InnVest REIT Reports First Quarter Results

InnVest Real Estate Investment Trust (the "REIT")(TSX:INN.UN) and InnVest
Operations Trust ("IOT"), collectively "InnVest", today announced financial
results for the three months ended March 31, 2012. All dollars are in thousands
of Canadian dollars unless otherwise specified.


"We continue to see modest improvement in the Canadian lodging industry's
fundamentals. Our hotels achieved rate growth which contributed to improved
margins and earnings during the quarter," commented Kenneth Gibson, InnVest's
President and Chief Executive Officer. "We expect revenues and earnings to
continue to improve heading into the important summer season as many of our
hotels benefit from renovations undertaken over the past year."


First Quarter Highlights



--  Revenue per available room ("RevPAR") on a same hotel basis increased
    1.9% driven by a 2.1% increase in average daily rate ("ADR"); 
--  Gross operating profit generated from hotel operations ("Hotel GOP")
    increased 7.2%; 
--  Hotel GOP margins increased 60 basis points; 
--  Net loss was $30.2 million compared to a loss of $20.0 million in the
    prior year. Excluding non-cash charges required by IFRS (unrealized
    losses on liabilities presented at fair value and finance costs relating
    to the presentation of certain equity instruments as liabilities under
    IFRS), deferred income taxes and depreciation and amortization, InnVest
    realized an adjusted net loss of $2.4 million compared to a loss of $3.0
    million in the prior period; 
--  Funds from operations ("FFO") was a loss of $0.023 per diluted unit for
    the quarter as compared with a loss of $0.033 from the prior period.
    Distributable loss was $0.063 per unit diluted as compared with a loss
    of $0.074 in the prior period; and 
--  In March 2012, InnVest refinanced a $151.9 million mortgage which was
    scheduled to expire in March 2013. InnVest is in the process of
    finalizing the renewal of a $164.2 million mortgage which matures in
    November 2012. 



The first quarter is traditionally InnVest's lowest earnings period. Given the
seasonality of the portfolio, the first quarter is not reflective of anticipated
results for the annual period. Revenues are typically higher in the second and
third quarters due to business and leisure travel trends as compared to the
first and fourth quarters.


InnVest's Consolidated Condensed Financial Statements and Management's
Discussion and Analysis for the three months ended March 31, 2012 and 2011 are
available on InnVest's website at www.innvestreit.com.




SELECTED FINANCIAL INFORMATION                                              
                                ----------------------                      
                                                                            
                                         Three Months          Three Months 
                                                Ended                 Ended 
                                       March 31, 2012        March 31, 2011 
($000s except per unit amounts)           (unaudited)           (unaudited) 
                                                                            
Revenue                                                                     
  Hotel properties                   $        128,978      $        126,274 
  Franchise business                 $          2,113      $          1,845 
  Other real estate properties       $            832      $            915 
                                --------------------------------------------
                                     $        131,923      $        129,034 
Gross operating profit (1)                                                  
  Hotel properties                   $         16,887      $         15,748 
  Franchise business                 $            599      $            531 
  Other real estate properties       $            252      $            354 
                                --------------------------------------------
                                     $         17,738      $         16,633 
                                                                            
Net loss and comprehensive loss      $        (30,197)     $        (20,035)
                                --------------------------------------------
Reconciliation to funds from                                                
 operations (FFO)                                                           
Add / (deduct)                                                              
  Depreciation and amortization                23,969                23,530 
  Deferred income tax recovery                (10,334)              (10,694)
  Unrealized loss on liabilities                                            
   presented at fair value                     14,150                 2,474 
  Finance costs - distributions                    36                 1,725 
  SIFT transition expenses                        220                     - 
                                --------------------------------------------
Funds from operations (2)            $         (2,156)     $         (3,000)
                                --------------------------------------------
Reconciliation to distributable                                             
 loss                                                                       
Add / (deduct)                                                              
  Non-cash portion of mortgage                                              
   interest expense                               684                   661 
  Non-cash portion of                                                       
   convertible debentures                                                   
   interest and accretion                         992                   896 
  Reserve for replacement of                                                
   furniture, fixtures and                                                  
   equipment and capital                                                    
   improvements                                (5,421)               (5,279)
                                --------------------------------------------
Distributable loss (2)               $         (5,901)     $         (6,722)
                                --------------------------------------------
Per unit data                                                               
Net loss and comprehensive loss                                             
 - diluted                           $         (0.323)     $         (0.222)
FFO - diluted                        $         (0.023)     $         (0.033)
Distributable loss - diluted         $         (0.063)     $         (0.075)
Distributions declared               $         0.0999      $         0.1251 
                                ----------------------                      
(1) Gross operating income ("GOP") is defined as revenues less hotel,       
franchise and other real estate properties expenses.                        
(2) Funds from operations and distributable loss are non-GAAP measures of   
earnings and cash flow commonly used by industry analysts. Non-GAAP         
financial measures do not have a standardized meaning and are unlikely to be
comparable to similar measures used by other organizations.                 



The operating statistics relating to gross room revenues for the three months
ended March 31, 2012 are on a same-hotel basis and exclude one hotel which was
classified as an operating lease.




              Occupancy                ADR                   RevPAR         
                     Variance              Variance               Variance  
                  %        to            $       to             $       to  
                         2011                  2011                   2011  
        --------------------------------------------------------------------
Ontario        51.8% (2.2 pts)   $  106.70      1.6%    $   55.27     (2.5%)
Quebec         54.1%  1.8 pts    $  105.19     (0.8%)   $   56.92      2.7% 
Atlantic       48.8% (0.8 pts)   $  106.60     (0.9%)   $   52.06     (2.4%)
Western        57.8%  2.6 pts    $  146.35      5.8%    $   84.53     10.7% 
        --------------------------------------------------------------------
Total          53.0% (0.2 pts)   $  114.52      2.1%    $   60.72      1.9% 



FINANCIAL REVIEW

Three months ended March 31, 2012

For the three month ended March 31, 2012, total revenues increased by 2.2% to
$131.9 million.


Revenues generated by hotel operations increased 2.1% or $2.7 million to $129.0
million. RevPAR over this period increased 1.9% based on a 2.1% increase in ADR
which offset a 0.2 point decline in occupancy. The RevPAR growth was driven by
increases of almost 30% at the Fairmont Palliser in Calgary and approximately
10% at the Hilton Quebec City following room renovations in 2011. These results
offset softness in southwestern Ontario, downtown Montreal (weak group activity)
and Halifax (Canada Winter Games held in prior year). Room revenues during the
first quarter of 2012 benefitted from one incremental day as a result of the
leap year.


InnVest generated gross operating profit ("GOP") from hotel operations of $16.9
million, up 7.2% or $1.1 million as compared to the prior period. GOP margins
from hotel operations improved 60 basis points aided by the ADR gains achieved
during the quarter.


The first quarter of 2012 generated a distributable loss of $5.9 million ($0.063
per unit diluted) and an FFO loss of $2.2 million ($0.023 per unit diluted) each
benefitting from the growth in GOP achieved.


BALANCE SHEET REVIEW

InnVest executed a number of transactions to strengthen its balance sheet including:



--  InnVest amended its existing credit agreement to increase the maximum
    amount available under its line of credit on a seasonal basis. The
    credit line was increased from $40.0 million to $50.0 million through
    June 15, 2012 and to $45.0 million through August 31, 2012. Thereafter
    the line of credit will return to the $40.0 million level. 
--  On March 30, 2012, InnVest refinanced a $151.9 million mortgage which
    was scheduled to expire in March 2013. The mortgage, secured by six
    full-service hotels, has an interest rate of 5.3% and has a three year
    term with two one-year extensions, at InnVest's option. 
--  InnVest is finalizing the terms of a five-year renewal of a $164.2
    million mortgage which matures in November 2012 and has a current
    interest rate of 7.5%. Assuming the completion of this renewal, the pro
    forma weighted average term to maturity of mortgages at March 31, 2012
    would increase to 3.6 years and the weighted average interest rate would
    approximate 5.6%. 



As of March 31, 2012, InnVest had approximately $24.4 million of cash (including
restricted cash) and $44.7 million drawn on its credit facility. Given the
seasonality of the business, the end of the first quarter is typically the low
point in InnVest's liquidity position.


At March 31, 2012, InnVest's leverage including convertible debentures was 61.8%
(44.7% excluding convertible debentures).


During the quarter, InnVest invested $9.9 million in capital expenditures
throughout its portfolio. These investments reflect a number of profit-improving
projects designed to increase cash flow and improve profitability including room
renovations at the Delta Centre-Ville and brand upgrades at a number of our
Holiday Inn and Hilton hotels.


INCOME TAX DEFERRAL

For 2012, InnVest estimates that the non-taxable portion of the distributions
made to unitholders during the year will approximate 40% (2011 - 60%).


CORPORATE REORGANIZATION

On July 20, 2011, the Minister of Finance (the "Minister") announced changes in,
among other things, the tax treatment of real estate investment trusts that have
issued "stapled" securities. If the Minister's announcement is enacted as
proposed and no changes are made to the existing structure of the REIT and IOT,
then rents (and certain other amounts) paid by IOT to the REIT after the
applicable transition date (expected to be July 20, 2012) (the "Transition
Period") would cease to be deductible in computing the income of IOT for
Canadian income tax purposes.


In November 2011, InnVest announced its intention to complete an internal
reorganization to unwind the stapled unit structure (the "Reorganization")
resulting in all the former stapled unitholders and stapled debenture holders of
the REIT and IOT holding only units or convertible debentures, as the case may
be, of the REIT. The merged entity would be governed as a trust.


The Reorganization was approved by 99.9% of the votes cast in person or by proxy
by InnVest unitholders at a special meeting held on February 23, 2012. On
February 29, 2012, InnVest received final court approval of the plan of
arrangement forming part of the Reorganization from the Ontario Superior Court
of Justice. InnVest anticipates that the effective date of the Reorganization
will be June 30, 2012.


Additional information about the Reorganization is contained in InnVest's
management information circular dated December 31, 2011, which is available on
SEDAR at www.sedar.com.


Pending completion of the proposed merger, InnVest is restricted from issuing
stapled securities during the Transition Period, subject to certain exceptions.
As a consequence, InnVest suspended its distribution reinvestment plan ("DRIP")
beginning in August 2011 until further notice and will satisfy all Trustee
compensation and the vesting of executive units in cash as opposed to the usual
satisfaction in the form of units.


OUTLOOK

Uncertainty in the world economy continues to impact our business. InnVest's
broad, diversified portfolio remains a key advantage in the current environment.


Looking ahead, we are focused on driving internal growth within our existing
portfolio. In 2011, we began an important multi-year capital program to enhance
our product offering at a number of our hotels. These targeted investments are
expected to improve our hotels' competitive positioning and operating
performance through increased occupancies and rates. An enhanced product,
coupled with improving demand and constrained new supply should enable InnVest
to realize cash flow growth.


QUARTERLY CONFERENCE CALL

Management will host a conference call on Friday May 11, 2012 at 11:00 a.m.
Eastern time to discuss the performance of InnVest. Investors are invited to
access the call by dialing [phone] or 1-866-226-1792. You will be
required to identify yourself and the organization on whose behalf you are
participating. A recording of this call will be made available May 11th
beginning at 1:00 pm through to 11:59 p.m. on May 18th. To access the recording
please call [phone] or [phone] and use the reservation number
7573534#.


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's 2012 annual
information form which is available at www.sedar.com or www.innvestreit.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.


INNVEST PROFILE

InnVest Real Estate Investment Trust (the "REIT") is an unincorporated
open-ended real estate investment trust which owns a portfolio of 143 hotels
across Canada representing approximately 19,000 guest rooms operated under
internationally recognized brands. The REIT leases its hotels to InnVest
Operations Trust ("IOT"), a taxable investment trust. IOT indirectly holds all
of the hotel operating assets, earns revenues from hotel customers and pays rent
to the REIT. IOT also holds a 50% interest in Choice Hotels Canada Inc., one of
the largest franchisors of hotels in Canada, and earns revenues from franchising
fees.


Each issued and outstanding 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's convertible debentures trade on the TSX under the
symbols INN.DB.B, INN.DB.C, INN.DB.D, INN.DB.E and INN.DB.F.