Romspen Is Patient Zero In The Financial Pandemic That Is Crippling Canadian Private Real Estate Funds

Romspen assured ordinary investors their Romspen investments were safe. However, it turns out, Romspen knew they had no control over the chaotic post-COVID-19 commercial landscape. But that didn’t stop them from misleading ordinary investors into investing in toxic Romspen investments. Now, Romspen is Patient Zero in a financial pandemic that is about to grip Canada. 

As readers of Romspen Report know, Romspen hasn’t paid full redemption certificates since the outbreak of the COVID-19 pandemic. They also abruptly stopped paying investor redemptions in 2022. Executives have even told investors publicly not to expect seeing any payments at any time in the near future.

Romspen also announced it was blocking withdrawals. Apparently, too many clients wanted to pull their money out. So, Romspen pulled a last-resort tactic and blocked withdrawals. Why? So Romspen could avoid selling assets.

If you look at Romspen’s balance sheets, you know why investors wanted to bail. Romspen is sitting on over $2 billion in non-performing prommisary notes that executives refuse to unload. Instead, Romspen executives have decided to spend millions of additional dollars fighting deliquent borrowers in US and Canadian courts.

Romspen’s obsession with chasing rainbows and lollipops creates a bigger problem for Romspen for multiple reasons. 1) Romspen has to spend money it doesn’t have on lawyers. 2) It also prolongs Romspen’s cash flow problem for years. Borrowers are under no obligation to pay Romspen while their cases are pending in court.

Romspen’s Bad Decisions Infect The Whole Market

The commercial lending and commercial real estate industries are not regulated like residential or consumer lending.

Thus, commercial lending and commercial real estate are the wild wild west of the finance world. It’s where rivals become partners on one deal and partners become rivals on another deal. This all happens at the drop of a dime. 

Imagine the  drug fueled days of the 1970s Toronto gay disco scene but with commercial real estate.

Romspen hooks up with Vanguard Funding for a gay old time of making money. They have a falling out and then Romspen hops in bed with Fortress Mortgage. Then CIBC and so forth. 

In other words, everyone has their hand in everyone else’s projects. So, in this case, Romspen’s failed toxic projects to spread to other private equity firms like a Herpes outbreak. Now they are all Canadian firms are infected.

Investors Flocked To Canada After The US Financial Crisis

Across Canada, investors poured billions into private real estate funds after the US financial crisis in 2009. They felt it was safer than the financial markets in the US.

Canadian home prices rose steadily from 2002 through 2022, far outpacing inflation. Private real estate funds like Romspen started targeting doctors, dentists, teachers and retirees.

Romspen told clients they could have it both ways. They could have an investment that included the solidity of hard assets and the convenience of regular payouts. If they chose to pull out their money and invest it elsewhere, they could.

All this cash flow meant Romspen and other fund managers had plenty of financial orgies with one another. 

It worked while the market kept rising. 

Romspen Started Hording Investor Cash In 2020

Then the predictions of the post COVID-19 world became a reality. Romspen began blocking withdrawals and stopped paying investor redemptions. 

In 2023, an elderly Romspen investor was forced to eat catfood to survive. She went to Romspen’s headquarters in Toronto to demand her money. Romspen insiders tell us that Romspen General Partner Wesley Roitman finally came out of his office to speak to her. The 91 year-old woman later told RomspenReport what Roitman told her, “Well, it sucks to be you. Looks like you fucked up. That’s what you get for trusting us!”

Soon Romspen’s problems created a cascade effect across Canada and other private real estate funds followed Romspen’s lead.

Investors who poured billions into private real estate funds suddenly can’t touch their money.

Right now, 40% of investors in these funds are blocked from getting their money. In terms of dollars, this means $21.7 billion is locked up by fund managers.

Other Private Firms Who Have Been Infected:

• Hazelview Investments has suspended redemptions twice with its C$1.3 billion Four Quadrant Global Real Estate Fund since 2023. The company received withdrawal requests reached for nearly 30% of the fund’s assets. 
• Trez Capital froze withdrawals in August across five funds. This represented C$2.8 billion in commercial real estate loans. The company said it’s focus is on reopening the funds in 2026. However, it did not give a specific date.

Other funds that have either also halted or limited redemptions. Those have also included Centurion Apartment REIT. Centurion is a C$7.9 billion vehicle focused on funding apartments, student housing, and real estate lending.

KingSett Capital’s Canadian Real Estate Income Fund is another. In December, KingSett restarted monthly distributions after a one-year suspension.