Inovalis REIT Fortifies Finances with Strategic Asset Sale

TORONTO, ON – January 30, 2026 – In a decisive move to strengthen its financial position, Inovalis Real Estate Investment Trust (TSX: INO.UN) has finalized the sale of its underperforming Trio property. The disposition sheds a cash-draining asset and significantly improves the company's debt profile, highlighting a disciplined strategy amid a challenging European office market.

A Calculated Retreat to Strengthen the Core

Inovalis REIT announced the completion of the Trio property's disposition, a transaction that follows a preliminary agreement signed in the fourth quarter of 2025. The property had been a noticeable drag on the REIT's performance, with an occupancy rate of just 40% and a negative contribution to cash flow at the time of its sale.

The proceeds from the disposition were immediately allocated to repay the entire mortgage loan secured by the Trio property, fully discharging the associated financing arrangements. This single transaction has a significant positive impact on the REIT's balance sheet, reducing its overall loan-to-value (LTV) ratio by approximately 5 percentage points. The company's LTV, excluding jointly held properties, now stands at a more robust 61.5%.

This reduction in leverage is a critical step for the Toronto-listed REIT, which specializes in office properties across France, Germany, and Spain. A lower LTV ratio not only signals greater financial stability to investors but also increases the company's flexibility and borrowing capacity for future strategic initiatives. The move aligns with the REIT's public statements on prioritizing balance sheet health and is a tangible outcome of its disciplined asset management approach. The property had been officially reclassified as an "asset held for sale" on the company's books as of September 30, 2025, signaling that this was a premeditated and strategic decision rather than a reactive measure.

The European Office Market Conundrum

The sale of the Trio property is more than just a line item on a balance sheet; it is a case study in the powerful headwinds buffeting the European commercial real estate sector. The property's struggle to maintain tenants, reflected in its low 40% occupancy, is symptomatic of a broader market shift. Across the continent, the rise of hybrid work models has fundamentally altered the demand for traditional office space.

This has created a "flight to quality," where tenants are increasingly abandoning older, less-equipped buildings in favor of modern, amenity-rich, and environmentally sustainable properties. Buildings that lack these features are facing rising vacancies and downward pressure on rents. Inovalis REIT itself acknowledged a "volatile" European real estate market with "limited visibility" in its recent financial reporting, a sentiment echoed by analysts across the sector.

Furthermore, a climate of rising interest rates has made financing more expensive, impacting property valuations and squeezing the margins of property owners. For an asset like Trio, which was already generating negative cash flow, the combination of low occupancy and a challenging financing environment likely made its disposition the most prudent path forward. This move by Inovalis is one that many other portfolio managers are being forced to consider as they re-evaluate assets that may no longer be viable in the post-pandemic office landscape.

'Asset Recycling': A Strategy in Action

The disposition of the Trio property is not an isolated event but a key part of Inovalis REIT's clearly articulated "Asset Recycling Plan." This strategy involves the selective and systematic sale of underperforming or non-core assets to unlock capital, which can then be reinvested into more promising opportunities or used to strengthen the company's financial foundation.

This is a well-trodden path for the REIT. In May 2025, it completed the sale of its Sabliere property for €18.2 million, followed by the disposition of the Baldi property in France for €14.0 million in December 2025. The proceeds from these sales were similarly earmarked for debt reduction and funding capital expenditures on repositioning other assets within the portfolio.

The effectiveness of this culling strategy becomes apparent when looking at the REIT's portfolio metrics. While the total portfolio occupancy was reported at 58.6% as of September 30, 2025, this figure is skewed by the underperforming assets slated for sale. When those properties are excluded, the occupancy rate of the remaining core portfolio jumps to a much healthier 80.2%. This demonstrates that the REIT's core holdings remain strong and that the recycling plan is successfully pruning the portfolio to enhance its overall quality and performance. By shedding assets like Trio, Inovalis is actively shaping a leaner, more resilient collection of properties.

Charting a Course for a Leaner Portfolio

With the sale of Trio, the Inovalis REIT portfolio now consists of 11 office properties. The company's focus is shifting towards maximizing the value of these remaining assets and ensuring they are positioned to thrive in the new office market reality. The capital freed up from recent sales provides the dry powder needed for strategic reinvestment, whether in the form of modernizing existing buildings, adding sustainable features, or other value-add initiatives.

For instance, the REIT recently celebrated achieving a LEED Platinum certification for its Delgado property in Spain, which boasts 100% occupancy, underscoring the success of high-quality, sustainable assets. In contrast, properties like the Gaïa building in France, with 65% occupancy, may be candidates for the kind of capital expenditure and repositioning that this asset recycling strategy enables.

As stated by the REIT's management, the overarching goal is to "strengthen our portfolio and unlock long-term value" while ensuring "financial resilience and adaptability." The selective monetization of certain properties is the engine driving this transformation. By converting underperforming assets into financial flexibility, Inovalis REIT is not just weathering the current market storm but is actively charting a course toward a more focused, stable, and profitable future.