InnVest REIT

Proposed amendment

It is proposed that an extraordinary resolution be passed, to:

(a) increase the rate of interest payable per annum on the Series G Debentures from 5.75% to 6.25%; and

(b) increase the conversion price for each Unit to be issued upon the conversion of one Series G Debenture from $5.80 to $8.00 per Unit.

Offer

InnVest is offering to purchase up to $28,750,000 of the principal amount of the issued and outstanding Series G Debentures at a purchase price of $1,060 in cash (subject to applicable withholding taxes, if any) per $1,000 principal amount of Series G Debentures., representing a premium of $44 to the volume-weighted average price of the Series G Debentures on the TSX over the 20 trading days ending June 16, 2014. Debentureholders whose Series G Debentures are taken up will receive all accrued and unpaid interest to such date, equal to $529,905.82 in aggregate or $18.43 per $1,000 principal amount of Series G Debentures. If the principal amount of the Deposited Debentures exceeds $28,750,000, pro-ration will apply. It is a condition to the REIT taking up and paying for deposited Debentures that the extraordinary resolution in respect of the indenture amendments is passed.

Canadian tax consequences

Amendments. "Canadian courts have held that substantial changes to the fundamental terms of a debt instrument can result in the disposition of an existing debt obligation and the creation of a new debt obligation. It is not certain whether the Indenture Amendments would result in a disposition of the Series G. Debentures for Canadian income tax purposes. Counsel is of the view, based in part on information provided by the REIT, that the Indenture Amendments should not result in the creation of a new debt obligation."

Take-up

"A Resident Holder who disposes of Series G Debentures pursuant to the Offer will be considered to have dispose of such Series G Debentures for proceeds of disposition equal to the Offer Price (other than the portion of the Offer Price received as interest, including any premium deemed to be interest as described below)."

Part XIII tax

"By virtue of the fact that the Series G Debentures are convertible into Units of the REIT, there is a risk that both (i) the amount of the Offer Price that exceeds the principal amount of the Series G Debentures (the "Excess"); and (ii) all interest paid or deemed to be paid to a Non-Resident Holder in connection with the Offer could be considered to be participating debt interest, in which case Canadian withholding tax would apply. It is at present unclear whether the CRA would consider the Excess and any other interest paid or deemed to be paid on the Series G Debentures to be participating debt interest, or whether a Canadian court would agree with the CRA's position. As a result there is a risk that both (i) the Excess; and (ii) all interest paid or deemed to be paid to a Non-Resident Holder in connection with the Offer could be subject to Canadian withholding tax."