BUILDING BUILDING

BUILDING
THE BEST
INNVEST REAL ESTATE INVESTMENT TRUST
ANNUAL REPORT 2015
BUILDING THE BEST 2015 was a very active and positive year for InnVest REIT
as we successfully delivered on our strategic plan to expand and enhance our
hotel portfolio, leverage our newly internalized asset management team to accelerate
growth, and strengthen our balance sheet and financial position. We look for
continued growth and strong operating performance in the years ahead.
2015 HIGHLIGHTS
117.4M
8.8%
12.8%
10.9%
81.2%
$
CONTENTS
ABOUT INNVEST
2Message to Unitholders
10Message from the CFO
11Financial Operating
Performance Highlights
12InnVest Portfolio
14Our Blueprint for
Building the Best InnVest
16Board of Directors
16Unit Price Information
IBC Corporate Information
InnVest Real Estate Investment Trust
is an unincorporated open-ended
real estate investment trust which owns
interests in a portfolio of 110 hotels across
Canada representing over 14,500 guest
rooms operated under internationally
recognized brands.
$
Acquired interests in three high quality,
full-service, city-centre hotels, further
strengthening our asset base.
Accretive growth in AFFO per Unit.
Refer to InnVest’s 2015 Management’s
Discussion and Analysis and Consolidated
Financial Statements for detailed financial
information and explanation of non-IFRS
measures and definitions.
RevPAR growth with increases in average
daily room rates and occupancy gains.
Solid and conservative AFFO payout ratio,
strengthened from 88.4% in 2014.
Increase in GOP with revenue growth,
property renovations and contributions
from acquisitions.
41.9M
Investment in hotel improvements to
enhance portfolio quality.
COVER AND OPPOSITE:
FAIRMONT ROYAL YORK, TORONTO
BUILDING THE BEST
INNVEST
MESSAGE
TO UNITHOLDERS
DREW COLES
President and Chief Executive Officer
Dear Unitholders:
I am very pleased to report on our 2015 results for my first full year as President
and Chief Executive Officer of InnVest. 2015 was an active and successful year for
the REIT as we made significant progress in three key areas of our strategic plan:
We enhanced the quality and scale of our hotel portfolio through acquisitions
and reinvestment;
➤
We internalized our asset management team to drive income growth; and
➤
We strengthened our balance sheet and financial position.
➤
Looking ahead, we remain focused on building
on this progress with continued growth and strong
operating performance in the years ahead.
ENHANCING THE INNVEST PORTFOLIO
2015 was a year in which we significantly expanded
and diversified our hotel portfolio with the acquisition
of interests in three full-service city-centre hotels.
During the year we purchased a 20% interest in the
iconic Fairmont Royal York in the centre of Toronto,
a 33% interest in the Courtyard by Marriott in
downtown Toronto, and a 100% interest in The
Hotel Saskatchewan, Autograph Collection, Regina.
Adding to this momentum, in February 2016 we
acquired a 100% interest in the Ottawa Marriott Hotel,
well-located in central downtown Ottawa.
The aggregate net purchase price for our interests
in these properties was approximately $117 million,
adding 2,651 rooms to the portfolio. All are high
quality, full-service hotels well-located in strong
downtown markets. We believe these additions to our
hotel portfolio will make accretive and increasing
contributions to our operating results and provide a
higher quality of income over the long term.
A perfect example of this income quality is the
strong performance at our Hyatt Regency hotel in
downtown Vancouver, acquired in December 2014.
In 2015, the property continued to exceed our
expectations, contributing $16.4 million in Gross
Operating Profit to our consolidated results for
the year.
HYATT REGENCY, VANCOUVER
2
INNVEST REAL ESTATE INVESTMENT TRUST
BUILDING
ORGANIC
GROWTH
By leveraging our highly experi­enced
and recently internalized asset
manage­ment team and investing
in our core hotel portfolio to ensure
each property is the most modern
and attractive in its market, we
significantly accelerated the operating
perfor­mance of our hotel portfolio
in 2015. We expect to see further
growth going forward.
HYATT REGENCY,
VANCOUVER
Built: 1973
Renovated: 2012
Rooms: 644
Function space: 40,000 sq. ft.
16.4M
$
2015 Gross Operating Profit
ANNUAL REPORT 2015
3
BUILDING A
QUALITY
PORTFOLIO
We continue to strengthen and
diversify our hotel portfolio
through the acquisition of high
quality assets located in deep
markets that can deliver income
growth with low volatility,
the disposition of low-yield
non-core properties, and
investments in repositioning
core hotels to ensure they are
the best in their markets.
THE HOTEL SASKATCHEWAN,
AUTOGRAPH COLLECTION,
REGINA
Built: 1927
Renovation: 2015
Rooms: 224
Function Space: 14,000 sq. ft.
$
45M
Purchase Price including
Capital Improvements
DELTA WINNIPEG
4
INNVEST REAL ESTATE INVESTMENT TRUST
MESSAGE TO UNITHOLDERS
REINVESTING IN OUR PORTFOLIO
Over the last three years InnVest has directed more
than $179 million in capital improvements across
our hotel portfolio to ensure we have the most
competitive, modern and attractive properties in our
markets. During 2015, approximately $41.9 million
was invested in a number of projects including the
completion of room renovations at Calgary’s Fairmont
Palliser and the Sheraton Suites Eau Claire, the
first phase of room renovations at the Delta London
Armouries, and lobby renovations at Moncton’s
Delta Beausejour.
Reinvesting in our hotels works. For example, in
2013 and 2014 we renovated 58 Comfort Inns and
as a result, in 2015 saw an 8.6% increase in room
revenues at these renovated properties and a solid
19.8% increase in gross operating profit compared to
the prior year. We will continue to reinvest in our
properties where we believe we can generate strong
incremental returns.
Our focus on revenue management
resulted in solid increases in all our
key performance benchmarks in 2015,
including a much improved GOP
margin of 26.3%.
Our efforts to strengthen our hotel portfolio have also
resulted in the sale of a number of non-core properties
which were not performing to our expectations. Since
the beginning of 2013, 31 non-core properties have
been sold generating proceeds, after the repayment
of associated debt, of approximately $147 million.
The cap rate generated by our property sales, and
the reinvestment of the net proceeds, have generated
significant accretive value for our Unitholders. We
have identified additional properties that we have
slated for sale which we believe will generate
additional net proceeds to help fuel InnVest’s growth.
ENHANCING OUR FINANCIAL POSITION
Another key focus has been to strengthen our
financial position, and we made considerable progress
with this objective in 2015. Our debt to gross book
value ratio improved significantly to 58.2% at year
end compared to 62.0% at December 31, 2014.
Pro forma the Ottawa Marriott acquisition, our debt
leverage is 60.5%. We are targeting an annual debt
leverage ratio below 55% over the near-term and
50% over the longer term. We remain committed to
maintaining a lower debt leverage ratio although the
ratio may vary through the year based on seasonality
and optimal permanent financing.
HOTEL GOP MARGIN (%)
26%
25%
24%
23%
22%
21%
20%
THE HOTEL SASKATCHEWAN,
AUTOGRAPH COLLECTION,
REGINA
STAYBRIDGE SUITES, OAKVILLE
2011
2012
2013
2014
2015
HOLIDAY INN GUELPH HOTEL & CONFERENCE CENTRE
ANNUAL REPORT 2015
5
MESSAGE TO UNITHOLDERS
We also made significant progress in improving our
debt profile in 2015. The weighted average mortgage
rate declined to 5.0% from 5.5% at December 31, 2014
while the weighted average term to maturity was
extended to 4.7 years from 2.8 years at the end of
2014. Looking ahead, with only $47 million in
mortgages maturing near the end of 2016 with a
weighted average interest rate of 5.8%, we expect
to renew these mortgages at prevailing lower rates.
We will seek further interest rate cost and maturity
advantages by capitalizing on the current low
interest rate environment
We were also pleased to complete a successful
bought-deal equity offering in July 2015, raising net
proceeds of approximately $46.4 million, including an
over-allotment option, to fund our recent acquisitions
and reduce debt. As at December 31, 2015 we had a
liquidity position of approximately $92.3 million,
providing us with the financial resources and flexibility
to act on future growth opportunities as they arise.
Our focus on revenue management
resulted in increased average daily room
rates and occupancies in 2015, combining
to drive strong increases in all our key
performance benchmarks and a solid and
accretive 10.9% increase in AFFO per Unit.
STRONG RESULTS
The progress demonstrated in meeting our strategic
priorities generated much improved operating and
financial performance in 2015. Our focus on revenue
management increased average daily room rates and
occupancies through the year, combining to drive
strong increases in our key performance benchmarks.
Overall revenues grew 3.3% for the year, while same
property revenue per available room (RevPAR) rose
2.1% compared to 2014. Overall Gross Operating
Profit was up 12.8% on a much improved 26.3% GOP
margin compared to 24.1% last year.
As a result of this strong operating performance,
our Adjusted Funds from Operations (AFFO) rose
41.0% in 2015 to $62.5 million or $0.489 per diluted
unit. Additionally, these improved operating results
contributed to a solid improvement in our payout
ratio to 81.2% at December 31, 2015 compared to
88.4% at the prior year end. The strong and accretive
10.9% increase in our AFFO per Unit was generated
despite the 24.2% increase in the weighted average
number of Units outstanding in 2015 resulting from
our successful equity financings.
AFFO PAYOUT RATIO (%)
■ Total Distributions
■ Cash Distributions (1)
100%
90%
80%
70%
60%
2011
2012
2013
2014
2015
OTTAWA
MARRIOTT
(1) Excluding distribution reinvestment plan
COMFORT INN, WATERLOO
6
INNVEST REAL ESTATE INVESTMENT TRUST
DELTA WINNIPEG
BUILDING
FINANCIAL
STRENGTH
A key goal is to maintain a
strong and flexible financial
position to ensure we have the
capacity and resources to invest
effectively in growth opportu­
nities. We have made significant
progress in reducing our leverage,
lowering our interest costs and
strengthening our balance sheet,
and expect further progress
going forward.
OTTAWA MARRIOTT
Built: 1972
Rooms: 489
Function Space: 35,000 sq. ft.
115M
$
Purchase Price
($235,000 per room)
FAIRMONT ROYAL YORK, TORONTO
ANNUAL REPORT 2015
7
BUILDING
TALENT
We believe our recently inter­nal­ized
asset management team is among the
best in the business with deep expertise
gained from years of experience in
all aspects of the hotel industry. Our
people bring an average 20 years of
industry experience to InnVest, talents
that will generate solid and stable
growth in the years ahead.
COURTYARD BY MARRIOTT,
TORONTO
Built: 1957
Renovation: 2016
Rooms: 575
Function Space: 14,000 sq. ft.
$
34.6M
For a 33.3% interest
ANDREW C. COLES
President and
Chief Executive
Officer
8
INNVEST REAL ESTATE INVESTMENT TRUST
GEORGE M. KOSZIWKA
Chief Financial
Officer
LISA CONWAY
Executive Vice President,
General Counsel and
Corporate Secretary
MESSAGE TO UNITHOLDERS
It is a brand new InnVest REIT, with
the people, the assets and the proven
strategies to deliver stable, sustainable
and growing returns to our Unitholders
over the long term.
Canadian national RevPAR is forecasted to grow
2.0% in 2016 after a 3.5% increase in 2015. The hotel
industry should also benefit from today’s cheaper cost
of fuel to drive increased travel, the low relative value
of the Canadian dollar attracting larger numbers of
US and overseas visitors to Canada, and continuing
non-energy sector economic growth.
CLOSING THOUGHTS
2015 was a year of significant transition for InnVest.
We successfully delivered on our key value-enhancing
objectives while at the same time internalizing our
asset management function, enhancing the depth
of our senior management team, and building a
stand-alone operating platform on which we can
continue to grow.
Among all classes of real estate, hotels provide a
competitive advantage as we can reprice our inventory
every day. This is unique for a real estate class, and
provides a distinct opportunity to accelerate our
growth and operating results. Today, InnVest is the
largest owner of hotel assets in Canada with a
property portfolio that is transitioning into ’best in
class’ in terms of quality, scale, diversification and
performance. Combining these solid fundamentals
with what I am confident is the industry’s most
experienced management team, and I believe
InnVest’s future looks bright.
Looking ahead, we will continue to focus on our key
strategic imperatives:
Accelerating organic growth by optimizing the
operational performance of all our properties;
➤
Investing in our assets to enhance performance;
➤
Growing our portfolio through disciplined and
accretive acquisitions of quality properties in deep
markets; and
➤
Strengthening our financial position through
reduced leverage, lower interest costs and
extending our average term to maturity.
➤
In closing, we believe, a high quality hotel property
will generate high quality results, and we look
forward to keeping you apprised of our progress
in the years ahead.
Sincerely,
In short, it is a brand new InnVest REIT, with the
people, the assets and the proven strategies to
deliver stable, sustainable and growing returns to
our Unitholders over the long term.
Our confidence in the future is based on strong
fundamentals in the Canadian hotel business.
According to HVS Global Hospitality Services, the
Drew Coles
President and Chief Executive Officer
COURTYARD BY MARRIOTT,
TORONTO
SARA GLENN
Senior Vice President
Asset Management
BRAD POLLOCK
Vice President
Taxation and
Treasury
DENISE ACHONU
Vice President
Finance
CHANTAL NAPPERT
Vice President
Finance and
Investor Relations
LEO FLEMING
Vice President Asset
Management and
Capital Projects
MATT CORNELL
Vice President
Investments
NICHOLAS LAKAS
Vice President
Asset Management,
Luxury – Full Service
ANNUAL REPORT 2015
9
MESSAGE FROM THE CFO
2015 was a very positive year for InnVest as we successfully delivered on our objectives to
expand and enhance our hotel portfolio, leverage our newly internalized asset management
team to accelerate growth, and strengthen our balance sheet and financial position. We made
significant progress in all areas of our plan, and look for continued growth and strong operating
performance in the years ahead.
A key element of our strategic plan is to strengthen
our financial position. As at December 31, 2015 we
significantly reduced our leverage ratio to 58.2%,
down from 62.0% at the end of 2014, while at the
same time lowering our weighted average interest
rate by 0.5% to 5.0% and extending the term to
maturity from 2.8 years to 4.7 years.
Total investments of approximately $117 million were
made in the acquisition of three high quality city-centre
hotels during the year, while another $41.9 million
in renovations and hotel improvements served to
enhance the overall quality of our hotel portfolio.
We continue to recycle proceeds from the sale of
non-core assets to re-invest in our growth plans and
to generate higher quality earnings going forward.
Together, our portfolio and financing achievements
have enabled us to improve our payout ratio to
81.2% as compared to 88.4% in the prior year and
HIGHLIGHTS
58.2%
Significant reduction in our
leverage ratio from 62.0% at
December 31, 2014
THE HOTEL SASKATCHEWAN,
AUTOGRAPH COLLECTION, REGINA
10 INNVEST REAL ESTATE INVESTMENT TRUST
will contribute to the stability and sustainability of
our cash flows and unitholder distributions going
forward. Looking ahead, we will continue to focus
on growing our business while maintaining a strong
financial position. Our near-term target is to further
reduce our leverage ratio to under 55%, and 50%
over the longer term. We also intend to continue
capitalizing on the current low interest rate environment
to further reduce debt costs while extending our
term to maturity.
George Kosziwka
Chief Financial Officer
5.0%
Reduced weighted average
interest rate from 5.5% at
December 31, 2014
HILTON QUEBEC
4.7YEARS
Extended weighted average
term to maturity from 2.8 years
at December 31, 2014
Financial Operating Performance Highlights
Year Ended December 31,
2015
2014
CONSOLIDATED PERFORMANCE
Number of hotel properties – December 31
107 110
Number of rooms – December 31
13,730 14,164
Occupancy (%)
65.0% 63.5%
ADR
$132.06 $124.14
RevPAR
$85.80 $ 78.86
Revenues
$553,388 $535,535
Gross Operating Profit (GOP) (1)
145,346 128,821
Gross operating margin
26.3% 24.1%
Net loss and comprehensive loss
(13,541) (14,727)
Funds from operations (FFO) (1)
76,345 58,451
Adjusted funds from operations (AFFO) (1)
62,525 44,351
Distributions declared
50,751 39,222
Capital expenditures
$41,895 $76,932
SAME HOTEL PERFORMANCE
Number of hotel properties
105 105
Occupancy (%)
64.6% 64.1%
ADR
$127.71 $126.11
RevPAR
$82.48 $ 80.77
Room Revenues
$379,459 $371,691
GOP
$127,706 $122,325
GOP margin
26.7% 25.7%
PER DILUTED UNIT
Net loss and comprehensive loss
$(0.107)$(0.152)
FFO
$0.598 $ 0.574
AFFO $0.489 $ 0.441
Distributions per unit
$0.3996 $0.3996
FFO and AFFO – Weighted average units outstanding – basic
126,370,77496,598,100
FFO and AFFO – Weighted average units outstanding – diluted
148,729,970119,734,543
December 31, December 31,
As at: 2015 2014
Total assets
1,314,0521,329,285
Gross mortgages and other debt
804,626801,363
Convertible debentures
211,220247,608
Weighted average term to maturity (2)
4.7 years2.8 years
Weighted average interest rate (2)
5.0% 5.5%
Total debt to gross asset value (leverage ratio) (3)(4)
58.2% 62.0%
Total debt to total capitalization (3)(4)
59.7% 60.1%
Debt service coverage ratio (times) (3)(4)
1.9 x 1.6 x
Interest coverage ratio (times) (3)
2.6 x 2.0 x
Floating rate debt as % of total debt
12.5% 21.2%
Total potential liquidity (5)
92,308121,292
Twelve–month trailing AFFO payout ratio
81.2% 88.4%
Twelve–month trailing AFFO payout ratio (including DRIP)
68.8% 81.2%
(1)Refer to Non–IFRS Financial Measures and Additional IFRS Financial Measures.
(2)Mortgages & other debt.
(3)Calculated on a trailing 12 month basis.
(4)Total debt consists of mortgage and other debt and convertible debentures.
(5)Total potential liquidity is defined as cash on hand, the availability under credit facilities and restricted cash.
ANNUAL REPORT 2015 11
InnVest Portfolio
DISTRIBUTION BY REGION
Hotel
City
Prov. Asset Class
Number of
Guest Rooms
Hotel
City
Prov. Asset Class
Number of
Guest Rooms
WESTERN
3,538
ONTARIO
8,047
Hyatt Regency Vancouver
Travelodge Hotel Calgary Airport
The Fairmont Palliser
Sheraton Suites Calgary Eau Claire
Holiday Inn Calgary
Macleod Trail South
Fairmont Hotel Macdonald
Comfort Inn Edmonton
Travelodge Edmonton South
Comfort Inn Prince Albert
Quality Hotel Regina
Comfort Inn Regina
Hotel Saskatchewan
Comfort Inn Saskatoon
Comfort Inn Swift Current
Comfort Inn Brandon
Delta Winnipeg
Comfort Inn Winnipeg Airport
Comfort Inn Winnipeg South
Holiday Inn Barrie
Barrie
ON Midscale
161
Homewood Suites by Hilton
Burlington
ON Midscale
83
Hilton Garden Inn Toronto
/ Burlington
Burlington
ON Midscale
120
Holiday Inn Burlington Hotel &
Conference Centre
Burlington
ON Midscale
237
Comfort Inn Cambridge
Cambridge ONLimited
81
Comfort Inn Cobourg
Cobourg
ONLimited
60
Comfort Inn Dryden
Dryden
ONLimited
61
Holiday Inn Guelph
Guelph
ON Midscale
136
Staybridge Guelph
Guelph
ON Midscale
120
Comfort Inn Hamilton
Hamilton
ONLimited
59
Holiday Inn Ottawa Kanata
Kanata
ON Midscale
152
Comfort Inn Kanata
Kanata
ONLimited
146
Comfort Inn Kapuskasing
Kapuskasing ONLimited
65
Comfort Inn Kenora
Kenora
ONLimited
75
Comfort Inn Kingston – 401
Kingston
ONLimited
50
Holiday Inn Kingston-Waterfront Kingston
ON Midscale
197
Comfort Inn Kirkland Lake
Kirkland Lake ONLimited
64
Radisson Hotel Kitchener
Kitchener
ON Midscale
172
Staybridge Suites London
London
ON Midscale
117
Holiday Inn Hotel & Suites London London
ON Midscale
143
Delta London Armouries
London
ONFull-Service/Upscale 220
Comfort Inn Newmarket
Newmarket ONLimited
100
Travelodge Airport North Bay
North Bay
ONLimited
100
Holiday Inn Express Hotel & Suites
North Bay
North Bay
ON Midscale
116
Best Western North Bay
North Bay
ON Midscale
130
Holiday Inn & Suites Oakville @BronteOakville
ON Midscale
144
Staybridge Oakville
Oakville
ON Midscale
105
Comfort Inn Orillia
Orillia
ONLimited
78
Les Suites Hotel Ottawa
Ottawa
ONFull-Service/Upscale
83
Ottawa Marriott Hotel
Ottawa
ONFull-Service/Upscale 489
Travelodge Ottawa East
Ottawa East ONLimited
128
Comfort Inn Ottawa East
Ottawa East ONLimited
68
Comfort Inn Parry Sound
Parry Sound ONLimited
60
Comfort Inn Pembroke
Pembroke
ONLimited
60
Comfort Inn Pickering
Pickering
ONLimited
146
Comfort Inn Sault Ste. Marie
Sault Ste. MarieON Limited
79
Comfort Inn Simcoe
Simcoe
ONLimited
61
Travelodge Sudbury
Sudbury
ONLimited
140
Comfort Inn Sudbury East
Sudbury
ONLimited
79
Comfort Inn Sudbury
Sudbury
ONLimited
78
Comfort Inn Thunder Bay
Thunder Bay ONLimited
78
Comfort Inn Timmins
Timmins
ONLimited
89
Quality Suites Toronto Airport
Toronto
ON Midscale
254
Holiday Inn Toronto Midtown
Toronto
ON Midscale
209
Holiday Inn Express Toronto East Toronto
ON Midscale
140
Holiday Inn Express Toronto
Downtown
Toronto
ON Midscale
196
Holiday Inn Toronto Airport East
Toronto
ON Midscale
191
Fairmont Royal York (1)
Toronto
ONFull-Service/Upscale 1,363
Courtyard by Marriott (2)
Toronto
ONFull-Service/Upscale 575
Comfort Inn Waterloo
Waterloo
ONLimited
85
Quality Suites Whitby
Whitby
ON Midscale
104
Vancouver
Calgary
Calgary
Calgary
BCFull-Service/Upscale
ABLimited
ABFull-Service/Upscale
ABFull-Service/Upscale
644
203
405
323
Calgary
AB Midscale
Edmonton ABFull-Service/Upscale
Edmonton ABLimited
Edmonton ABLimited
Prince Albert SKLimited
Regina
SK Midscale
Regina
SKLimited
Regina
SKFull-Service/Upscale
Saskatoon SKLimited
Swift Current SKLimited
Brandon
MBLimited
Winnipeg
MBFull-Service/Upscale
Winnipeg
MBLimited
Winnipeg
MBLimited
151
199
100
219
61
126
98
224
78
73
79
393
79
83
DIVERSIFIED OPERATIONS
HOTEL
MANAGEMENT
DIVERSIFICATION
HOTEL
ASSET CLASS
DIVERSIFICATION
OUTER CIRCLE
Hotel Revenue
Westmont
Fairmont
Marriott (1)
Hyatt
Hilton
OUTER CIRCLE
2015
2014
54%
17%
11%
10%
8%
59%
20%
11%
1%
9%
2015
2014
60%
15%
8%
11%
6%
63%
22%
8%
0%
7%
INNER CIRCLE
Hotel GOP
Westmont
Fairmont
Marriott (1)
Hyatt
Hilton
HOTEL
GEOGRAPHIC
DIVERSIFICATION
Hotel Revenue
Full-Service/
Upscale
Midscale
Limited
OUTER CIRCLE
2015
2014
48%
28%
24%
44%
31%
25%
2015
2014
INNER CIRCLE
Hotel GOP
Full-Service/
Upscale
Midscale
Limited
Hotel Revenue
Western
Ontario
Quebec
Atlantic
2015
2014
37%
34%
17%
12%
32%
37%
18%
13%
2015
2014
38%
35%
14%
13%
35%
36%
15%
14%
INNER CIRCLE
42%
25%
33%
39%
28%
33%
Hotel GOP
Western
Ontario
Quebec
Atlantic
(1)Held through a 20% partnership interest
(2)Held through a 33.3% joint venture partnership interest
(1) Including Delta
12 INNVEST REAL ESTATE INVESTMENT TRUST
AS AT MARCH 24, 2016
Hotel
City
Prov. Asset Class
Number of
Guest Rooms
QUEBEC
2,666
Comfort Inn Alma
Alma
QCLimited
Comfort Inn Ancienne-LoretteAncienne
Lorette
QC Limited
Quality Hotel Montreal – Anjou
Anjou
QC Midscale
Comfort Inn Baie-Comeau
Baie-Comeau QCLimited
Comfort Inn Boucherville
Boucherville QCLimited
Comfort Inn Brossard
Brossard
QCLimited
Comfort Inn Chicoutimi
Chicoutimi QCLimited
Comfort Inn Drummondvillle
DrummondvillleQC Limited
Comfort Inn Gatineau
Gatineau
QCLimited
Holiday Inn Laval
Laval
QC Midscale
Quality Suites Laval
Laval
QC Midscale
Comfort Inn Laval
Laval
QCLimited
Quality Suites Montreal Aeroport Pointe Claire QC Midscale
Hilton Quebec City
Quebec City QCFull-Service/Upscale
Quality Suites Quebec City
Quebec City QC Midscale
Comfort Inn Rimouski
Rimouski
QCLimited
Comfort Inn Rivière-du-Loup
Rivière-du-LoupQC Limited
Comfort Inn Rouyn-Noranda
Rouyn-NorandaQC Limited
Comfort Inn Sept-Iles
Sept-Iles
QCLimited
Delta Sherbrooke Hotel
and Conference Centre
Sherbrooke
QC Full-Service/Upscale
Comfort Inn Sherbrooke
Sherbrooke QCLimited
Comfort Inn Thetford Mines
Thetford MinesQC Limited
Comfort Inn Val D’Or
Val D’Or
QCLimited
59
58
157
60
98
98
78
59
78
176
114
120
161
571
119
79
67
77
60
Hotel
City
Prov. Asset Class
ATLANTIC
Number of
Guest Rooms
1,906
Comfort Inn Campbellton
Campbellton NBLimited
Comfort Inn Edmundston
Edmundston NBLimited
Comfort Inn Fredericton
Fredericton NBLimited
Delta Beausejour
Moncton
NBFull-Service/Upscale
Comfort Inn Moncton Magnetic Hill Moncton
NBLimited
Comfort Inn Moncton East
Moncton
NBLimited
Hilton Saint John
Saint John NBFull-Service/Upscale
Comfort Inn Saint John
Saint John NBLimited
Delta Prince Edward
CharlottetownPEI Full-Service/Upscale
Comfort Inn Charlottetown
CharlottetownPEI Limited
Comfort Inn Amherst
Amherst
NSLimited
Comfort Inn Bridgewater
Bridgewater NSLimited
Comfort Inn New Glasgow
New GlasgowNSLimited
Comfort Inn Sydney
Sydney
NSLimited
Comfort Inn Truro
Truro
NSLimited
Comfort Inn Yarmouth
Yarmouth
NSLimited
Comfort Inn Corner Brook
Corner Brook NLLimited
Quality Hotel Harbourview
St. John’s
NL Midscale
59
120
99
310
58
78
197
59
211
78
60
61
61
60
80
78
78
159
178
58
63
78
DISTRIBUTION BY BRAND
Western
Ontario
Quebec
Atlantic
Total
No. ofNo. ofNo. ofNo. of
No. of GuestNo. of GuestNo. of GuestNo. of Guest
HotelsRooms HotelsRooms HotelsRooms HotelsRooms
No. of% of Total
No. ofGuestGuest
HotelsRoomsRooms
Comfort Inn
8 651 22 1,722 16 1,190 14 1,029 60 4,592 28.4%
Fairmont Hotels & Resorts
2 604 1 1,363(1)
––––
3 1,967 12.2%
Holiday Inn 1 151 9 1,570 1 176 – –
11 1,897 11.7%
Delta Hotels 1 393 1 220 1 178 2 521 5 1,312 8.1%
Quality Hotels/Suites 1 126 2 358 4 551 1 159 8 1,194 7.4%
Travelodge2 422 3 368 ––––
5 790 4.9%
Hilton Hotel––––1 571 1 197 2 768 4.8%
Hyatt1 644 ––––––
1 644 4.0%
Courtyard––1 575(2)
––––
1 575 3.6%
Marriott––1 489 ––––
1 489 3.0%
Holiday Express––3 452 ––––
3 452 2.8%
Staybridge Suites ––3 342 ––––
3 342 2.1%
Sheraton Suites1 323 ––––––
1 323 2.0%
Autograph Collection1 224 ––––––
1 224 1.4%
Radisson Suites––1 172 ––––
1 172 1.1%
Best Western––1 130 ––––
1 130 0.8%
Hilton Garden Inn––1 120 ––––
1 120 0.7%
Hilton Homewood Suites––1 83 ––––
1 83 0.5%
Independent––1 83 ––––
1 83 0.5%
Total
18 3,538 51 8,047 23 2,666 18 1,906 110 16,157 100.0%
(1)Held through a 20% partnership interest
(2)Held through a 33.3% joint venture partnership interest
Full-Service/Upscale 6
2,1885
2,7302
7493
718
Midscale 2 277 21 3,227 5 727 1 159 Limited
10 1,073 25 2,090 16 1,190 14 1,029 18 3,538 51 8,047 23 2,666 18 1,906 166,38539.5%
29 4,390 27.2%
65 5,382 33.3%
110 16,157 100.0%
ANNUAL REPORT 2015 13
OUR BLUEPRINT FOR
BUILDING THE BEST INNVEST
At InnVest, our ultimate goal is to build unitholder value by owning a highquality and diversified hotel portfolio that generates strong, sustainable and
growing returns to our investors with a low risk profile.
Our objective is to own interests in a portfolio of
high quality, city-centre hotels diversified by
geography, asset class and brand, assets that will
outperform in periods of economic growth and be
insulated from declines during economic downturns.
Our focus going forward is to increase our ownership
of full-service, upscale hotels in high barrier to
entry downtown locations in stable markets with
long-term growth potential.
renovations to guest rooms, lobbies, restaurants and
function rooms will serve to grow occupancies and
average daily rates and provide a solid return for
our Unitholders.
Our goal is also to maintain a strong financial position
by further reducing our leverage and interest costs
while extending the maturity of our debt portfolio to
minimize our cost of capital and ensure we have the
resources and flexibility to capitalize on growth
opportunities as they occur.
We will continue to invest in our core properties to
ensure they are competitive in their markets.
Investments in hotel and brand repositioning and
In summary, we believe a high quality hotel portfolio
will deliver high quality growth for our Unitholders.
POSITIVE SUPPLY AND DEMAND DYNAMICS
■ Supply
■ Demand
■ Occupancy (%)
6%
68%
4%
64%
2%
0
60%
–2%
56%
–4%
–6%
Source: STR Inc. / HVS
OCCUPANCY
PERCENTAGE CHANGE
Fundamentals in the
Canadian hotel business
continue to strengthen
with demand outpacing
new supply.
52%
01
02
HOLIDAY INN, LONDON
14 INNVEST REAL ESTATE INVESTMENT TRUST
03
04
05
06
07
08
09
10
11
12
13
14
15
16F
DELTA WINNIPEG
FAIRMONT ROYAL YORK,
TORONTO
BUILDING ON
OUR
VISION
At InnVest, our vision is to
become one of the top-five
performing REITs in Canada by
capitalizing on the talents of our
people, our low cost of capital,
and our proven active property
management to deliver superior
returns from our portfolio of
quality hospitality assets across
the country.
FAIRMONT ROYAL YORK,
TORONTO
Built: 1929
Rooms: 1,363
Function Space: 65,000 sq. ft.
37.9M
$
For a 20% interest
FAIRMONT PALLISER, CALGARY
ANNUAL REPORT 2015 15
Board of Directors
1Independent Trustee
2Audit and Risk Committee
3Investment Committee
4Compensation and Corporate Governance Committee
*Chair of Committee
EDWARD W. BOOMER 1,2,4
Corporate Director
Previous President and Chief Investment Officer of
Partners Real Estate Investment Trust. Mr. Boomer
has over 20 years of experience in commercial real
estate including as the Founder and President of
Reference Realty Inc. Mr. Boomer holds an LLB from
Queen’s University, a Bachelor of Arts (Economics)
from Glendon College and is a Member of the Law
Society of Upper Canada.
DREW COLES
President and Chief Executive Officer,
InnVest REIT
Drew Coles was appointed InnVest REIT’s President
and CEO in January 2015. He previously served as
Vice President, Hotels at Oxford Properties Group,
responsible for its luxury hotel portfolio, and in senior
management positions with Delta Hotels, bcIMC,
Fairmont Raffles Hotels International, General Electric
Capital and Choice Hotels International. He holds
an Honors MBA from Webster University (St. Louis,
Missouri), a BA Economics from Acadia University,
and serves as a Board Member of the Tourism
Industry Association of Canada.
HEATHER-ANNE IRWIN 1,4*
Adjunct Professor of Finance, Rotman School
of Management, University of Toronto
Extensive capital markets experience following roles
with TD Securities (Equity Capital Markets), Nesbitt
Burns (Investment Banking) and Citibank Canada
(Fixed Income). Ms. Irwin has an MBA from the
Schulich School of Business and an Honours Bachelor
of Science in Engineering from Queen’s University.
DANIEL LEWIS 1,3
Co-founder and Managing Partner
Orange Capital, LLC
Nearly 20 years of investment experience in shareholder
activist campaigns, event-driven equities, and
distressed debt investments worldwide. Mr. Lewis
is a former Director of Citigroup Global Special
Situations Group. Mr. Lewis holds a Bachelor of
Science from Cornell University.
JON E. LOVE 1,3
Founder and Managing Partner
KingSett Capital
Founded KingSett Capital, Canada’s leading private
equity real estate investment business co-investing
with institutional and high net worth clients. Former
President and Chief Executive Officer of Oxford
Properties Group. Mr. Love graduated with an
Honours Business Administration from the Ivey
School of Business.
ROBERT McFARLANE 1,2*
Corporate Director
Previously served as EVP and CFO of TELUS
Corporation and was named Canada’s Top CFO in
2007. He led a national team of over 800 professionals
with responsibility for conventional finance functions,
corporate strategy, M&A, ventures investment, risk
management and regulatory and governmental
affairs. Prior to Telus Corporation, Mr. McFarlane was
CFO of startup national wireless carrier Clearnet.
EDWARD PITONIAK 3
Corporate Director
Served as Managing Director of the REIT from
April 2014 to March 2015. Previously served as
President, CEO, and Board Trustee of CHIP REIT, a
leading hotel owner listed on the Toronto Stock
Exchange. In 2007 Mr. Pitoniak led CHIP REIT through
a sale to the British Columbia Investment Management
Corporation (“bcIMC”) in a going-private transaction
worth $1.2 billion.
ROBERT WOLF 1,2,3*,4
Corporate Director
Previously served as CFO of RioCan Real Estate
Investment Trust, Canada’s largest public REIT.
Mr. Wolf provides financial advisory services to
small and medium sized businesses. Mr. Wolf has a
Chartered Accountancy designation, an MBA from
the Schulich School of Business at York University
and a Bachelor of Commerce from McGill University.
Unit Price Information
TOTAL 2015 RETURN
$120
Distributions
Year ended
Declared
December 31, 2015Unit PricePer Unit
$110
High Low
1st Quarter
$6.56 $5.41 $
0.0999
2nd Quarter $
5.93 $
5.12 $
0.0999
3rd Quarter
$5.40 $4.49 $
0.0999
4th Quarter $
5.72 $
4.84 $
0.0999
$100
$90
$0.3996
$80
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
CAUTIONARY AND FORWARD-LOOKING STATEMENTS
Certain financial measures discussed in this report, including GOP, FFO and AFFO, as well as the REIT’s Key Performance Indicators (KPIs), are additional and non-IFRS financial measures of earnings and
cash flow commonly used by industry analysts. Additional and non-IFRS financial measures do not have a standardized meaning and are unlikely to be comparable to similar financial measures used by other
organizations. Definitions and calculations for these measures can be found in the REIT’s Management’s Discussion and Analysis.
Statements contained in this report that are not historical facts are forward-looking statements. These forward-looking statements include statements with respect to assumptions and forecasts of future
results for InnVest. These forward-looking statements are based on current expectations of management and involve risks and uncertainties which could cause actual results to differ materially from those
expressed in the forward-looking statements. These factors are discussed in InnVest’s annual information form, which is available at www.sedar.com. Although management of InnVest believes that the
expectations with respect to such forward-looking statements are reasonable, such forward-looking statements are subject to known and unknown risks and uncertainties and, accordingly, there can be no
assurance that such expectations will prove to be correct. The forward-looking statements included in this report are made as of the date hereof and 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.
16 INNVEST REAL ESTATE INVESTMENT TRUST
DESIGN: CRAIB DESIGN & COMMUNICATIONS WWW.CRAIB.COM PRINTED IN CANADA
■ InnVest REIT
■ S&P/TSX REIT Index
■ S&P/TSX Composite Index
CORPORATE
INFORMATION
FAIRMONT ROYAL YORK,
TORONTO
CORPORATE
OFFICE
STOCK
EXCHANGE LISTING
REGISTRAR AND
TRANSFER AGENT
Royal Bank Plaza
200 Bay Street, Suite 2200
South Tower
Toronto, Ontario M5J 2J2
Toll-free: 1-877-209-3429
Email: [email protected]
Website: www.innvestreit.com
The Toronto Stock Exchange
Trading Symbol: INN.UN
Convertible Debentures:
INN.DB.E, INN.DB.F, INN.DB.G
Inquiries regarding change of
address, registered holdings,
transfers and duplicate
mailings should be directed
to the following:
Computershare Trust
Company of Canada
100 University Avenue, 8th Floor
Toronto, Ontario M5J 2Y1
Phone: 1-800-564-6253
Fax: 1-866-249-7775
AUDITORS
Deloitte LLP
Toronto, Ontario
DISTRIBUTION
REINVESTMENT PLAN
Unitholders may acquire units by
reinvesting cash distributions without
paying brokerage commissions or
administrative charges. For general
information concerning the Distribution
Reinvestment Plan or for a change
of address, please contact the transfer
agent and registrar.
InnVest REIT holds one of Canada’s largest hotel portfolios together with an
interest in Choice Hotels Canada Inc., one of the largest franchisors of hotels
in Canada. InnVest’s portfolio comprises 110 hotels across Canada representing
over 14,500 guest rooms operating under 18 internationally recognized brands.
RESERVATIONS
AUTOGRAPH COLLECTION HOTELS
1-844-324-1672
www.autographhotels.com
HILTON GARDEN INN
1-877-782-9444
www.hgi.com
MARRIOTT
1-888-236-2427
www.marriott.com
BEST WESTERN
1-800-780-7234
www.bestwestern.com
HILTON HOTELS
1-800-445-8667
www.hilton.com
QUALITY HOTEL, QUALITY SUITES
1-800-424-6423
www.choicehotels.ca
COMFORT INN
1-800-424-6423
www.choicehotels.com/comfort-inn
HOLIDAY INN
1-888-465-4329
www.holidayinn.com
RADISSON
1-888-201-1718
www.radisson.com
COURTYARD BY MARRIOTT
1-800-321-2211
www.courtyard.marriott.com
HOLIDAY INN EXPRESS
1-888-465-4329
www.hiexpress.com
SHERATON HOTELS & RESORTS
1-800-325-3535
www.starwoodhotels.com/sheraton
DELTA HOTELS
1-888-890-3222
www.deltahotels.com
HOMEWOOD SUITES HOTELS
1-800-225-5466
homewoodsuites3.hilton.com
STAYBRIDGE SUITES HOTELS
1-877-660-8550
www.staybridge.com
FAIRMONT HOTELS & RESORTS
1-800-257-7544
www.fairmont.com
HYATT REGENCY
1-888-591-1234
www.hyatt.com
TRAVELODGE
1-800-578-7878
www.travelodge.com
www.innvestreit.com