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Behind Bluesky’s $2.1B Bid To Buy InnVest REIT

InnVest REIT is being acquired by Bluesky Hotels and Resorts, a Hong Kong-backed Canadian company that’s seeking to build a North American presence. Here’s what you need to know about the deal.

1. It’s worth $2.1B

Behind Bluesky’s $2.1B Bid To Buy InnVest REIT

The transaction, announced Tuesday, values InnVest (20% owner of the iconic Fairmont Royal York Hotel) at $2.1B, including assumption of the REIT’s net debt. InnVest president/CEO Drew Coles says the deal—unanimously OK'd by the trust’s board and management team—is a “winning outcome for all stakeholders,” noting the work his firm has done to improve the quality of its portfolio—109 hotels nationwide, with 14,500 guest rooms under Fairmont, Hyatt, Travelodge and Holiday Inn brands, including Vancouver’s Hyatt Regency, below—has “culminated in the crystallization of value that this transaction represents.”

2. It's a growth play

Behind Bluesky’s $2.1B Bid To Buy InnVest REIT

The acquisition of InnVest—which has a 50% stake in Choice Hotels Canada, one of the country's largest hotel franchisers—gives Bluesky a global platform from which it can continue to “pursue growth opportunities in North America,” CEO Li Chen said. Describing itself as a privately held Canadian corporation backed by Hong Kong capital, Bluesky is looking to develop a “diversified asset portfolio of hotels, hospitality services, real estate and other long-term holdings."

3. CEO is staying on

Ottawa Marriott Hotel
Ottawa Marriott Hotel

Li Chen said Bluesky is impressed with InnVest’s hotel assets (it bought the Ottawa Marriott, above, last year) and with its management team. His firm intends to maintain InnVest’s current senior leadership and workforce, including CEO Drew Coles (and InnVest’s HQ will remain in Toronto). Bluesky is aligned with InnVest’s strategic objectives for its portfolio, Drew said, “and I look forward to continuing to lead InnVest on the path of asset-quality-driven growth.” The deal is expected to close in Q3. (InnVest has lost 20% of its market value in the past five years, Bloomberg reports.)

4. Unitholders get a premium

Behind Bluesky’s $2.1B Bid To Buy InnVest REIT

InnVest unitholders, who vote on the deal at the trust's June annual general meeting (it requires 66-2/3% approval), will get $7.25 per unit, a 37% premium over the 30-day volume weighted average trading price of InnVest units on the TSX on May 10 ($5.28). Major stakeholders include KingSett Real Estate Growth LP No 5. (KingSett Capital co-owns the Royal York; the two firms also acquired Courtyard by Marriott Downtown Toronto, above.) InnVest chair Edward Pitoniak said the deal came after an “intense period of deliberation” by the board, and “lengthy, constructive negotiations with Bluesky."