Innvest Real Estate Investment Trust : REIT Reports Results for Second Quarter 2016

2016 Strategic Highlights

• Entered into an arrangement agreement pursuant to which Bluesky Hotels and Resorts Inc., ("Bluesky") will acquire all the issued and outstanding units of InnVest for $7.25 in cash per unit, pursuant to a court-approved plan of arrangement (the "Arrangement"). Closing is anticipated on or about August 18, 2016;

• Announced the acquisition of the leasehold interest in the Fairmont Vancouver Airport for $90.0 million. Closing of the hotel acquisition is anticipated in the third quarter of 2016. The acquisition of the hotel has the support of, and has been consented to, by Bluesky;

• Acquired the Marriott Ottawa hotel for $114.8 million and finalized a $54.4 million mortgage on the property at 3.87% for a 7-year term;

• InnVest and its joint venture partner KingSett, finalized a floating rate 2-year mortgage financing on the Courtyard by Marriott Toronto hotel for $82.0 million. InnVest's effective pro rata share of the financing totaled $27.2 million;

• Invested $36.1 million in hotel capital improvements to enhance the portfolio;

• Expanded the non-core properties for sale to 26 hotels with estimated net proceeds of over $135 million; and

• Sold one non-core property for $5.7 million in net proceeds in the first quarter. Subsequent to the end of the second quarter, sold two hotels for over $30.0 million in net proceeds. The REIT has entered into an agreement to sell an additional 14 hotels for anticipated net proceeds of over $40.0 million. Closing is anticipated in the third quarter.

  Q2 Operating Highlights

• Positive performance across majority of portfolio impacted by weakness in Alberta and displacement from ongoing renovation projects;

• RevPAR(1) up 5.4% on occupancy and room rate gains;

• Same-hotel(2) RevPAR grew 2.6% with strength in most regions offsetting softness in Alberta. Excluding the Alberta portfolio, same-hotel RevPAR grew 5.7%;

• GOP(1) improved 2.8% driven by contributions from new acquisitions;

• Same-hotel GOP declined $0.4 million. Excluding the Alberta portfolio, same-hotel GOP improved 3.9%;

• Net income was impacted by $3.3 million of transaction costs related to the Arrangement as well as a

  $1.0 million non-cash charge related to the revaluation of unit plans;

• FFO(1) and AFFO(1) per unit impacted by higher number of units outstanding;

• Trailing twelve-month AFFO payout ratio of 88.7%; and

• Leverage ratio of 61.1%.

(1) RevPAR is defined as the product of the average daily rate and the average daily occupancy. RevPAR measures room revenue and is a commonly used metric within the hotel industry to evaluate hotel operations. Gross operating profit ("GOP"), Funds from operations ("FFO") and Adjusted FFO ("AFFO") are non- IFRS financial measures which do not have a standardized meaning and may not be comparable to similar financial measures used by other organizations. Hotel GOP measures hotel property level results before debt service costs and facilitates comparisons between InnVest and its hotel competitors. FFO and AFFO are indicators which measure profitability and cash flow after all internal funding requirements including debt service costs and capital reserves. For further

information about InnVest's business and financial results, please refer to the "Management's Discussion and Analysis" section of the REIT's filings on SEDAR.

(2) Same-hotel information includes 105 hotel properties and does not include the results of operations for the five properties sold since January 1, 2015. Additionally, it excludes hotels that the REIT did not own for the entirety of the periods presented (Hotel Saskatchewan in Regina and the Ottawa Marriott Hotel) and hotels in which the REIT owns partial interests (the Fairmont Royal York and Courtyard by Marriott Toronto).

"Our portfolio continues to deliver solid growth aided by acquisitions and capital investments across the portfolio. Our second quarter results demonstrate the value of our diversified portfolio with revenue and GOP growth achieved, despite softness in Alberta and other resource markets," said Drew Coles, President and Chief Executive Officer of InnVest. "Last week, we announced the pending closing of the acquisition of the REIT by Bluesky on or about August 18, 2016. This transaction is a positive outcome for all stakeholders. Execution of InnVest's strategy to improve its portfolio quality and strengthen its balance sheet has culminated in the crystallization of value that this transaction represents. Bluesky is aligned with InnVest's strategic objectives for the portfolio, and I look forward to continuing to lead InnVest on the path of asset- quality driven growth."

The following table details occupancy, ADR and RevPAR for the same-hotel portfolio for the three and six months ended June 30, 2016 and excludes properties sold or acquired since January 1, 2015:

Note: Gross hotel revenues on a same-hotel basis (105 hotels), excluding hotels which were sold or acquired during the periods presented

Revenues increased 4.7% and 3.3% in the second quarter and first half of 2016, respectively, driven by same- hotel growth and contributions from acquisitions. Same-hotel revenues for the three and six months ended June 30, 2016 improved $1.1 million (0.8%) and $0.3 million (0.1%) notwithstanding weakness in the REIT's Alberta portfolio, and displacement from ongoing hotel renovation programs. Not including the Alberta properties, same-hotel revenues increased 3.9% and 3.7% in the quarter and year-to-date periods.

Overall RevPAR for the second quarter and year-to-date of 2016 increased 5.4% and 3.5% compared to the same prior year periods, benefitting from the contribution of upscale acquisitions. Same-hotel RevPAR improved 2.6% and 0.9%, respectively. Not including the Alberta hotels, same-hotel RevPAR rose 5.7% and 4.5% for the three and six months ended June 30, 2016.

For the three and six months ended June 30, 2016, Gross Operating Profit (GOP) grew 2.8% and 1.3%, respectively. Contributions from acquisitions were somewhat offset by the decline in operating performance at the Alberta hotels and the reduced contribution from non-core properties sold. Second quarter same-hotel GOP declined 0.9% due to weaker results in the Alberta properties. Not including Alberta, same-hotel GOP rose 3.9% in the second quarter. For the six months ended June 30, 2016, same-hotel GOP declined 2.7%. Not including Alberta, same-hotel GOP rose 5.4% in the first half of the year.

Corporate and administrative expenses increased in the three months ended March 31, 2016 due primarily to a

$1.0 non-cash charge related to the mark-to-market valuation of the REIT's unit plans, the full periods' expenses related to the internalized corporate, finance and asset management platform completed through 2015 and costs associated with remediation efforts related to internal controls.

Second quarter expenses include $3.3 million of transaction costs (legal fees and financial advisory services) related to the Arrangement.

For the three months ended June 30, 2016, InnVest generated funds from operations ("FFO") and adjusted funds from operations ("AFFO") of $29.6 million ($0.209 per diluted unit) and $24.9 million ($0.174 per unit diluted) compared to $29.4 million ($0.224 per unit diluted) and $25.0 million ($0.189 per unit diluted) in the same prior year period. For the six months ended June 30, 2016, InnVest generated FFO of $24.8 million ($0.184 per unit diluted) and AFFO of $17.5 million ($0.130 per unit diluted) compared to $26.0 million ($0.215 per unit diluted) and $19.8 million ($0.162 per unit diluted) for the same period in 2015. Per unit amounts in 2016 were impacted by the 8.2% and 9.2% increase in the weighted average number of units outstanding for the three and six months ended June 30, 2016, respectively, related to the July 2015 equity offering.

For the twelve months ended June 30, 2016 the REIT's AFFO payout was 88.7% compared to 81.2% for the twelve months ended December 31, 2015.

During the first half of 2016, the REIT expanded its portfolio of non-core properties slated for sale to 26 hotels. The sale of properties is expected to generate net aggregate proceeds of over $135 million. Proceeds from these asset sales are expected to be re-invested to improve the overall quality and diversification of the REIT's core portfolio, reduce debt, and fund further growth. In the first quarter, the REIT sold one non-core hotel for net proceeds of $5.7 million.

As at June 30, 2016 InnVest has entered into two separate transactions to sell 16 hotels for aggregate gross proceeds of $122.6 million (anticipated net proceeds of over $70 million). Subsequent to the end of the quarter, InnVest completed the sale of two properties, generating net proceeds of over $30.0 million. The sale of an additional 14 hotels is anticipated to close in the third quarter of 2016 for net proceeds of over $40.0 million.

Capital investments in the REIT's core portfolio help to ensure performance is optimized and assets are competitive within their markets. During the first half of 2016 the REIT invested approximately $31.6 million in its owned portfolio, and $36.1 million including participation in joint venture hotel investments.

Capital investment projects completed during the six months ended June 30, 2016 included the addition of a gold floor executive product at the Fairmont Macdonald in Edmonton (completed in June), room renovations at Moncton's Delta Beausejour (completed in May), room, lobby and food and beverage outlet renovations at the Hotel Saskatchewan in Regina (completed in May) and room and public space renovations at Toronto's Courtyard Marriott Hotel (completed in June).

At June 30, 2016 InnVest had liquidity of $33.9 million, down from the prior year end due primarily to the funding of the Ottawa Marriott acquisition in the first quarter. Liquidity is before the impact of possible divestiture and financing activities which, if successful, could generate aggregate liquidity of over $100 million. Consequently, to the extent these activities are successful, liquidity would be greatly enhanced. Subsequent to the end of the quarter, InnVest completed the sale of two properties, generating net proceeds of over $30.0 million. The sale of an additional 14 hotels is anticipated to close in the third quarter of 2016 for net proceeds of over $40.0 million. Liquidity generated is expected to be partially used to fund the $90.0 million acquisition of the Fairmont Vancouver Airport. The acquisition is expected to be funded by first mortgage financing of approximately 50%.

At June 30, 2016 InnVest's leverage ratio was 61.1%, up from 58.2% at December 31, 2015 due primarily to the use of bridge funding for the Marriott Ottawa acquisition, pending the planned sale of assets. The REIT's weighted average interest rate improved to 4.9% at June 30, 2016 from 5.0% at December 31, 2015, with a weighted average term to maturity of 3.9 years.

During the first quarter of 2016, the REIT completed a $54.4 million seven-year mortgage financing of its recently-acquired Marriott Ottawa Hotel with a fixed interest rate of 3.87%. In January 2016, the REIT partially funded this acquisition with a bridge loan of $52.0 million which was fully repaid through the first half of the year.

In May 2016, InnVest and KingSett completed a 2-year mortgage financing on the Courtyard Marriott Toronto hotel for $82.0 million at an interest rate of either (i) the Canadian bank prime rate plus 1.75%, or (ii) the Canadian Bankers' Acceptance rate plus 2.75%. InnVest's effective pro rata share of the financing totaled

$27.2 million. Proceeds were used to repay the balance of the bridge loan and for general corporate purposes, including to fund capital investments.

In December 2016 approximately $46.1 million of mortgage debt bearing an interest rate of 5.8% matures on two hotel properties. InnVest is proceeding in the normal course to refinance its 2016 maturities.

On May 10, 2016, the REIT and Bluesky Hotels and Resorts Inc., ("Bluesky"), a privately-held Canadian company, announced that they have entered into an arrangement agreement pursuant to which Bluesky will acquire all the issued and outstanding units of InnVest for $7.25 in cash per unit, pursuant to a court-approved plan of arrangement (the "Arrangement").

On June 28, 2016, unitholders approved the Arrangement at the annual and special meeting of unitholders. On July 18, 2016, debentureholders approved certain amendments to the indentures governing the redemption of each of InnVest's series of convertible debentures, on or about the date of the closing of the Arrangement.

On August 4, 2016, InnVest announced that all of the required regulatory approvals have been obtained with respect to the Arrangement. The parties currently anticipate that the transaction will close on or about August 18, 2016.