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Canadian private real estate company KingSett Capital is halting income distributions to investors in its $3.5B property fund until December 2025.
Redemptions will also be halted, Bloomberg reported. The move comes as the private real estate manager seeks to accumulate cash so the fund can weather challenges in the real estate sector.
“Unfortunately, we have seen downward pressure on property values and illiquidity in the market,” KingSett CEO Rob Kumer told Bloomberg by email.
Kumer said the fund's buildings, which include major Canadian office properties, are full and receiving rent, but he also acknowledged the fund was having trouble selling properties in a high-interest-rate environment, which in turn creates issues with raising cash.
“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,” Kumer said.
The Bank of Canada has cut benchmark rates four times since June. While the most recent cut in October brought the base rate to 3.75% and was anticipated by some in the CRE industry to restart investor activity and transactions, it is unclear if that has taken off yet.
In the U.S., the effects of Federal Reserve rate cuts haven't yet materialized for many commercial real estate borrowers.
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