Scott's REIT reports strong growth

    Significant number of acquisitions result in the REIT's strongest
    quarter since IPO

    $16 million in acquisitions currently pending for fourth quarter

    TORONTO, Nov. 2 /CNW/ - Scott's Real Estate Investment Trust (TSX:
SRQ.UN) ("Scott's REIT" or the "REIT"), Canada's leading owner of small-box
retail properties, today reported its financial results for the third quarter
ended September 30, 2007.

    Third Quarter 2007 Highlights
    -  Revenue $3.8 million, up 22.5 per cent compared to the third quarter
       in 2006
    -  Distributable income(*) $1.7 million, up 5.7 per cent compared to the
       third quarter in 2006
    -  Payout ratio of 94.7 per cent represents lowest payout ratio to date
    -  Four property acquisitions for $18 million announced during the
    -  $12.6 million in acquisitions closed during the quarter
    -  Completed $20 million convertible debenture offering

    (*) See section entitled Non-GAAP measures.

    "This was an extremely successful quarter and I am pleased to report that
it was also our strongest performance to date," said John Bitove, chairman and
CEO of Scott's REIT. "This quarter reinforces our commitment to an aggressive
growth strategy as we closed three acquisitions and announced four additional
acquisitions. Our asset base has increased by 33 per cent since our IPO and we
are on pace to exceed our goal of doubling our asset value in three years."

    Financial Performance

    The operating results of Scott's REIT for the quarter ended and the
year-to-date ended September 30, 2007, have improved from the previous year's
third quarter results due to seven new properties acquired during the last
twelve months and two additional properties acquired during the third quarter
in 2006.
    Revenues from income-producing properties include all amounts earned from
tenants related to lease agreements including basic rent, operating cost and
realty tax recovery, as well as adjustments for the straight-lining of rents.
Property operating expenses include realty taxes as well as other costs
related to interior and exterior maintenance; heating, ventilation and
air-conditioning (HVAC); insurance; utilities and the management fee. In
accordance with GAAP, Scott's REIT accounts for rent step-ups by
straight-lining the incremental increases over the non-cancellable lease term.
In the third quarter, straight-line rent of $0.24 million (YTD - $0.53
million) was recorded compared to last year's third quarter of $0.15 million
(YTD - $0.47 million) due to the acquisitions.
    Revenues of $3.81 million for the third quarter were favourable by $0.7
million, an increase of 22.5 per cent (YTD $10.65 million and favourable by
$1.79 million) compared to the same quarter last year.
    Operating expenses of $0.41 million for the third quarter were higher by
$0.23 million (YTD $0.98 million and unfavourable by $0.51 million) compared
to the same quarter last year. This increase is due to the nine properties
acquired during the last fiscal year.
    General and administrative expenses of $0.28 million were higher by $0.03
million, or 12.0 per cent, year-over-year (YTD $0.91 million and unfavourable
by $0.19 million). Approximately $0.02 million of this increase is the result
of higher audit fees from the previous quarter (YTD $0.04 million). The REIT's
net operating income for the third quarter of 2007 was $3.4 million, an
increase of 22.5 per cent over the third quarter of 2006.
    Distributable income for the third quarter was $1.7 million, an increase
of 5.7 per cent versus the same quarter last year.
    At September 30, 2007, Scott's REIT had $8.53 million in cash and cash
equivalents (compared to $1.28 million as at December 31, 2006) reflecting the
remaining proceeds from the convertible debenture, which was completed before
quarter end. The balance is anticipated to be invested in additional
income-producing properties in subsequent periods or used for general
corporate purposes as defined in the Declaration of Trust.

    Acquisition Update

    During the third quarter, Scott's REIT acquired the following properties
totalling 79,000 feet of gross leasable space for a total of $12.7 million:

    -  A multi-tenant retail centre in St. Thomas, Ontario anchored by a new
       format Shopper's Drug Mart, which has an average remaining triple-net
       lease term of 11 years, for an aggregate purchase price of $6.9

    -  A single-tenant retail centre in Smith Falls, Ontario for an aggregate
       purchase price of $1.6 million. Occupied by Pharma Plus, the property
       has a remaining quadruple-net lease term of seven years.

    -  A multi-tenant retail centre located in Longueuil, Quebec anchored by
       a Staples Business Depot for an aggregate purchase price of
       $4.2 million. The location is a triple-net lease property.

    Subsequent to the quarter, Scott's REIT acquired or has under contract,
the following additional transactions totalling $18 million:

    -  Acquired two additional properties located in Longueuil and Lachine,
       Quebec, two suburban areas of Montreal. The properties, which are
       leased exclusively to Laurentian Bank, were purchased for $2.25

    -  Announced two purchase and sale agreements to acquire an additional
       four properties leased exclusively to Pharma Plus in Windsor, Renfrew
       and Hanover, Ontario for a total purchase price of $16 million. These
       combined acquisitions, which are subject to customary conditions to
       closing, including satisfactory due diligence and financing, are
       expected to close in the fourth quarter. Once closed,these
       transactions will include the REIT's single largest acquistion
       completed to date.

    Financing Activities

    During the third quarter, the REIT completed the issuance of a $20
million convertible debenture. The net proceeds of the debenture offering were
used to pay down $8.8 million of the acquisition line, finance an acquisition
for $2.25 million which closed on October 1, 2007, and fund future
acquisitions and general corporate purposes.

    Effect of Bill C-52 Budget Implementation Act, 2007

    As a result of the enactment of Bill C-52, the REIT recorded a non-cash
benefit to earnings and future income tax liability in the amount of $1.61
million during the period. These differences are expected to reverse on or
after January 1, 2011.

    Priszm LP

    Scott's REIT holds master lease agreements with Priszm LP in which
specified restaurant locations are cross collateralized. The master leases
with Priszm LP terminate starting in 2016 with the majority of the properties
scheduled for renewal during 2018. There is approximately on average 10.7
years remaining on the 190 properties leased by Priszm LP.
    On October 18, 2007, Priszm Income Fund announced that it may close
approximately 25 stores and sell up to 120 stores in its restaurant portfolio.
The REIT understands that Priszm has preliminarily identified stores for
closure on approximately two per cent of the REIT's current portfolio of
properties on which Priszm is a tenant. In addition, Priszm has preliminarily
identified stores for sale on approximately 30 per cent of the REIT's current
properties on which Priszm is a tenant. The REIT will provide an update in its
future quarterly or annual filings on Priszm's restructuring as it relates to
the REIT's portfolio of properties after Priszm has finalized the details of
its restructuring plans and notified the REIT of its plans.

    As the Priszm LP leases currently state:

    -  In the event that Priszm LP sells some of its restaurant operations,
       Priszm LP is responsible for paying the rent for the duration of its
       leases. In the event that a lease is assigned, Priszm LP would be
       required to guarantee the rent and term. Under this scenario, Scott's
       REIT's underlying covenant will be strengthened by having an
       additional lessee on the properties.

    -  In the event that a restaurant is closed, Priszm LP is responsible to
       maintain its lease agreement on these properties until termination of
       the lease. Should Priszm LP choose to sublet, it is responsible for
       paying any and all expenses associated with finding a new tenant, and
       each and every new tenant is subject to Scott's REIT's approval.

    Priszm is committed to its lease obligations and will bear the costs
incurred on any closures or restaurant sales.

    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 and the guarantee fee, less the
straight-line revenue accrual. For more information, please refer to the
REIT's MD&A, which is included in its annual filings at

    Conference Call

    Scott's REIT will hold a conference call on Friday November 2, 2007 at
11:30 a.m. EDT to discuss the company's progress since its IPO and to present
the REIT's financial results for the third quarter of 2007. To access the
conference call, dial 1-800-588-4490 toll free or 416-644-3426 for the Toronto
area. The call will be simultaneously audio webcast at:
    An archived recording of the call will be available from 1:30 p.m. EDT on
Friday November 2, 2007 at 1-877-289-8525 toll free or 416-640-1917 (passcode
21251733 followed by the number sign), until midnight on Sunday December 2,

    About Scott's Real Estate Investment Trust

    Scott's REIT (TSX: SRQ.UN) is Canada's premier small-box retail property
owner with 201 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 (TSX: SRQ.UN), visit our website at

    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 Real Estate 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

    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 quarter ended September 30, 2007 and 2006, and the notes
thereto included in Scott's REIT's annual filings at

    (in thousands of dollars except per Unit amounts)

                                                       September   September
    For the quarter ended                               30, 2007    30, 2006
    Cash provided by operating activities             $    2,745  $    1,865
    Net change in non-cash working capital                 1,055         238
    Distributable income                                   1,720       1,627
    Distributions declared                                 1,629       1,542
    Distributable income per Unit                          0.224       0.225
    Distributions per Unit                                 0.213       0.213
    Distributable income payout ratio                      94.7%       94.8%

    (in thousands of dollars)
                                                       September    December
                                                        30, 2007    31, 2006

    Income-producing properties                       $  151,721  $  133,463
    Intangible assets                                      5,863       3,358
    Cash and short-term investments                        8,535       1,280
    Prepaid expenses and other assets                        645         660
    Deferred costs                                           100           -
    Straight-line revenue accrual                          1,313         785
    Deferred financing charges                                 -         777
    Guarantee fee                                              -         199
                                                         168,177     140,522

    Mortgages payable                                     85,342      73,000
    Convertible debentures                                18,521           -
    Note payable                                               -       3,900
    Accounts payable and accrued liabilities               1,208         718
    Future income taxes                                    1,608           -
    Due to related companies                                 270         102
    Distributions payable to Unitholders                     543         514
                                                         107,492      78,234
    Class B Exchangeable Units                            19,080      20,795

    Contributed surplus                                        -         341
    Class A Units of Scott's REIT                         49,254      45,043
    Convertible debentures                                   299           -
    Cumulative earnings                                      698       1,365
    Cumulative distributions declared on Class A Units    (8,646)     (5,256)
                                                          41,605      41,493
                                                         168,177     140,522

    (in thousands of dollars, except Unit and per Unit amounts)

                                 Three months ended       Nine months ended
                                     September 30,            September 30,
                                  2007        2006        2007        2006

    Rental revenue received   $    3,577  $    2,961  $   10,122  $    8,395
    Straight-line revenue
     accrual                         235         151         528         465
                                   3,812       3,112      10,650       8,860
    Amortization                   1,600       1,294       4,510       3,660
    Operating expenses               407         182         982         472
    Interest                       1,217         942       3,390       2,574
    General and administrative       282         255         906         719
    Guarantee fee                      -           -         199           -
                                   3,506       2,673       9,987       7,425
    Earnings before income
     taxes and non-controlling
     interest                        306         439         663       1,435
    Income tax (recovery)
     expense                      (1,025)          -       1,608           -
    Earnings (loss) before
     non-controlling interest      1,331         439        (945)      1,435
    Non-controlling interest
     of Class B Exchangeable
     Units                           391         137        (278)        447
    Net earnings (loss)
     for the period                  940         302        (667)        988
    Cumulative earnings (loss)
     - Beginning of period          (242)        987       1,365         301
    Cumulative earnings - End
     of period                       698       1,289         698       1,289
    Basic (loss) earnings
     per Unit                      0.174       0.060      (0.125)      0.198
    Diluted earnings (loss)
     per Unit                      0.173       0.060      (0.125)      0.198
    Class A Units outstanding  5,410,527   5,000,000   5,410,527   5,000,000
    Class B Exchangeable Units
     outstanding               2,254,909   2,254,909   2,254,909   2,254,909

    (in thousands of dollars)

                                  Three months ended      Nine months ended
                                      September 30           September 30
                                   2007        2006        2007        2006
    Net earnings (loss) for
     the period               $      940  $      302  $     (667) $      988
    Other comprehensive
     income                            -           -           -           -
    Comprehensive income
     (loss)                          940         302        (667)        988

    (in thousands of dollars)
                                 Three months ended      Nine months ended
                                    September 30,           September 30,
                                  2007        2006        2007        2006

     (USED IN)
    Operating activities
    Net earnings (loss) for
     the period               $      940  $      302  $     (667) $      988
    Add (deduct)
       interest of Class B
       Exchangeable Units            391         137        (278)        447
      Amortization of
       properties                  1,386       1,187       3,994       3,440
      Amortization of
       intangible assets             214         107         516         220
      Amortization of
       deferred financing
       charges                        48          45         157         131
      Guarantee fee                    -           -         199           -
       revenue accrual              (235)       (151)       (528)       (465)
      Future income taxes         (1,025)          -       1,608           -
                                   1,720       1,627       5,001       4,761
    Change in other non-cash
     operating items
      Prepaid expenses and
       other assets                  274          66          15        (219)
      Accounts payable and
       accrued liabilities           613         160         490         163
      Due to related companies       168          12         168        (189)
                                   2,775       1,865       5,674       4,516
    Investing activities
    Construction-in-progress         (27)          -         (56)          -
    Deferred costs                  (100)          -        (100)          -
    Acquisitions-in-progress      (2,198)          -      (2,198)          -
    Property acquisitions        (12,838)     (7,291)    (22,761)     (7,291)
    Additions to
     properties                     (258)          -        (258)          -
    Note payable                       -           -      (3,900)          -
                                 (15,421)     (7,291)    (29,273)     (7,291)
    Financing activities
    Class A Units issued               -           -       3,870           -
    Proceeds from mortgage
     payable                       6,060       8,000      13,043       8,000
    Deferred financing fees       (1,204)       (129)     (1,241)       (129)
    Distributions paid            (1,628)     (1,542)     (4,798)     (4,627)
    Loan payable                  (2,800)          -           -           -
    Convertible debenture         20,000           -      20,000           -
    Principal repayments
     on mortgages payable            (20)          -         (20)          -
                                  20,408       6,329      30,854       3,244
    Increase in cash and
     short-term investments
     during the period             7,762         903       7,255         469
    Cash and short-term
     investments - Beginning
     of period                       773       1,223       1,280       1,657
    Cash and short-term
     investments - End
     of period                     8,535       2,126       8,535       2,126
    Cash and short-term
     investments consist of
      Cash                           132         526         132         526
      Short-term investments       8,403       1,600       8,403       1,600
                                   8,535       2,126       8,535       2,126
    Supplemental cash flow
    Interest paid                  1,108         854       3,175       2,401

For further information:

For further information: For investor information, please contact: Trish
Moran, (416) 624-5133,; For media information,
please contact: Wilcox Group, (416) 203-6666,

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