September 23 2025

Private Real Estate Cracks Widen: Gold Is the Last Safe Haven

admin Banking Crisis, De-Risking, Financial Industrial Complex, Great Financial Confiscation, Opinion, Precious Metals / Gold, Real Estate, Sovereignty, The Canadian Corner, The Great Reset

By Peter J. Merrick, TEP® and Adrian C. Spitters, CFP®, co-authors of the international bestseller It Starts With Gold™ and the forthcoming book Guns, Gold & Land™

This analysis continues a series of long-form investigations published in The Merrick Spitters Reset Report™

⚠️ Disclaimer This article is an opinion piece intended for educational purposes only. It is not investment, legal, or financial advice. Readers should consult a qualified professional before making financial decisions. The authors may hold positions in precious metals or related securities.

The Mirage of Private Real Estate Stability

For years, Canadians have been told that private real estate offers diversification, stability, and smoother returns compared to the public markets. Wealth managers and private real estate investment trusts (REITs) reinforced the narrative that because valuations were appraised quarterly rather than marked-to-market daily, investors could sleep more easily.

It sounded comforting. But what seemed like stability was often little more than delayed recognition of stress. When the public market reprices instantly and the private market holds valuations steady, the gap widens until reality forces itself in. That is exactly what we are now witnessing.

The illusion of stability is giving way to cracks in the foundation. Distribution cuts, redemption delays, and price slashing by developers are sending signals that can no longer be dismissed as temporary blips. What once seemed like isolated events are becoming structural shifts. For investors, these cracks are not just financial. They carry systemic consequences for banks, pensions, and households alike.

A Market That Has Turned

The Canadian housing story has long been rooted in one direction: up. Rising values were not just a market trend, they became part of the national psyche. Canadians used home equity to fund renovations, investments, and even retirements. Policymakers leaned on construction and real estate as pillars of GDP growth.

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But cycles always turn. Higher borrowing costs, falling rental yields, and changing demand for office space are converging into a structural reset. This reset is forcing both developers and private REITs into choices that reveal the underlying fragility.

Some public REITs have already adjusted. Tricon Residential, once a prominent player with deep U.S. housing exposure, was ultimately taken private in 2024, showing how market pressures can force strategic exits. Meanwhile, certain private funds have reported positive returns, some claiming gains of 10 to 15%. The divergence is glaring.

It raises a question every investor should be asking: are private funds truly immune, or are valuations being smoothed until the pressure can no longer be contained? Managers have an incentive to smooth valuations to retain investor confidence, protect fundraising efforts, and avoid redemption spirals. But these temporary buffers cannot hold forever.

Redemption Promises Under Stress

One of the great selling points of private real estate has been the promise of redemption windows, usually quarterly or semi-annually. Investors were told they could request liquidity within a set period, providing a measure of flexibility not often seen in traditional private equity structures.

But those promises are being tested. Across Canada, multiple private REITs have announced delayed or reduced redemptions. The language in investor notices often emphasizes prudence and long-term stability. Yet for the investor who needs access to their money, the message is clear: your cash is trapped.

This is not theoretical. It has already happened. In practice, redemption suspensions often take the form of queues, pro-rata payouts, or indefinite freezes. For an investor relying on steady cash flow, these mechanics transform a supposedly liquid investment into a locked box.

Romspen: Frozen Since 2022

Romspen, one of Canada’s largest private commercial mortgage lenders with approximately $3 billion in assets under management, froze investor redemptions in November 2022. The freeze locked up capital for more than 7,000 investors, many of whom were relying on quarterly distributions for retirement income or business reinvestment.

Some investors have now been waiting nearly two years with no clarity on when their funds will be released. The promise of liquidity has been replaced by silence and frustration. Romspen’s case demonstrates that when redemptions are frozen, ordinary investors bear the brunt of the pain.

Trez and KingSett: The Pattern Widens

The strain has not been limited to Romspen. In August 2025, Trez Capital Mortgage Investment Corp., which manages roughly $4.5 billion across its mortgage vehicles, halted redemptions from five of its funds. Investors were told their requests could not be honoured, underscoring how quickly market stress can overwhelm even seasoned managers.

A year earlier, KingSett Capital Inc., one of the country’s most experienced commercial real estate investors with more than $15 billion under management, halted both redemptions and distributions on its flagship Canadian real estate income fund. Thousands of investors suddenly found themselves cut off from both income and liquidity. KingSett has stated plans to restart distributions in December 2025, but the freeze highlighted how even industry veterans are not immune to systemic stress.

Romspen, Trez, and KingSett reflect three different faces of the same problem. Romspen represents commercial mortgage lending stress, Trez shows the vulnerability of mortgage pools, and KingSett illustrates that even institutional-grade managers can be forced into defensive moves. Together, they demonstrate that redemption risk is not isolated. It is widespread.

Blackstone: A Global Case Study

The world’s largest alternative asset manager has faced the same problem. Blackstone’s $69-billion Real Estate Income Trust began capping redemptions in late 2022 after wealthy families and institutions sought to withdraw billions. BREIT later reported that it met all redemption requests for the first time in February 2024, showing how conditions can shift but the fact remains that even the largest players can impose gates when stress builds.

Even with strong reported occupancy and income growth, redemption requests exceeded the limits BREIT had set. Investors were shocked to discover that the supposed liquidity was conditional. For many institutions, the psychological blow was as damaging as the financial one. The lesson was clear: if Blackstone could gate liquidity, any manager could.

These precedents matter. When giants like Blackstone, Romspen, Trez, and KingSett restrict access, it signals that liquidity stress is not confined to weak players. It is systemic. Liquidity stress is only one vector; project and construction exposure adds a second, often hidden, risk channel.

Development Risk in Disguise

Private REITs often highlight their value-add strategies, buying, improving, and developing assets to create long-term wealth. On paper, it looks compelling. In practice, it exposes investors to risks far greater than simple ownership.

Development projects carry permitting hurdles, cost overruns, and financing challenges. If the market softens during construction, what looked like a profitable deal can turn into a loss overnight. This is a form of hidden leverage: even if debt levels appear moderate, exposure to unfinished projects multiplies risk.

The collapse of Vancouver-based developer Coromandel is a prime example. The firm borrowed heavily, expanded quickly, and sought creditor protection under the CCAA in February 2023. Subsequent court proceedings placed parts of its portfolio into receivership. For partners and investors, the losses were not hypothetical. They were real.

Private REITs with exposure to development pipelines face amplified risk. When markets rise, the upside looks spectacular. When markets fall, the downside can be devastating.

Greenpark Homes: Unverified Reports

Perhaps the most striking sign of change came not from a fund but from a developer with deep roots in Canada’s housing market.

Industry rumours and commentary circulating on YouTube channels and real estate forums alleged that in 2023 Greenpark Homes cut condo prices in Oakville, Ontario by more than 40% from around $1,100 per square foot to roughly $675 per square foot to clear remaining inventory.

These claims have not been confirmed by mainstream outlets or primary documents. They are included here because investors and developers often respond to rumours, adjusting behaviour even when hard evidence is lacking. The broader point is clear: discounted units can sell quickly at lower valuations, and even speculation of price cuts can reset local benchmarks. This example is illustrative and not presented as a verified fact.

Perception itself can move markets. Even the suggestion of steep discounts pressures appraisers, spooks lenders, and sets new expectations for buyers.

The Contagion Effect

Real estate markets are interconnected. When one major developer cuts prices, appraisers must adjust. Lenders revalue collateral. Investors lose confidence.

This cascading effect can turn a single pricing decision into a systemic event. The Greenpark repricing, whether real or rumoured, forced the hand of competitors, reshaped appraisals, and sent shockwaves through lenders and funds.

For private REITs, the implications are stark. Distributions are often funded by valuations and cash flows that assume higher asset prices. When those assumptions collapse, the first response is to gate redemptions. Investors who thought they were holding a steady, income-producing asset suddenly discover they are locked in a liquidity freeze.

Contagion does not stop there. Lower valuations ripple to banks, then to pensions, and eventually to households. Each step magnifies the original shock.

The Bigger Picture: Banks, Pensions, and Stability

Banks Under Pressure

Canada’s Big Six banks are heavily exposed to mortgages, construction loans, and commercial real estate lending. When valuations fall, collateral weakens. When developers slash prices, loans become riskier. When borrowers default, the losses accumulate.

Canadian mortgages are generally full-recourse, meaning lenders can pursue borrowers beyond the value of the home. Alberta and Saskatchewan provide limited anti-deficiency protections under specific conditions, but these exceptions are narrow. Borrowers should confirm the rules that apply to their specific loan and province. This framework protects institutions in the short term, but it risks pushing households into long-term financial ruin.

Pension Funds at Risk

Canada’s largest pensions maintain meaningful real estate allocations. CPP Investments reported about 12% in property, Ontario Teachers’ noted a –0.7% one-year return in real estate in 2024, and OMERS acknowledged that valuations in parts of its office portfolio had weighed on results.

But reality is cutting in. OMERS reported write-downs on parts of its office portfolio in 2023 and 2024. CPP has flagged underperforming assets, while Ontario Teachers’ acknowledged weaker returns from property holdings in its 2024 annual report. When valuations fall by 20, 30, or even 40%, the paper gains evaporate. These write-downs directly threaten the retirement security of millions of Canadians.

Bank of Canada Warnings

The Bank of Canada has echoed these concerns. In its 2024 Financial System Review, the central bank highlighted that household credit-market debt sits around 175%–180% of disposable income, among the highest ratios in the G7. It specifically warned that elevated household debt and stretched real estate valuations leave the financial system vulnerable to shocks. The report noted that a correction in real estate could amplify risks across households, lenders, and institutional investors.

Lessons From History

The warning signs we see today are not unprecedented.

In the 1990s, Toronto experienced a real estate crash that wiped out years of gains. Land values fell by as much as 80%. Entire towers sat empty, and projects were abandoned mid-construction. Developers went bankrupt, leaving creditors and investors with deep losses.

In 2008, the U.S. subprime crisis began with missed mortgage payments in one corner of the housing market. Within months, it spread globally through derivatives, banks, and pension funds. The chain reaction nearly brought down the financial system.

History is clear. Cracks in real estate markets are rarely contained. They spread.

The Hard Truth for Investors

Investors in private REITs face a hard truth. The promise of liquidity and steady distributions was always conditional. When stress arrives, the gates go up.

The question is not whether redemption restrictions will continue. The question is how long they will last, how deep they will cut, and how many investors will be caught unprepared.

For developers, the question is not whether to cut prices. It is how much, and how quickly. Those who move early may survive. Those who delay may not.

For banks and pensions, the issue is not whether losses will occur. It is how large they will be, and how they will ripple through the economy.

Not All Private REITs Are the Same

It is important to note that not all private REITs face the same outcome. Many are well managed, carry moderate levels of debt, and operate with conservative assumptions. Unlike highly leveraged developers or funds chasing aggressive value-add projects, these REITs focus on cash flow, disciplined acquisitions, and risk controls.

Moderate debt often means lower loan-to-value ratios, greater reliance on stabilized income-producing assets, and diversified tenant bases. These characteristics provide resilience even during downturns.

The most prudent and transparent way to access private REITs is through a registered Exempt Market Dealer (EMD). Before approving a REIT offering for distribution by its dealing representatives, the EMD must conduct a thorough vetting process that includes reviewing financial statements, debt levels, management quality, and portfolio exposure. This level of due diligence provides investors with an added layer of protection and oversight.

By contrast, purchasing units directly from a REIT, without the oversight and screening of an EMD, can carry significantly more risk. Investors may not benefit from the same standardized review of financial data or the regulatory safeguards that EMD distribution requires.

Some high-profile private wealth management firms now include private REITs in their client portfolios. The important distinction is whether these are third-party REITs offered at arm’s length, or in-house products managed by the same wealth firm. The ones to watch out for are those that embed their own proprietary REITs into client portfolios. In these cases, the firm earns fees both for managing client accounts and for operating the REIT itself. This creates an inherent conflict of interest, incentivizing the firm to allocate client capital into its own product, even when it may not be the most suitable choice.

It is also critical to examine what types of real estate a REIT holds. The greatest risks today are in office properties, retail shopping centres, and development projects. Office towers continue to struggle with high vacancy rates and declining valuations in the wake of hybrid work. Retail has been weakened by e-commerce and consumer belt-tightening, leaving many shopping spaces under pressure. Development carries even more uncertainty, with rising interest rates, construction costs, and financing challenges threatening to derail projects midstream. Wealth management firms that direct client funds into REITs concentrated in these sectors expose investors to heightened risk, especially if combined with high leverage.

By contrast, private portfolio managers who source third-party REITs that have been fully vetted through their due diligence process provide stronger safeguards. Because these offerings are at arm’s length, they reduce conflicts of interest and improve alignment with client objectives. The separation between portfolio manager and product helps ensure that investor protection, transparency, and disciplined risk management remain the top priorities.

Investors should remain vigilant: when a wealth management firm promotes its own REIT, the line between protecting client interests and protecting the firm’s bottom line can blur—and too often, it is the client who carries the risk.

The Case for Gold

At our firm, we assist clients in structuring wealth by Owning Assets in Order of Asset Security. We prioritize the most secure assets and safeguard those that are most vulnerable.

Gold stands apart in this framework. Unlike real estate, it is not dependent on leverage. Unlike private REITs, it does not gate redemptions. Unlike pensions, it is not tied to appraisals that can swing 40% in a single year.

Gold trades daily on deep global markets, making it highly liquid. It is tangible and globally recognized as a store of value. In times of systemic stress, it has consistently preserved wealth while other assets faltered.

The evidence is undeniable. From 1970 to 1980, gold rose from about $35 per ounce to $850, an increase of more than 2,300%. Between 2007 and 2011, during the global financial crisis, it climbed from $650 to $1,900, nearly tripling in value. These gains were not speculative anomalies. They were the result of investors seeking safety when the financial system was under stress.

Gold cannot be printed, diluted, or gated. It remains the one asset outside the system that is failing.

Conclusion: Preparation Over Hope

Private real estate has been marketed as a stable, diversified anchor for portfolios. But delayed redemptions, distribution cuts, and reports of price resets reveal that the stability was an illusion. The cracks are widening, and the contagion is spreading.

At the same time, it is also true that many private REITs are prudently managed and may weather the storm better than others. The sector is diverse, and outcomes will vary.

The lesson is clear. Real estate may freeze, pensions may falter, but gold does not carry issuer default risk, does not gate redemptions, and cannot go bankrupt. Preparation matters more than hope.

The cracks are no longer invisible. The question for investors is whether to act on them now or wait until the choice has been taken away.

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That is why we wrote It Starts With Gold™, co-authored by us, Peter J. Merrick, TEP® and Adrian C. Spitters, CFP®. It is not just a book. It is a framework for surviving and thriving when the financial system begins to fail. Visit www.ItStartsWithGold.com.

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