Scott's REIT reports strong financial results for fourth quarter and fiscal 2007



    Significant progress made to double asset base by end of 2008 with
    13 acquisitions completed in 2007

    TORONTO, March 10 /CNW/ - Scott's Real Estate Investment Trust (TSX:
SRQ.UN) ("Scott's REIT" or the "REIT") today reported its financial results
for the full year and fourth quarter ended December 31, 2007.

    
    2007 Financial Highlights

    -   Revenue increased 22 per cent to $14.8 million
    -   Net operating income increased 18 per cent to $13.2 million
    -   Distributable income(*) $6.6 million
    -   Completed thirteen strategic acquisitions
    -   Payout ratio at 97.7 per cent

    Fourth Quarter 2007 Financial Highlights

    -   Revenue increased 28 per cent to $4.1 million
    -   Net operating income increased 24 per cent to $3.5 million
    -   Distributable income(*) $1.6 million

    (*) See section entitled Non-GAAP measures.
    

    "This was another very successful year for Scott's REIT," said John
Bitove, Chairman and Chief Executive Officer of Scott's REIT. "We continue to
meet and exceed our strategic objectives and I am pleased that in just two
short years as a public company we have become the premier small-box retail
property owner in Canada. We are well on way to doubling our asset base by the
end of 2008 and we look forward to the upcoming year as new opportunities
develop in the marketplace."

    Financial Performance

    Revenues increased $0.9 million to $4.1 million for the fourth quarter
compared to the same quarter last year (year-to-date $14.8 million, an
increase of $2.7 million). The increase was due to the acquisition of thirteen
properties during the last twelve months.
    Operating expenses increased $0.2 million to $0.5 million for the fourth
quarter compared to the same quarter last year (year-to-date $1.5 million, an
increase of $0.7 million). This increase was due to the terms of the lease
agreements for the acquisitions of the fifteen properties during the past two
years. Eight of the acquired properties are triple net leases, requiring the
REIT to incur and recover common area maintenance costs from the tenants. The
remaining seven acquired properties are quadruple net leases, requiring the
tenant to pay all common area maintenance costs and capital maintenance
expenditures directly.
    General and administrative expenses increased $0.1 million to
$0.35 million in the fourth quarter compared to the same quarter last year
(year-to-date $1.26 million, an increase of $0.28 million). Approximately
$0.05 million (year-to-date $0.05 million) can be attributed to increased
quarterly and annual reporting fees as a result of raising the convertible
debenture and other public company costs. In addition, the asset management
fee and incentive fees increased $0.05 million (year-to-date $0.01 million)
due to the acquisitions which have taken place over the last twelve months.
    Distributable income totalled $1.6 million for the fourth quarter 2007
and $6.6 million on a full-year basis. Distributable income per unit,
year-to-date, had a positive variance of $0.01 per unit from fiscal 2006.
    The REIT had $0.7 million of cash and short-term investments at
December 31, 2007 compared to $1.3 million at the end of 2006. The cash
balance will be used for general corporate purposes including monthly
distributions paid to unitholders.

    Monthly Distribution

    Scott's REIT also announced a cash distribution for the month of March
2008 of $0.0708 per unit payable on April 15, 2008 to unitholders of record on
March 31, 2008.
    Scott's REIT also announced today a monthly cash distribution of $0.0708
per unit to unitholders of record of Class B Limited Partnership Units in
Scott's Real Estate LP on March 31, 2008. This distribution marks the 29th
consecutive cash distribution declared since Scott's REIT began operations on
October 6, 2005.

    Fourth Quarter 2007 Highlights

    Scott's REIT acquired six properties in Ontario and Quebec, adding
approximately 60,000 square feet of general leasable area (GLA) area to its
portfolio during the fourth quarter.
    On October 1, 2007, Scott's REIT acquired two properties located in
Longueuil and Lachine, Quebec for a purchase price of $2.15 million plus 
$0.13 million in acquisition related costs. The aggregate purchase price of
$2.28 million was financed through the use of proceeds from the REIT's
convertible debentures. The properties, leased exclusively to Laurentian Bank,
were acquired at a strong cap rate of approximately 8.0 per cent. At the time
of acquisition, the average length of lease on the properties was eight years.
    On December 13, 2007, a subsidiary of Scott's Real Estate LP, 2156135
Ontario Inc., acquired three companies, whose assets included three properties
located in Windsor and Renfrew Ontario. The companies were purchased for a
total price of $14.2 million plus acquisition related costs of $0.35 million.
The aggregate purchase price of $14.54 million was financed through an
assumption of a mortgage for $2.50 million, the use of proceeds from the
convertible debentures and the REIT's acquisition line. These properties are
leased exclusively to Rexall Pharma Plus and have an average lease term of
more than 18 years. The cap rate to acquire these properties was 7.1 per cent.
    On December 17, 2007, Scott's REIT acquired a property located in
Hanover, Ontario for a purchase price of $1.38 million plus $0.65 million in
acquisition related costs. The aggregate purchase price of $1.44 million was
financed through the REIT's acquisition line. The property was acquired at a
strong cap rate of 8.0 per cent and is leased to Rexall Pharma Plus with an
average lease term of 8.4 years.
    Scott's REIT has completed fifteen acquisitions for a total of
$52 million since July 2006.

    Non-GAAP Measures

    Distributable Income

    Distributable income is not a measure recognized under GAAP and does not
have a standardized meaning prescribed by GAAP. Distributable income is
presented in this press release because management of Scott's REIT believes
this non-GAAP measure is a relevant measure of the ability of Scott's REIT to
earn and distribute cash returns to Unitholders. Distributable income as
computed by Scott's REIT may differ from similar computations as reported by
other similar organizations and, accordingly, may not be comparable to
distributable income as reported by such organizations. Distributable income
in this press release represents income before non-controlling interest of
Scott's REIT on a consolidated basis as determined in accordance with GAAP,
plus depreciation and amortization expense, the guarantee fee, less the
straight-line revenue accrual and interest accretion. For more information,
please refer to the REIT's MD&A, which is included in its annual filings at
sedar.com.

    About Scott's Real Estate Investment Trust

    Scott's REIT (TSX: SRQ.UN) is Canada's premier small-box retail property
owner with 205 properties in seven provinces across Canada. Scott's REIT's
properties are well-located and geographically diverse across Canada and
nearly all properties are long-term quadruple net leases. The REIT has a 70.6 
per cent interest in Scott's Real Estate LP. To find out more about Scott's
Real Estate Investment Trust, visit our website at http://www.scottsreit.com.

    Forward-Looking Statements

    This media release contains forward-looking statements. Such statements
are based on current expectations that are subject to significant risks and
uncertainties that are difficult to predict. Actual results might differ
materially from projections suggested in any forward-looking statements due to
factors such as the competitive nature of the quick service restaurant
industry, the ability of Scott's REIT and Scott's Real Estate LP to execute a
growth and development strategy, the reliance of Scott's REIT and Scott's Real
Estate LP on key personnel, on Priszm LP and risk associated with the
structure of income trusts. Scott's REIT and Scott's RE LP assume no
obligation to update the forward-looking statements, or to update the reasons
why actual results could differ from those reflected in the forward-looking
statements. Additional information identifying risks and uncertainties is
contained in Scott's REIT filings with the Canadian securities regulators,
available at www.sedar.com.

    The following selected financial information, with the exception of the
Reconciliation of Distributable Income, has been derived from and should be
read in conjunction with the historical audited financial statements of
Scott's REIT for the years ended December 31, 2007 and 2006, and the notes
thereto included in Scott's REIT's annual filings at www.sedar.com.



    
    RECONCILIATION OF DISTRIBUTABLE INCOME
    (in thousands of dollars except per Unit amounts)

                                  Three months ended     Twelve months ended
                                         December 31,            December 31,
    -------------------------------------------------------------------------
                                    2007        2006        2007        2006
    Cash provided by operating
     activities                   $1,673      $1,615      $7,136      $6,130
    Net change in non-cash
     working capital                  67         138         530        (107)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributable income           1,609       1,477       6,609       6,130
    Distributions declared         1,627       1,541       6,455       6,168
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributable income per Unit   0.21        0.20        0.87        0.86
    Distributions per Unit          0.21        0.21        0.85        0.85
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Distributable Income Payout
     Ratio                         101.2%      104.1%       97.7%       98.8%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    CONSOLIDATED BALANCE SHEETS
    (in thousands of dollars)

    As at December 31,                                      2007        2006

    ASSETS
    Income-producing properties                         $165,071    $133,573
    Intangible assets                                      6,937       3,358
    Cash and short-term investments                          705       1,280
    Prepaid expenses and other assets                        502         550
    Straight-line revenue accrual                          1,506         785
    Deferred financing charges                                 -         777
    Guarantee fee                                              -         199
                                                      -----------------------
                                                         174,721     140,522
                                                      -----------------------
                                                      -----------------------
    LIABILITIES AND UNITHOLDERS' EQUITY
    Mortgages payable                                     87,837      73,000
    Convertible debentures                                18,602           -
    Note payable                                               -       3,900
    Demand loan                                            5,800           -
    Accounts payable and accrued liabilities               1,008         718
    Due to related companies                                 294         102
    Distributions payable to Unitholders                     543         514
                                                      -----------------------
                                                         114,084      78,234
                                                      -----------------------
    Class B Exchangeable Units                            19,067      20,795
                                                      -----------------------

    UNITHOLDERS' EQUITY
    Contributed surplus                                      341         341
    Class A Units of Scott's REIT                         48,913      45,043
    Convertible debentures                                   299           -
    Cumulative earnings                                    1,813       1,365
    Cumulative distributions declared on Class A Units    (9,796)     (5,256)
                                                      -----------------------
                                                          41,570      41,493
                                                      -----------------------
                                                         174,721     140,522
                                                      -----------------------
                                                      -----------------------



    CONSOLIDATED STATEMENTS OF EARNINGS AND CUMULATIVE EARNINGS
    (in thousands of dollars, except per Unit amounts)

    For the years ended December 31,                        2007        2006

    REVENUE
    Rental revenue received                              $13,993     $11,415
    Amortization of below market rentals                      36           6
    Straight-line revenue accrual                            721         637
                                                      -----------------------
                                                          14,750      12,058
                                                      -----------------------
    EXPENSES
    Depreciation and amortization                          6,263       5,018
    Operating expenses                                     1,518         804
    Interest expense                                       4,881       3,571
    General and administrative                             1,254         979
    Guarantee fee                                            199         142
                                                      -----------------------
                                                          14,115      10,514
                                                      -----------------------
    Earnings before income taxes and non-controlling
     interest                                                635       1,544
    Income taxes                                               -           -
                                                      -----------------------
    Earnings before non-controlling interest                 635       1,544
    Non-controlling interest of Class B Exchangeable
     Units                                                   187         480
                                                      -----------------------
    Net earnings for the year                                448       1,064
    Cumulative earnings - Beginning of year                1,365         301
                                                      -----------------------
    Cumulative earnings - End of year                      1,813       1,365
                                                      -----------------------
                                                      -----------------------

    Basic earnings per Unit                                0.084       0.213
                                                      -----------------------
                                                      -----------------------

    Diluted earnings per Unit                              0.084       0.213
                                                      -----------------------
                                                      -----------------------

    Class A Units outstanding                          5,410,527   5,000,000
                                                      -----------------------
                                                      -----------------------

    Class B Exchangeable Units outstanding             2,254,909   2,254,909
                                                      -----------------------
                                                      -----------------------



    CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
    (in thousands of dollars)

    For the years ended December 31,                        2007        2006
                                                      -----------------------
    Net earnings for the year                              $ 448     $ 1,064
    Other comprehensive income                                 -           -
                                                      -----------------------
    Comprehensive income                                     448       1,064
                                                      -----------------------
                                                      -----------------------



    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (in thousands of dollars)

    For the years ended December 31,                        2007        2006
    Cash provided by (used in)
    Operating activities
    Net earnings for the period                             $448      $1,064
    Add (deduct)
      Non-controlling interest of Class B Exchangeable
       Units                                                 187         480
      Depreciation of income-producing properties          5,464       4,659
      Amortization of intangible assets                      760         353
      Amortization of deferred financing charges             256         176
      Amortization of deferred costs                           3           -
      Amortization of guarantee fee                          199         142
      Interest accretion                                      13           -
      Straight-line revenue accrual                         (721)       (637)
                                                      -----------------------
                                                           6,609       6,237
    Change in other non-cash operating items
      Prepaid expenses and other assets                       45        (221)
      Accounts payable and accrued liabilities               290         291
      Due to related companies                               192        (177)
                                                      -----------------------
                                                           7,136       6,130
                                                      -----------------------
    Investing activities
    Construction-in-progress                                 (66)        (32)
    Acquisitions in progress                                  93        (110)
    Property acquisitions                                (38,571)     (7,283)
    Additions to income producing properties                (257)          -
    Prepaid expenses and other assets                          -        (250)
                                                      -----------------------
                                                         (38,801)     (7,675)
                                                      -----------------------
    Financing activities
    Class A Units issued on initial public offering        3,870           -
    Note payable                                          (3,900)          -
    Convertible debenture                                 20,000           -
    Proceeds from mortgage payable                        13,043       8,000
    Mortgage financing fees                               (1,247)       (145)
    Environmental remediation holdback                         -        (520)
    Distributions paid                                    (6,426)     (6,167)
    Principal repayments on mortgages payable                (50)          -
    Demand loan                                            5,800           -
                                                      -----------------------
                                                          31,090       1,168
                                                      -----------------------
    Increase (decrease) in cash and short-term
     investments during the year                            (575)       (377)
    Cash and short-term investments - Beginning of year    1,280       1,657
                                                      -----------------------
    Cash and short-term investments - End of year            705       1,280
                                                      -----------------------
                                                      -----------------------
    Cash and short-term investments consist of
    Cash                                                     215         425
    Short-term investments                                   490         855
                                                      -----------------------
                                                             705       1,280
                                                      -----------------------
                                                      -----------------------
    Supplemental cash flow disclosure
    Interest paid                                          4,635       3,335
    Vendor note payable on acquisition of properties           -       3,900
                                                      -----------------------
    

    %SEDAR: 00022537E




For further information:

For further information: For investor information: Trish Moran, (416)
624-5133, trish.moran@scottsreit.com; For media information: Wilcox Group,
(416) 203-6666, scottsreit@wilcoxgroup.com

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