Last week, InnVest REIT (TSX: INN-U, OTC: IVRVF) announced that it had received an offer from Bluesky Hotels to acquire the REIT in an all-cash deal for C$7.25 per unit. This represents a 37% premium to the 30-day average price before the offer was made. The offer is supported by important shareholders, top management and the board.

Unitholders will vote on the deal at the annual meeting on June 28, and the offer needs the support of 66.6% to pass. Regulatory approvals are also required in accordance with the Invest Canada Act and the Competition Act. If all goes according to plan, the deal is expected to close by the third quarter.

The premium offered is rather substantial compared to our fair value estimate of C$6.30, or US$4.90. Although management has done a good job of enhancing the portfolio over the past two years, we think it’s unlikely that a better offer will emerge.

InnVest’s unit price has jumped on the news, and now trades just shy of the offer price. Therefore, we’ve decided to sell our units to lock in our gain. InnVest is a Sell.

Investors who intend to hold their units through the deal’s close or time the sale of their units should note that the distribution will continue to be paid monthly, with the next ex-dividend date on May 27.