(Bloomberg) --Real estate manager KingSett Capital Inc. suspended payments to investors in a large Canadian property fund, saying it needs to hoard cash as it deals with the consequences of the sector’s long slump.
The Toronto-based firm said holders of the KingSett Canadian Real Estate Income Fund won’t get any income distributions for the next year, nor will they be able to redeem their units. The private fund has a gross asset value of C$4.9 billion ($3.5 billion), which includes major office properties across Canada.
“Our buildings are full, and our tenants are paying rent,” KingSett Chief Executive Officer Rob Kumer said in an emailed statement. But it has been difficult to sell properties to raise money with interest rates still elevated and economic growth weak.
“Unfortunately, we have seen downward pressure on property values and illiquidity in the market,” Kumer said. “In this environment, the right thing to do is to retain liquidity and fortify our balance sheet so that we are well positioned to generate growth in the recovery that will follow.” The decision was reported earlier by the Globe and Mail.
The fund will restart distributions in December 2025, he pledged.
KingSett is considered one of Canada’s top private real estate companies, managing more than C$18 billion including high-end properties such as Toronto’s Scotia Plaza — the company’s crown jewel and longtime headquarters of Bank of Nova Scotia. It also owns Vancouver’s Arthur Erickson Place, named after the famous Canadian architect who designed it.
“It’s been a perfect storm for real estate,” said Scott Morrison, the founder of Toronto-based Wealhouse Capital Management, which manages over C$1.5 billion on behalf of family offices and high net worth individuals, but does not have any money with KingSett.
“It’s economics 101. There’s more sellers than there are buyers,” he said.
Morrison said that many limited partners in real estate-focused private equity firms are asking for their money back right now, just as the properties themselves have become harder to sell. At the same time, the cost of owning real estate, from upkeep to tenant amenities, has risen, making monthly distributions to investors harder to maintain.