UPDATE 1-InStorage says offer is significantly discounted

(Adds details)

TORONTO Oct 20 (Reuters) - InStorage Real Estate Investment Trust IS_u.TO maintained that a C$91-million hostile bid by Canadian Storage Partners was a "significant" discount to trading values prior to recent market turmoil.

Even so, the trust, which owns and operates a portfolio of self-storage warehouses, still held off on making a recommendation to its unitholders until a review has been completed and again urged its unitholders to take no action.

InStorage said the offer represented a significant 28.9 percent discount to the one-year weighted average trading price for InStorage's trust units.

Last week, Canadian Storage Partners, a subsidiary of the U.S.-based TKG-StorageMart group, said it will offer C$3.75 a unit to buy the rest of the fund that it does not already own, shortly after increasing its stake.

The deal is worth about C$91 million, based on the company's 24.28 million outstanding units as of Oct. 3, according to Reuters data.

The trust said the offer values the InStorage portfolio at just over C$110 per square foot, well below the C$143 per square foot recognized on its balance sheet. Furthermore, it costs about C$155 per square foot to develop self-storage facilities in Canada, the trust said.

InStorage's special committee said it believed the units could rise more than what is reflected in the unsolicited offer because the REIT has a strong portfolio that will see cash flow grow in the long term.

The trust said Canadian Storage had paid a "considerably" higher average price of about C$5.50 per unit for units acquired between April 15 and October 8. That excludes the stake acquired after agreeing with money manager Sentry Select last week to acquire its 2.38 million units of InStorage at C$3.75 per unit.

Canadian Storage was not immediately available for comment.

InStorage units were up 2.5 percent at C$3.64 on the Toronto Stock Exchange. The units have been on a steady decline since 2007, but popped in higher-than-usual volume since the Canadian Storage offer was made public.

($1=$1.19 Canadian) (Reporting by Ka Yan Ng; Editing by Frank McGurty)