Payout ratio significantly improves to 78 per cent from 96 per cent

TORONTO – Scott's Real Estate Investment Trust, Canada’s leading owner of small-box retail properties, reported its financial results for the second quarter ended June 30, 2009. The REIT also announced its 45th consecutive monthly cash distribution for the month of August 2009.

Second Quarter 2009 Financial Highlights

* Revenue increased 17.8 per cent to $5.1 million
* Net operating income increased 13.8 per cent to $4.3 million
* Distributable income* per Unit grew by 24.6 per cent
* Payout ratio improved to 77.6 per cent from 96.4 per cent

*See section entitled Non-GAAP measures.

“Scott’s REIT is doing very well despite the difficult recession, which speaks to the quality of our tenant portfolio and reflects the success of our strategy of focusing on high-quality national tenants as we continue to bring value to our unitholders,” said John Bitove, Chairman and Chief Executive Officer of Scott’s REIT.

Financial Performance

“The REIT’s solid performance this quarter reflects the accretive acquisitions that we have made over the past two years as well as rent escalations realized in the fourth quarter of 2008, which resulted in a 9.0 per cent increase in total adjusted funds from operations (“AFFO”), as well as a 15.2 per cent quarter-to-quarter increase in AFFO per unit over the same period last year,” said Bitove. “The REIT also implemented a unit buyback program to provide a greater return to unitholders over the long term. Pursuant to a normal course issuer bid, the REIT purchased for cancellation more than 435,000 Class A Units, which also attributed to our continued strong results.”

Scott’s REIT reported revenue of $5.1 million for the three-month period ended June 30, 2009, an increase of 17.8 per cent over the second quarter of 2008.

Operating expenses for the second quarter of 2009 were $0.8 million, an increase of $0.2 million over the second quarter of 2008.

The REIT’s net operating income for the second quarter of 2009 was $4.3 million, an increase of 13.8 per cent over the prior year quarter.

During the second quarter of 2009, the REIT generated distributable income of $2.0 million, an increase of 24.6 per cent over the second quarter of 2008.

Liquidity

At June 30, 2009, Scott’s REIT increased its cash on hand to approximately $0.9 million compared to $0.1 million at December 31, 2008. The REIT’s cash balance is anticipated to be used for general corporate purposes including monthly distributions paid to Unitholders, payments on the demand loan and principal payment on mortgages.

In 2009, cash provided by operating activities (including non-cash working capital) is higher than distributions. As such, Scott’s REIT anticipates that it will continue to maintain stable monthly cash distributions to its Unitholders throughout the remaining fiscal year.

Subsequent to the end of the second quarter, the REIT renewed its demand loan. In light of the current tight conditions of the credit market, the new terms stipulate that the demand loan will expire on December 31, 2009 and bear interest at prime plus three per cent for August 2009, increasing by one percent every month thereafter until the loan’s expiry. Scott’s REIT is pursuing alternate financing solutions and currently has received interest from other financial institutions for a $6 million replacement facility. The REIT anticipates that it will be able to fully meet its financing obligations with regards to the demand loan. At June 30, 2009, $3.2 million has been drawn on the facility, which was used to fund recent acquisitions and other corporate purposes. Reductions on the demand loan could also come from payment of holdbacks, cash from the operations of the business and future equity offerings.

“Our solid track record is also serving us well as we hold discussions with several lenders with respect to the renewal of our upcoming loan in 2010. While these discussions are still in the preliminary stage, several parties are interested in refinancing the full loan amount,” said Bitove.

Monthly Distribution for August 2009

Scott’s REIT announced a cash distribution for the month of August 2009 of $0.0708 per unit payable on September 15, 2009 to Unitholders of record on August 31, 2009.

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 August 31, 2009. This distribution marks the 45th consecutive cash distribution declared since Scott’s REIT began operations on October 6, 2005.

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 MD&A 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. distributable income in this MD&A represents income before non-controlling interest of Scott’s REIT on a consolidated basis as determined in accordance with GAAP, plus amortization expense, income taxes, stock compensation, less the straight-line revenue accrual, deferred financing costs, deferred amortization costs, below market rents and interest accretion.