KingSett Capital has suspended payments to investors in its Canadian Real Estate Income Fund, citing the need to conserve cash as the property market weathers a prolonged downturn.

The Toronto-based real estate manager announced that income distributions for the C$4.9 billion fund will cease for the next year, and investors will not be able to redeem their units. The fund’s assets include significant office properties across Canada.

The Globe and Mail originally reported KingSett’s decision while not identifying its sources because they were not authorized to speak publicly about the matter. But KingSett CEO Rob Kumer confirmed the company’s decision to both the Globe and Bloomberg.

“Our buildings are full, and our tenants are paying rent,” said Kumer in an emailed statement to Bloomberg. However, he noted that elevated interest rates and weak economic growth have made it challenging to sell properties and raise cash.

“Unfortunately, we have seen downward pressure on property values and illiquidity in the market,” Kumer added in his statement to Bloomberg. “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 pledged that distributions would resume in December 2025.

The move underscores the challenges facing Canada’s commercial real estate market, particularly the office sector, which has been hit hard by rising borrowing costs and a slowdown in property transactions. KingSett, one of Canada’s leading private real estate firms, manages more than C$18 billion in assets, including high-profile properties such as Toronto’s Scotia Plaza and Vancouver’s Arthur Erickson Place.

“It’s been a perfect storm for real estate,” Scott Morrison, founder of Toronto-based Wealhouse Capital Management, told Bloomberg.

Wealhouse oversees about $1.5 billion in capital but has no investments with KingSett.

“It’s Economics 101. There’s more sellers than there are buyers,” Morrison told Bloomberg.

He told the wire service that limited partners in real estate-focused private equity funds are increasingly asking for their money back just as properties become more difficult to sell.

At the same time, the rising costs of owning real estate, from maintenance to tenant amenities, are squeezing monthly distributions to investors.

But Kumer expressed optimism about the long-term prospects for recovery, telling Bloomberg that the company’s decision to retain cash would position it for future growth. The fund will resume distributions in December 2025, he told the Globe and Bloomberg.