Costs have risen for the industry and maintaining liquidity is key
Investors in a $4.9 billion Canadian real estate fund will be stuck with their investment and have to remain patient for payments for at least the next year.
Fund manager KingSett Capital Inc. said Thursday that it was suspending distributions from its Canadian Real Estate Income Fund and investors will be unable to sell their units. Payments are expected to be restarted in December 2025.
The firm, which owns properties including major Canadian office buildings such as Scotia Plaza, the home of Scotiabank, said the foundations of its business are solid, but costs have increased and the market is not conducive to selling at the current time due to interest rates and economic concerns.
“Our buildings are full, and our tenants are paying rent,” KingSett CEO Rob Kumer told BNN Bloomberg in an emailed statement. “Unfortunately, we have seen downward pressure on property values and illiquidity in the market.”
Kumer added that retaining liquidity and shoring up the firm’s balance sheet is the prudent approach to ensure it can seize growth opportunities when the market inevitably recovers.
Recently, Keith Reading, Morguard’s director of Research, shared his insights on the Canadian CRE market with WP. He said that a strong portfolio is key to riding out challenges.
“It's times like this, when things are a little rocky, a little challenging, when it pays to own good real estate,” he said. “When you come out of a down economic period, good real estate tends to carry you through those challenges and you come out the other side in a little better condition.”
Cash flow is king
In an interview in August, Kumer talked about the importance of cash flow, following a recent injection of investor cash to the $18 billion AUM Toronto firm.
“The core of real estate investing is cash flow and that’s where I’m focused today because the capital appreciation, I don’t know where it’s going,” he said.
KingSett recently filed a petition to the BC Supreme Court regarding almost $86 million it says it is owed by developer Thind Properties Ltd. A receiver has been appointed to take control of a project in Surrey, as reported by Business in Vancouver, after interest payments were missed and KingSett became concerned about the developer’s ability to meet its borrowing commitments to the firm.
