(Bloomberg)—Canadian real estate lender Romspen Investment Corp. has halted redemptions on its largest fund after a number of borrowers stopped making payments.
The Toronto-based firm will “temporarily defer payment” of redemption requests until it’s clearer when borrowers will repay the loans and the fund can get cash from asset sales, according to a letter to investors dated Nov. 8. “Loan payoff activity remains suppressed.”
The Romspen Mortgage Investment Fund had C$2.8 billion ($2.1 billion) invested in 134 mortgages at the end of June, about evenly divided between Canadian and US projects.
Romspen, which is backed by New York-based TIG Advisors, is an established specialty manager of private mortgage funds, providing pre-development, construction and other loans for commercial and residential projects. It’s among the largest private players in that business in Canada.
“Please be assured that we are working diligently to expedite a number of these portfolio transactions and remain confident in the underlying value of the fund’s assets,” Romspen said in the letter, which was signed by eight trustees. “In many cases, however, such transactions involve coordinating the interests of a number of independent third parties, who are also affected by the present market uncertainties.”
The nation’s real estate market has been roiled by this year’s aggressive rate increases and rising commercial vacancies in some cities, including Toronto. Romspen has cut back on its dealmaking as a result, Managing Partner Derek Jenkin told Bloomberg last month.
To preserve liquidity, the firm created a “runoff pool” for investors who want to get their money out as assets are sold. But that didn’t dampen redemption requests, according to the letter, which said the firm may take further measures if conditions worsen.
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