Scott's Real Estate Investment Trust announces $5 million increase in Firm Capital loan, leasing update, adoption of a unit ownership policy for its trustees, future changes to external management agreements and April 2012 distribution
TORONTO, April 18, 2012 /CNW/ - Scott's Real Estate Investment Trust (TSX: SRQ.UN) ("Scott's REIT") today announced the following:
$5 Million Increase in Firm Capital Corporation First and Second Mortgages
On April 5, 2012, Scott's REIT completed an amendment to its Firm Capital first and second mortgages ("Firm Capital Loan"), increasing the amount available under the loan by $5 million. The additional $5 million may be drawn in $1 million increments to a maximum loan amount of $38 million. If fully drawn, the weighted average interest rate of the Firm Capital Loan increases to 7.1%, from 7.0%, up to March 7, 2013, and to 7.38%, from 7.25%, for the last six month period of the loan's thirty month term ending September 7, 2013. A standby fee of 0.5% is payable on any undrawn portion of the increased $38 million loan. The Firm Capital Loan remains open for repayment at any time up to its maturity date of September 7, 2013.
"The amendment to the Firm Capital Loan provides Scott's REIT with the necessary flexibility to manage its cash through this transitional year as the REIT completes the re-leasing of its vacant properties and restores occupancy to historical levels," said Teresa Neto, Chief Financial Officer of Scott's REIT. "The amended loan is secured by strong Ontario assets and continues to support a loan to value ratio below 65%".
Scott's REIT has leased a further three properties that were previously leased by Priszm and disclaimed, representing one site in British Columbia and two sites in Manitoba.
Further, Priszm Income Fund ("Priszm") gave notice to Scott's REIT that it intends to disclaim one lease located in Nova Scotia effective April 19, 2012.
Including the three new leases and additional one disclaimed lease, Scott's REIT has now leased 33 of the total 44 sites disclaimed, or 75.2% of the total disclaimed GLA. After giving effect to these three new leases and all other committed leasing, the REIT's occupancy rate increases to approximately 97.2%.
"We are significantly ahead of schedule on our re-leasing efforts which will translate into an earlier recovery of net operating income," said Kevin Salsberg, Chief Operating Officer of Scott's REIT. "The REIT has only 11 vacant properties remaining from those disclaimed by Priszm, which we expect will either be sold or re-leased over the next six to 12 months."
Adoption of Unit Ownership Policy for Trustees
Scott's REIT has adopted a trustee unit ownership policy to better align the interests of the trustees of Scott's REIT with those of its unitholders. Effective April 18, 2012, each trustee of Scott's REIT must hold a minimum of 3,000 units of Scott's REIT. This requirement is to be attained within 3 years of the effective date of the policy or the individual becoming a trustee of Scott's REIT.
Amendments to Scott's REIT's External Management Agreements
The Trustees of Scott's REIT have approved amendments to the most recent amended and restated property management and asset management agreements between Scott's REIT, Scott's Real Estate Limited Partnership and JBM Properties Inc. (the "Manager"), a related party of Scott's REIT, which amend the existing structure and fees payable to the Manager. Although the terms of the amending agreements have been finalized the amending agreements will not take effect until the earlier of i) January 1, 2013; ii) such time as the sale process pertaining to the undertaking, property and assets of Priszm Income Fund, which has a 60% interest in Priszm Limited Partnership, Scott's REIT's second largest tenant, have been completed; or iii) such other time as the parties to the amending agreements mutually agree that the sale process pertaining to the undertaking, property and assets of Priszm has been completed. The material change report containing a summary of the particulars of the amending agreements and copies of each of the amending agreements will be available on SEDAR at www.sedar.com.
April 2012 Distribution
Scott's REIT announced a cash distribution of $0.0708333 per unit for the month of April 2012. The distribution will be payable on May 15, 2012 to Unitholders of record on April 30, 2012.
Scott's REIT reviews the amount of its distributions on an ongoing basis and considers a number of factors including expected cash flows based on occupancy rates, operating expenses, capital expenditures and debt service requirements. Although Scott's REIT has maintained the same distribution amount for 77 consecutive months in accordance with its distribution policy, there can be no assurance that any future distributions will be at the current level.
About Scott's Real Estate Investment Trust
Scott's REIT (TSX: SRQ.UN) is Canada's premier small-box retail property owner with 229 properties in eight provinces across Canada. Scott's REIT's properties are well located and geographically diverse across Canada with the majority of all properties containing long-term quadruple net leases. To find out more about Scott's Real Estate Investment Trust (TSX: SRQ.UN), visit our website at www.scottsreit.com.
This document contains certain information that may constitute forward-looking information within the meaning of securities laws. In some cases, forward-looking information can be identified by the use of terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Forward-looking information may relate to management's future outlook and anticipated events or results, and may include statements or information regarding future growth opportunities and potential and expected cash distributions or cash distribution levels. In particular, information regarding the REIT's monthly cash distributions and information relating to the impact of the REIT's recent refinancing transactions on annual interest expense is forward-looking information. Forward-looking information is based on certain factors and assumptions regarding, among other things, occupancy rates, property expense and capital expenditures. While the REIT considers these assumptions to be reasonable based on information currently available to it, they may prove to be incorrect. Forward looking-information is subject to certain factors, including risks and uncertainties, which could cause actual results to differ materially from what is currently expected. Such factors include risks relating to the REIT's reliance on Priszm, the REIT's second largest tenant, risks associated with investment in real property, competition, reliance on key personnel, financing and refinancing risks, environmental matters, tenant risks, risks related to current economic conditions and other risk factors more particularly described in the REIT's Annual Information Form for the year ended December 31, 2011. You should not place undue importance on forward-looking information and should not rely upon this information as of any other date. Other than as required by applicable Canadian securities law, the REIT does not undertake to update this information at any particular time. Additional information identifying risks and uncertainties is contained in Scott's REIT filings with the Canadian securities regulators, available at www.sedar.com.
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