I like Jeff Snider’s podcasts and in this one he spends the first half talking about Canadian real estate investment funds that are starting to restrict payouts. Given that Canadian real estate values are crashing, if they don’t halt outflows the funds could quickly become insolvent. The Bloomberg article he quotes is behind a paywall, but he conveniently scrolls through it so you can read the whole thing.
“Stung by a deep downturn in the country’s housing market, many of the funds have restricted cash distributions, client withdrawals, or both in a process the industry calls gating. Often the companies don’t say when access will resume, and about 30 billion Canadian, about 21.7 billion US equivalent. Almost 40% of the 80 billion Canadian invested in such funds is now locked up.”
I’m hearing that construction activity in Ontario is way down (this from a relative with major ties in the construction industry).
When is Carney gonna start on the 2M(?) new housing units??
That’ll have to wait until Justin’s millions of trees mature.
This not completely out of the ordinary. Real Estate funds are intended to be safer long-term investments, and to make them such they protect themselves in down markets. Investors are made to sign a form accepting the blackout periods and the reason for them (every advisor should do this). The last time there was a prolonged black period was Covid. The real estate fund is used to diversify lower risk portfolios. I would imagine that the funds will not re-open until we see the housing market stabilize and begin to recover (I wouldn’t expect that in the near term as the poor economy has not truly affected the market and will do after–I believe the majority of the losses thus far are with a drop in foreign investors and immigration).
The market in my area has certainly slowed, houses would usually sell in days to weeks have been sitting on the market for months, some, the agreements have been terminated with no re lists. I use an app that allows one to go back to historical data for sales, etc. some houses have been reduced to below what they sold for during covid, even after renovations, people are LOOSING money on housing, but I believe that was just the bubble breaking, as the prices of houses in my area skyrocketed, double or triple the prices pre covid. During covid, I estimated that 40% of all the houses in my area, changed hands, some having been owned for 30 years or more!!
There are now lots of failing new projects, first the one that was supposed to go in at the Old Christie Cookie plant down by the Lakeshore, was supposed to be 40,000 units in total, plus a new road and new transit station, now pushed back at least 5 years. Then the Clove sold less than 10% of their pre-sales, and cancelled the project. Yesterday, Menkes cancelled their redevelopment for Filmores, because of lack of sales.
I used to like him until gold reached something like $4,200 and he did a video telling people to sell all their gold!
There is someone he partners with, I think, named Steven Van Meter, who on the same day also told people to sell all their gold.
Of course the next step is to invest some of the money in their course or system and they will offer you suggestions on what to do with the rest of the money.
Why does this story sound JUST like a Bernie Madoff fraudulent pyramid investment scheme?