not hold any interest in NorSerCo.  The equity reported in these condensed combined financial statements will be presented by way of combining the two entities together.Intercompany balances and transactions, and any unrealized income and expenses arising from intercompany transactions, are eliminated in preparing these condensed combined financial statements.  Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment. Intercompany transactions between the REIT and NorSerCo are eliminated in the same manner as intercompany transactions in consolidated financial statements. The creation of NorSerCo resulted in a reclassification within equity for the issuance of NorSerCo Common Shares, being an increase of $6.9 million in Units equal to the special distribution in the cumulative deficit to unitholders reported by the REIT for the distribution of the NorSerCo Common Shares to the unitholders of the REIT.Principles of consolidationThese condensed combined financial statements include the accounts of the REIT, NorSerCo and their subsidiaries, partially owned partnerships and joint ventures, collectively NPR.  Subsidiaries are entities controlled by NPR. The financial statements of subsidiaries are included in the combined financial statements to the date that control ceases. The accounting policies of subsidiaries, partially owned partnerships and joint ventures are the same as those of the Entities.  NPR has no controlling entity.Use of estimatesThe preparation of financial statements requires management to make estimates and judgments about the future.  Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.  Accounting estimates will, by definition, seldom equal the actual results. The following discussion sets forth management's:most critical estimates and assumptions in determining the value of assets and liabilities; andmost critical judgments in applying accounting policies. The preparation of the combined financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.  Actual results may differ from these estimates.Critical accounting estimates and key assumptionsAllowance for doubtful accountsNPR must make an assessment of whether accounts receivable are collectible from tenants.  Accordingly, management establishes an allowance for estimated losses arising from non-payment, taking into consideration customer creditworthiness, current economic trends and past experience. If future collections differ from estimates, future earnings would be affected.Values of investment propertiesNPR carries its investment properties at fair value.  While investment properties are recorded at fair value on a quarterly basis, not every property is independently appraised every year. Significant judgment is applied in arriving at these fair values, particularly as many of the properties are in smaller communities with limited trading activity.  Changes in the value of the rental properties affect earnings.Accrued liabilitiesEntities must estimate accrued liabilities when invoices have not been received in order to ensure all expenditures have been recognized.  If future expenditures differ from estimates, future earnings would be affected.Capital adequacyNPR prepares estimated cash flow projections on a regular basis to ensure there will be adequate liquidity to maintain operating, capital and investment activities in addition to making monthly distributions to stapled unit holders and uses these estimates to assess capital adequacy.  The Trustees review the current financial results and the annual business plan in determining appropriate capital adequacy and use this to determine distribution levels.  Changes in these estimates affect distributions to stapled unit holders and the Entities' cost of capital, which in turn affects earnings.Critical judgments in applying accounting policiesStapled UnitsPrior to May 11, 2010, the REIT's Declaration of Trust ("DOT") included the requirement that on the last day of the year, an amount equal to the net income of the Trust for such Taxation Year, determined in accordance with the Tax Act and excluding net realized capital gains, not previously made payable to Unitholders in the Taxation Year, less the amount of any non-capital losses, as defined in the Tax Act, of the Trust carried forward, shall be automatically payable to Unitholders at the close of business on such day. This feature indicates that the units have a fixed payment requirement and implies that NPR's Trust Units be classified as debt rather than equity. Therefore, at transition to IFRS, NPR is required to report its Trust Units and Northern Property Limited Partnership ("NPLP") Class B Units as financial liabilities rather than as equity in accordance with the substance of the contractual arrangement under IAS 32 - Financial Instruments: Presentation ("IAS 32") because of this requirement.  As a result of the amendments to the DOT approved at the May 11, 2010 Annual General Meeting, the Trustees have discretion to determine the amounts of distributions to the unitholders; and, therefore, after that date, the Trust Units are classified as equity. The ability to exchange NPLP Class B Units for Trust Units implies a liability element exists because it imposes an unavoidable obligation to deliver units of the trust (i.e., a financial instrument of another entity).  Therefore, the NPLP Class B units continued to be classified as financial liabilities until the December 31, 2010 internal reorganization.The equity classification of the NPR Trust Units is an exemption to the classification of the units as a liability under IAS 32 and is restricted to the accounting for such instruments under IAS 1 - Presentation of Financial Statements ("IAS 1"), IAS 32, IFRS 9 - Financial Instruments: Recognition and Measurement ("IFRS 9") and IFRS 7 - Financial Instruments: Disclosure ("IFRS 7").  The Trust Units are not considered equity under other guidance such as IFRS 2 - Share based Payments ("IFRS 2").  As IAS 33 - Earnings per Share ("EPS") is not mentioned in the list of standards to which the exemption applies, no EPS figures need to be presented in these condensed combined interim financial statements.Purchase of investment propertiesNPR reviews its purchases of investment property to determine whether or not the purchase is part of a business combination as IFRS requires differing treatment of property acquisitions depending on whether or not the purchase is part of a business combination.  Judgment is involved in determining whether or not a purchase forms part of a business combination or an asset acquisition.  Should the purchase form part of a business combination, closing costs, such as appraisal and legal fees are expensed immediately and earnings are affected.  If the purchase is an asset acquisition, these costs form part of the purchase price and earnings are not immediately affected.Investment in joint venturesInterests in joint venturesJoint venture arrangements that involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities. NPR reports its interests in jointly controlled entities using the equity method of accounting.  Under the equity method, investments in jointly controlled entities are carried in the combined balance sheet at cost as adjusted for NPR's proportionate share of post acquisition changes in the net assets of the joint ventures, or for post acquisition changes in any excess of the NPR's carrying amount over the net assets of the joint ventures, less any identified impairment loss.  When NPR's share of losses of a joint venture equals or exceeds its interest in that joint venture, NPR discontinues recognizing its share of further losses. An additional share of losses is provided for and a liability is recognized only to the extent that NPR has incurred legal or constructive obligations to fund the entity or made payments on behalf of that entity.Where a group entity transacts with a joint venture of NPR, profits and losses are eliminated to the extent of the Entities' interest in the relevant joint venture. Balances outstanding between NPR and jointly controlled entities are not eliminated in the combined balance sheet.Subsidiaries and associatesSubsidiaries and associates are consolidated when NPR has the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities. Subsidiary accounting policies are consistent with those of NPR and reporting dates are the same as NPR. The subsidiary financial statements are combined line by line, adding assets, liabilities, equity, revenue and expenses of similar types.  Intercompany balances, transactions, income and expense are eliminated and gains or losses on intercompany transactions are eliminated. Where NPR does not own 100% of the subsidiary or associate, non controlling interest is classified as a component of equity.Investment propertiesNPR's investment properties include residential and commercial properties held to earn rental income, held for capital appreciation or for both and properties that are being constructed or developed for future use as investment properties.  NPR has adopted IAS 40: Investment Property ("IAS 40"), and has chosen the fair value method of presenting its investment properties in these financial statements.  NPR reviews the fair value of its investment property each reporting period and revises the carrying value when market circumstances change the underlying variables used to fair value the property occur. The fair value of investment property is the amount that the property should exchange at between a willing buyer and a willing seller in an arm's length transaction. Investment properties are measured initially at cost, including transaction costs, unless the acquisition is part of a business combination. Subsequent to initial recognition, investment properties are measured at fair value.Investment property consists of several separate components which are included in the estimation of fair value for each property. Residential investment property includes prepaid land equity leases ranging in terms from 15 to 30 years, asset acquisition costs, furniture and fixtures, and sustaining CAPEX. Sustaining CAPEX represents ongoing expenditures required to maintain the productive capacity of the REIT's portfolio. In addition, commercial investment property includes above and below market leases, in-place leases, prepaid tenant improvements and indirect leasing costs. Tenant inducements include cash payments made to tenants where no specific obligation exists on how the payment is utilized by the tenant. Tenant inducements are considered in the cash inflows modeled to measure the fair value of a commercial investment property; the lease incentive asset is separated on the balance sheet by deducting this amount from the fair value of the property to avoid double counting of assets.Management utilizes a combined external valuation by independent appraisers and internal calculation approach to fair value its investment properties. Investment properties were segregated into the following categories: apartments, townhouses, duplexes, single family, seniors, mixed use, execusuite, commercial (retail and warehouse) and administrative.  Administrative properties including office and warehouse facilities utilized by NPR as well as staff residential accommodations are reported as property, plant and equipment. A representative sample of properties from each of the categories was selected for external appraisal.  Independent appraisers with expertise in each of the regions in which NPR operates fair valued approximately 30% of NPR's investment properties for the January 1, 2010 IFRS Condensed Combined Statement of Financial Position. Management relied on the external investment property appraisals to verify its assessment of regional vacancy, management overhead and Capitalization Rate ("Cap Rate") information which was then applied to the stabilized net operating income to calculate the fair value of the remainder of NPR's investment properties. External appraisals of investment property are performed throughout each year, on a rotating basis and continue to be used to verify certain variables used in the internal calculation of investment property values.  The fair value of investment property is based on valuations by a combination of independent appraisers and management estimates including any capital additions since the date of the most recent appraisal. Where increases or decreases are warranted, NPR adjusts the fair value of its investment properties. Unrealized gains and losses arising from changes in the fair value of investment properties are included in profit or loss in the period in which they arise.An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Investment properties are reclassified to Assets held for sale when criteria in IFRS 5: Non-current Assets Held for Sale and Discontinued Operations ("IFRS 5") are met. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the period in which the property is derecognized.The cost of investment properties under development includes direct development costs, insurance, realty taxes and borrowing costs directly attributable to the development. Borrowing costs associated with direct expenditures on investment properties under development or re-development are capitalized. Borrowing costs are also capitalized on the purchase cost of a site or property acquired specifically for redevelopment in the short‐term but only where activities necessary to prepare the asset for development or redevelopment are in progress. The amount of borrowing costs capitalized is determined first by reference to borrowings specific to the project, where relevant, and otherwise by applying a weighted average cost of borrowings to eligible expenditures after adjusting for borrowings associated with other specific developments.  Where borrowings are associated with specific developments, the amount capitalized is the gross cost incurred on those borrowings less any investment income arising on their temporary investment. Borrowing costs are capitalized from the commencement of the development until the date of practical completion. The capitalization of borrowing costs is suspended if there are prolonged periods when development activity is interrupted. NPR considers practical completion to have occurred when the property is capable of operating in the manner intended by management. Generally this occurs upon completion of construction and receipt of all necessary occupancy and other material permits. Where NPR has pre-leased space as of or prior to the start of the development and the lease requires NPR to construct tenant improvements which enhance the value of the property, practical completion is considered to occur on completion of such improvements.Capital improvements are capital repairs or additions, improvements to the properties to meet investment requirements and expenditures made in the 18 months following the acquisition of a property to complete any deferred maintenance.Sustaining CAPEX represents ongoing expenditures required to maintain the productive capacity of the REIT's portfolio. These include capital expenditures to maintain and renew common areas, HVAC systems, building envelopes, investments in wood pellet boilers, expenditures to reduce energy consumption and to refurbish units on tenant turnover.Asset Acquisition/Business CombinationIncome producing properties fall within the definition of investment properties under IAS 40 and consist of residential and commercial properties held to earn rental income and properties that are being constructed, developed, or redeveloped for future use as income producing properties. Management must assess whether the acquisition of property through the purchase of a corporate vehicle or directly should be accounted for as an asset purchase or a business combination. Where the acquisition contains significant assets, liabilities or activities in addition to property and related mortgage debt, particularly where there is an integrated set of activities and assets, capable of being conducted and managed for the purpose of providing a return, lower costs or other economic benefits, the transaction is accounted for as a business combination. More specifically, consideration is made of the extent to which significant processes are acquired and, in particular, the extent of ancillary services provided. Where there are no such integrated activities, the transaction is treated as an asset acquisition.Residential and commercial properties, developments and redevelopments are measured initially at cost. Cost includes all amounts relating to the acquisition, including transaction costs, (except transaction costs related to a business combination) and improvement of the properties. All costs associated with upgrading and extending the economic life of the existing facilities, other than ordinary repairs and maintenance, are capitalized as investment property. Costs that are directly attributable to investment properties under development or redevelopment are capitalized. These costs include direct development costs, realty taxes and borrowing costs directly attributable to the development.Property, plant and equipmentLand and buildings used by NPR as administrative offices, warehouse properties and staff residential accommodations are classified as property, plant and equipment ("PP&E") rather than investment property.  NPR measures PP&E using the cost model.  Cost includes expenditures that are directly attributable to the acquisition of the asset.NPR elected to measure land and building PP&E using fair value as deemed cost at transition to IFRS. Land is not depreciated.  Subsequently, each remaining class of PP&E reported on the balance sheet is measured and carried at cost less accumulated depreciation and recognized impairment losses. Other PP&E includes automotive equipment, computer equipment, and furniture, fixtures and equipment.Property, plant and equipment are recorded at cost and depreciated using the following annual rates and methods:     BuildingsFurniture, fixtures and equipmentAutomotiveComputer     maximum 50 years5 years5 years4 years     straight-line basisstraight-line basisstraight-line basisstraight-line basisWhen major components of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment and depreciated at their estimated useful lives. Buildings have major components which include parking lot, roof, heating ventilating and air conditioning ("HVAC") and other ("building"). Estimated useful lives of PP&E are evaluated annually by management and any changes in these estimates are accounted for on a prospective basis.Gains and losses on disposal of an item of PP&E are determined by comparing the proceeds from disposal with the carrying amount of PP&E, and are recognized net within expenses and other income in profit or loss.Other long term assetsOther assets consist primarily of deferred rent receivables arising from the recognition of rental revenue on a straight line basis over the lease term in accordance with IAS 17 - Leases ("IAS 17") and other receivables from tenants for capital improvements. The other receivables are amortized to net operating income at the same amount as is being recovered from tenants and are included in the calculation of annual recoverable operating costs.Assets held for saleAmounts related to the disposal of non-current assets are classified as held for sale, and the results of operations and cash flows associated with the assets disposed are reported separately as assets held for sale, less applicable income taxes. A non-current asset is classified as an asset held for sale at the point in time when it is available for immediate sale, management has committed to a plan to sell the asset and is actively seeking a buyer for the asset at a sales price that is reasonable in relation to the current fair value of the asset, and the sale is probable and is expected to be completed within a one-year period. For unsolicited interest in a non-current asset, the asset is classified as held for sale only if all the conditions of the purchase and sale agreement have been met, a sufficient purchaser deposit has been received and the sale is probable and expected to be completed shortly after the end of the current period.Other long term assetsOther assets consist primarily of deferred rent receivables arising from the recognition of rental revenue on a straight line basis over the lease term in accordance with IAS 17 - Leases ("IAS 17") and other receivables from tenants for capital improvements. The other receivables are amortized to net operating income at the same amount as is being recovered from tenants and are included in the calculation of annual recoverable operating costs.Financial InstrumentsFinancial assets and financial liabilities are recognized when NPR becomes a party to the contractual provisions of the instrument. All 'regular way' purchases or sales of financial assets are recognised and derecognised on a trade date basis. Financial assets and financial liabilities are initially recognized at fair value in accordance with IFRS 9 and are subsequently accounted for based on their classification as described below. IFRS 9 simplifies accounting for financial assets by replacing the multiple measurement categories in IAS 39 with a single principle based approach to classification. Where NPR's objective is to hold the financial asset to collect the contractual cash flows (Tenant A/R, Term deposits, Vendor Take Back mortgages), the financial assets are measured at amortized cost. Financial assets are classified as fair value through profit or loss ("FVTPL") when they do not meet the following criteria; i) the financial asset is not held to collect a contractual cash flow, ii) the payments received are not solely principle and interest on the amount of principle outstanding. NPR would derecognize a financial asset when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. Financial instruments that are subsequently measured at amortized cost are subject to testing for impairment each reporting period.Financial liabilities are measured at fair value minus transaction costs directly attributable to the issue of the financial liability when the liability is not valued at FVTPL.  A hierarchical method is used to measure fair value: a) active market with quoted prices; b) no active market - requiring valuation techniques: recent market transactions, discounted cash flow, reference to a similar transaction; c) no active market - equity instruments: cost less impairment may be used if no reliable estimate of fair value can be made.   All other financial liabilities are carried at amortized cost. NPR would derecognize a financial liability when its obligations are discharged, cancelled or expire. Any difference between the amount of the financial liability derecognized and the consideration paid and payable is recognized in profit and loss.Classification and measurement of financial assets and liabilities under IFRS 9:                  Financial asset or financial liability              MeasurementFinancial assets                Current financial assets                    Accounts receivableLoan receivableTerm depositsCash and cash equivalents               Amortized costAmortized costAmortized costAmortized costFinancial liabilities                Non-current financial liabilities                 Mortgages              Amortized cost Current financial liabilities                      Distributions payableTrade and other payablesUnit based paymentsForward utility contractsBank indebtednessOperating facilities                Amortized costAmortized costFVTPLFVTPLAmortized costAmortized costCash is comprised of cash balances and all deposits used in operations.   Bank indebtedness repayable on demand and forming an integral part of NPR's cash management are included as a component of cash for the purpose of the statement of cash flows. Distributions or dividends payable declared on Trust Units or NorSerCo common shares with a record date of or prior to NPR's reporting date are recorded as a financial liability. Derivative instruments are recorded in the combined balance sheet at fair value, including those derivatives that are embedded in financial or non‐financial contracts and which are not closely related to the host contract.Distributions and dividendsStapled unit holders at the close of business on each Distribution Record Date, (the last day of the month) are entitled to receive distributions from the REIT as declared by the Trustees for such month. The distributions are accrued and will be paid on the Distribution Date (usually the 15th of the following month). Where the Trustees determine that the REIT does not have sufficient cash to pay distributions, the payment may, at the Trustees discretion, include the issuance of additional units.Stapled unit holders of NorSerCo are entitled to receive dividends as determined and declared by the Board of Directors.ImpairmentImpairments are recorded on assets not carried at fair value when the recoverable amounts of assets are less than their carrying amounts. The recoverable amount is the higher of an asset's fair value less cost to sell or its value in use.  Impairment losses are evaluated for potential reversals when events or changes in circumstances warrant such consideration.Financial assetsFinancial assets that are measured at amortized cost are assessed for impairment at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial assets, the estimated future cash flows of the asset have been affected.Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to NPR on terms that NPR would not consider otherwise, indications that a debtor or issuer will enter bankruptcy.An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against receivables. Interest on the impaired asset continues to be recognized through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.Non-financial assetsThe carrying amounts of NPR's non-financial assets, other than investment property are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated.Property, plant and equipment and other long-term assets carried at cost are reviewed at each reporting date to determine whether there is any indication of impairment.  If any such indication exists, then the asset's recoverable amount is estimated.  When such a determination is made, recoverability is measured by a comparison of the carrying amount of the asset to the estimated discounted future cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.  NPR estimates fair value based upon current prices for similar assets.Finance cost and finance incomeInterest earned from financial assets is recognized by applying the effective interest rate to the principal outstanding when it is probable that economic benefits will flow to NPR.Mortgage interest and interest on operating facilities is recognized by applying the effective interest rate to the principal outstanding.Income taxesNPR is taxed as a "mutual fund trust" for income tax purposes.  Pursuant to the DOT, the Trustees may, at their sole discretion, determine distributions or designate all taxable income earned; including the taxable part of net realized capital gains, to unitholders and will deduct such distributions and designations for income tax purposes.  Subsequent to completion of the Arrangement on December 31, 2010 (Note 1), the REIT meets the definition of a Real Estate Investment Trust under the Income Tax Act and is not subject to entity level income taxation.  NorSerCo is incorporated under the Business Corporations Act of Alberta, is subject to entity level income taxation and is taxed as a "corporation" for income tax purposes.  The directors of NorSerCo may declare dividends to the shareholders of NorSerCo which the Directors in their discretion determine to be appropriate.NPR follows the tax liability method for determining income taxes. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the carrying amounts and tax bases of specific balance sheet items. Deferred tax assets are recognized for all deductible temporary differences to the extent it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax liabilities are not recognized for the temporary differences from investments in all subsidiaries and interests in joint ventures to the extent that: i) NPR is able to control the timing of the reversal of the temporary difference, and ii) the temporary difference will not reverse in the foreseeable future. Deferred tax assets and liabilities are measured based on enacted or substantively enacted tax rates and laws at the date of the financial statements for the years in which these temporary differences are expected to reverse, and adjustments are recognized in earnings as they occur. Any future deferred income tax liabilities will relate to tax and accounting base differences in the assets and liabilities of NorSerCo.During 2010, all the earnings net of distributions to unitholders were subject to entity level income taxation.  Subsequent to completion of its internal reorganization on December 31, 2010, the REIT meets the definition of a Real Estate Investment Trust under the income Tax Act and is no longer subject to entity level income taxation.  During 2011, only the earnings of NorSerCo are subject to entity level income taxation.Revenue recognitionRevenue from a rental property is recognized when a tenant commences occupancy of a property and rent is due.  NPR retains all benefits and risk of ownership of its rental properties, and therefore, accounts for leases with its tenants as operating leases.  Rental revenue includes rent and other sundry revenue recoveries. Rental revenue to be received from leases with rental rates varying over the term of the lease is recorded on a straight-line basis over the term of the associated lease. Accordingly the difference between the rental revenue recorded on a straight line basis and the rent that is contractually due from the tenant has been recorded as deferred rent receivable for accounting purposes.Tenant inducements are recorded as other long-term assets and charged against revenue on a straight-line basis over the lease term.Gains or losses from sale of investment property or property, plant and equipmentGains or losses from the sale of investment property or PP&E are recognized when title is passed to the purchaser at the closing of the transaction when all or substantially all of the funds have been received, are receivable and all conditions of the sale have been met.Unit based paymentsUnder NPR's Unit Option Plan (the "Option Plan"), options to acquire stapled units are granted to trustees, directors, officers and employees from time to time at exercise prices not less than the five day average market value of the units at the date of the grant. Options granted by NPR are accounted for in accordance with the fair-value method of accounting for unit based compensation, and as such, the calculated fair value of the option is recognized as compensation expense with an offsetting amount recorded to unit based payments, based on an estimate of the fair value using a Black-Scholes option-pricing model.  NPR records compensation expense and unit based payments based on the grant date fair values over their vesting periods, less an estimated forfeiture rate. The estimated forfeiture rate is based on the historical forfeiture rate. As options vest or are forfeited, this estimate is adjusted to actual over the vesting period.  Upon expiration of an option, or in the event an option is otherwise terminated for any reason, without having been exercised in full, the number of stapled units in respect of the expired or terminated option will again be available for the purposes of the Option Plan.Upon exercise of the options, consideration paid, which approximates the market value of the stapled units on grant date, is credited to capital. In addition unit based payments, representing the calculated fair value of the options exercised, are reclassified to capital.NPR also issues units to officers and employees under a Long-Term Incentive Plan ("LTIP"). Under this plan, the fair value of the units granted to officers and employees is recognized as compensation expense with an offsetting amount to unit based payments based on the market price at the time of vesting. NPR records compensation expense and unit based payments based on the fair values of the units over the vesting period, less an estimated forfeiture rate. The estimated forfeiture rate is based on the historical forfeiture rate. As units are forfeited or issued, this estimate is adjusted to actual over the vesting period.  The liability is adjusted to reflect the change in the value of the units at the end of each period, with an offsetting adjustment to compensation expense.Upon issue, the market value of the units is credited to capital with a corresponding reduction to unit based payments.4. RECENT ACCOUNTING PRONOUNCEMENTSThe IASB released IFRS 9 in October 2009 and amended it in October 2010; both standards applicable to condensed and annual combined financial statements relating to fiscal years beginning on or after January 1, 2013.  The IASB also amended IFRS 7, applicable to interim and annual combined financial statements relating to fiscal years beginning on or after July 1, 2011 and amended IAS 12 - Income Taxes relating to fiscal years beginning on or after January 1, 2012.  As part of its transition to IFRS, NPR has elected to early adopt these standards and the conforming changes to IFRS 1.In May 2011, the IASB released IFRS 10 - Consolidated Financial Statements, IFRS 11 - Joint Arrangements, IFRS 12 - Disclosure of Interests in Other Entities, and IFRS 13 - Fair Value Measurement together with conforming changes to IAS 27 - Separate Financial Statements and IAS 28 - Investments in Associates and Joint Ventures.  IFRS 10 establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.  IFRS 11 establishes principles for financial reporting by parties to a joint arrangement.  IFRS 12 applies to entities that have an interest in a subsidiary, a joint arrangement, an associate or an unconsolidated structured entity.  These standards are effective for annual periods beginning January 1, 2013, early adoption permitted.  NPR is currently assessing the impact of these standards.5. INVESTMENT PROPERTIES                    March 31,2011  December 31,2010   January 1,2010Investment propertiesInvestment properties under development     1,117,3568,029  1,088,2696,019   1,064,1247,078Balance     1,125,385  1,094,288   1,071,202Changes to investment properties for the periods:                 2011   2010Balance at January 1 (Note 29)AcquisitionsDisposalsProperty improvementsUnrealized fair value changes         1,094,28828,683-4,209(1,795)   1,071,20228,201(53)27,761(32,823)Balance at March 31, 2011 (December 31, 2010)     1,125,385   1,094,288As discussed in Note 3, NPR uses the Cap Rate method to value investment properties.  As at March 31, 2011, Cap Rates ranging from 7.8% - 12.5% (December 31, 2010 - 7.8% - 12.5%, January 1, 2010 - 7.8% to 12.5%) were applied to a projected stabilized net operating income.  The weighted average Cap Rate applied to fair value NPR's investment properties as at March 31, 2011 is 8.8% (December 31, 2010 - 8.8%, January 1, 2010 - 8.8%).Included in investment properties is one property (2010 - one) with a carrying value of $1,490,000 (2010 - $1,490,000) on which the tenant has a purchase option exercisable in 2014.Acquisitions for the three months ended March 31 were financed as follows:                        Jasper  Nanaimo       2011   2010    Multi-family  Multi-family   Other   Total   TotalCash paid   5,741  4,238   5   9,984   -Mortgages payable   11,199  7,500       18,699   -Total   16,940  11,738   5   28,683    Residential rental units acquired   230  151   -   381   -6. PROPERTY, PLANT AND EQUIPMENT                     Land Buildings Furniture& Fixtures Automotive ComputerEquipment OtherAssets TotalCost or deemed cost                Balance at January 1, 2010   233 11,319 115 1,363 1,277 727 15,034Additions for the year   4 212 - 399 269 65 949Disposals for the year   - - - (42) - - (42)Balance at December 31, 2010   237 11,531 115 1,720 1,546 792 15,941Additions for the period   - - - 93 20 6 119Disposals for the period   - - - (19) - - (19)Balance at March 31, 2011   237 11,531 115 1,794 1,566 798 16,041Accumulated depreciation                Balance at January 1, 2010   - - - 737 879 596 2,212Depreciation for the year   - 441 23 257 273 68 1,062Disposals for the year   - - - (41) - - (41)Balance at December 31, 2010   - 441 23 953 1,152 664 3,233Depreciation for the period   - 110 6 59 37 12 224Disposals for the period   - - - (19) - - (19)Balance at March 31, 2011   - 551 29 993 1,189 676 3,438Carrying amounts                At January 1, 2010   233 11,319 115 626 398 131 12,822At December 31, 2010   237 11,090 92 767 394 128 12,708At March 31, 2011   237 10,980 86 801 377 122 12,603Depreciation expense for the three months ended March 31, 2011 was $224,000 (March 31, 2010 - $252,000).7. OTHER LONG TERM ASSETS                               March 31, 2011   December 31, 2010   January 1, 2010Deferred rent receivable          6,097   5,760   4,538Deferred recoverable costs          337   419   129Tenant inducements          1,569   1,628   603           8,003   7,807   5,2708. INTEREST IN JOINT VENTURESNPR has a 50% interest in Inuvik Capital Suites Zheh Gwizu' Limited Partnership ("ICS") and a 50% interest in Inuvik Commercial Properties Zheh Gwizu' Limited Partnership ("ICP")                     ICP   ICS   Total               As at January 1, 2010              Current assets     132   159   291Non-current assets     18,661   6,946   25,607Total assets     18,793   7,105   25,898               Current liabilities     447   149   596Non-current liabilities     9,742   6,213   15,955Total liabilities     10,189   6,362   16,551Net assets     8,604   743   9,347NPR share of net assets     4,302   372   4,674               As at December 31, 2010              Current assets     531   397   928Non-current assets     18,593   7,936   26,529Total assets     19,124   8,333   27,457               Current liabilities     247   103   350Non-current liabilities     10,393   6,028   16,421Total liabilities     10,640   6,131   16,771Net assets     8,484   2,202   10,686NPR share of net assets     4,242   1,101   5,343               For the three months ended March 31, 2010              Revenue     1,127   572   1,699Expenses     (2,048)   (430)   (2,478)Profit (loss)     (921)   142   (779)NPR share of profit (loss)     (460)   71   (389)              As at March 31, 2011              Current assets     702   516   1,218Non-current assets     18,594   7,936   26,530Total assets     19,296   8,452   27,748               Current liabilities     251   144   395Non-current liabilities     10,275   5,930   16,205Total liabilities     10,526   6,074   16,600Net assets     8,770   2,378   11,148NPR share of net assets     4,385   1,189   5,574For the three months ended March 31, 2011              Revenue     1,090   627   1,717Expenses     (804)   (451)   (1,255)Profit     286   176   462NPR share of profit     143   88   231There has been no change in NPR's 50% ownership or 50% voting interests in these joint ventures for the reported periods.NPR's share of the earnings of the joint venture operations of ICP and ICS during the three months ended March 31, 2011 was $231,000 (three months ended March 31, 2010 - $389,000).  During the three months ended March 31, 2011 NPR invested $nil (three months ended March 31, 2010 - $700,000) of capital in its joint ventures.9. LOANS RECEIVABLELoans receivable consist of vendor take back loans on disposals of investment property as follows:                                       2011     2010Balance, January 1               279     371Repayments               (3)     (92)Balance, March 31, 2011 / December 31, 2010               276     279Vendor take back loans receivable on asset disposals are repayable over 15 year terms at interest rates of between 8.0% and 9.0% ending between August 31, 2021 and March 31, 2023.   Loans are secured by the investment properties sold which had a fair value of $288,000 at the time of sale.  Should the purchaser default on the loans, NPR would reacquire the property for the outstanding loan balance..10. PREPAID EXPENSES AND OTHER ASSETS                                         March 31, 2011   December 31, 2010   January 1, 2010Prepaid expenses               1,640   1,735   2,516Other assets               173   674   10                1,813   2,409   2,52611. TRUST AND LIMITED PARTNERSHIP CLASS B UNITSPrior to May 11, 2010, the REIT's DOT included the requirement that on the last day of the year, an amount equal to the net income of the Trust for such Taxation Year, determined in accordance with the Tax Act and excluding Net Realized Capital Gains, not previously made payable to Unitholders in the Taxation Year, less the amount of any non-capital losses as defined in the Tax Act of the Trust carried forward, shall be automatically payable to Unitholders at the close of business on such day. Under IAS 32, this feature implies that the units have a fixed payment requirement, gives the Trust Units' debt conditions and accordingly, the Trust Units and NPLP Class B units are financial liabilities, carried at fair value.  Therefore, upon transition to IFRS, NPR is required to report its Trust Units and NPLP Class B Units as financial liabilities rather than as equity in accordance with the substance of the contractual arrangement under IAS 32.  As a result of the amendments to the DOT approved at the May 11, 2010 Annual General Meeting, the Trustees have discretion to determine the amounts of distributions to the unitholders; and, therefore, after that date, the Trust Units are classified as equity. The ability to exchange NPLP Class B Units for Trust Units implies a liability element exists because it imposes an unavoidable obligation to deliver units of the trust (i.e., a financial instrument of another entity). Therefore, all classes of equity except the NPR Stapled Units will continue to be classified as financial liabilities.On December 31, 2010, NPR completed its internal reorganization pursuant to the Arrangement (Note 1) which was approved by unitholders at a special meeting held on November 25, 2010. The Arrangement was completed to ensure NPR meets the definition of a Real Estate Investment Trust as defined in the Income Tax Act.The Arrangement resulted in the following:(i)   The Class B Limited Partnership units of Northern Property Limited Partnership which were reported as a financial liability were converted into REIT Trust Units; and(ii)   The Common Shares of NorSerCo were distributed to all REIT unitholders.  The REIT Trust Units and NorSerCo Common Shares are listed on the TSX together as a "Stapled Unit" under the trading symbol NPR.UN.The continuity schedule for the Trust and Limited Partnership Class B units classified as liabilities for the period ending March 31, 2011 is as follows:                         NPLP Class     Issue Price      Date   Description   B units  Trust Units  Call Price  Total Units  $(000's)January 1, 2010     2,085,090  23,020,538  21.90  25,105,628  549,821NPLP Class B units exchanged during Q1-2010  (59,436)  59,436  -  -  -January 4, 2010  LTIP units issued  -  12,941  21.81  12,941  282January 6, 2010  LTIP units issued  -  18,709  22.67  18,709  424February 8, 2010  LTIP units issued  -  662  22.74  662  15Q1, 2010  Options exercised  -  9,000  1.98  9,000  18Q1, 2010  Options exercised  -  8,333  10.05  8,333  84Q1, 2010  Fair value adjustment  -  -   -  -   58,114March 31, 2010      2,025,654  23,129,619  24.20  25,155,273  608,758Q2, 2010  Options exercised  -  2,725  9.10  2,725  25Q2, 2010  Options exercised  -  7,567  8.98  7,567  68NPLP Class B units exchanged during Q2-2010  (47,949)  47,949  -  -  -May 11, 2010  Transfer to equity  -  (23,187,860)  24.91  (23,187,860)  (577,610)NPLP Class B units exchanged during Q2-2010  (45,000)  -  -  (45,000)  (1,052)Q2, 2010  Fair value adjustment  -  -  -  -  14,611June 30, 2010      1,932,705  -  23.18  1,932,705  44,800NPLP Class B units exchanged during Q3-2010  (35,000)  -  24.41  (35,000)  (854)Q3, 2010  Fair value adjustment  -  -  -  -  4,692September 30, 2010      1,897,705  -  25.63  1,897,705  48,638NPLP Class B units exchanged during Q4-2010  (26,278)  -  27.00  (26,278)  (710)Q4, 2010  Fair value adjustment  -  -  -  -  6,194NPLP Class B units exchanged as per the Arrangement  (1,871,427)  -  28.92  (1,871,427)  (54,122)December 31, 2010      -  -  -  -  -NPLP was wound up as part of the Arrangement and NPR LP was created.  No NPR LP Class B Trust Units or NorSerCo Special Shares have been issued as of March 31, 2011.Distributions paid to unitholders are reported as interest paid to unitholders during the period when Trust Units or Class B units are reported as financial liabilities.  When Trust Units or Class B units are reported as equity, distributions are reported in equity.12. MORTGAGES PAYABLE                               March 31, 2011   December 31, 2010   January 1, 2010CurrentNon-current          60,244461,087   52,598451,985   46,576444,852Total          521,331   504,583   491,428Mortgages payable bear interest at rates ranging from 2.96% to 7.00% (December 31, 2010 - 2.96% to 7.00%, January 1, 2010 - 2.31% to 12.13%) and have a weighted average rate of 4.79% as at March 31, 2011 (December 31, 2010 - 4.80%, January 1, 2010 - 4.87%). Mortgages are payable in monthly instalments of blended principal and interest of approximately $3.6 million (December 31, 2010 - $3.6 million, January 1, 2010 - $3.5 million).  The mortgages mature between 2011 and 2025 and are secured by charges against specific properties. Land and buildings with a carrying value of $973.3 million (December 31, 2010 - $938.1 million, January 1, 2010 - $919.7 million) have been pledged to secure mortgages payable of NPR. The fair value of mortgages payable at March 31, 2011 is approximately $539.8 million (December 31, 2010 - $523.8 million, January 1, 2010 - $507.8 million).13. INCOME TAXESOn 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 Investment Flow Throughs ("SIFTs"), which include certain publicly listed income trusts and publicly listed partnerships. These entities are 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 provided for a transition period for publicly traded entities that existed prior to November 1, 2006 and did not apply to NPR until 2011. The new tax regime does not apply to entities that qualify 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.IFRS requires NPR to recognize deferred income tax assets and liabilities based on the estimated temporary differences between the estimated accounting and tax values of the REIT's assets and liabilities calculated using the expected tax rates of 19.63% to 28.40%.  On December 31, 2010, the REIT completed an internal reorganization as described in Note 1.  Following the internal reorganization, the REIT qualified for the REIT Exemption and is not subject to entity level income taxes.NorSerCo was incorporated in October 2010, had no operations during 2010 and effective January 1, 2011, operates the non-qualifying assets of the REIT and pays entity level income tax on its taxable income at the general combined federal/provincial corporate income tax rate.  As a result, only a small portion of NPR's earnings in the first quarter of 2011, those of NorSerCo, are subject entity level income taxation.Income tax expense is recognized based on management's best estimate of the weighted average annual income tax rate expected for the full financial year applied to the pre-tax income of the interim period.  For the quarter ended March 31, 2011, this rate was 27.66% (March 31, 2010 - 27.66%)14. OPERATING FACILITIES AND BANK INDEBTEDNESS                               March 31, 2011   December 31, 2010   January 1, 2010Bank indebtednessOperating facilities          1,67617,398   -7,898   1,71333,698NPR has two revolving credit facilities totalling $57.5 million (December 31, 2010 - $57.5 million, January1, 2010 - $57.5 million) for acquisition and operating purposes. The $50.0 million facility bears interest at prime plus 1.50% or Bankers' Acceptance plus 2.50% with a maturity date of May 21, 2011.  The $7.5 million facility bears interest at prime plus 1.50% or bankers' acceptance plus 2.50% with a maturity date of July 31, 2011. Specific properties with a carrying value of $158.7 million (December 31, 2010 $158.7 million, January 1, 2010 $157.9 million) have been pledged as collateral security for the operating facilities. At March 31, 2011 NPR had utilized $17.4 million (December 31, 2010 - $7.9 million, January 1, 2010 - $33.7 million) of the operating facilities. On May 20, 2011, NPR extended its $50 million revolving credit facility through June 30, 2011.  The negotiated interest rate on the facility is at prime plus 1.00% or Bankers' Acceptance plus 2.25% for the following twelve months. This 40 day extension gives NPR and its lenders time to amend the wording of the credit facility to reflect NPR's transition to IFRS.15. UNIT BASED PAYMENTSLong-Term Incentive PlanNPR has a Long-Term Incentive Plan 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 UnitsMarch 31, 2011   IssuePrice   Number of UnitsDecember 31, 2010   IssuePrice                   Balance - January 1Units issued - JanuaryUnits issued - FebruaryUnits granted - December 31, 2010     50,390(32,991)--   $28.42  48,473(31,650)(662)34,229  $22.32$22.74$28.92Balance, end of period     17,399       50,390    Units granted and issued under the LTIP to key management personnel are as follows:                        Number of UnitsMarch 31, 2011   IssuePrice   Number of UnitsDecember 31, 2010   IssuePrice Balance - January 1Units issued - JanuaryChanges in key management personnelUnits granted - December 31, 2010           33,439(23,543)(2,314)-       $28.42-        34,096(24,142)-23,485     $22.32-$28.92Balance, end of period     7,582    -    33,439   -The total amount of LTIP awards are determined at the end of each fiscal year by the Trustees based on an assessment of the performance of NPR 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.  LTIP awards to the President and CEO vest immediately.Unit option planNPR has an Option Plan, which is subject to the rules of the TSX.  In accordance with the Option Plan, NPR 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 in 1/3 tranches: immediately upon award, then 12 and 24 months following or as determined by the Governance and Compensation Committee of NPR. 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 change in the number of options outstanding is as follows:                         March 31, 2011   December 31, 2010      Number of   Weighted Average   Number of   Weighted Average      Options   Exercise Price   Options   Exercise PriceOutstanding, January 1GrantedExercisedExpired / forfeited497,131---$22.05---859,997-(362,866)-$22.80-$21.80-Outstanding, at end of period     497,131   $22.05   497,131   $22.05Exercisable at end of period     497,131   $22.05   444,635   $22.88The fair value of the options granted was determined using the Black-Scholes option pricing model with the following weighted average assumptions:                                                        Risk-free interest rateExpected dividend yieldExpected termExpected volatilityForfeiture rate                    March 31, 20111.91%5.02%3 years30.49%0.00%     December 31, 20101.79%5.29%4 years30.30%0.00%Compensation expense for the three months ended March 31, 2011 relating to options granted was $21,000 (2010 - $123,000).The following options were exercised during the year ended December 31, 2010:                         Trustees andOfficers    OfficersExercise Date NumberExercised   Average Unit Priceon Exercise   NumberExercised   Average Unit Priceon ExerciseMarch 31, 2010June 30, 2010September 30, 2010December 31, 201017,33311,4924,000330,041   $19.24$15.05$15.05$22.26   17,3333,525-192,007   $19.24$15.05-$22.39No options were exercised during the three months ended March 31, 2011.Obligation under the LTIP and unit option plans                                    March 31, 2011   December 31, 2010   January 1, 2010                      Long-Term Incentive Plan UnitsOption Plan Units            85 4,195    9543,380   686812                                   4,280    4,334   1,49816. EMPLOYEE UNIT PURCHASE PLANUnder the terms of the Employee Unit Purchase Plan (the "EUPP"), employees may invest a maximum of 5% of their salary in NPR 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, 2011, employees invested a total of $34,901 (2010 - $30,427) and NPR contributed $11,635 (2010 - $10,140). During the three months ended March 31, 2011, 1,443 units (2010 - 1,590 units) were purchased at an average cost of $ 28.30 per unit (2010 - $22.39 per unit).17. STAPLED UNIT HOLDERS' EQUITYOn December 31, 2010, NPR completed the Arrangement, pursuant to which each holder of REIT Units received, for and in addition to each REIT Unit held, one NorSerCo Share.  Each issued and outstanding REIT Unit now trades together with a NorSerCo Share as a Stapled Unit on the TSX under the symbol "NPR.UN".The DOT contains a number of provisions to achieve the "stapling" of the REIT Units and the NorSerCo Shares.  In particular, at any time during which the REIT Units and the NorSerCo Shares are "stapled together" as Stapled Units (a "Stapled Time"):(a)  each REIT Unit may be transferred only together with a NorSerCo Share;(b)  no REIT Unit may be issued by the REIT to any person unless   (i) a NorSerCo Share is simultaneously issued by NorSerCo to such person, or   (ii) the REIT has arranged, subject to applicable regulatory approval, for the REIT Units to be consolidated immediately after such issuance, such that each Stapled Unit holder will hold an equal number of REIT Units and NorSerCo Shares immediately following such consolidation;(c)  a REIT Unitholder may require the REIT to redeem any particular number of REIT Units only if it also requires, at the same time, and in accordance with the provisions of the articles of NorSerCo, NorSerCo to redeem the same number of NorSerCo Shares; and(d)  the REIT may not purchase any REIT Units for cancellation unless NorSerCo purchases a corresponding number of NorSerCo Shares for cancellation.If NorSerCo subdivides, redivides, reduces, combines, consolidates, reclassifies or makes other changes to the NorSerCo Shares during a Stapled Time, the REIT will be required, subject to applicable regulatory approvals, to simultaneously make a corresponding change to the REIT Units (other than in respect of changes that do not result in a REIT Unitholder holding an unequal number of REIT Units and NorSerCo Shares or a change that is followed immediately by a subdivision or consolidation after which each REIT Unitholder holds an equal number of REIT Units and NorSerCo Shares).Apart from attributes necessary to achieve such "stapling", each REIT Unit and NorSerCo Share retains its own separate identity and is separately listed, but not posted for trading, on the TSX.  The following is a summary of the material attributes and characteristics of the REIT Units and the NorSerCo Shares comprising the Stapled Units.REIT Trust UnitsThe total authorized number of Trust Units is unlimited. The total number of Trust Units of the REIT outstanding as at March 31, 2011 is 27,475,297 (December 31, 2010 - 27,442,306, January 1, 2010 - 23,020,538).Each REIT Unit represents an equal undivided beneficial interest in any distributions from the REIT, and in any of the net assets of the REIT in the event of termination or winding-up of the REIT.  All REIT Units are of the same class with equal rights and privileges and are not subject to future calls or assessments.  Each REIT Unit entitles the holder of record thereof to one vote for each whole REIT Unit held at all meetings of REIT Unitholders.  Except as set out under "Redemption Rights" below, the REIT Units have no conversion, retraction, redemption or pre-emptive rights.The REIT Units should not be viewed by potential investors as shares in the REIT.  A REIT Unitholder has substantially all of the same protections, rights and remedies as a shareholder would have under the CBCA, except that REIT Unitholders will not have the statutory rights normally associated with ownership of shares of a CBCA corporation including, for example, "dissent rights" in respect of certain corporate transactions and fundamental changes, rights to submit shareholder proposals at shareholder meetings, or the right to bring "derivative" or "oppression" actions.  The Trustees of the REIT have powers, responsibilities and duties analogous to those of a board of directors of a corporation governed by the CBCA.  The protections, rights and remedies available to a REIT Unitholder are contained in the DOT.Transfer of REIT UnitsPursuant to the DOT, during a Stapled Time, a REIT Unit may only be transferred by a holder thereof in conjunction with the transfer of a NorSerCo Share.  At any time that is not a Stapled Time (for instance, upon the occurrence of a Separation Event whereby the REIT Units and the NorSerCo Shares become unstapled), the REIT Units are freely transferable.Purchase of REIT UnitsPursuant to the DOT, the REIT may from time to time purchase REIT Units in accordance with applicable securities regulatory laws, regulations or policies or the policies of any applicable stock exchange, provided that if such time is a Stapled Time, the REIT shall not purchase for cancellation any outstanding REIT Units unless NorSerCo purchases for cancellation an equal number of NorSerCo Shares in accordance with its articles.  Any such purchases will constitute an "issuer bid" for each of the REIT and NorSerCo under Canadian provincial securities legislation and must be conducted in accordance with the applicable requirements thereof.Redemption RightsREIT Units are redeemable at any time on demand by the holders thereof provided that, if the time is a Stapled Time, the REIT Unitholder must simultaneously tender to NorSerCo for retraction an equal number of the holder's NorSerCo Shares in accordance with the articles of NorSerCo (see "NorSerCo Common Shares" below).  A REIT Unitholder not otherwise holding a fully registered Stapled Unit certificate who wishes to exercise the redemption right is required to obtain a written redemption notice (the "Redemption Notice") from his or her investment dealer who is then required to deliver the completed Redemption Notice to the REIT.  Upon receipt by the REIT of the Redemption Notice, the REIT Unitholder shall thereafter cease to have any rights with respect to the REIT Units tendered for redemption (other than to receive the redemption payment therefore) including the right to receive any distributions thereon which are declared payable to the REIT Unitholders of record on a date which is subsequent to the day of receipt by the REIT of such notice.  REIT Units shall be considered to be tendered for redemption on the date that the REIT has, to the satisfaction of the Trustees, received the Redemption Notice and all other required documents or evidence.Upon receipt of the Redemption Notice by the REIT, the holder of the REIT Units tendered for redemption shall be entitled to receive a price per REIT Unit (the "Redemption Price") equal to the lesser of:(a) 90% of the "market price" of the REIT Units on the principal market on which the units are quoted for trading during the 20 trading day period commencing immediately subsequent to the day on which the units were surrendered to the REIT for redemption (the "Redemption Date"); and(b) 100% of the "closing market price" on the principal market on which the REIT Units are quoted for trading on the Redemption Date.If the Redemption Date occurs during a Stapled Time, the above references to REIT Units must be read as "Stapled Units", and the Redemption Price will be reduced by the retraction price of a NorSerCo Share (as calculated in accordance with NorSerCo's articles) on that date.For the purposes of calculating the Redemption Price, "market price" shall be an amount equal to the weighted average of the closing price of the REIT Units for each of the trading days on which there was a closing price; provided that if the applicable exchange or market does not provide a closing price, but only provides the highest and lowest prices of the REIT Units traded on a particular day, the "market price" shall be an amount equal to the average of the highest and lowest prices for each of the trading days on which there was a trade; and provided further that if there was trading on the applicable exchange or market for fewer than five of the 20 trading days, the "market price" shall be the weighted average of the following prices established for each of the 20 trading days: (i) the weighted average of the last bid and last asking prices of the REIT Units for each day there was no trading; (ii) the closing price of the REIT Units for each day that there was trading if the exchange or market provides a closing price; and (iii) the weighted average of the highest and lowest prices of the REIT Units for each day that there was trading if the market provides only the highest and lowest prices of such units traded on a particular day.  Where the holder of REIT Units tendered for redemption is entitled to receive a price per unit equal to 100% of the "closing market price" on the principal market on which the units are quoted for trading on the Redemption Date, the "closing market price" shall be (i) an amount equal to the closing price of the REIT Units if there was a trade on the date and the exchange or market provides a closing price; (ii) an amount equal to the weighted average of the highest and lowest prices of the REIT Units if there was trading and the exchange or other market provides only the highest and lowest prices of REIT Units traded on a particular day; or (iii) the weighted average of the last bid and last asking prices of those units if there was no trading on that date.The aggregate Redemption Price payable by the REIT in respect of any REIT Units surrendered for redemption during any calendar month shall be satisfied by way of a cash payment no later than the last day of the calendar month following the month in which the 20 trading day period referred to above ended, provided that there is no entitlement for REIT Unitholders to receive cash upon the redemption of their REIT Units if:(a) the total amount payable by the REIT in respect of such REIT Units and all other units tendered for redemption in the same calendar month exceeds $50,000, provided that the Trustees may, in their sole discretion, waive such limitation in respect of all REIT Units tendered for redemption in any particular calendar month;(b) at the time such REIT Units are tendered for redemption, the outstanding units are not listed on a stock exchange or traded or quoted on another market which the Trustees consider, in their sole discretion, provides representative fair market value prices for the REIT Units; or(c) the normal trading of outstanding REIT Units is suspended or halted on any stock exchange on which the REIT Units are listed for trading (or, if not listed on a stock exchange, on any market on which the REIT Units are quoted for trading) on the Redemption Date or for more than five trading days during the 20 day trading period commencing immediately after the Redemption Date.If a REIT Unitholder is not entitled to receive cash upon the redemption of REIT Units as a result of any one of the foregoing limitations, then the Redemption Price for such REIT Units shall be the fair market value thereof as determined by the Trustees and shall, subject to any applicable regulatory approvals, be paid out and satisfied by way of a distribution in specie consisting of such assets of the REIT as determined by the Trustees.Based on historic information over the past year, redemption levels are expected to be nil.  However, the actual level of redemptions may differ significantly from historic experience.NorSerCo Common SharesThe total authorized number of common shares is unlimited. The total number of Common Shares of NorSerCo outstanding as at March 31, 2011 is 27,475,297, (December 31, 2010 - 27,442,306; January 1, 2010 - nil). NorSerCo Common Shares are "stapled" to REIT Trust Units and trade together as "Stapled Units" on the Toronto Stock Exchange under the trading symbol NPR.UN. Pursuant to NorSerCo's articles of incorporation, at a Stapled Time, a NorSerCo Shareholder can require NorSerCo to redeem such shareholder's NorSerCo Shares, provided that the shareholder simultaneously tenders to the REIT for redemption, in accordance with the DOT, an equivalent number of the REIT Units held by the shareholder.  A NorSerCo Shareholder will be entitled to be paid, in respect of each NorSerCo Share tendered for retraction, the lesser of $100 or the fair market value of a NorSerCo Share, plus any declared but unpaid dividends on such shares.NPLP Class B Exchangeable Limited Partnership Units and Special Voting Units ("NPLP Class B Units")Prior to the Arrangement, Northern Property Limited Partnership ("NPLP"), a wholly owned subsidiary of the REIT, had issued NPLP Class B Units on the formation of the REIT and for subsequent property acquisitions.  The NPLP Class B Units were exchangeable for REIT Trust Units at any time at the option of the holder of the NPLP Class B Units.  Each NPLP Class B Unit had a "Special Voting Unit" attached to it, which entitled 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 unitholder of the trust.As part of the Arrangement completed on December 31, 2010 (Note 1) all outstanding NPLP Class B Units were redeemed for REIT Trust Units and NPLP was subsequently dissolved.  The total number of NPLP Class B Units and special voting units outstanding as at March 31, 2011 is nil, (December 31, 2010 - nil; January 1, 2010 - 2,085,090).NPR Class B Limited Partnership Units and Special Voting Units ("NPR LP Class B Units")As part of the Arrangement (Note 1), a new wholly owned partnership, NPR Limited Partnership ("NPR LP") was created.  Similar to NPLP, NPR LP can issue NPR LP Class B Units in conjunction with property acquisitions.  NPR LP Class B Units can be exchanged for Trust Units at any time at the option of the holder. Each NPR LP Class B Unit 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 unitholder of the trust.  The total number of NPR LP Class B Units and special voting units outstanding as at March 31, 2011 is nil, (December 31, 2010 - nil; January 1, 2010 - nil).NorSerCo Special SharesThe total authorized number of special shares is unlimited. The NorSerCo special shares are "stapled" to the NPR LP Class B Units, a wholly owned subsidiary of the REIT.  The special shares are convertible into common shares upon NPR LP Class B unitholders exercising their option to convert to REIT Trust Units.  The total number of NorSerCo special shares outstanding as at March 31, 2011 is nil, (December 31, 2010 - nil; January 1, 2010 - nil).As part of the Arrangement (Note 1), the REIT distributed the Common Shares of NorSerCo to each NPR Unitholder.  The transaction is a related party transaction and was recorded at net book value of $6.9 million (Note 16).The units of the REIT are stapled to the NorSerCo Common Shares effective December 31, 2010.  These stapled units are listed and posted for trading on the TSX. Providing that a "separation event" has not occurred; a REIT Trust Unit may only be transferred together with a NorSerCo Common Share; no trust unit may be issued by the REIT unless a NorSerCo Common Share is issued; and a unitholder may require the REIT to redeem a particular number of Trust Units only if the same number of NorSerCo Common Shares are redeemed. Equivalent restrictions apply with respect to the transfer, issuance and redemption of NorSerCo Common Shares.The Stapled Units of the REIT and NorSerCo may only be transferred together as Stapled Units unless a "separation event" has occurred.  A separation of the REIT Trust Units and NorSerCo Common Shares can occur under either of the following:  (a) the holders of REIT Trust Units vote in favour of the unstapling of REIT Trust Units and NorSerCo Common Shares; or (b) at the sole discretion of the trustees of the REIT or the directors of NorSerCo, upon an event of bankruptcy or insolvency of either the REIT or NorSerCo and/or their respective subsidiaries. The number of Stapled Units issued and outstanding for the period ended March 31, 2011 is as follows:              Date  Description  Stapled Units  Fair Value   $(000's)May 11, 2010  Transfer from unit obligation  23,187,860      577,610Q2, 2010  Options exercised  1,200  $23.47   28Class B LP units exchanged during Q2, 2010     45,000  $23.38   1,052June 30, 2010      23,234,060      578,690Q3, 2010  Options exercised  4,000  $23.90   96Q3, 2010  Public Offering  1,941,500  $25.50   49,508Q3, 2010  Issue costs         (2,505)Class B LP units exchanged during Q3, 2010     35,000  $23.90   856September 30, 2010      25,214,560      626,645Class B LP units exchanged during Q4, 2010             Q4, 2010  Options exercised  305,341  $25.50   7,863Q4, 2010  Options exercised  17,200  $27.41   471Q4, 2010  Options exercised  7,500  $28.00   210NPLP Class B units Redeemed for REIT Trust Units     26,278  $27.00   709NPLP Class B units Redeemed for REIT Trust Units  Plan of Arrangement  1,871,427  $28.20   54,122Special distribution  Plan of Arrangement         6,867December 31, 2010      27,442,306      696,887January 12, 2011  LTIP units issued  11,213  $28.56   320January 17, 2011  LTIP units issued  21,778  $28.35   618March 31, 2011      27,475,297      697,825Distributions to Stapled Unit holdersPursuant to the DOT, holders of Trust Units and NPRLP Class B units are entitled to receive distributions made on each distribution date as approved by the Trustees.Effective December 31, 2010, the REIT Trust Units and NorSerCo Shares are listed on the TSX together as a "Stapled Unit". The total number of Stapled Units outstanding and eligible for distributions at March 31, 2011 is 27,475,297, (December 31, 2010 - 27,442,306; REIT Trust Units and LP B Units January 1, 2010 - 25,105,628.18. NON-CONTROLLING INTERESTSNPR holds investments in a number of jointly controlled entities.  NPR controls 55% of the GoGa Cho Building Limited partnership ("GoGa Cho") and, accordingly, consolidates the operations and records a 45% non-controlling interest.  NPR controls 49% of the Icicle / Ninety North Joint Venture ("Icicle") and Aqsaqniq / Ninety North Joint Venture ("Aqsaqniq") operations; however NPR effectively controls the operations.  NPR manages all aspects of the joint venture operations, prepares budgets which follow NPR operating policies and determines whether distributions should be paid to the joint venture partners.  Because of the inherent control over the joint venture operations, NPR consolidates their operations and records non-controlling interests.NPR's ownership interest:                    Jointly controlled entity           March 31, 2011   December 31, 2010    January 1, 2010 IcicleAqsaqniqGoGa Cho          49%49%55%   49%49%55%   49%49%55%                    19. GUARANTEES, COMMITMENTS AND CONTINGENCIESIn 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 vary based on the contract and do not provide any limit on the maximum potential liability. To date, NPR has not made any 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, 2011 and at December 31, 2010 will not have a material impact on NPR.During the normal course of operations, NPR provided guarantees for mortgages payable relating to investments in corporations and joint ventures where NPR owns less than 100%. The mortgages 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 up to 100% of the outstanding balances of these mortgages payable.                     March 31,2011   December 31,2010   January 1,2010Mortgage payable guarantees of controlled entities:               Aqsaqniq (at 49%)Icicle (at 49%)     144 152    153162   186197      296   315   383At March 31, 2011, NPR has provided guarantees on mortgages secured by investment properties totalling $296,000 (December 31, 2010 - $315,000, January 1, 2010 - $383,000) of its equity investments. As at March 31, 2011, these mortgages bear interest at rates ranging from 3.46% and mature December 2011, (December 31, 2010 - 3.46% and mature December 2011, January 1, 2010 - 3.06% and mature December2010). As at March 31, 2011, land and buildings with a fair value of $1.2 million have been pledged to secure these mortgages payable (December 31, 2010 - $1.2 million, January 1, 2010 - $1.2 million). The mortgage balances have been recorded in NPR's financial statements.  Management believes that no default will occur and, accordingly, no amount has been recorded by NPR in these combined financial statements.                     March 31,2011    December 31,2010   January 1,2010Mortgage payable guarantees of equity consolidated joint ventures:               ICP (at 50%)ICS (at 50%)     7,053 3,750    7,0943,750   5,7013,750      10,803    10,844   9,451At March 31, 2011, NPR has provided guarantees on mortgages secured by investment properties totalling $10.8 million (December 31, 2010 - $10.8 million, January 1, 2010 - $9.5 million). These mortgages bear interest at rates ranging from 4.34% to 6.10% and mature May 2011 to December 2015 (December 31, 2010 - 4.34% to 6.10% and mature May 2011 to December 2015, January 1, 2010 - 4.95% to 6.10% and mature July 2010 to December 2013). As at March 31, 2011, land and buildings with a carrying value of $24.5 million have been pledged to secure these mortgages payable (December 31, 2010 - $24.5 million, January 1, 2010 - $23.5 million). Due to the equity consolidation of ICP and ICS, the mortgage balances have not been recorded in NPR's financial statements.  Management believes that no default will occur and, accordingly, no amount has been recorded by NPR in these combined financial statements.20. FINANCIAL INSTRUMENTSFinancial assets and financial liabilities are initially recognized at fair value in accordance with IFRS 9 and are subsequently accounted for based on their classification as described below. IFRS 9 simplifies accounting for financial assets by replacing the multiple measurement categories in IAS 39 with a single principle based approach to classification. IFRS 9 require that all financial assets and liabilities be classified as FVTPL or amortized cost on the basis of NPR's business model for managing financial assets or financial liability and the cash flow characteristics of the financial instrument. Financial assets and financial liabilities are initially measured at fair value plus transaction costs or those financial assets and financial liabilities measured at FVTPL; fair value not including transaction costs. Financial assets measured at amortized cost are assessed for impairment each reporting period.Where NPR's objective is to hold the financial asset to collect the contractual cash flows (Tenant A/R, Term deposits, Vendor Take Back mortgages), the financial assets are measured at amortized cost. Financial assets are classified as FVTPL when they do not meet the following criteria; i) the financial asset is not held to collect a contractual cash flow, ii) the payments received are not solely principal and interest on the amount of principal outstanding. NPR would derecognize a financial asset when the contractual rights to the cash flows from the asset expire or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity.Financial liabilities are measured at fair value minus transaction costs directly attributable to the issue of the financial liability when the liability is not valued through profit or loss.  A hierarchical method is used to measure fair value: a) active market with quoted prices; b) no active market - requiring valuation techniques: recent market transactions, discounted cash flow, reference to a similar transaction; c) no active market - equity instruments: cost less impairment may be used if no reliable estimate of fair value can be made. Distributions or dividends payable declared on Trust Units or NorSerCo common shares with a record date of or prior to NPR's reporting date are recorded as a financial liability.  NPRLP Class B units and NorSerCo Special Shares if any had been issued would be recorded as financial liabilities. NPR would derecognize a financial liability when its obligations are discharged, cancelled or expire. Any difference between the amount of the financial liability derecognized and the consideration paid and payable is recognized in profit and loss.NPR has the following categories of financial instruments:                     Financial asset or financial liability   March 31, 2011   December 31, 2010  January 1, 2010    CarryingValue  FairValue  CarryingValue  FairValue  CarryingValue  FairValueFinancial assets carried at amortized cost                    Accounts receivableLoan receivableTerm depositsCash2,7362764,208-2,7362764,208-2,9912794,0872,921  2,9912794,0872,921  3,8783713,555-  3,8783713,555-Financial liabilities carried at FVTPL                    Trust unitsUnit based paymentsForward utility contracts-4,28025-428025-4,33455  -4,33455  549,8211,498152  549,8211,498152Financial liabilities carried at amortized cost                    Mortgages payable   521,331  540,943  504,583  523,540  491,428  507,813                      Distributions payableTrade and other payablesBank indebtednessOperating facilities3,50316,1191,67617,3983,50316,1191,67617,3983,49918,601-7,898  3,49918,601-7,898  3,09615,1451,71333,698  3,09615,1451,71333,698                     NPR had no embedded derivatives requiring separate recognition.NPR's financial assets and financial liabilities are substantially carried at amortized cost, which approximates fair value.  Such fair value estimates are not necessarily indicative of the amounts the Trust might pay or receive in actual market transactions.The fair value hierarchy of financial instruments measured at fair value on the balance sheet is as follows:                                     March 31,2011  December 31, 2010  January 1, 2010      Level 1  Level 2  Level 3  Level 1  Level 2  Level 3  Level 1  Level 2  Level 3Financial Liabilities Unit based paymentsTrust unitsForward utility contracts     ---  4,280-25  ---  ---  4,334-55  ---  -549,821-  1,498-152  ---The three levels of the fair value hierarchy are described as follows:Level 1:  Values based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities.Level 2:  Values based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.Level 3:  Values based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.The classification and measurement of financial assets and liabilities under IFRS 9 as compared to Canadian GAAP is below.  The date of initial application was December 31, 2010 and IFRS 9 was applied retrospectively to January 1, 2010.             Financial asset or financial liabilityat January 1, 2010   Classification andMeasurement underCanadian GAAP  New measurementcategory underIFRS 9    Financial assets            Current financial assets             Accounts receivableLoan receivableTerm depositsCash   Loans and receivablesLoans and receivablesLoans and receivablesLoans and receivables  Amortized costAmortized costAmortized costAmortized cost    Financial liabilities            Non-current financial liabilities             MortgagesTrust and Limited Partnership Class B units   other financial liabilitiesEquity  Amortized costFVTPL     Current financial liabilities             Distributions payableTrade and other payablesUnit based paymentsForward utility contractsBank indebtednessOperating facilities   other financial liabilitiesother financial liabilitiesequityother financial liabilitiesother financial liabilitiesother financial liabilities  Amortized costAmortized costFVTPLFVTPLAmortized costAmortized cost    NPR had no credit derivatives over financial assets at March 31, 2011, December 31, 2010, January 1, 2010 and throughout the intervening periods. Utility cost riskNPR's quarterly operating costs and earnings have a seasonal component to them resulting from higher utility costs in the first and fourth quarters of each year.  As well, NPR is exposed to utility cost risk, which results from the fluctuation in retail prices for fuel oil, natural gas and electricity, the primary utilities used to heat its properties. The exposure to utility cost risk is restricted primarily to the residential rental and Execusuites portfolio. The leases in the remainder of the portfolio generally provide for recovery of operating costs from tenants, including utilities. Because of the northern location of a significant 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.Heating oil is the primary source of fuel for heating properties located in Nunavut and the Northwest Territories. Over the last three years, NPR converted heating systems for some properties in Yellowknife from fuel oil based boilers to wood pellet boilers and in Inuvik, all of the fuel oil based boilers in the residential portfolio have now been converted to natural gas based boilers. The investment in these environmentally friendly and more efficient boilers continues to reduce NPR's exposure to volatile heating oil prices. 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 main 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 18% of the Entities' usage in Alberta. Natural gas prices in Inuvik and BC are not subject to regulated price control and NPR 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 in the average price of heating oil and natural gas would impact NPR's net earnings by $78,000 for the quarter ended March 31, 2011.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 Entities' multi-family rental units.  As a result, there is no significant risk to NPR regarding the price of electricity.Liquidity riskUltimate responsibility for liquidity risk management lies with management and the Trustees.  NPR manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by managing mortgage and loan maturities to ensure a relatively even amount of mortgage maturities in each year.At March 31, 2011, NPR has two revolving credit facilities totalling $57.5 million, unchanged from December 31, 2010. At March 31, 2011, NPR has utilized $17.4 million of its operating facilities compared to $7.9 million at December 31, 2010. Cash flow projections are completed on a regular basis to ensure there will be adequate liquidity to maintain operating, capital and investment activities in addition to making monthly distributions to unitholders. The Trustees review the current financial results and the annual business plan in determining appropriate distribution levels.Contractual maturity for non-derivative financial assets at March 31, 2011                             CarryingAmount  ContractualCash Flows  0 - 6months  6 monthsto 1 year   1 - 5years   Over 5yearsTerm deposits and short term investmentsAccounts receivableLoans receivablePrepaid expenses and other assets     4,2082,7362761,813  4,2172,7364251,813  4,2172,736181,530  18182   202101   187-                        Contractual maturity for non-derivative financial assets at December 31, 2010                              CarryingAmount  ContractualCash Flows  0 - 6months  6 monthsto 1 year   1 - 5years   Over 5yearsCashTerm deposits and short term investmentsAccounts receivableLoans receivablePrepaid expenses and other assets     2,9214,0872,9912792,409  2,9214,0872,9914342,409  2,9214,0872,991182,056  ---18254   ---20299   ---196-                        Contractual maturity for non-derivative financial liabilities at March 31, 2011                            CarryingAmount  ContractualCash Flows  0 - 6months  6 monthsto 1 year  1 - 5years  Over 5YearsTrade and other payablesBank indebtednessOperating facilitiesTenant security depositsMortgages payable     11,9381,67617,3984,181521,331  11,9381,67617,3984,181674,452  11,7651,67617,3981,88226,504  63--1,46357,598  110--836358,965  ----231,385                      Contractual maturity for non-derivative financial liabilities at December 31, 2010                      CarryingAmount  ContractualCash Flows  0 - 6months  6 monthsto 1 year  1 - 5years  Over 5YearsTrade and other payables  14,578  14,578  14,376  92  110  -Distributions  3,499  3,499  3,499  -  -  -Operating facilities  7,898  7,898  7,898  -  -  -Tenant security deposits  4,023  4,023  1,810  1,408  805  -Mortgages payable  504,583  649,223  39,214  37,116  378,465  194,428                   Contractual maturity for derivative financial liabilities at March 31, 2011                                CarryingAmount  ContractualCash Flows  0 - 6months  6 monthsto 1 year  1 - 5years  Over 5YearsUnit based payments       4,280  4,280  4,195  85  -  -Forward utility contract       25  25  25  -  -  -                        Contractual maturity for derivative financial liabilities at December 31, 2010                                CarryingAmount  ContractualCash Flows  0 - 6months  6 monthsto 1 year  1 - 5years  Over 5YearsUnit based payments       4,334  4,334  4,310  24  -  -Forward utility contract       55  55  41  14  -  -                        Management believes that future cash flows from operations and cash available under the current operating facilities provide sufficient available funds through the foreseeable future to support these financial liabilities.Credit riskNPR's credit risk primarily arises from the possibility that tenants may not be able to fulfill their lease commitments. Tenant receivables are comprised of a large number of tenants spread across the geographic areas in which NPR operates. There are no significant exposures to single tenants with the exception of AgeCare Investments Ltd. ("AgeCare"), which leases seniors' properties in Alberta and BC and the Governments of Canada, Nunavut and the Northwest Territories, which lease a large number of residential units and commercial space in the Northwest Territories and Nunavut.NPR mitigates credit 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. NPR records a specific bad debt provision on balances owed from past tenants and provides an allowance for receivables, net of security deposits, from current tenants where the expected amount to be collected is less than the actual accounts receivable.The following is an aging of current tenant and other receivables:                   March 31, 2011   December 31, 2010   January 1, 2011                              0-30 days    863   1,008   1,37131-60 days    144   414   19061-90 days    94   76   53Over 90 days    566   746   659Tenant receivables    1,667   2,244   2,273Other receivables    1,409   1,087   1,930Allowance for doubtful accounts    (340)   (340)   (325)     2,736   2,991   3,878NPR classifies tenants as past tenants on the date of their move out from a residential unit. NPR records a specific allowance for doubtful accounts 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 doubtful accounts 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 and past 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:                 March 31, 2011   December 31, 2010           Balance, January 1     340   325Accounts added to allowance     246   788Accounts receivable written off     (21)   (144)Accounts recovered     (104)   (430)Increase in allowance     (121)   (199)Balance, end of period     340   340Age of impaired trade receivables                                   March 31,2011   December 31,2010         January 1,2010Current                                  70   -         2231-60 days         107   71         8461-90 days         63   29         27Over 90 days         100   240         192Total         340   340         325Interest rate riskNPR is exposed to interest rate risk on mortgages payable and does not hold any financial instruments to mitigate that risk. In the current economic environment, it is difficult to predict what future interest rates will be and as such, NPR may not be able to continue to renew mortgage loans with interest rates that are lower than those currently in place. NPR utilizes both fixed and floating rate debt. Interest rate risk related to floating interest rates is limited primarily to the utilization of operating 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, NPR 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. During 2010, the Bank of Canada has increased the Overnight Rate by 0.75%, which resulted in corresponding increases in Prime Interest Rates charged by most Canadian Financial institutions. This increase directly impacts NPR's borrowing costs on its credit facilities and other floating rate debt.A sensitivity analysis on floating rate debt has been completed based on the exposure to interest rates at the balance sheet date. Floating rate debt includes all mortgages payable which are not subject to fixed interest rates and the credit facilities. A 0.50% change in interest rates, keeping all other variables constant, would change NPR's net earnings for the quarter ended March 31, 2011 by $18,000.21. CAPITAL MANAGEMENTNPR's objectives when managing its capital are to safeguard its assets while maximizing the growth of its business, returns to unitholders and maintaining the sustainability of cash distributions. NPR's capital consists of mortgages payable, operating and acquisition facilities, REIT Trust Units, NorSerCo Common Shares, NPRLP Class B Units and NorSerCo Special Shares. NPLP Class B units were redeemed for REIT Trust Units as part of the Arrangement (Note 1) completed on December 31, 2010 and NPLP was subsequently dissolved.Management monitors the Entities' capital structure on an ongoing basis to determine the appropriate level of mortgages payable to be placed on specific properties at the time of acquisition or when existing debt matures. NPR follows conservative guidelines which are set out in the DOT. In determining the most appropriate debt, consideration is given to strength of cash flow generated from the specific property, interest rate, depreciation period, maturity of the debt in relation to the existing debt of NPR, interest and debt service ratios, and limits on the amount of floating rate debt. NPR has operating facilities which are used to fund acquisitions and capital expenditures until specific mortgage debt is placed or additional equity is raised.NPR's calculations of its adherence to bank covenants are considered non-IFRS measures.Consistent with others in the industry, NPR monitors capital on the basis of debt to gross book value ratio. The DOT provides for a maximum debt to gross book value ratio of 70%. For the purposes of these financial statements, Debt to Gross Book Value is calculated on the combined Entities. NPR does not anticipate operating above a debt to gross book value ratio of 60%.NPR's debt to gross book value is as follows:                 Three months endedMarch 31, 2011   Year endedDecember 31, 2010Bank indebtedness (cash)     1,676   (2,921)Operating facilities     17,398   7,898Mortgages payable     521,331   504,583Debt     540,405   509,560           Investment properties     1,125,385   1,094,288Property, plant and equipment     12,603   12,708Accumulated depreciation     3,438   3,233Gross Book Value     1,141,426   1,110,229           Debt to Gross Book Value     47.3%   45.9%NPR is subject to three principal financial covenants in its mortgage payable and operating facilities. The financial covenants are described as follows:   i)     Debt Service Coverage - calculated as Net earnings before interest (not including distributions classified as interest paid on NPR Trust Units or Class B units), unrealized fair value adjustments, taxes and depreciation divided by the debt service payments (total interest expense (not including distributions classified as interest paid on NPR Trust Units or Class B units), and principal repayments);   ii)     Interest Coverage - calculated as Net earnings before interest (not including distributions classified as interest paid on NPR Trust Units or NPLP Class B units), unrealized fair value adjustments, taxes and depreciation divided by total interest expense (not including distributions classified as interest paid on NPR Trust Units or NPLP Class B units);   iii)     Debt to Gross Book Value as calculated above.             Three months endedMarch 31, 2011   Year EndedDecember 31, 2010Earnings from continuing operations before taxes   12,000   (78,828)Depreciation   224   1,062Interest on mortgages   6,623   26,290Interest on operating facilities   127   1,163Unrealized fair value changes   2,585   119,717Interest (distributions) on units   -   14,324Net earnings before interest, taxes and depreciation   21,559   83,728         Interest on mortgages   6,623   26,290Interest on operating facilities   127   1,163Total Interest Expense   6,750   27,453Principal repayments   4,248   16,571Debt Service Payments   10,998   44,024Interest Coverage    3.19   3.05Debt Service Coverage    1.96   1.90As at and during the three months ended March 31, 2011 and March 31, 2010, NPR complied with all externally imposed capital requirements and all covenants relating to its debt facilities.22. OPERATING EXPENSESDuring the three months ended March 31, 2011, operating expenses on investment property generating rental revenue were $13,548 (2010 - $12,855).  During the three months ended March 31, 2011, operating expenses on investment property not generating rental revenue were nil (2010 - nil).23. UNREALIZED FAIR VALUE CHANGES              Three months endedMarch 31, 2011   Investment properties    1,795   Unit based payments    790   Trust units    -   Net unrealized fair value decreases    2,585   24. NON-CASH WORKING CAPITAL RELATED TO OPERATIONS    Three months endedMarch 31, 2011Three months endedMarch 31, 2010Term deposits and short term investments(121)(158)Accounts receivable255(308)Prepaid expenses596(5,103)Loans receivable328Trade and other payables(2,641)1,007Forward utility contract(30)(60) (1,938)(4,594)25. OPERATING LEASESNPR leases investment property held under operating leases (Note 5). Residential property leases generally have terms not exceeding one year. Commercial property operating leases have lease terms of between 1 to 15 years, with an option to extend for a further period. All operating lease contracts contain market review clauses in the event that the lessee exercises its option to renew. Except as disclosed in note 5, lessees do not have an option to purchase the property at the expiry of the lease period.The future minimum lease payments are as follows:                       March 31, 2011   December 31, 2010   January 1, 2010Less than 1 year      3,387   2,893   1,029Between 1 and  5 years      29,052   20,513   26,799More than 5 years      61,871   74,546   75,902       94,310   97,952   103,73026. RELATED PARTY TRANSACTIONSRelated party transactions are conducted in the normal course of operations and are made on terms equivalent to those used in arms length transactions.A Trustee of NPR is the Chairman of AgeCare Investment Ltd. ("AgeCare"), which leases six seniors' properties. For the three months ended March 31, 2011, NPR earned rental income, including rental revenue earned on a straight-line basis over the term of the lease, totalling $3.2 million (2010 - $3.2 million) from AgeCare. Amounts outstanding in accounts receivable pertaining to this lease were $nil at March 31, 2011 (December 31, 2010 - $nil, January 1, 2010 - $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, 2011, NPR paid $30,000 for these services (2010 - $30,000).On transition to IFRS, the loan receivable of $2.0 million from AgeCare, which related to the renovations completed in 2009, was reclassified to a capital improvement and the loan payments recorded as lease payments in accordance to its lease agreement.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 $120,000 for the three months ended March 31, 2011 (2010 - $125,000). Amounts outstanding in accounts receivable pertaining to this lease were $nil at March 31, 2011 (December 31, 2010 - $nil, January 1, 2010 - $nil).Key management personnel are comprised of NPR's Trustees and executive officers.Other Related Party Transactions:              Transactions for the threemonths ended March 31  Balance Outstanding     2011  2010  March 31,2011  December 31,2010Revenue               Associates    74  68  26  21Receipt of services               Associates    10  10  -  -               27. SEGMENTED INFORMATIONManagement primarily uses geographic segments (i.e. provinces and territories) to manage the properties. In addition, due to the differences between the commercial and the residential markets, management also reviews operations by market segment. Within the residential property market, Execusuites and seniors residences are reviewed and managed as separate sub-segments.NPR's residential properties are comprised of three components: apartments, town homes and single family rental units; NorSerCo's execusuite apartment rental units, where the rental periods range from a few days to several months; and seniors' properties where the properties are leased on a long term basis to qualified operators who provide services to individual residents. The commercial business segment is comprised of office, industrial and retail properties in areas where NPR has residential operations.Geographic Segments                  Three months ended                  March 31, 2011  BC  Alberta  NWT  Nunavut  Nfld  Total                   Rental revenue  4,728  9,428  9,781  6,794  4,979  35,710Other property income  198  240  354  95  106  993Operating expense  (1,807)  (2,942)  (4,655)  (2,314)  (1,830)  (13,548)   3,119  6,726  5,480  4,575  3,255  23,155Mortgage interest  (803)  (2,819)  (1,315)  (944)  (742)  (6,623)Depreciation  (31)  (63)  (56)  (44)  (30)  (224)EARNINGS BEFORE                  OTHER ITEMS  2,285  3,844  4,109  3,587  2,483  16,308Total assets  163,078  389,152  263,231  179,697  153,633  1,148,791Investment properties  160,499  381,993  257,157  175,608  150,128  1,125,385Total liabilities  66,365  228,604  106,104  75,869  57,726  534,668                   Three months ended                  March 31, 2010  BC  Alberta  NWT  Nunavut  Nfld  Total                   Rental revenue  4,266  8,361  8,577  6,497  4,716  32,417Other property income  115  177  368  131  143  934Operating expense  (1,856)  (3,142)  (4,071)  (2,048)  (1,738)  (12,855)   2,525  5,396  4,874  4,580  3,121  20,496Mortgage interest  (803)  (2,760)  (1,300)  (970)  (714)  (6.547)Depreciation  (35)  (68)  (64)  (48)  (37)  (252)EARNINGS BEFORE                  OTHER ITEMS  1,687  2,568  3,510  3,562  2,370  13,697Total assets  147,822  392,744  244,752  162,418  152,944  1,100,680Investment properties  144,968  383,334  236,051  157,884  148,887  1,071,124Total liabilities  58,315  218,134  101,958  74,958  59,556  512,921 Business Segments                   Three months endedMarch 31, 2011  Multi-family  Execusuites  Seniors'  TotalResidential  Commercial  Total                   Rental revenue  23,756  1,744  4,586  30,086  5,624  35,710Other property income  824  43  -  867  126  993Operating expenses  (10,217)  (1,022)  (5)  (11,244)  (2,304)  (13,548)   14,363  765  4,581  19,709  3,446  23,155Mortgage Interest  (4,310)  (227)  (1,483)  (6,020)  (603)  (6,623)Depreciation  (187)  (8)  -  (195)  (29)  (224)EARNINGS BEFORE                  OTHER ITEMS  9,866  530  3,098  13,494  2,814  16,308Total assets  744,104  33,315  210,426  987,845  160,946  1,148,791Investment properties  732,484  32,576  204,559  969,619  155,766  1,125,385Total liabilities  377,315  15,638  97,602  490,555  44,113  534,668                   Three months endedMarch 31, 2010  Multi-family  Execusuites  Seniors'  TotalResidential  Commercial  Total                   Rental revenue  20,739  1,706  4,493  26,938  5,479  32,417Other property income  720  25  -  745  189  934Operating expenses  (9,738)  (958)  (6)  (10,702)  (2,153)  (12,855)   11,721  773  4,487  16,981  3,515  20,496Mortgage interest  (4,205)  (238)  (1,514)  (5,957)  (590)  (6,547)Depreciation  (208)  (12)  -  (220)  (32)  (252)EARNINGS BEFORE                  OTHER ITEMS  7,308  523  2,973  10,804  2,893  13,697Total assets  700,809  32,094  209,043  941,946  158,734  1,100,680Investment properties  682,411  31,371  203,553  917,335  153,789  1,071,124Total liabilities  351,423  16,295  100,460  468,178  44,743  512,921 Reconciliation of reportable segment profit                Three months ended     Three months ended     March 31, 2011     March 31, 2010Total Net Earnings for reportable segments    16,308     13,697 Administration    (1,918)     (1,625) Interest paid on operating facilities    (127)     (270) Interest paid to unitholders    -     (9,301) Interest revenue    91     38 Equity in earnings (loss) of joint ventures    231     (389) Unrealized fair value changes    (2,585)     (64,730) Income tax expense    -     (633)     12,000     (63,213)Reconciliation of reportable segment assets                    As at March 31        2011   2010Total Assets for reportable segments       1,148,791   1,100,680 Property, plant and equipment       572   254 Other long-term assets       153   387 Investment in joint ventures       5,574   4,985 Term deposits and short term investments       4,208   3,713 Accounts receivable       771   980 Loans receivable       276   343 Prepaid expenses and other assets       253   164Total Assets       1,160,598   1,111,506Reconciliation of reportable segment liabilities                    As at March 31        2011   2010Total liabilities for reportable segments       534,668   512,921 Bank indebtedness       1,676   932 Operating facilities       17,398   36,498 Trade and other payables       2,782   2,633 Distributions payable       3,503   3,102 Forward utility contract       25   92 Unit based payments       4,280   1,782 Trust and Limited Partnership Class B units       -   608,780 Deferred taxes       -   57,541Total Liabilities       564,332   1,224,28128. SUBSEQUENT EVENTSAs described in note 13, NPR extended its operating facility to June 30, 2011.On May 27, 2011, NPR completed a public offering of 1,955,000 stapled units at an issue price of $29.85 per stapled unit for gross proceeds of $58.4 million dollars less of issue costs of $2.8 million.On April 15, 2011 NPR completed an asset acquisition of 3 commercial buildings in St John's Newfoundland with 65,510 square feet of space at an approximate cost of $4.7 million.  The purchase was funded through a combination of mortgage financing of $1.1 million and cash from the operating facility.Between April 1, 2011 and June 14, 2011 NPR acquired 75 residential units in 5 properties for approximately $14.0 million, 120 execusuites in 2 properties for approximately $22.9 million and 6 development properties for approximately $7.7 million through an estimated $44.6 million business combination in Iqaluit, Nunavut. The purchase was funded through a combination of $2.0 million of mortgage financing and $42.6 million cash from the public offering.Between April 1, 2011 and June 14, 2011 NPR completed mortgage assumptions, renewals and new financing of $16.7 million with interest rates between 4.11% and 5.90% and terms to maturity from 1 to 10 years. Proceeds from the mortgage assumptions were used to fund new acquisitions as described above.29. IFRS 1 RECONCILIATIONSThis reconciliation of the Canadian GAAP condensed combined statement of financial position at January 1, 2010 and December 31, 2009, together with the statement of retained earnings for NPR is shown on the following page, including separate explanations of the effects of applying IFRS.NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUSTCondensed Combined Statement of Financial Position (unaudited)          Notes  December 31,2009GAAP Balance   IFRS Adjustment  January 1, 2010IFRS BalanceASSETS            Non-current assets            Investment properties  a)  863,720  207,482  1,071,202Property plant & equipment  a)  -  12,822  12,822Other long term assets  b)  4,539  731  5,270Investment in joint ventures  c)  -  4,674  4,674Loans receivable  d)  2,456  (2,085)  371      870,715  223,624  1,094,339             Current assets            Term deposits and short term investments     3,555  -  3,555Accounts receivable  f)  4,158  (280)  3,878Prepaid expenses and other assets  g)  5,088  (2,562)  2,526Intangible assets  h)  4,851  (4,851)  -      17,652  (7,693)  9,959      888,367  215,931  1,104,298LIABILITIES            Non-current liabilities            Trust and Limited Partnership Class B units  i)  -  549,821  549,821Mortgages  j)  498,996  (54,144)  444,852Deferred taxes  k)  43,751  13,540  57,291      542,747  509,217  1,051,964Current liabilities            Bank indebtedness  l)  1,820  (107)  1,713Operating facilities     33,698  -  33,698Trade and other payables  m)  15,403  (258)  15,145Distributions payable     3,096  -  3,096Current portion of mortgages payable  j)  -  46,576  46,576Unit based payments  i)  -  1,498  1,498Forward utility contract     152  -  152Intangible liabilities  h)  94  (94)  -      54,263  47,615  101,878      597,010  556,832  1,153,842EQUITY            Equity attributable to unitholders  n)  290,893  (342,310)  (51,417)Non-controlling interest  n)  464  1,409  1,873TOTAL EQUITY     291,357  (340,901)  (49,544)      888,367  215,931  1,104,298This reconciliation of the Canadian GAAP condensed combined statement of financial position at December 31, 2010, together with the statement of retained earnings for NPR is shown on the following page, including separate explanations of the effects of applying IFRS.NORTHERN PROPERTY REAL ESTATE INVESTMENT TRUSTCondensed Combined Statement of Financial Position (unaudited)         Notes  December 31, 2010GAAP Balance   IFRS Adjustment  December 31, 2010IFRS BalanceASSETS            Non-current assets            Investment properties  a)  893,347  200,941  1,094,288Property plant & equipment  a)  -  12,708  12,708Other long term assets  b)  6,058  1,749  7,807Investment in joint ventures  c)  -  5,343  5,343Loans receivable  d)  279  -  279      899,684  220,741  1,120,425Current assets            Cash  e)  3,216  (295)  2,921Term deposits and short term investments     4,087  -  4,087Accounts receivable  f)  2,916  75  2,991Prepaid expenses and other assets  g)  5,154  (2,745)  2,409Intangible assets  h)  3,671  (3,671)  -      19,044  (6,636)  12,408      918,728  214,105  1,132,833LIABILITIES            Non-current liabilities            Trust and Limited Partnership Class B units  i)  -  -  -Mortgages payable  j)  512,544  (60,559)  451,985Deferred taxes  k)  253  (253)  -      512,797  (60,812)  451,985Current liabilities            Operating facilities     7,898  -  7,898Trade and other payables  m)  18,355  246  18,601Distributions payable     3,499  -  3,499Current portion of mortgages payable  j)  -  52,598  52,598Unit based payments  i)  -  4,334  4,334Forward utility contract     55  -  55Intangible liabilities  h)  43  (43)  -      29,850  57,135  86,985      542,647  (3,677)  538,970EQUITY            Equity attributable to stapled unit holders  n)  375,699  216,144  591,843Non-controlling interest  n)  382  1,638  2,020TOTAL EQUITY     376,081  217,782  593,863      918,728  214,105  1,132,833Impact of IFRS on Financial PositionThe following paragraphs quantify and describe the impact of significant differences between Canadian GAAP and IFRS on NPR's combined balance sheet:a) Investment property and property, plant and equipmentManagement considers residential and commercial revenue producing properties to be investment properties under IAS 40, "Investment Property" ("IAS 40"). IAS 40 defines investment property as property that includes land and buildings held primarily to earn rental income or for capital appreciation or both, rather than for use in the production or supply of goods or for sale in the ordinary course of business. Similar to Canadian GAAP, investment property is initially recorded at cost under IAS 40. However, subsequent to initial recognition, IFRS requires that an entity choose either the cost or fair value model to account for its investment property. The fair value of NPR's investment property is the amount that the property should exchange at between a willing buyer and a willing seller in an arm's length transaction. Management elected to use the fair value model and implemented a combined external appraisal and internal calculation approach to fair value NPR's investment properties. Approximately 30% of properties in each of NPR's regions of operation were selected for independent external appraisal. The properties selected were comprised of apartment, single family, duplex, town home, commercial, seniors', execusuite and mixed use facilities. The services of three independent appraisal companies were commissioned during the fourth quarter of 2009, each with expertise in certain regions in which NPR operates, to perform external property appraisals. Management reviewed the external investment property appraisals for reasonableness and then applied externally obtained regional vacancy, management overhead and Cap Rate information to the stabilized net operating income for the remainder of NPR's investment properties on a regional basis to internally calculate fair values. This change in accounting policy has also been applied to investment properties held in NPR's joint ventures and subsidiaries. The adjustments from historical cost to fair value at transition to IFRS are recorded in retained earnings. Subsequent fair value gains and losses are recorded in net income in the period in which they arise.Management has determined that the fair value of NPR's investment property portfolio at January 1, 2010 is approximately $1.1 billion (December 31, 2009 - $864 million), $207 million greater than the carrying value under Canadian GAAP. The adjustment to retained earnings under the fair value model represents the cumulative unrealized gain in respect of NPR's investment property, net of the de-recognition of related intangible assets and liabilities which are inherently reflected in the fair value of commercial property, and the reclassification of straight-line rent receivable.NPR reports investment property at fair value each reporting period. The resulting changes in fair value of investment property are recorded in the statements of income. IAS 40 does not allow depreciation to be calculated and reported in the statements of income for any revenue producing properties classified as investment property. Management has determined that the fair value of NPR's investment property portfolio at December 31, 2010 is approximately $1.1 billion compared to the GAAP value of $893 million which is an increase of $201 million.         Investment properties   December 31, 2010   January 1, 2010 Fair value adjustment(1)   230,390   235,119 Reclassification to property, plant and equipment(2)   (12,708)   (12,822) Investment in joint ventures(3)   (13,114)   (12,797) Non-controlling interest(4)   (1,287)   (1,287) Reclassification to tenant inducements(5)   (2,057)   (603) Reclassification to other long term assets(6)   (253)   (128)     200,941   207,482Fair value adjustment - Revenue producing properties that were reported at historical cost under GAAP are reported at fair value under IFRS. The net increase in reported value is $230.4 million (January 1, 2010 - $235.1 million).Reclassification to property, plant and equipment - NPR has regional offices and warehouse facilities in each of its operating regions. These assets were included in the building costs under IFRS. NPR also provides residential housing to staff. The fair value of these assets reclassified to property, plant and equipment at transition to IFRS was $12.7 million (January 1, 2010 - $12.8 million).Investment in joint ventures - The operations of ICP and ICS were proportionately consolidated under Canadian GAAP. IFRS 11 Joint Arrangements ("IFRS 11") became effective May 12, 2011 and requires the use of the equity method of accounting for interests in joint venture entities, thereby eliminating the proportionate consolidation method. NPR has reported its jointly controlled entities using the equity method of accounting. In anticipation of IFRS 11, NPR has reported its investment in joint ventures using the equity method of accounting, as permitted in IAS 31. The value of NPR's investment properties as reported under Canadian GAAP has decreased by $13.1 million (January 1, 2010 - $12.8 million) at transition to IFRS for the change in accounting method used for ICP and ICS.NPR owns and operates certain investment properties using partnership and joint venture arrangements. GoGa Cho is 55% owned by NPR and has been consolidated reporting a 45% non-controlling interest; Aqsaqniq is 49% owned by NPR and has been consolidated reporting a 51% non-controlling interest; and Icicle, which was proportionately consolidated under GAAP, is 49% owned by NPR and has been consolidated reporting a 51% non-controlling interest in this opening balance sheet.Reclassification to tenant inducements - Where IAS 40 applies and investment properties are measured at fair value, the tenant inducements are considered in the cash inflows modeled to measure the fair value of the investment property, forming part of the in-place operating leases. In accordance with IAS 40.50(c), lease incentive assets are separated for presentation on the balance sheet by deducting this amount from the fair value of the property to avoid double counting of assets. NPR has reclassified $2.1 million (January 1, 2010 - $603,000) of tenant inducements to avoid double counting of assets.Reclassification to other long term assets - deferred recoverable costs - These costs have been reclassified under IAS 40 and IAS 17. Deferred recoverable costs are those costs incurred for capital maintenance performed on commercial buildings and regarded by NPR as recoverable costs from commercial tenants. These costs are amortized to operating income and are included in the calculation of annual recoverable operating costs.NPR reports investment property at fair value and restated its comparable 2010 investment property using a combined external appraisal and internal valuation approach. The resulting changes in fair value of investment property were recorded in the deficit at transition to IFRS. As a result of electing to report investment property at fair value, depreciation is no longer calculated and reported in the statement of income for any revenue producing properties classified as investment property. The weighted average Cap Rate at December 31, 2010 was 8.8% (January 1, 2010 - 8.8%).Property, plant and equipment (PP&E)NPR provides rental accommodations to its employees and occupies administrative office and warehouse space in the regions in which it operates. IAS 40.9(c) defines these types of capital assets as owner-occupied property and requires that these assets be reported under IAS 16 "Property, Plant and Equipment" ("IAS 16"). IAS 16 defines PP&E as tangible assets used in the production or supply of goods and services or for administrative purposes, and have an expected life of more than one period. Owner-occupied property and staff housing in the amount of $13.0 million has been reclassified from investment property to PP&E in accordance with IAS 16 on transition to IFRS.NPR has also measured staff housing and owner-occupied property at fair value as at the transition date and used that amount as the deemed cost in the opening IFRS balance sheet. Management has identified the significant asset components of PP&E and their appropriate useful lives for the purpose of depreciating PP&E as required by IAS 16. These assets are subject to a review for impairment annually. NPR will continue to report PP&E using the cost model, measuring each class at cost less accumulated depreciation and any impairment losses recognized. Vehicles, computer and other equipment are reported at the Canadian GAAP amortized cost value at January 1, 2010 as this is an approximation to fair value.NPR experiences monthly changes in staff rental accommodations due to move-ins, move-outs and transfers between residential units. The estimated cost that would be incurred to implement the internal processes required to track and value these transfers between Investment Property and PP&E significantly exceed the benefits provided to users of these financial statements. Since staffing levels and internally used space do not change materially on a monthly basis, management decided to allocate employee accommodations and administrative and warehouse space to PP&E at transition to IFRS and not to revise these allocations unless a significant change in the number of units or square footage occupied occurs.         Property, plant and equipment     December 31, 2010   January 1, 2010 Reclassification from investment properties(1)   16,111   15,238 Asset impairment(2)   (148)   (148) Investment in joint ventures(3)   (21)   (21)     15,942   15,069Accumulated Depreciation         Accumulated Depreciation   (3,234)   (2,247)     12,708   12,822  1)     PP&E for owner-occupied property includes land, buildings and furniture, fixtures and equipment reclassified from investment property at transition to IFRS in the amount of $16.1 million (January 1, 2010 - $15.2 million). During 2010 NPR acquired additional property, plant and equipment in the amount of $949,000. Management has determined that the portion of the fair value adjustment of investment property that applies to furniture, fixtures and equipment for owner-occupied property was considered to be immaterial in its application at the property level.  2)     Asset impairment - IAS 36.9 requires that an asset be assessed for impairment at the end of each reporting period. Certain assets purchased as part of a previous business acquisition were tested for impairment. It was determined that the carrying value of the equipment exceeded the recoverable amount.  3)     Investment in joint ventures - The operations of ICP and ICS were proportionately consolidated under Canadian GAAP. IAS 31 - Interests in Joint Ventures ("IAS 31") allows proportionate consolidation of jointly controlled entities. In anticipation of IFRS 11, NPR has reported its investment in joint ventures using the equity method of accounting, as permitted in IAS 31. The value of NPR's property, plant and equipment as reported under Canadian GAAP has decreased by $21,000 (January 1, 2010 - $26,000) for the change in accounting method used for ICP & ICS.b)  Other long term assetsParagraph 52 of IAS 17 "Leases" ("IAS 17") states that, "Indirect costs incurred by lessors in negotiating and arranging an operating lease shall be added to the carrying amount of the leased asset and recognized as an expense over the term on the same basis as the lease income". For Canadian GAAP a separate intangible asset was presented on the balance sheet, whereas for IFRS, the deferred leasing costs form a component of the total fair value of the investment property and are not accounted for separately.NPR's commercial leases on commercial property can have three types of deferred leasing costs:1) Tenant inducements - Where IAS 40 applies and investment properties are measured at fair value, the tenant inducements are considered in the cash inflows modeled to measure the fair value of the investment property, forming part of the in-place operating leases. In accordance with IAS 40.50(c), lease incentive assets are separated for presentation on the balance sheet by deducting this amount from the fair value of the property to avoid double counting of assets;2) Tenant improvements - Tenant improvements which benefit the tenant are treated as an incentive and netted against revenue in accordance with SIC-15 "Operating Lease - Incentives". Where the tenant improvements are deemed the assets of the lessor, then IAS 40 applies and the investment property is measured at fair value and the tenant improvements form part of the fair value of the property, and;3) Deferred recoverable costs - These costs have been reclassified under IAS 40 and IAS 17. Deferred recoverable costs are those costs incurred for capital maintenance performed on commercial buildings and regarded by NPR as recoverable costs from commercial tenants. These costs are amortized to operating income and are included in the calculation of annual recoverable operating costs.         Other long term assets   December 31, 2010   January 1, 2010 Deferred rent receivable(1)   (11)   (2) Deferred recoverable costs(2)   253   129 Tenant inducements(3)   2,052   669     2,294   796Accumulated amortization         Accumulated amortization   (545)   (65)    1,749   731         Deferred rent receivable - ICS and ICP were proportionately consolidated under Canadian GAAP and are equity consolidated as permitted in IAS 31. This change amounted to a decrease of $11,000 as at December 31, 2010.Deferred recoverable costs - These costs have been reclassified under IAS 40 and IAS 17. Deferred recoverable costs are those costs incurred for capital maintenance performed on commercial buildings and regarded by NPR as recoverable costs from commercial tenants. These costs are amortized to operating income and are included in the calculation of annual recoverable operating costs.Tenant inducements - Where IAS 40 applies and investment properties are measured at fair value these amounts are considered in the cash inflows modeled to measure the fair value of the investment property forming part of the in-place operating leases. NPR has reclassified $2.1 million at December 31, 2010 (January 1, 2010 - $603,000) of tenant inducements to avoid double counting of assets.c) Investment in joint venturesIFRS 1 states that a first‐time adopter may elect not to apply IFRS 3, "Business Combinations" ("IFRS 3") retrospectively to business combinations that occurred before the date of transition to IFRS. Both IFRS and Canadian GAAP require the use of the acquisition method of accounting for all business combinations, however there are differences between the two frameworks. Under IFRS transaction costs are expensed immediately while under Canadian GAAP the costs are included in the cost of the assets acquired. This may have a material negative impact on net income, FFO, AFFO and EBITDA in the year of acquisition. IFRS requires the purchaser to measure any non-controlling interest in the acquiree at either fair value or at the non-controlling interest's proportionate share of the fair value of the acquirees' identifiable net assets. Canadian GAAP required the minority interest to be measured at the non-controlling interest's proportionate share of the historical carrying value of the acquirees' identifiable net assets.Management has elected not to apply IFRS 3 retrospectively to business combinations that occurred prior to the date of transition to IFRS. NPR's jointly controlled entities and subsidiaries have also transitioned to IFRS as of January 1, 2010.IAS 31 allows proportionate consolidation of jointly controlled entities. On May 12, 2011 the IASB issued IFRS 11, which requires jointly controlled entities to be reported using the equity method of accounting. In anticipation of IFRS 11, NPR has elected to use the equity method to account for its investment in joint ventures as permitted by IAS 31.NPR owns and operates certain investment properties using partnership and joint venture arrangements. GoGa Cho is 55% owned by NPR and has been consolidated reporting a 45% non-controlling interest; Aqsaqnig is 49% owned by NPR and has been consolidated reporting a 51% non-controlling interest; and  Icicle is 49% owned by NPR and has been consolidated reporting a 51% non-controlling interest in this opening balance sheet.NPR has applied IAS 27. IAS 27.13 to IAS 27.17 defines control, identifying when a subsidiary should be consolidated. Control is deemed to exist if more than half of the voting power of an entity is owned directly or indirectly. Control also exists when less than half of the voting rights are owned when there is:  a)     Power over more than half of the voting rights by virtue of an agreement with other investors;  b)     Power to govern the financial and operating policies of the entity under an agreement;  c)     Power to appoint the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body; or  d)     Power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body.Management has concluded that NPR controls the GoGa Cho and effectively controls the Aqsaqniq and Icicle subsidiaries and has consolidated their operations reporting the appropriate non-controlling interest.          Investment in joint ventures    December 31, 2010   January 1, 2010 ICS(1)                                        1,100   372 ICP(1)    4,243   4,302     5,343   4,674          Interest in joint ventures - The operations of ICP and ICS were proportionately consolidated under Canadian GAAP. NPR has reported its jointly controlled entities using the equity method of accounting as permitted in IAS 31. The value of NPR's equity accounted investments in joint ventures as reported under Canadian GAAP has increased by $5.3 million (January 1, 2010 - $4.7 million) at transition to IFRS for the change in accounting method used for ICP & ICS.            d) Loans Receivable          Loans receivable     December 31, 2010   January 1, 2010 Interest in joint ventures(1)     -   (20) Renovations(2)     -   (2,065)      -   (2,085)           Interest in joint ventures - The operations of ICP and ICS were proportionately consolidated under Canadian GAAP. NPR will report its jointly controlled entities using the equity method of accounting. The value of NPR's loans receivable as reported under Canadian GAAP has decreased by $20,000 at transition to IFRS for the change in accounting used for ICP and ICS.NPR completed renovations to one of its senior's facilities on behalf of the operator and recorded a receivable for the value of the renovation. IAS 40 requires tenant improvements to form part of the fair value of investment property.     e) Cash   Cash December 31, 2010    January 1, 2010 Investment in joint ventures  - ICP and ICS(1) (409)- Aqsaqniq and Icicle(2) 114-   (295)-     The amount of NPR's cash as reported under Canadian GAAP has decreased by $409,000 (January 1, 2010 - nil) at transition to IFRS for the change in accounting method used for ICP and ICS. The operations of ICP and ICS were proportionately consolidated under Canadian GAAP. NPR will report these jointly controlled entities using the equity method of accounting.Under IAS 27 the business partnership with Aqsaqniq and Icicle is regarded as investments in subsidiaries. Both companies are 49% owned by NPR and have been consolidated reporting a 51% non-controlling interest.     f) Accounts Receivable     Accounts receivable   December 31, 2010    January 1, 2010 Investment in joint ventures(1) (150)(103) Aqsaqniq/Ninety North Ltd.(2) 277(77) Reclassification on internal reorganization of subsidiaries   (52)(100)   75(280)     The value of NPR's accounts receivable as reported under Canadian GAAP has decreased by $150,000 (January 1, 2010 - $103,000) at transition to IFRS for the change in accounting method used for ICP, ICS and Aqsaqniq. The operations of ICP and ICS were proportionately consolidated under Canadian GAAP. Under IFRS, NPR reports the interest in joint ventures using the equity method of accounting.Aqsaqniq - Under IAS 27, the business partnership with Aqsaqniq is regarded as an investment in a subsidiary Aqsaqniq is 49% owned by NPR and has been consolidated reporting a 51% non-controlling interest.     g) Prepaid expenses and other assets   Prepaid expenses and assets December 31, 2010    January 1, 2010 Prepaid equity leases(1) (24)(1,997) Interest in joint ventures(2) (2,265)(27) Other - Aqsaqniq(3) (423)(500) Other - Icicle(3) (33)(38)   (2,745)(2,562)     Equity leases - IAS 40 defines investment property as property that includes land and buildings held primarily to earn rental income or for capital appreciation or both, rather than for use in the production or supply of goods or for sale in the ordinary course of business. In the Nunavut region there is very little deeded land. The majority of our investment property in this region includes equity leases on land where substantially all benefits of ownership are those of the lessee. Under IFRS NPR has reclassified the unamortized balance of the prepaid equity lease payments as a component of the fair value of our investment property.Interest in joint ventures - The operations of ICP and ICS were proportionately consolidated under Canadian GAAP. NPR has reported its jointly controlled entities using the equity method of accounting. The value of NPR's prepaid expenses as reported under Canadian GAAP has decreased by $27,000 at transition to IFRS for the change in accounting used for ICP and ICS.Other - Aqsaqniq and Icicle - Under IAS 27 the business partnership with Aqsaqniq and Icicle are regarded as investments in subsidiaries. Aqsaqniq is 49% owned by NPR and has been consolidated reporting a 51% non-controlling interest; and Icicle is 49% owned by NPR and has been consolidated reporting a 51% non-controlling interest.     h) Intangible assets and liabilities   Intangible assets and liabilities(1) December 31, 2010    January 1, 2010 Above-market leases (14)(34) In-place leases (3,064)(4,008) Lease origination costs (593)(809)   (3,671)(4,851) Below-market leases (43)(94)   (43)(94)     With adoption of IFRS, NPR has derecognized intangible assets and liabilities relating to tenant leases. These are now considered in the determination of the fair value of NPR's investment properties. The result was a decrease in intangible assets of $3.7 million (January 1, 2010 - $4.8 million) and a decrease in intangible liabilities of $43,000 (January 1, 2010 - $94,000), respectively at January 1, 2010.i) Financial instruments - NPR Trust and Class B Limited Partnership unitsIAS 32 "Financial Instruments: Disclosure and Presentation", ("IAS 32"); IFRS 9 "Financial Instruments" ("IFRS 9") (replacement of IAS 39), and; IAS 7 "Financial Instruments: Disclosures", ("IAS 7"). These standards establish the principles for recognizing, measuring and presenting financial instruments as assets, liabilities or equity and offsetting financial assets and liabilities.Upon initial recognition, a financial instrument should be classified as a financial liability, a financial asset or equity in accordance with the substance of the contractual arrangement applying the definitions in these sections. NPR will assess its contractual arrangements and determine whether any give rise to treatment as a financial asset, financial liability or equity.Management has determined that NPR's Trust units and Class B Exchangeable Limited Partnership units ("Class B units") do not qualify for equity treatment at transition to IFRS under IAS 32. NPR Trust units cannot be treated as equity because of the requirement to pay annual distributions equal to taxable income as per NPR's DOT which implies that NPR Trust units are debt because of the contractual obligation to deliver cash or another financial asset to another entity. The Class B units have the same requirement to pay distributions and also may be redeemed for NPR Trust units. Canadian GAAP allows for the treatment of multiple classes of redeemable trust units or Class B units to be treated as equity. IAS 32 stipulates that classes of equity must be identical to be treated as equity. The disclosure of separate classes of equity under Canadian GAAP implies that redeemable trust units and Class B units are somehow different and therefore would be treated differently under IAS 32. The ability to exchange Class B units for Trust units may imply a liability element exists because it imposes an unavoidable obligation to deliver units of the trust (i.e., a financial instrument of another entity). NPR has reported its Trust units and Class B units as liabilities at a fair value of $549.8 million at transition to IFRS.    Trust and Class B Limited Partnership Units December 31, 2010    January 1, 2010 Reclassification from Stapled Unit Holders' equity (deficit) -368,690 Fair value adjustment -181,131   -549,821Unit based compensation in the form of options or deferred units are classified as equity under Canadian GAAP. Since unit based compensation is to be settled by issuance of a financial liability itself, such unit based compensation would be classified as a financial liability. Measurement is based upon the fair value of the trust units using the Black Scholes options-pricing model, recognized over the vesting period at each reporting period.    Unit based compensation December 31, 2010    January 1, 2010 Reclassification from Unitholders' equity (deficit) 2,0911,135 Fair value adjustment 2,243363   4,3341,498The IASB has issued IFRS 9, which will become effective January 1, 2013 as a replacement for IAS 39. IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the many different rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets. The new requirements address the problem of volatility in profit or loss arising from an issuer choosing to measure its own debt at fair value. This is often referred to as the 'own credit' problem. An entity choosing to measure a liability at fair value will present the portion of the change in its fair value due to changes in the entity's own credit risk in the other comprehensive income (OCI) section of the statement of income, rather than within the statement of earnings.The IASB permits early adoption of the IFRS 9 and requires transition disclosure by all entities adopting the new IFRS. NPR has adopted the IFRS 9 requirements for financial assets and financial liabilities.j) Mortgages   Mortgages payable December 31, 2010    January 1, 2010 Mortgages payable(1) (60,559)(54,144)   (60,559)(54,144)      Current portion of long term debt - mortgage(1) 52,59846,576   (7,961)(7,568)     Under IFRS a classified statement of financial position is presented requiring mortgages to be allocated between the current and non-current portions. The reported balances of property specific mortgages and subsidiary borrowings at December 31, 2010 decreased by approximately $8.0 million (January 1, 2010 - $7.6 million) due to the equity reporting of jointly controlled entities under IAS 31 compared to balances reported due to proportionate consolidation of jointly controlled entities in accordance with Canadian GAAP.k) Deferred taxesNPR is an open ended mutual fund trust which is not a taxable entity. The deferred tax liability under IFRS will generally be determined by applying tax rates to temporary differences based on the general expectation that the method of realization is through owning and operating our properties rather than through sale. NPR also has certain corporate subsidiaries which are subject to income tax on their respective taxable income at the applicable legislated tax rates.IFRS requires NPR to recognize deferred income tax assets and liabilities based on estimated temporary differences expected as at January 1, 2011. Under the current legislation, NPR did not appear to qualify for the REIT Exemption. The deferred 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 expected tax rates between 19.1% and 28.4%.  A deferred tax provision in the amount of $57.3 million has been recorded in the opening statement of financial position.As a result of NPR's internal reorganization as set out in the Arrangement, which was approved by unitholders at a special meeting held on November 25, 2010, the REIT meets the definition of a Real Estate Investment Trust as defined in the Income Tax Act.l) Bank indebtednessThe value of NPR's bank indebtedness as reported under Canadian GAAP has decreased at December 31, 2010 by nil (January 1, 2010 by $107,000) to IFRS for the change in accounting method used under IAS 31 for ICP, ICS, Aqsaqniq and Icicle Under Canadian GAAP the operations of ICP, ICS and Icicle were proportionately consolidated while the equity method of accounting was used for Aqsaqniq.m) Trade and other payablesThe value of NPR's trade payables as reported under Canadian GAAP has decreased at December 31, 2010 by $246,000 (January 1, 2010 by $258,000) for the change in accounting method used under IAS 31 for ICP, ICS, Aqsaqniq and Icicle Under Canadian GAAP the operations of ICP, ICS and Icicle were proportionately consolidated while the equity method of accounting was used for Aqsaqniq.n)  Reconciliation of equity as reported under Canadian GAAP and IFRSThe following is a reconciliation of NPR's total equity reported in accordance with Canadian GAAP to its total equity in accordance with IFRS at the transition date:(Thousands of dollars) Notes Trust Units Contributed Surplus CumulativeNet Earnings Cumulative Distributionsto Unitholders Equity Attributable to Unitholders Non- ControllingInterests Total EquityAs reported under Canadian GAAP - December 31, 2009   368,690 2,109 107,385 (187,291) 290,893 - 290,893                 Reclassification of non-controlling interests to  equity (i) - - - - - 464 464Investment property fair value adjustments (ii) - - 245,741 - 245,741 1,287 247,028Asset impairment (iv) - - (148) - (148) - (148)NPR unit options (v) - (1,135) - - (1,135) - (1,135)Unvested LTIP units (v) - (974) - - (974) - (974)Trust unit reclassification to liabilities (vi) (368,690) - - - (368,690) - (368,690)Unit options & LTIP fair value adjustment (vi) - - (180,520) - (180,520) - (180,520)Distributions reclassification as cumulative net earnings (vi) - - (187,291) 187,291 - - -Recovery of deferred taxes (vii) - - (35,137) - (35,137) (160) (35,297)Investment in joint ventures (viii) - - (1,163) - (1,163) - (1,163)Business consolidation (i)(ix) - - (284) - (284) 282 (2)As reported under IFRS - January 1, 2010   - - (51,417) - (51,417) 1,873 (49,544)The following is a reconciliation of NPR's total equity reported in accordance with Canadian GAAP to its total equity in accordance with IFRS at December 31, 2010:(Thousands of dollars) Notes TrustUnits ContributedSurplus CumulativeNetEarnings CumulativeDistributionsto StapledUnit Holders EquityAttributable toStapled UnitHolders Non-ControllingInterests TotalEquityAs reported under Canadian GAAP - December 31, 2010   431,695 2,091 174,941 (233,028) 375,699 - 375,699                 Reclassification of non-controlling interests to equity (i) - - - - - 382 382Investment property fair value adjustments (ii) - - 244,585 - 244,585 1,287 245,872Reclassification of loan receivable (iii) - - 97 - 97 - 97Asset impairment (iv) - - (148) - (148) - (148)NPR unit options reclassified as liabilities (v) - (1,297) - - (1,297) - (1,297)Unvested LTIP units reclassified as liabilities (v) - (794) - - (794) - (794)Unit options & LTIP exchanged for trust units at fair value (vi) 265,192 - - - 265,192 - 265,192Unit options & LTIP fair value adjustment (vi) - - (267,413) - (267,413) - (267,413)Distributions reclassified as cumulative net earnings (vi) - - (187,291) 187,291 - - -Reclassification of distributions paid (vi) - - (14,323) 14,323 - - -Recovery of deferred taxes (vii) - - (21,595) - (21,595) - (21,595)Investment in joint ventures (viii) - - (2,132) - (2,132) - (2,132)Business consolidation (i)(ix) - - (351) - (351) 351 -As reported under IFRS - December 31, 2010   696,887 - (73,630) (31,414) 591,843 2,020 593,863Reconciliation of the equity under Canadian GAAP to IFRS at March 31, 2010:   Notes TrustUnits ContributedSurplus CumulativeNetEarnings CumulativeDistributionsto Unitholders EquityAttributable toUnitholders Non-ControllingInterests  TotalEquityAs reported under Canadian GAAP - March 31, 2010   369,714 1,532 110,773 (196,592) 285,427 - 285,427                 Reclassification of non-controlling interests to equity (i) - - - - - 471 471Investment property fair value adjustments (ii) - - 246,647 - 246,647 1,287 247,934Reclassification of loan receivable (iii)     23   23   23Asset impairment (iv)     (148)   (148)   (148)NPR unit options (v) - (444) - - (444) - (444)Unvested LTIP units (v) - (1,088) - - (1,088) - (1,088)Trust units reclassified to liabilities (vi) (369,714) - - - (369,714) - (369,714)Unit options & LTIP fair value adjustment (vii) - - (239,066) - (239,066) - (239,066)Distributions reclassified as cumulative net earnings (vi) - - (187,291) 187,291 - - -Reclassification of distributions paid (vi)     (9,301) 9,301 - - -Recovery of deferred taxes (vi) - - (34,458) - (34,458) (160) (34,618)Investment in joint ventures (vii) - - (1,553) - (1,553) - (1,553)Business consolidation (i),(ix) - - (308) - (308) 308 -As reported under IFRS - March 31 2010   - - (114,682) - (114,682) 1,906 (112,776)(i)     Reclassification of non-controlling interests to equityIAS 1 Presentation of Financial Statements ("IAS 1") requires non-controlling interests to be classified as a component of equity. Under Canadian GAAP non-controlling interest was classified outside of equity.(ii)    Investment propertyNPR considers its residential (multi-family, seniors and execusuite) and commercial properties to be investment properties under IAS 40. Investment property includes land and buildings located in the Northwest Territories, Nunavut, British Columbia, Alberta and Newfoundland held primarily to earn rental income or for capital appreciation or both and is not used for administrative or staff housing purposes. Investment property is initially reported at cost. Subsequent to initial recognition, an entity is required to choose either the cost or fair value model to account for investment property. After review and analysis of the IAS 40 policy choices, NPR concluded that it would change its accounting policy in respect of investment property from depreciated historical cost to the fair value model, on the basis that this would reflect more relevant information in relation to these properties. The adjustment to retained earnings represents the cumulative unrealized gain in the fair value of NPR's residential and commercial property; net of the de-recognition of related intangible assets and liabilities which are reflected in the fair value of commercial property; the de-recognition of long term prepaid land leases in Nunavut which are inherent in the fair value of residential and commercial property; and, the recognition of deferred rent receivable.The fair value of NPR's investment property is the amount that the property should exchange at between a willing buyer and a willing seller in an arm's length transaction. A combined external appraisal and internal valuation approach was used to value investment property. Management initially categorized investment properties into the following: multi-family, townhome, single family, seniors, execusuite, mixed use and commercial facilities. External appraisers with expertise in each of the regions in which NPR operates were engaged to fair value approximately one third of the investment properties in each category and region. Management reviewed the external investment property appraisals for reasonableness and then applied externally obtained regional vacancy and CAP rate information to the remainder of NPR's investment properties on a regional basis to calculate their fair values. This change in accounting policy has also been applied to investment properties held in NPR's joint ventures and equity reported investments.(iii)  Reclassification of loan receivableRenovations reclassified as an asset addition during the last quarter of 2010 have been reclassified at transition to IFRS.(iv) Asset impairmentIAS 36.9 requires that an asset be assessed for impairment at the end of each reporting period. Certain assets purchased as part of a previous business acquisition were tested for impairment. It was determined that the carrying value of the assets exceeded the recoverable amount.(v)   Unit based paymentsUnit option and LTIP unit based payments vest in tranches; one third immediately, one third after twelve months and one third after twenty four months. Under IFRS a financial liability is recognized for the unvested portion of unit options and LTIP. As at Dec. 31, 2010, $1.3 million (January 1, 2010 - $1.1 million) of stock option expense previously reported in contributed surplus was reclassified to a liability account; $794,000 for 52,496 unvested LTIP units (January 1, 2010 - $974,000, for 48,473 unvested LTIP units) were reclassified to a liability account. The financial liability was fair valued at transition to IFRS.(vi)    Financial instrumentsIAS 32.16 defines a financial instrument as an equity instrument rather than a financial liability if, and only if, both of the following conditions are met.  a)     The instrument includes no contractual obligation:   -to deliver cash or another financial asset to another entity; or   -to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavorable to the issuer.  b)     If the instrument will or may be settled in the issuer's own equity instruments, it is:   -a non-derivative that includes no contractual obligation for the issuer to deliver a variable number of its own equity instruments; or   -a derivative that will be settled only by the issuer exchanging a fixed amount of cash or another financial asset for a fixed number of its own equity instruments.NPR Trust units and Class B units did not meet the IFRS definition of equity under IAS 32.16 at January 1, 2010 because of the DOT requirement to pay distributions equal to taxable income. Therefore both are classified as financial liabilities at transition to IFRS. In addition, the units have been revalued to fair value using the closing trading price for December 31, 2009.(vii)   Deferred taxesNPR has certain corporate subsidiaries which are subject to income tax on their respective taxable income at the applicable legislated tax rates.IFRS requires NPR to recognize deferred income tax assets and liabilities based on estimated temporary differences expected as at December 31, 2010 and January 1, 2011. The deferred 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%. NPR's deferred income tax liability related primarily to the increased carrying values of its investment properties at transition to IFRS. Deferred income taxes have also been recognized on the differences between the tax values and the carrying values of the investment property in NPR's equity investments and subsidiary companies. The deferred income tax liability under IFRS is determined by applying tax rates to temporary differences that are consistent with NPR's expectation that the method of realization will be through sale rather than through owning and operating its properties.(viii)   Investment in joint venturesNPR is a 50% joint venture partner in two jointly controlled entities; ICS and ICP which were proportionately consolidated under Canadian GAAP.IAS 31 allowed proportionate consolidation of jointly controlled entities, On May 12, 2011 the IASB issued IFRS 11, which requires jointly controlled entities to be reported using the equity method of accounting effective January 1, 2013 with early adoption allowed. In anticipation if IFRS 11, NPR has elected to use the equity method to account for its investment in joint ventures.(ix)  Business consolidationNPR owns and operates certain investment properties using partnership and joint venture arrangements. GoGa Cho is 55% owned by NPR and has been consolidated reporting a 45% non-controlling interest; Aqsaqniq is 49% owned by NPR and has been consolidated reporting a 51% non-controlling interest; and  Icicle is 49% owned by NPR and has been consolidated reporting a 51% non-controlling interest in this opening balance sheet.NPR applied IAS 27; IAS 27.13 to IAS 27.17 defines control, identifying when a subsidiary should be consolidated. Control is deemed to exist if more than half of the voting power of an entity is owned directly or indirectly. Control also exists when less than half of the voting rights are owned when there is:  a)     Power over more than half of the voting rights by virtue of an agreement with other investors;  b)     Power to govern the financial and operating policies of the entity under an agreement;  c)     Power to appoint the majority of the members of the board of directors or equivalent governing body and control of the entity is by that board or body; or  d)     Power to cast the majority of votes at meetings of the board of directors or equivalent governing body and control of the entity is by that board or body.Management has concluded that NPR controls the GoGa Cho and effectively controls the Aqsaqniq and Icicle subsidiaries and has consolidated their operations reporting the appropriate non-controlling interest.      Non-controlling interest  Aqsaqniq  Icicle  GoGa Cho   Total As reported under Canadian GAAP - December 31, 2009--464464 Partner's Distributions(92)--(92) Partner's Equity - Deferred taxes(38)11(133)(160) Partner's Equity - FV of assets228321,0271,287 Partner's Equity - Retained earnings262112-374 As reported under IFRS - January 1, 20103601551,3581,873      Non-controlling interestAqsaqniqIcicleGoGa ChoTotal As reported under Canadian GAAP - December 31, 2010--382382 Partner's Distributions(92)--(92) Partner's Equity - Deferred taxes---- Partner's Equity - FV of assets228321,0271,287 Partner's Equity - Retained earnings27011558443 As reported under IFRS - December 31, 20104061471,4672,020       o)  Reconciliation of net earnings under Canadian GAAP to IFRS     NoteYear ended  December 31, 2010  Three months endedMarch 31, 2010Net earnings as reported under Canadian GAAP 67,5563,388Differences increasing (decreasing) reported amounts    Subsidiaries and joint ventures(i)    Joint ventures (283)(668)  Subsidiaries 23348 Investment properties(ii)    Fair value loss (32,864)(6,022)  Reverse Canadian GAAP depreciation expense 31,4097,486  Operating costs capitalized under Canadian GAAP (231)(80) Financial instruments(iii)    Trust Units and unit based payments      Fair value loss (86,894)(58,731)   Distributions recorded as financing charge (14,324)(9,301)  Unit based compensation (22)(10) Deferred taxes(iv)13,540677Net income as reported under IFRS (21,880)(63,213)NPR did not have any comprehensive income for the periods reported.(i)     Subsidiaries and joint venturesNet income was impacted by the change from consolidation principles under Canadian GAAP to consolidation principles under IFRS.  Jointly controlled entities under Canadian GAAP  NPR share  Non-controlling interest   Icicle        49%    51%   Aqsaqniq        49%    51%   GoGa Cho                                               55%    45%   ICS        50%    50%   ICP        50%    50%The principal purpose and activity of NPR's subsidiaries and joint ventures is the holding of investment properties.The Aqsaqniq joint venture was reported using the equity basis of consolidation and Icicle joint venture was proportionately consolidated under Canadian GAAP. NPR has consolidated these financial results into this consolidated statement of financial position reporting a 51% non-controlling interest. The GoGa Cho partnership has been consolidated into this consolidated statement of financial position reporting a 45% non-controlling interest. It had been similarly reported under Canadian GAAP.The operations of ICS and ICP were proportionately consolidated under Canadian GAAP. IAS 31 allows either proportionate consolidation or the equity method of accounting for jointly controlled entities. However, the newly released standard, IFRS 11 - Joint Arrangements, allows only the equity method of accounting to be used to account for jointly controlled entities. When NPR selected its accounting policies under IFRS, it reviewed the exposure drafts on proposed standards, and chose to use the equity method.(ii)    Investment propertiesAs discussed above in the changes to equity, NPR values its investment properties at fair value under IFRS, changed from cost with a provision for depreciation. Fair value losses have been recorded under IFRS and Canadian GAAP depreciation expense on these properties has been reversed.Under IFRS, borrowing costs cannot be capitalized during the lease up period on a newly developed property, while Canadian GAAP permits capitalization of borrowing costs and operation losses during the lease up period. Costs capitalized under Canadian GAAP for the first nine months of 2010 were expensed under IFRS.(iii)    Financial instrumentsTrust Units were considered equity under Canadian GAAP and were reclassified to debt. Likewise, the obligation for unit based payments was also reclassified to debt from equity. As discussed above, these liabilities are carried at fair value and the related increases to fair value are reflected as losses on the statement of income.Distributions to unit holders when the Trust Units are classified as debt are considered interest expense under IFRS.The unit based payment obligation was calculated in accordance with IFRS resulting in a small change to unit based compensation expense.(iv)    Deferred income taxesThe aforementioned recording of investment properties at fair value gave rise to additional deferred income taxes under IFRS. Changes in the fair value of investment properties affected the amount of deferred tax expense recorded under IFRS.p)  Material adjustments to cash flowsThe transition from Canadian GAAP to IFRS had no impact on the actual cash flows of NPR; however, the changes in presentation of the condensed combined statement of earnings and comprehensive earnings require changes in the presentation of the statement of cash flows. The key changes in presentation relate to:the accounting treatment and classification of partially owned subsidiaries and joint ventures;the reclassification of NPLP Class B units from equity to financial liabilities fair valued through profit and loss until completion of the internal reorganization on December 31, 2010;the reclassification of REIT Trust Units from equity to financial liabilities fair valued through profit and loss until unitholder approval of the changes to the DOT on May 11, 2010 giving the trustees authority to determine the amounts of distributions;the reclassification of Unit based compensation from equity to financial liabilities fair valued through profit and loss;investment property fair value adjustments including the elimination of depreciation on these assets;The change in accounting treatment of joint venture entities ICP and ICS from proportional consolidation to equity accounting and the change in accounting treatment of subsidiaries to consolidation with a non-controlling interest decreased the January 1, 2010 bank indebtedness balance by $107,000 and decreased the December 31, 2010 cash balance by $295,000.Elected exemptions from full retrospective applicationIn preparing these combined financial statements in accordance with IFRS 1, NPR has applied certain of the optional exemptions from full retrospective application of IFRS. The optional exemptions applied are described below:(i)     Business combinationsNPR has applied the business combinations exemption in IFRS 1 to not apply IFRS 3, "Business Combinations" retrospectively to past business combinations. Accordingly, NPR has not restated business combinations that took place prior to the transition date of January 1, 2010.(ii)    Fair value as deemed costNPR has elected to measure land and buildings at fair value as at the transition date and use that amount as its deemed cost in the opening IFRS balance sheet.q)  Mandatory exemptions from full retrospective application(i)     Hedge accountingHedge accounting can only be applied prospectively from the transition date to transactions that satisfy the hedge accounting criteria in IAS 39, Financial Instruments:  Recognition and Measurement ("IAS 39"), at that date. Hedging relationships cannot be designated retrospectively and the supporting documentation cannot be created retrospectively. NPR had no transactions that qualified for hedge accounting.(ii)    EstimatesHindsight was not used to create or revise estimates and accordingly the estimates previously made by NPR under Canadian GAAP are consistent with their application under IFRS.