InnVest Real Estate Investment Trust
TSX : INN.UN
TSX : INN.DB.A
TSX : INN.DB.B

InnVest Real Estate Investment Trust

July 12, 2007 17:37 ET

InnVest REIT Announces Transformational Portfolio Acquisition and Offering of $200 Million of Subscription Receipts and $70 Million of Convertible Extendible Unsecured Subordinated Debentures

TORONTO, ONTARIO--(Marketwire - July 12, 2007) -

NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR FOR DISSEMINATION TO THE UNITED STATES

InnVest Real Estate Investment Trust ("InnVest") (TSX:INN.UN)(TSX:INN.DB.A)(TSX:INN.DB.B), in partnership with Cadbridge Investors LP ("Cadbridge"), a joint venture entity between affiliates of Cadim, a division of the Caisse de Depot et placement du Quebec, and Westmont Hospitality Group, announced today a take-over bid for all of the outstanding units of Legacy Hotels Real Estate Investment Trust ("Legacy") at a price of $12.60 per unit. The take-over bid will be effected by LGY Acquisition LP, a newly-formed limited partnership, owned by InnVest and Cadbridge in which InnVest has an approximate 26% interest. Upon the successful completion of the acquisition of 100% of Legacy's outstanding units, InnVest and Cadbridge will reorganize Legacy's assets such that InnVest will become the owner of the following eleven first class hotels: The Fairmont Palliser, Sheraton Suites Calgary Eau Claire, Delta Calgary Airport, Fairmont Hotel Macdonald, Delta Winnipeg Hotel, Delta Ottawa Hotel and Suites, Delta Centre-Ville, Delta Beausejour, Delta Prince Edward, Delta Barrington and the Delta Halifax (collectively the "Portfolio"). This reorganization is expected to be completed within 30 days of LGY Acquisition LP acquiring 100% of Legacy's outstanding units and, until such time, InnVest will remain an approximate 26% owner in LGY Acquisition LP.

The purchase price, including the assumption of existing debt, in respect of the eleven hotels that InnVest will ultimately acquire, is approximately $652 million ($178,000 per key) prior to closing and transaction costs.

"We are very pleased to announce the Portfolio acquisition which will be transformational for InnVest. It is a rare opportunity to acquire a portfolio of highly sought after first class hotels at below replacement cost. It significantly expands our presence in Western Canada and adds the successful and internationally renowned Sheraton and Fairmont brands to the InnVest portfolio. In addition, the acquisition of eight more Delta branded hotels builds on our successful relationship with Delta, one of Canada's most recognizable and trusted brands." said InnVest President and Chief Executive Officer, Kenneth D. Gibson.

Upon the completion of the portfolio acquisition, InnVest's total portfolio will increase to 146 properties, totaling 19,148 rooms across Canada.

Description of the Offering

In order to partially fund the $679 million cost of the Portfolio acquisition (which includes the various transaction and financing costs required to close the Portfolio acquisition), InnVest has entered into an agreement to sell to a syndicate of underwriters led by RBC Capital Markets (as sole-bookrunner) and Scotia Capital Inc., on a bought deal basis, $200 million of subscription receipts at a price of $12.35 per subscription receipt representing the right to receive trust units of the REIT and $70 million of convertible extendible unsecured subordinated debentures. Westmont Hospitality Group has expressed its intention to acquire $5 million of the subscription receipts being offered. The remainder of the purchase price will be satisfied with the assumption of $194 million in mortgage debt secured by the properties and $215 million of bridge financing from RBC. InnVest intends to refinance the existing mortgages and arrange new mortgage financing on five of the acquired assets that are currently unencumbered. The bridge loan will be repaid from the proceeds of these financings.

The subscription receipts are exchangeable on a one-for-one basis for units of InnVest upon completion of LGY Acquisition LP's take-over bid for Legacy (but prior to the subsequent reorganization as described above). The take-over bid is subject to customary conditions, including receipt of regulatory approvals and the requirement that a minimum of two-thirds of Legacy's units be tendered into the bid. Fairmont Hotels & Resorts Inc., Legacy's largest unitholder representing 20.4% of the outstanding voting rights, has entered into a lockup agreement with LGY Acquisition LP to tender its entire ownership interest in Legacy to the take-over bid. The convertible debentures have an initial maturity date of December 31, 2007 (but can mature earlier upon the occurrence of certain events) and will be extended to August 1, 2014 upon completion of LGY Acquisition LP's take-over bid for Legacy. The convertible debentures have a coupon of 5.85% per annum and will pay interest semi-annually in arrears on August 1 and February 1 in each year commencing on February 1, 2008. The convertible debentures will be convertible into approximately 68.027 units of the REIT per $1,000 principal amount, at any time, at the option of the holder, representing a conversion price of $14.70 per unit.

The subscription receipts and convertible debentures will be offered in all the provinces of Canada by means of a short form prospectus. Closing of the offerings is expected to occur on or about August 3, 2007.

Description of the Hotels to be Acquired

The acquired hotels are leading properties in their respective markets and include a number of historical landmarks. The majority of the acquired hotels have considerable meeting space, multiple food and beverage facilities and are ideally located in downtown city centre locations within very close proximity to a number of demand drivers, including but not limited to shopping and recreation areas, businesses, restaurants, convention centres, historical sites and casinos.



Details of the hotel properties being acquired by InnVest are as follows:

Hotel Location Rooms
----- -------- -----

Delta Beausejour Moncton, New Brunswick 310

Delta Winnipeg Hotel Winnipeg, Manitoba 393

Delta Centre-Ville Montreal, Quebec 711

Sheraton Suites Calgary Calgary, Alberta 323
Eau Claire

The Fairmont Palliser Calgary, Alberta 405

The Fairmont Hotel Macdonald Edmonton, Alberta 199

Delta Prince Edward Charlottetown, Prince Edward Island 211

Delta Ottawa Hotel and Suites Ottawa, Ontario 328

Delta Calgary Airport Calgary, Alberta 296

Delta Barrington Halifax, Nova Scotia 200

Delta Halifax Halifax, Nova Scotia 296

Total 3,672


Hotel Highlights
----------------

The Fairmont Palliser
- A historical landmark in the heart of Calgary offering distinctive
accommodation in elegant surroundings
- Connected by a Skywalk to the Telus Convention Centre, the Calgary
Tower and the Glenbow Museum
- One of the few high-end luxury hotels in the Calgary city centre

Sheraton Suites Calgary Eau Claire
- Located in the midst of Calgary's fastest growing shopping and
recreation areas
- Neighboring attractions include the Eau Claire Market, IMAX Theatre
and Prince's Island Park - an extensive parkland which plays host to a
multitude of Calgary festivals
- Awarded top Sheraton Worldwide Hotel of the year in 2005 by Starwood
- RevPAR market leader in Calgary

The Fairmont Hotel Macdonald
- The historic Fairmont Macdonald is Edmonton's only Four Diamond-rated
luxury hotel
- Standing high on the bank overlooking the largest urban parkway in
North America, the North Saskatchewan River Valley
- RevPAR market leader in Edmonton

Delta Calgary Airport
- Conveniently located within the Calgary International Airport, the
gateway for Calgary business travelers or tourists enroute to Banff
and the Canadian Rockies
- RevPAR index leader in North East Calgary Market

Delta Winnipeg Hotel
- Located in the heart of downtown, recently renovated, and
conveniently connected to the Winnipeg Convention Centre
- Close proximity to The Forks Market, Winnipeg Art Gallery, Royal
Winnipeg Ballet, Centennial Concert Hall, Assiniboine Park and
CanWest Global Park

Delta Ottawa Hotel and Suites
- Located in the centre of Ottawa's business district and within a 5
minute walk to the Parliament buildings, the Supreme Court of Canada,
Constitution Square, the National Archives of Canada and the new War
Museum of Canada
- Part of a mixed-use complex which includes an adjoining office
building which provides an excellent source of business demand

Delta Centre-Ville
- Situated in the heart of Montreal within walking distance to the Bell
Centre, St. Catherine Street and Crescent Street
- Exceptional quality, full-service upscale hotel with spectacular glass
atrium lobby and panoramic views of Montreal with revolving restaurant
- Close proximity to the Montreal Convention Centre, historic Old
Montreal and the Montreal Casino

Delta Beausejour
- Located in the heart of Moncton, a key east coast tourist and retail
hub
- One of Greater Moncton's premier luxury accommodation hotels
- Top 10 hotel restaurant in Canada (Windjammer)

Delta Prince Edward
- Located in the heart of Old Charlottetown, Delta Prince Edward is the
centrepiece of the city's waterfront, boasts its own waterfront park
and marina, and is nestled beside the Peake's Wharf complex of quaint
shops and restaurants
- Prince Edward Island is a key tourist destination, ranked as Canada's
top golf destination
- Largest meeting and conference facilities on Prince Edward Island

Delta Barrington
- Located in the city centre with the historic facade in the Granville
market area, and connected by indoor walkway to the Delta Halifax
- The location on the Downtown Link walkway system offers quick, climate
controlled access to shops, boutiques, office towers, Casino Nova
Scotia and the World Trade and Convention Centre
- Halifax is a key east coast business and political centre with strong
leisure tourist appeal

Delta Halifax
- Located in the city centre, overlooking the Halifax Harbour, and
connected by indoor walkway to Delta Barrington
- The location on the Downtown Link walkway system offers quick easy
access to shops, boutiques, office towers, Casino Nova Scotia, World
Trade & Convention Centre
- Halifax is a key east coast business and political centre with strong
leisure tourist appeal


Please see the investor presentation available on InnVest's website for further details on the enclosed transaction.

General

InnVest REIT holds Canada's largest hotel portfolio together with an interest in Choice Hotels Canada Inc., the largest franchisor of hotels in Canada. The hotel portfolio currently comprises 135 hotel properties, with 15,476 guest rooms, operated under internationally recognized franchise brands such as Comfort Inn®, Holiday Inn®, Quality Suites/Inn®, Raddisson®, Delta®, Travelodge®, Hilton® and Best Western®. InnVest's trust units and outstanding convertible debentures trade on the Toronto Stock Exchange under the symbols INN.UN, INN.DB.A and INN.DB.B, respectively.

FORWARD LOOKING STATEMENTS

Statements contained in this press release that are not historical facts are forward-looking statements which involve risk and uncertainties which could cause actual results to differ materially from those expressed in the forward-looking statements. Among the key factors that could cause such differences are real estate investment risks, hotel industry risks and competition. These and other factors are discussed in InnVest REIT's 2006 annual information form which is available at http://www.sedar.com. InnVest disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by applicable securities law.

Contact Information

  • InnVest Real Estate Investment Trust
    Kenny Gibson
    President and Chief Executive Officer
    (905) 206-7100
    (905) 206-7114 (FAX)
    or
    InnVest Real Estate Investment Trust
    Tamara Lawson
    Chief Financial Officer and Secretary
    (905) 206-7100
    (905) 206-7114 (FAX)
    Website: www.innvestreit.com