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Canadian REIT sold to Hong Kong-backed company

The flow of capital coming out of China and into foreign hotel holdings continued on Wednesday when Bluesky Hotels & Resorts Inc., a closely held Candian company backed by capital from Hong Kong, agreed to buy Toronto-based InnVest Real Estate Investment Trust and its diversified 109 hotel portfolio for US$1.6 billion.

Bluesky will pay C$7.25 a share, a 33% premium to Tuesday’s closing price of C$5.47, including debt, to take ownership of a 14,500-room portfolio that ranges from the Toronto’s Fairmont Royal York Hotel (along with majority owner KingSett Capital, a 29% shareholder in InnVest), to a Marriott in Ottawa and a 50% stake in Choice Hotels Canada Inc.

“We are impressed with InnVest’s hotel assets and its management team,” Bluesky CEO Li Chen said in the statement. “This transaction is an investment that will establish a global platform from which Bluesky will continue to pursue growth opportunities in North America.”

Drew Coles, who will continue in Toronto as the president and chief executive of InnVest, said, “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 deal, expected to close in the third quarter, has received support from InnVest’s biggest shareholders, Orange Capital LLC and KingSett Capital.

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