Mortgage fund says payout freeze is 'prudent' amid volatility
BNN Bloomberg
Lender Romspen Investment needs more time to assess the state of the real estate market before it resumes letting investors withdraw money from its flagship mortgage fund, an executive said.
“You have to take prudent action to protect the fund,” Managing Partner Derek Jenkin said in an interview. The Toronto-based firm told investors this week it will temporarily defer redemptions in the Romspen Mortgage Investment Fund until there’s “more clarity” about when borrowers will be able to repay loans or assets can be sold to free up cash. Romspen’s business is secured lending against real estate, including construction.
The payout freeze means investors in the $2.8 billion (US$2.1 billion) fund who recently asked to redeem units won’t get paid out on Nov. 15 as scheduled.
The halt is simply a matter of short-term liquidity, Jenkin said. There’s mismatch in cash flows because Romspen has obligations to its borrowers, as well as a queue of investors who are looking to pull money out of the fund. In addition, some borrowers have halted interest or principal repayments, as rising interest rates create uncertainty about the viability of certain residential and commercial projects.