InStorage REIT announces fourth quarter and 2006 year end results



    TORONTO, April 30 /CNW/ - (TSXV: IS.UN) InStorage Real Estate Investment
Trust ("InStorage" or the "REIT") announced today its results for the three
months ended December 31, 2006 and the period from January 12, 2006 to
December 31, 2006.

    Summary

    
    -   Acquired 20 properties in 2006, with a gross rentable area of
        1.0 million square feet and gross book value of real estate assets of
        $144.3 million
    -   Announced aquisitions will grow the REIT's property portfolio to
        46 properties in the near term, with a gross rentable area of
        2.6 million square feet and gross book value of real estate assets of
        approximately $404.0 million
    -   Mezzanine financing program set up to provide a pipeline of potential
        properties for acquisition - $13.7 million of loans advanced as at
        December 31, 2006
    -   Mezzanine loan commitments have increased to $35.5 million since
        December 31, 2006, with an estimated development potential of 736,000
        square feet of gross rentable area
    -   Equity offerings with gross proceeds of $111.5 million completed in
        2006; public offering closed on April 3, 2007 with gross proceeds of
        $105.0 million
    -   Total rental property income of $3.2 million in the fourth quarter
    -   Mezzanine financing interest income of $0.3 million in the fourth
        quarter
    -   Net loss during the quarter of $1.1 million, representing a net loss
        of $0.01 per unit
    -   Net Operating Income ("NOI")(*) in fourth quarter of $2.1 million, or
        66% of rental property income
    -   Funds from Operations ("FFO")(*) of $0.6 million in the fourth
        quarter of 2006 with FFO per unit of $0.01
    

    2006 was the first year of operation for InStorage, with the
incorporation of SCOSS Capital Corp. ("SCOSS"), its predecessor corporation,
on January 12, 2006, and the completion of a plan of arrangement on August 4,
2006 to convert SCOSS to InStorage REIT. Over the first several months of its
operations, InStorage made a series of property acquisitions, and by year end
had acquired a portfolio of 20 properties, with 1.0 million square feet of
gross rentable area and gross book value of real estate assets of $144.3
million. Since December 31, 2006, InStorage has announced further
acquisitions, the completion of which will grow the REIT's property portfolio
to 46 self-storage facilities located in Alberta, Saskatchewan, Ontario and
Quebec, totalling 2.6 million square feet of gross rentable area and gross
book value of real estate assets of approximately $404.0 million. These
acquisitions will provide InStorage with a leading presence in the Greater
Toronto Area in Ontario and significant scale in Alberta, two very important
markets due to their size and economic growth.
    "We are pleased with the progress made by InStorage in such a short
period of time since formation," said T. James Tadeson, the Chief Executive
Officer of InStorage. "The Canadian self-storage market offers strong
potential for growth through consolidation and excellence in property
management and tenant services. We are committed to be the best operators of
self-storage properties in Canada and, in the process, deliver stable returns
to our unitholders. Our long-term goal is to establish ourselves as the
largest self-storage provider in the country with a 10% to 20% share of the
Canadian market."

    Operations Results Highlights

    Total rental property income for the fourth quarter of 2006 was $3.2
million. Total rental property income is made up of rental income from the
properties, sales of packaging materials and the sale of contents insurance to
tenants. Total rental property income for the period from January 12 to
December 31, 2006 was $4.4 million. Sales of ancillary items account for less
than 3% of total revenue but provide important storage related services to our
tenants. Acquisitions completed during the year are reflected in revenues only
for the period from the date of the acquisitions. The weighted average
annualized rent per square foot at December 31, 2006 was approximately $17
with a weighted average occupancy rate of 82%. Both the average rental rate
and occupancy are consistent with management's expectations.
    During the quarter, InStorage earned $0.3 million in interest income from
its mezzanine lending program. Year-to-date interest income from the mezzanine
lending program was $0.5 million. The mezzanine lending program provides
InStorage with a pipeline of potential properties for acquisition through
InStorage's development partner, InScotia Developments Limited Partnership
("InScotia"), a related party of the REIT. InStorage's relationship with
InScotia is an important component of the REIT's acquisition strategy.
InStorage advanced $13.7 million in mezzanine loans during 2006 and,
subsequent to the year-end, increased mezzanine loan commitments to $35.5
million.
    Direct property operating expenses for the quarter were $1.0 million, or
33% of rental revenue. These expenses consist primarily of realty taxes, wages
paid to staff operating the facilities, utilities, advertising, insurance,
repairs and maintenance and other administrative and operating costs. On a
year-to-date basis, property operating expenses were $1.5 million, or 34% of
rental revenue.
    NOI(*) for the three months ended December 31, 2006 was $2.1 million or 67%
of rental property income and for the year-to-date period $2.9 million, or 66%
of rental property income. The NOI for the properties is in-line with
management's expectations.
    InStorage incurred mortgage interest and bridge financing interest
expense for the quarter of $1.1 million. This includes $0.3 million in
amortization of deferred financing costs including $0.2 million of costs
associated with a bridge facility repaid during the quarter. Interest costs on
a year-to-date basis were $1.5 million.
    Total mortgage debt as at December 31, 2006 was $71.8 million, with a
leverage ratio of 38% based on total debt at period end as a percentage of the
total assets on the balance sheet. The REIT held $37.3 million in cash and
cash equivalents at December 31, 2006, a significant part of which was the
cash received on the closing of a private placement equity offering on
December 29, 2006, which raised $28.4 million, net of issuance costs. The
proceeds from this offering were earmarked for acquisitions closing in early
2007.
    FFO(*) for the fourth quarter of 2006 was $0.6 million, or $0.01 per unit.
FFO for the period reflects general and administrative expenses of $0.7
million incurred in respect of salaries, rent, professional fees, public
company costs and corporate governance initiatives. The year-to-date FFO was
$0.1 million and reflects overhead costs of $1.2 million for 2006 and
unit-based compensation expenses of $0.4 million recorded in the first half of
2006 in connection with option grants. The year-to-date overhead costs include
amounts incurred before the commencement of significant operations of the REIT
and are high in relation to revenues due to formation and reorganization
expenses incurred during the period.

    
    ----------------
    (*) See "Non-GAAP Mesures".


    Financial Highlights

    (dollars in thousands,
    except per unit amounts)    Three months ended    Period from January 12
                                 December 31, 2006      to December 31, 2006
    -------------------------------------------------------------------------
    Rental property income               $   3,155                  $  4,369
    Property operating expenses             (1,047)                   (1,497)
    -------------------------------------------------------------------------
    Net Operating Income ("NOI")(*)      $   2,108                  $  2,872
    Interest income on mezzanine loans         342                       527
    Interest expense                        (1,096)                   (1,518)
    General and administrative
     expenses                                 (679)                   (1,234)
    Asset management fees                      (96)                     (143)
    Unit-based compensation                      -                      (373)
    Amortization of income-
     producing properties                   (1,631)                   (2,205)
    -------------------------------------------------------------------------
    Net loss                             $  (1,052)                $  (2,074)
    -------------------------------------------------------------------------
    Basic and diluted net
     loss per unit                       $   (0.01)                $   (0.05)
    Funds From Operations ("FFO")(*)     $     579                 $     131
    Basic and diluted FFO(*) per unit    $    0.01                 $       -
    Weighted average number of
     units (thousands)                     107,004                    46,031
    -------------------------------------------------------------------------
    (*) See "Non-GAAP Measures"
    

    Cash Distributions

    InStorage announced on September 20, 2006 that it would commence paying a
monthly cash distribution to unitholders. From September to December 2006, the
REIT declared monthly distributions of $0.006041667 per unit to unitholders,
representing a total of $2.6 million of distributions declared during the
year. All distributions paid by the REIT in respect of 2006 were returns of
capital, and would not be included in the income of a unitholder for tax
purposes.

    Non-GAAP Measures

    NOI and FFO are widely used as supplemental measures of a Canadian real
estate investment trust's performance and are not defined under Canadian
generally accepted accounting principles ("GAAP"). InStorage uses these
measures to assess the operating performance of its income-producing
properties. NOI and FFO should not be considered alternatives to net income or
other measures that have been calculated in accordance with GAAP and may not
be comparable to similar measures presented by other issuers. Readers are
directed to the REIT's Management's Discussion and Analysis for the three
months ended December 31, 2006 and for the period from January 12, 2006 to
December 31, 2006 for a description of these Non-GAAP measures and a
reconciliation of FFO to net loss.

    InStorage Real Estate Investment Trust

    The REIT is an unincorporated open-ended real estate investment trust
that invests primarily in self-storage properties and ancillary businesses
throughout Canada. The REIT indirectly owns 37 self-storage properties located
in Alberta, Saskatchewan and Ontario, and is the second largest owner/operator
of self storage facilities in Canada.
    Additional information concerning the REIT may be obtained on the REIT's
website, www.instoragereit.ca, and on the SEDAR website at www.sedar.com,
under the REIT's profile.

    Forward-Looking Information

    This press release contains forward-looking statements. Forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of the REIT to
be materially different from any future results, performance or achievements
expressed or implied by the forward-looking statements. Examples of such
statements include: the intention to complete previously announced
acquisitions, as disclosed or at all; the implementation and effectiveness of
the REIT's acquisition, growth and development strategies; InStorage's plans
to be Canada's largest provider and leading manager of self-storage
properties; access to debt and equity financing; and any indications as to
expected future performance of the REIT. Actual results and developments are
likely to differ, and may differ materially, from those expressed or implied
by the forward-looking statements contained in this press release. Such
forward-looking statements are based on a number of assumptions which may
prove to be incorrect, including, but not limited to: the ability and desire
of the REIT and the vendors to complete announced acquisitions; the ability of
InStorage and its subsidiaries to obtain necessary debt or equity financing,
satisfy conditions under applicable transaction agreements; the availability
of acquisition opportunities; the level of activity in the underlying
self-storage business of InStorage, the self-storage industry and in the
economy generally; consumer interest in the services and products of
InStorage's subsidiaries; competition; and anticipated and unanticipated
costs. While the REIT anticipates that subsequent events and developments may
cause its views to change, it specifically disclaims any obligation to update
these forward-looking statements. These forward-looking statements should not
be relied upon as representing the REIT's views as of any date subsequent to
the date of this press release. Although the REIT has attempted to identify
important factors that could cause actual actions, events or results to differ
materially from those described in forward-looking statements, there may be
other factors that cause actions, events or results not to be as anticipated,
estimated or intended. There can be no assurance that forward-looking
statements will prove to be accurate, as actual results and future events
could differ materially from those anticipated in such statements.
Accordingly, readers should not place undue reliance on forward-looking
statements.
    The factors identified above are not intended to represent a complete
list of the factors that could affect the REIT. Additional factors are noted
under "Risk and Uncertainties" in the REIT's Management's Discussion and
Analysis for the three months ended December 31, 2006 and for the period from
January 12, 2006 to December 31, 2006, a copy of which may be obtained on the
SEDAR website at www.sedar.com.

    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this release.





For further information:

For further information: InStorage Real Estate Investment Trust: John
Bartkiw, Chief Financial Officer, Tel: (416) 867-9702; Alay Shah, Vice
President, Finance & Administration, Tel: (416) 867-9740

Organization Profile

INSTORAGE REAL ESTATE INVESTMENT TRUST

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