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File photo of Jon Love, Managing Partner, KingSett Capital.Tibor Kolley/The Globe and Mail

An unexpected peacemaker has emerged to help end the short, sharp battle over the future of InnVest Real Estate Investment Trust.

The REIT said Thursday that it had settled with the activist investor who had been demanding change at Canada's biggest publicly traded hotel owner. The surprise twist is the appearance of Canada's largest real estate private equity firm, KingSett Capital, which had been a quiet shareholder of InnVest and helped broker the deal.

Under the settlement with InnVest and Orange Capital LLC, InnVest's board will be remade, the REITs management will become internal to save costs, the company will get a full-time chief executive officer and KingSett will be on tap to provide future capital. In return, Orange is ending its bid for a special meeting to toss out the board.

Orange went public with its plan to remodel InnVest only six weeks ago. The company's shares had been laggards, the distribution had been repeatedly cut and the activist saw an opportunity. The goal was to install a new board, sell underperforming hotels and boost the stock. Then the company could become an acquisition vehicle.

Almost immediately, large institutional shareholders of InnVest came out in public support of Orange, meaning that InnVest would likely have to bend. Behind the scenes, KingSett revealed a seven per cent stake and also started to seek a settlement. KingSett is known as a peacemaker, and that's the role it played.

Settling "eliminates the need for a costly proxy campaign and removes market uncertainty," said Laurence Geller, the InnVest trustee who headed the special committee of InnVest's board charged with dealing with the activist.

KingSett has about $5-billion under management. The company's head, Jon Love, is known to avoid situations that are hostile. His appearance on the scene usually signals a friendly resolution. In last year's hostile takeover bid for Primaris Retail REIT, KingSett emerged as part of the group of friendly white knights that ended up buying the company.

The settlement will move management of InnVest from an external manager known as Westmont Hospitality later this year, at no cost to InnVest. Westmont's contract to manage hotels owned by InnVest will also be updated to change the way Westmont is paid. The REIT will also immediately start to speed up its sale of assets that aren't deemed key.

KingSett, the biggest real-estate private equity firm in Canada, is likely to play a key role. The firm has agreed to provide debt financing, and may be a buyer for assets that InnVest wants to sell.

"At the start of this process we sought certain changes to better align the REIT manager's interests with unitholders. We met these objectives and believe this Settlement will benefit all InnVest unitholders," Daniel Lewis, Managing Partner of Orange Capital, said in a statement. "During these last few weeks it became clear that all parties, including the special committee, Westmont, and KingSett Capital, wanted to work together in good faith to reach a constructive resolution."

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