InStorage Real Estate Investment Trust
TSX VENTURE : IS.UN

InStorage Real Estate Investment Trust

November 15, 2006 23:19 ET

InStorage REIT Reports Most Recent Quarterly Results on a Continuity of Interests Basis

TORONTO, ONTARIO--(Marketwire - Nov. 15, 2006) -

Attention Business/Financial Editors:

InStorage Real Estate Investment Trust ("InStorage" or the "REIT"), (TSX VENTURE:IS.UN), announced today that it has re-filed its unaudited financial statements for the interim period ended September 30, 2006. The re-filed statements reflect the conversion of SCOSS Capital Corp. to InStorage on a continuity of interests basis of accounting and therefore include the financial results of operations of SCOSS Capital Corp. and InStorage for the period from January 12, 2006 to September 30, 2006. The following highlights should be read in conjunction with the re-filed financial statements and re-filed Management's Discussion and Analysis of InStorage, which can be obtained from the SEDAR website at www.sedar.com.

The financial statements filed on November 13, 2006 accurately reflected the operating results of InStorage after the conversion from August 4, 2006 to September 30, 2006.



Financial Highlights
-------------------------------------------------------------------------
Three months ended Period from
(unaudited) ended January 12, 2006
(in $'s) September 30, 2006 to September 30, 2006
-------------------------------------------------------------------------


Total Revenue 1,127,830 1,214,046
Property operating income 707,345 763,425
Income (loss) (518,954) (1,022,009)

Income (loss) per unit Basic
and diluted (0.01) (0.04)

Funds from operation (FFO)(1) $21,893 ($447,738)
Per unit
Weighted average number of
units 49,719,816 24,825,568
FFO per weighted average
number of units outstanding $0.0004 ($0.02)
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Balance Sheet Highlights
(in $'s) September 30, 2006
-------------------------------------------------------------------------
Assets
Income producing properties 110,320,295
Cash and cash equivalents 28,567,092
Liabilities and Unitholders' Equity
Mortgages payable 40,105,254
Bridge facility 25,285,000
Unitholders' equity 84,610,219
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(1) See "Use of Non-GAAP Financial Measures"


Management believes that FFO is a relevant ongoing measure of the ability of InStorage to earn and distribute cash returns to unitholders. The financial results used to calculate FFO as shown above include the historical results of SCOSS prior to the conversion and therefore may not be indicative of the REIT's future financial performance.

InStorage had no commercial operations until the conversion of SCOSS to InStorage was completed on August 4, 2006. However, the REIT is considered to be a continuation of SCOSS under the continuity of interest method of accounting. As a result, the re-filed financial statements reflect a continuation of SCOSS and include the results of operations from January 12, 2006 to August 4, 2006 and the consolidated operations of the REIT from that date forward.

Property rental income for the current quarter was $1,127,830. Total rental income is made up of rental income from SCOSS' initial properties (the "Initial Properties") for the entire quarter and from the properties acquired during the quarter from the date of acquisition of the property to September 30, 2006.

Property rental income for the period from January 12, 2006 to September 30, 2006 was $1,214,046. In addition to the rental income amounts described in the preceding paragraph, this amount includes rental income from the Initial Properties that were purchased by SCOSS on May 29, 2006.

InStorage generated $184,660 in interest income during the quarter. Approximately $86,127 of interest income was earned by reinvesting in short term investments the excess cash generated from the private placement of $75 million completed by the REIT on August 31, 2006. The remaining $98,533 of interest income is a result of interest generated from InStorage's mezzanine lending program. Year to date interest income was $185,041.

Direct property operating expenses for the quarter were $420,485. These expenses consist primarily of wages paid to staff operating the facilities, realty taxes, insurance, advertising, repairs and maintenance and other administrative costs.

On a year to date basis, property operating expenses were $450,621. These expenses include property operating expenses from the date of purchase of the Initial Properties on May 29, 2006.

InStorage incurred mortgage interest and bridge financing interest expenses for the quarter of $393,548. These costs are directly attributable to financing put in place at the time of closing of the acquisitions completed by the REIT since the conversion on August 4, 2006. In addition to first mortgage financing, InStorage utilized a short term bridge facility with the Royal Bank of Canada to help complete the acquisition of certain properties. The commitment to the bridge facility was made prior to InStorage completing the equity private placement in August 2006.

Interest costs on a year to date basis were $421,304. This amount includes interest on the mortgages entered into to finance the Initial Properties on May 29, 2006.

The REIT incurred amortization costs of $540,847 for the quarter. This expense is comprised of the amortization of the buildings, deferred financing costs and the value of in place leases.

On a year to date basis, amortization costs were $574,271. This amount includes amortization of the Initial Properties that were purchased by SCOSS on May 29, 2006.

The REIT incurred general administration expenses during the quarter of $476,564. Prior to the August 4, 2006, SCOSS incurred significant one time set up costs in anticipation of its conversion to the REIT and its underlying self-storage business. These costs included consulting fees, professional fees and fees in connection with marketing and branding of the REIT, which amounted to $279,956. General and administrative expenses of $196,608, were incurred by the REIT subsequent to the August 4, 2006 conversion. The majority of these expenses relate to wages, rent, office supplies, professional fees and a management fee paid to Carttera Management Inc. the external manager of InStorage.

On a year to date basis, general and administration expenses were $601,792.

InStorage Real Estate Investment Trust

InStorage REIT is an unincorporated open-end real estate investment trust that invests primarily in self-storage properties and ancillary businesses. InStorage indirectly owns and operates 18 self-storage properties located in Ontario and Alberta.

Use of Non-GAAP Financial Measures

Funds from operations ("FFO") is a widely accepted supplemental measure of Canadian real estate investment trusts' performance and is not a measure defined by Canadian generally accepted accounting principles ("GAAP"). Readers are directed to the re-filed Management's Discussion and Analysis for the period ended September 30, 2006 for a description of the measure and a reconciliation of the measure to net loss. FFO should not be construed as an alternative to net income or cash flow from operating activities that have been calculated in accordance with GAAP and FFO may not be comparable to similar measures presented by other issuers.

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 InStorage 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 the transactions mentioned above, as disclosed or at all, the development intentions with respect to the aforementioned self-storage property in Calgary 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 of InStorage and its subsidiaries to obtain necessary mortgage financing, satisfy conditions under the transaction agreements; 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 InStorage 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 InStorage's views as of any date subsequent to the date of this press release. Although InStorage 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 InStorage. Additional factors are noted in the re-filed Management's Discussion and Analysis of InStorage for the interim ended September 30, 2006 under "Risks and Uncertainties".

Contact Information

  • InStorage Real Estate Investment Trust T. James Tadeson, CFA Chief Executive Officer (416) 867-9705
    InStorage Real Estate Investment Trust John Bartkiw, CA Chief Financial Officer (416) 867-9702