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Press release from Marketwire

InnVest REIT Announces Public Offering of $50 Million of Stapled Convertible Unsecured Subordinated Debentures and $25 Million of Stapled Units

Tuesday, February 22, 2011

InnVest REIT Announces Public Offering of $50 Million of Stapled Convertible Unsecured Subordinated Debentures and $25 Million of Stapled Units16:49 EST Tuesday, February 22, 2011TORONTO, ONTARIO--(Marketwire - Feb. 22, 2011) -NOT FOR DISTRIBUTION IN THE UNITED STATES OR OVER UNITED STATES WIRE SERVICESInnVest Real Estate Investment Trust (the "REIT") (TSX:INN.UN), announced today that it and InnVest Operations Trust ("IOT") have reached an agreement with a syndicate of underwriters co-led by RBC Capital Markets and Scotia Capital Inc. to issue to the public, subject to regulatory approval, on a bought deal basis, $50 million aggregate principal amount of 5.75% stapled convertible unsecured subordinated debentures due March 30, 2018 (the "Debentures") and 3,600,000 stapled units (the "Units") at a price of $7.00 per Unit for gross proceeds of approximately $25 million. Each Unit is comprised of one trust unit of the REIT and one non-voting trust unit of IOT. Each $1,000 principal amount of Debentures consists of $850 principal amount of convertible unsecured subordinated debentures of the REIT (the "REIT Debentures") and $150 principal amount of convertible unsecured subordinated debentures of IOT (the "IOT Debentures"). The REIT and IOT will directly or indirectly through their wholly owned subsidiaries fully guarantee the obligations of the other under the Debentures. The stapled debentures are convertible, at the option of the holder, into stapled units at $9.45 per stapled unit.The Debentures are convertible, at the option of the holder, into an equal number of REIT units and IOT units, which, until the occurrence of an uncoupling event, will trade together as a stapled unit. Prior to the occurrence of an uncoupling event, the REIT Debentures and IOT Debentures will trade together and must be converted and redeemed together.The net proceeds from this offering (after deducting the Underwriters' fee and estimated offering expenses) will be used by the REIT as to 85% of the net proceeds and by IOT as to 15% of the net proceeds to fund capital improvements, to fund future acquisitions and for general trust purposes.InnVest intends to file with the securities commissions and other similar regulatory authorities in each of the provinces and territories of Canada a preliminary short form prospectus relating to the issuance of the Debentures and Units by February 25, 2011. Closing of the offering is expected to occur on or about March 10, 2011. InnVest is scheduled to press release its fourth quarter results on Friday, March 11, 2011 to be followed by a conference call at 11:00 am Eastern Time. In expectation of the results being released by InnVest on March 11, 2011, InnVest advises, that while not material to its 2010 full year results, that it incurred restructuring charges and non-recurring sales training initiatives of approximately $1.3 million during the fourth quarter of 2010. In addition, InnVest was required to take various rooms out of the rental pool as result of renovations that were underway at the Fairmont Palliser and the Hilton Quebec, resulting in a reduction of FFO by approximately $1.1 million for the quarter. As previously announced, the Trust expects that the impact of the deemed cost election will be a reduction in the carrying value of its opening balance sheet hotel properties as at January 1, 2010 of approximately $200 to $230 million. Offsetting this adjustment will be the elimination of significant future income tax liabilities included in the Trust's hotel properties' asset base following the Trust's conversion to a Qualifying REIT such that the impact of these two changes will be a net reduction in the Trust's equity of approximately $30 to $50 million in 2010. This press release shall not constitute an offer to sell, or the solicitation of an offer to buy, any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The securities being offered have not been and will not be registered under the U.S. Securities Act of 1933 as amended and may not be offered or sold in the United States absent registration or pursuant to applicable exemption from registration. Trust Profile InnVest Real Estate Investment Trust ("InnVest REIT") is an unincorporated open-ended real estate investment trust which owns a portfolio of 144 hotels across Canada representing approximately 19,000 guest rooms operated under internationally recognized brands. InnVest REIT leases its hotels to InnVest Operations Trust ("IOT"), a taxable trust. IOT directly and indirectly holds all of the hotel operating assets, earns revenues from hotel customers and pays rent to InnVest REIT. IOT also holds a 50% interest in Choice Hotels Canada Inc., the largest franchisor of hotels in Canada, and earns revenues from franchising fees.Each issued and outstanding InnVest REIT unit trades together with a non-voting unit of IOT as a "stapled unit" on the Toronto Stock Exchange (the "TSX") under the symbol INN.UN. InnVest REIT's convertible debentures trade on the TSX under the symbols INN.DB.B, INN.DB.C, INN.DB.D and INN.DB.E.FORWARD LOOKING STATEMENTSStatements 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's 2009 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.FOR FURTHER INFORMATION PLEASE CONTACT: Kenneth D. GibsonInnVest Real Estate Investment TrustPresident and Chief Executive Officer(905) 206-7100(905) 206-7114 (FAX)ORTamara L. LawsonInnVest Real Estate Investment TrustChief Financial Officer and Corporate Secretary(905) 206-7100(905) 206-7114 (FAX)www.innvestreit.com