KingSett Capital Inc., one of the country’s most experienced commercial real estate investors, has halted redemptions and distributions from its flagship Canadian fund as it navigates persistent industry woes.
KingSett told investors in its Canadian Real Estate Income Fund about the changes earlier this month and addressed the matter in-person during a meeting at its red granite Scotia Plaza office tower in downtown Toronto on Wednesday.
Investors in the fund, which has $1.9-billion in equity and a total value of $4.9-billion including debt, will not be able to cash out of the fund or receive a cash distribution for the next year. Investors were also told that KingSett wants to pay down debt and has tried to sell assets to generate cash, but there has been little interest from large investors who used to snap up office towers and industrial properties as soon as they hit the market, according to two sources familiar with the meeting.
The Globe and Mail is not naming the sources because they were not authorized to speak publicly about the matter.
In an e-mailed statement, KingSett chief executive Rob Kumer confirmed the changes for one year but added the fund has committed to restart distributions on Dec. 15, 2025.
KingSett’s redemption and distribution freeze echoes similar moves by other large private real estate investors, including Romspen Investment Corp. and Hazelview Investments. Romspen has now halted its redemptions for two full years and has cut its distribution multiple times. Hazelview, meanwhile, has halted redemptions on its $1.3-billion Four Quadrant fund twice in the same year.
What makes KingSett’s decision stand out, however, is its reputation and client base. Founded by Jon Love, KingSett has an elite reputation and many of its investors are big figures on Bay Street as well as family offices and institutions. Romspen, meanwhile, has long marketed to a wide range of retail investors.
KingSett’s Canadian Real Estate Income Fund also largely owns assets such as office towers that generate cash flow, whereas Romspen and Hazelview often lend to development projects.
The commercial real estate industry has faced difficulties since the height of the COVID-19 pandemic because remote work reduced demand for office space, leading to lower valuations for office buildings, and lockdowns limited how frequently shoppers could visit retail stores in malls and strip plazas. More recently, the rapid rise in interest rates in 2022 and 2023 increased the cost of borrowing and made it harder for the real estate industry to operate.
In his e-mailed statement, Mr. Kumer said KingSett’s buildings are full and its tenants are paying rent. He also called the firm’s property operating results constructive. “Unfortunately, we have seen downward pressure on property values and illiquidity in the market,” he wrote. “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.”
KingSett initially limited investor redemptions from the Canadian Real Estate Income Fund LP (CREIF) and also reduced distributions in early 2023, telling investors that it had devised a new formula that linked the distribution to cash flows. Throughout the year, KingSett also asked CREIF investors to agree to invest more in the fund if needed, something known as capital commitments.
KingSett has since used about half of the capital commitments, but in the second quarter of this year, the firm warned investors that it needed to reassess redemptions and distributions.
David Ryan, a spokesperson for KingSett, said the capital raised was to be used to invest in what it called “accretive opportunities, not solely to repay debt.” He said KingSett started a program last year to sell non-core assets and that it was making progress.
“However, property liquidity today is challenging, especially at scale. When selling assets, we look to balance execution with realizing fair value,” Mr. Ryan said.