Scott's REIT provides update on ongoing business matters

$33-million sale and leaseback transaction with Shoppers Drug Mart expected to close September 22

TORONTO, Sept. 13, 2011 /CNW/ - Scott's Real Estate Investment Trust (TSX: SRQ.UN) ("Scott's REIT" or "the REIT") today provided an update on its previously announced acquisition of nine retail properties from Shoppers Drug Mart Corporation (TSX: SC) ("Shoppers Drug Mart"), as well as the REIT's re-leasing efforts with respect to the locations formerly occupied by Priszm Income Fund ("Priszm").

The REIT also provided comment on business arising from Priszm's ongoing restructuring efforts.

Shoppers Drug Mart Acquisition #2

Scott's REIT announced that it has waived all conditions with respect to the acquisition of nine retail properties from Shoppers Drug Mart and has set the closing date for this acquisition for Thursday, September 22, 2011. The $33-million sale and leaseback transaction will be financed with the proceeds of the previously announced convertible debenture offering expected to close on Tuesday, September 20, 2011 and with a first mortgage secured against the properties upon closing.

The transaction is subject to customary closing conditions. This transaction follows the first Shoppers Drug Mart acquisition of 12 properties that closed on March 5, 2010.

Re-Leasing Update

To date, Priszm has disclaimed leases related to 22 properties owned by Scott's REIT (the "Disclaimed Sites"). The REIT has entered into lease agreements with new tenants for eight of those locations. It is also currently in advanced stages of negotiation for five more of the Disclaimed Sites and anticipates being able to finalize such agreements by the end of the third quarter.

"The interest from potential tenants has been extremely strong as the majority of these sites are located on desirable corners in primary markets," said John Bitove, CEO of Scott's REIT. "We are confident that we will re-lease the remaining sites in the near future - further diversifying our tenant base and strengthening the stability of our cash flows."

Update on Priszm

Last week, Scott's REIT was served with court materials concerning the ongoing proceedings involving Priszm and its related entities (collectively, "Priszm Entities") under the Companies' Creditors Arrangement Act ("CCAA").

The matters to which these materials relate will be heard by the Ontario Superior Court of Justice (Commercial List) (the "Court") on Wednesday, September 14, 2011.

The Priszm Entities are bringing a motion for an order:

  • approving the Asset Purchase Agreements among the Priszm Entities and FMI Atlantic Inc. with respect to the sale of 43 operating restaurants in Nova Scotia and New Brunswick; and
  • approving an Asset Purchase Agreement dated September 7, 2011 between Priszm LP, Priszm Inc. and 1844440 Ontario Inc. with respect to the sale of all equipment used in the operation of the outlet located at the address at 2032 Kipling Avenue in Toronto, Ontario.

Of the properties listed in the above transactions, Scott's REIT is the landlord of 20 locations. As such, Scott's REIT supports the proposed approval of all the transactions.

Scott's REIT was also informed that the senior secured creditors of the Priszm Entities: Prudential Insurance Company of America, Pruco Life Insurance Company, and Prudential Retirement Insurance and Annuity Company, have brought forward an application to appoint RSM Richter Inc. as receiver of all of the assets of Priszm, and its undertakings and properties. At the same time, FTI Consulting Canada Inc. - the Court-appointed monitor of the Priszm Entities - is seeking an order, discharging itself as the Court-appointed monitor of the Priszm Entities.

The REIT believes that the change from a CCAA restructuring to a receivership of the Priszm Entities is not likely to have an adverse effect on Scott's REIT.

"We expect that obligations owing to the REIT with respect to those leases that have not been disclaimed by Priszm prior to the conclusion of its CCAA proceedings, or have not been terminated by the Receiver after the receivership has commenced, will continue to be honoured," said Teresa Neto, Chief Financial Officer at Scott's REIT. "We look forward to putting this issue behind us so that we can continue to focus on growing Scott's REIT with a strong, diversified and stable tenant base across Canada."

Scott's REIT is continuing with its claim to the proceeds of the sale transaction between Priszm and Soul Restaurants and, to date, the Court-appointed monitor for Priszm has set aside $12.2 million from the sale proceeds until such claim is determined. There can be no assurance as to the outcome of any litigation involving this claim.

About Scott's Real Estate Investment Trust

Scott's REIT (TSX: SRQ.UN) is Canada's premier small-box retail property owner with 220 properties in seven 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. The REIT has approximately 75.6 per cent interest in Scott's Real Estate LP. To find out more about Scott's Real Estate Investment Trust (TSX: SRQ.UN), visit our website at http://www.scottsreit.com.

Forward-looking Statements

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 acquisitions on annual revenues and 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 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, 2010. 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.

SOURCE Scott's Real Estate Investment Trust

For further information:

For investor information, please contact:
Trish Moran
416-624-5133
trish.moran@scottsreit.com

For media information, please contact:
Trevor Boudreau
604-564-8209
trevor.boudreau@scottsreit.com

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Scott's Real Estate Investment Trust

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