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Canada  + Cross Border News + Ontario  + Apartments  | 
Kingsett Capital has commenced construction on a large Toronto mixed-use development that includes affordable housing.

Kingsett Looks to Invest $2.5B in ‘Mispriced’ Market

Kingsett Capital is looking to invest $2.5 billion in what it deems “mispriced” Canadian office and retail real estate sectors.

“We’re in a spot where, in my view, the risk has been mispriced in office and retail in Canada,” Rob Kumer, Kingsett’s new CEO, told Bloomberg. “I like the idea today of buying assets that are high cash flow.”

Office property valuations have declined due to high interest rates and the remote-work trends, while retail asset values have felt the effects of the COVID-19 pandemic that severely reduced mall traffic, as well as disruptions caused by increased e-commerce. But Kumer told Bloomberg that Canadian office and retail investors are insulated from distress situations that have hampered lenders from Japan to New York.

In Canada, he explained, many commercial mortgages are recourse loans that allow lenders to seize and sell an owner’s other assets if the value of a mortgaged property falls below the debt owed.

“There’s going to be some pressure on valuation metrics and we’re going to have to sort it out,” Kumer told Bloomberg. “But because Canada is more conservatively levered, it’s more institutionally held, it’s all recourse — I think these things will drive a much more stable market and landlords will be able to sort themselves out.”

The angst over office values overlooks the healthy income that the assets are generating, and malls are still performing well, he added.

“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 told Bloomberg. 

Kumer expects more office and retail assets to be put up for sale this year, but owners are still reluctant to sell, he noted. He indicated that Toronto-based Kingsett has been unable to reduce the bid-ask gap while pursuing deals.

“The right value is where sides come together and agree on price, and we haven’t quite found that yet,” he told Bloomberg.

Kumer, a longtime Kingsett executive, became CEO in January as the company’s legendary majority owner Jon Love took on the role of executive chair.

Image: BDP Quadrangle


Inside The Story

Kingsett CapitalRob Kumer

About Monte Stewart

Monte Stewart serves as Content Director - Canada for Connect Commercial Real Estate. Based in Vancouver, British Columbia, Monte provides daily news coverage of major Canadian commercial real estate markets, including Vancouver, Toronto, Montreal and Calgary. He has written about the real estate sector for various media outlets and Avison Young since the early 2000s. In addition, he has covered sports, general news and business for several leading wire services and publications, including The Canadian Press, The Associated Press, The Calgary Herald, The Globe and Mail, Research Money, The Daily Oil Bulletin, Natural Gas World and The Toronto Star. Monte is active in his community as a youth basketball coach and raises funds for such charitable causes as Movember.

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