Say you have $100,000 to invest.

Option one: you buy $100,000 of a Canadian REIT ETF. Tomorrow morning you can check what it is worth. If the bond market has a bad week, you might open your account and see $85,000. You will not like that number, but you will know it, and you can hit sell before lunch if you want to.

Option two: you put the same $100,000 into a private apartment REIT or a five-year real estate syndication. Your statement barely moves. The marketing materials talk about a 7 percent preferred return, a 5 percent cash distribution, institutional-quality buildings and “low historical volatility.” It feels calmer. Nothing is flashing red on a screen.

The second investment can feel safer for exactly that reason. But calmness is not the same thing as safety, and a statement that does not move is not the same thing as an investment that is not moving. What happens when you actually want the money back? What does “7 percent preferred return” mean when the fund only distributes 4 percent in cash? Who decides what your units are worth if there is no market to check against? What happens when the mortgage on the underlying building matures at twice the interest rate it was written at? And why might the sponsor keep collecting fees comfortably even in the years you are not?

Those are the questions this article tries to answer properly, using actual Canadian offering documents, prospectuses, court records and regulatory filings rather than marketing copy. I am not going to tell you private real estate is a trap, and I am not going to tell you public REITs are the smart choice. Both of those conclusions are lazier than the evidence supports. What I want to do is follow the money through an actual Canadian private real estate investment, from the property to the debt to the fees to the waterfall to the tax slip, and show you exactly what you are buying when someone sells you “private real estate” instead of a REIT you could buy on the TSX this afternoon.

The central idea running through everything below is simple: private real estate does not eliminate volatility. It changes how, and when, you see it. A publicly traded REIT tells you what the market thinks your investment is worth every trading day. A private fund usually does not. That produces much smoother-looking statements. It does not produce a smoother-performing building.

What are we actually talking about?

“Private real estate” gets used as a catch-all for several genuinely different products, and the differences matter more than the marketing suggests.

A public REIT is a trust or corporation whose units trade on an exchange. You can see the price. You can sell in seconds. It publishes audited annual statements and quarterly reports, and it gets covered by analysts who will tell you when management is overpaying itself.

A private REIT is usually structured as a trust, but its units are not listed anywhere. Sponsors often organize them so the trust can qualify as a “mutual fund trust” under the Income Tax Act, a status that matters mostly for RRSP and TFSA eligibility (more on that below). A private REIT can look, on paper, remarkably like a public one. It just has no daily exchange price and no exchange to sell into.

A real estate syndication, usually structured as a limited partnership, is narrower: a defined group of investors financing one property or a small, specific portfolio, typically for a stated number of years. This is a different legal relationship than owning REIT units. You own a partnership interest with its own tax rules, its own loss limitations, and, in many retail deals, limited control over the underlying investment.

A private real estate fund can be either shape, open-ended like a private REIT or fixed-life like a syndication, and can be built as a trust, a limited partnership or, occasionally, a corporation.

A mortgage investment corporation, or MIC, is a different animal entirely: it lends against real estate rather than owning it, which makes it debt risk, not equity risk, and it carries its own tax treatment under a specific section of the Income Tax Act.

A private apartment REIT, a condominium-development limited partnership and a MIC can all be marketed under the words “private real estate.” Their legal structures, their tax treatment, their registered-account eligibility and their risk of total loss are not remotely the same. Nothing below applies uniformly to all of them, and that is the point.

Why investors actually like this stuff

Before I spend several thousand words picking this apart, it is worth taking the pitch seriously, because parts of it are legitimate.

Private real estate gives you access to specific buildings and strategies a public REIT rarely offers: a single well-located apartment complex, a value-add repositioning, a development deal, exposure a diversified public trust would never take on for one asset. It can put professional management behind a tangible asset without you becoming a landlord yourself. Multi-property funds do offer real diversification across buildings and tenants, even without daily pricing. And there is a genuine, defensible argument that patient capital, money that does not need to move for years, deserves to be paid a premium for accepting that patience. Financial theory calls this the illiquidity premium, and it is a real concept, not a marketing invention.

The trouble is the gap between “investors should demand an illiquidity premium” and “investors reliably receive one.” Those are different claims, and only the first one is well supported. There is no Canadian data set that reliably shows the average retail private real estate vehicle delivers a return premium over public alternatives once you account for fees, leverage and the risk of picking the wrong sponsor. I looked. It is not there.

American pension-fund data comparing listed REITs to private real estate funds, compiled by CEM Benchmarking for the REIT industry group Nareit, has found listed REITs outperforming private vehicles by something in the range of 1.4 to 2.7 percentage points a year, net of fees, over multi-decade samples, though the source has an obvious interest in that finding and other academic work using different methods reaches more favourable conclusions for private funds.

Say the honest thing: investors should demand compensation for giving up liquidity. The evidence does not establish that Canadian retail private real estate reliably pays it.

It is also worth being honest about how Canadian pension plans do this, because their success gets used constantly to sell retail products. Large Canadian pension investors approach private real estate very differently from a retail investor. BCI owns QuadReal, OMERS owns Oxford Properties, and La Caisse folded Ivanhoe Cambridge into its main investment platform, so those plans hold much of their real estate through operating businesses they control. Other large plans have the scale to invest directly, negotiate institutional fees and keep enormous pools of liquid assets elsewhere.

Between them they have internal investment teams, direct ownership of properties, a say in governance and the ability to hold assets through a full cycle without selling into a weak market. When you write a $50,000 cheque into a private REIT, you are not replicating the economics of a Canadian pension plan. You are buying a much smaller, much less controlling slice of something a professional sponsor built and priced for you.

Private real estate does not eliminate volatility. It changes how you see it.

Here is the part of the pitch that deserves the most scrutiny.

A public REIT’s unit price is set by a market that reprices it, second by second, based on interest rate expectations, capitalization rate assumptions, leasing news, everything. A private fund’s net asset value is usually determined through a periodic valuation process involving appraisals, manager estimates or both. The resulting NAV is what eventually appears on your statement.

Canadian research has found substantial evidence that commercial-property appraisals incorporate changing market conditions gradually rather than instantaneously. Secondary citations to work by Hamilton and Clayton at the University of British Columbia suggest that Canadian appraisers in their sample incorporated only about 20 percent of new market information in each valuation period, with substantial weight left on prior valuations. I would treat that particular coefficient cautiously, however, because I was unable to verify it directly from the original paper.

Nor is it a Canadian index-level statistic you can plug into a model: I did not find a reliable published estimate of how much smoothing exists in the main Canadian institutional property index, the MSCI/REALPAC Canada Property Index, and I am not going to invent one. This is a feature of how valuation works, not evidence that anyone is concealing anything. What the research does support is the mechanism: appraisals can incorporate new information gradually rather than all at once.

You can watch that mechanism play out in a single year. In 2022, as the Bank of Canada began the fastest rate-hiking cycle in a generation, the standing-investment component of the MSCI/REALPAC Canada index returned roughly 1.35 percent for the year. Over the same twelve months, iShares’ S&P/TSX Capped REIT Index ETF, ticker XRE, which is a decent investable proxy for how the public market repriced the same broad asset class, returned negative 17.4 percent on a total-return basis. That is a gap of nearly 19 percentage points in a single year.

I want to be precise about what that gap does and does not prove. It does not prove the public market was right and the private appraisals were wrong. Public markets overshoot. Sentiment, forced selling, and the mechanics of daily-traded prices can push a REIT well below the eventual liquidation value of its buildings.

It also does not prove the appraisals were right, either. A valuation process that moves slowly while financing costs change rapidly can take time to reflect new economic conditions, with some of the adjustment eventually appearing at appraisal, refinancing or sale.

Both things can be true at once: the public price overshot on the way down, the private appraisal lagged the deterioration, and the truth sat somewhere between the two.

What you cannot honestly say is that the private fund’s smoother statement proves it was the less volatile investment. It proves it was the less frequently priced investment. Those are different claims.

Lower reported volatility is not automatically lower economic volatility.

“Redeemable” is not the same word as “liquid”

This is where the theory gets tested against what actually happened to real Canadian investors, and the record is unusually good, because 2022 through 2026 turned out to be a live stress test for the entire private real estate industry.

Take Centurion Apartment REIT, one of the largest and most established private residential REITs in the country, holding apartments, student housing and mortgages across Canada and the United States, structured as a mutual fund trust with roughly $7.9 billion in assets.

Centurion’s offering memorandum gives unitholders a redemption right, but the ordinary cash-redemption right comes with a hard cap: aggregate cash redemptions are generally limited to about $50,000 per month unless the trustees approve more. Against a $7.9 billion fund, that is not much of a liquidity mechanism for a group of investors who all want out at once.

When redemption requests rose sharply in 2025, Centurion activated a Managed Redemption Program under which requests could be satisfied through Centurion Operating Trust Notes, or COT Notes, while the fund allocated $20 million a month to redeeming those notes on a pro-rata basis. Reporting by The Globe and Mail indicates the notes cannot be held in an RRSP or TFSA, which creates an obvious complication for anyone redeeming from a registered account.

New subscriptions into the fund fell from roughly $101.5 million in January 2025 to under $1 million by March 2026, which tells you how dramatically investor demand changed.

None of this means Centurion has failed. It means the redemption terms matter.

Centurion is not an isolated case. Trez Capital temporarily suspended redemptions across five open-ended funds totalling roughly $2.8 billion in August 2025, and on August 17, 2026 announced another temporary suspension across five open-ended trusts. Trez’s own fund page for at least one of those trusts also shows NAV calculation suspended while the redemption suspension remains in effect.

The issue is broader than those two firms. Bloomberg reported in January 2026 that roughly C$30 billion, almost 40 percent of the approximately C$80 billion it identified in Canadian private real estate funds, was subject to restrictions on withdrawals, cash distributions or both.

I want to be clear that a gate is not, by itself, evidence of fraud or mismanagement. It is a tool funds can use when redemption demand collides with assets that cannot be sold quickly without potentially hurting remaining investors.

The buildings do not become liquid just because the fund’s marketing said “monthly redemptions.” The legal right to request your money back and the practical ability to receive cash are two different things. Actual liquidity can depend on cash reserves, new subscriptions, credit facilities, loan repayments and the manager’s ability to sell assets at acceptable prices. Several of those sources can weaken at the same time during a real estate downturn.

A “five-year hold” may not mean five years

Evergreen funds like Centurion are one problem. Fixed-life syndications, the kind sold with a specific target term, are supposed to solve it by giving investors a defined exit date.

In practice, the exit date can turn out to be more of a plan than a promise, and the clearest documented Canadian example of why is Starlight U.S. Multi-Family (No. 2) Core Plus Fund.

This was an Ontario limited partnership, sponsored by Starlight Group under Daniel Drimmer, that raised roughly $107 million from Canadian retail investors in an initial public offering in early 2021 to buy apartment properties in the United States.

The properties were American, but this was a Canadian-sponsored Ontario limited partnership offered to Canadian investors under a Canadian prospectus, which makes its complete journey from launch through liquidation unusually useful for understanding how these structures work.

The Starlight prospectus called the fund’s term “targeted to be three years,” which sounds like a maturity date. It was not one. The general partner held two separate one-year extension rights it could exercise on its own, and it used both of them. Beyond those two extensions, any further extension required both a special resolution of unitholders and the general partner’s approval.

The fund ultimately wound up in December 2025, closer to five years after launch than the three originally targeted.

Nobody misled anyone about the rules; the extension rights were laid out from the start.

The point is simply that a target term is a plan, not a guaranteed exit date.

What “7 percent preferred return” actually means

The Starlight prospectus is also the cleanest primary-source example I found for a phrase that appears in nearly every private real estate pitch in this country: the preferred return.

Starlight’s offering described a 7 percent “Minimum Return”, a preferred return, alongside a stated target of cash distributions of only 4 percent a year.

Read that combination carefully, because it tells you almost everything about how these numbers actually work. The prospectus itself says the return is not guaranteed and “may not be paid on a current basis in each year or at all.”

A preferred return is not a bond coupon.

It is a place in line.

Here is how the line actually works, simplified. When money becomes available to distribute, whether from rental income or from selling a property, it goes first to return investors’ original capital. Then, if there is enough money left, investors receive the preferred return. Only after that does the sponsor start collecting its carried interest, in Starlight’s case 25 percent of profits above the preference, with a catch-up provision that lets the sponsor accelerate into its full share once returns clear the hurdle.

The preferred return’s job is to decide who gets paid first if enough proceeds exist. It does nothing to create those proceeds.

If the properties do not generate enough cash and do not sell for enough, the money to pay it simply is not there, and there is no separate debt claim forcing the partnership or the sponsor to make up the shortfall.

The preference lives inside the waterfall. It is not a bond the sponsor owes you.

What actually happened to Starlight’s investors illustrates how thin that line can be.

Distributions stopped entirely in November 2022, as the fund explained at the time, because of the sharp rise in interest rates. When the fund’s mortgages came up for renewal, lenders were unwilling to extend or modify the loans without substantial principal paydowns, and the fund did not have the cash to make them.

The financing problem then forced asset-level outcomes.

The Denver property, Montane, was sold in mid-2025 for roughly US$133.0 million against about US$96 million of mortgage debt. In Orlando, the lender of Hudson at East required a sale, which closed at roughly US$68.4 million with about US$67.0 million of debt repaid.

And the Raleigh property, Summermill, was transferred to its lender, so the fund received no cash proceeds from the transfer, as Starlight’s own release explains.

By the time the fund wound up in December 2025, Class A unitholders had received a C$2.75 special distribution and a C$0.2685 final distribution, together roughly C$3.02 per original C$10 Class A unit in liquidation proceeds.

I want to state precisely what that figure is and is not: it is the liquidation payout on the original units, not a complete lifetime return calculation, because investors also received operating distributions in 2021 and 2022 before the pause.

It is well below the $10 original unit price, and it came from a fund whose prospectus had described a 7 percent Minimum Return at launch.

Nobody had guaranteed that 7 percent would show up; the document said so explicitly. Almost nobody reads that sentence with the attention it deserves until the year it stops mattering as a technicality and starts mattering as their money.

Leverage: the part that can quietly wipe out your equity

None of this happens in a vacuum. It happens on top of debt, and debt is what turns a modest miss on property value into a catastrophic loss on your equity.

Take a straightforward example. A syndicate buys a $20 million apartment building using $13 million of mortgage debt and $7 million of investor equity, a 65 percent loan-to-value ratio.

If the property’s value rises 15 percent, to $23 million, the mortgage balance is unchanged and your equity jumps from $7 million to $10 million, a 43 percent gain.

Leverage feels wonderful on the way up.

Run the same math the other direction: the property falls 15 percent, to $17 million, the mortgage is still $13 million, and your equity has dropped from $7 million to $4 million, a 43 percent loss, from a property decline most people would describe as manageable, not catastrophic.

Push the decline to 35 percent and the property is worth $13 million, exactly the mortgage balance, meaning the equity is essentially wiped out before anyone has even paid a selling commission.

Now add refinancing, because that is where the theoretical math turns into something real investors actually experience.

Say the property has fallen to $17 million and the mortgage matures. The new lender will only lend to 60 percent loan-to-value, which caps the new mortgage at $10.2 million against the old $13 million balance.

Someone has to come up with the $2.8 million difference, and that is before accounting for a debt-service-coverage test that could push the maximum loan, and therefore the shortfall, even higher.

This is not a hypothetical dreamed up for an article. It is close to a general description of what happened to Starlight’s mortgages when rates rose and lenders wanted paydowns the fund could not make.

What happens when the fund needs more money?

This is the point where most investors assume the answer is “I get a call asking for another cheque.”

In the Canadian retail limited partnership offering documents I examined for this article, that is not how it worked, and I want to state that carefully: I did not find a mandatory capital-call provision requiring existing retail limited partners to contribute additional money in either of the two fixed-life vehicles reviewed.

That is not the same as saying no Canadian syndicate has one, and commitment-and-drawdown structures do exist elsewhere in private markets; it is a statement about what I found.

The investor may not receive a phone call demanding another $40,000.

But that doesn’t mean a refinancing shortfall leaves them untouched.

The shortfall still has to be funded somehow, and the alternatives tend to land on the limited partner indirectly. The fund can issue new units to new or existing investors, which dilutes everyone who does not participate. It can borrow from the general partner or its affiliates, and those loans can rank ahead of investor equity in the payment order and carry their own financing cost. Where the governing documents allow it, it can bring in preferred equity or subordinated debt that sits ahead of the existing units.

One British Columbia condo-development offering memorandum I reviewed disclosed part of this structure directly: additional units could dilute existing limited partners, and general-partner loans and fees ranked ahead of limited-partner distributions in the waterfall.

Or the shortfall gets resolved the way Starlight’s was, through suspended distributions, asset sales, or a lender taking the property.

You may never get a call asking for more money. You can still lose a good deal of what you already put in.

Follow the fees

Private real estate has more places to charge a fee than almost any other retail investment product, and the honest way to evaluate a deal is to add them all up before you look at the advertised return.

Starlight’s prospectus disclosed an agents’ fee of up to 5.25 percent of the amount raised, offering expenses capped around 1.3 to 1.5 percent, a 1.00 percent acquisition fee on the purchase price of each property, an annual asset management fee of 0.35 percent charged not against investor equity but against the gross value of the assets, a 0.15 percent annual guarantee fee on debt the sponsor guaranteed, a third-party property management fee of 1.75 to 2.5 percent of gross rental revenue, a capital-project management fee of 5 percent on capital work, which the sponsor’s manager could earn, and finally the 25 percent carried interest above the preferred return.

Notice that many of these fees, the acquisition fee, asset management fee, guarantee fee and property management fee, can be paid regardless of whether your equity ends the fund ahead or behind. The carried interest, by contrast, requires sufficient returns to move through the waterfall.

And notice the asset management fee’s calculation base: 0.35 percent of gross asset value is not 0.35 percent of your equity. On a hypothetical fund levered at 65 percent, that fee measured against the equity supporting the property is closer to 1 percent.

Leverage does not just multiply your gains and losses. It can also magnify the effective cost to equity investors of fees charged against the whole property rather than against their equity.

Related-party arrangements compound this.

Starlight’s initial properties were purchased from an entity affiliated with the sponsor. The general partner was wholly owned by Starlight Group. The manager was controlled by the same person who controlled the sponsor. The guarantee fee, if debt was guaranteed, was payable to the manager or its affiliate.

None of that is inherently improper, and it was disclosed in the prospectus.

The relevant question for an investor is not whether related-party fees are automatically a problem. It is simpler than that: how many different ways does the sponsor get paid on this one investment, and how many of those payments happen whether or not you, the limited partner, end up ahead?

When I ran a separate illustrative version of this math on a $20 million property with a 65 percent mortgage, a 1.5 percent acquisition fee, a 1 percent annual asset management fee, a 1 percent disposition fee and a 30 percent promote above a preferred return, the sponsor collected roughly $800,000 to $850,000 over a five-year hold in the base and weak scenarios, and closer to $1.2 million in the strong one once the promote kicked in.

Investor outcomes across those same three scenarios swung from a healthy profit to a loss of more than half the equity.

The sponsor’s fixed fees barely moved.

That isn’t unique to private real estate, but it is worth knowing which dollars depend on your outcome and which do not.

The math on $100,000, run three ways

To make all of this concrete, here is a simplified model built on that same $20 million apartment building, financed with $13 million of debt against $7 million of property-level equity, raising roughly $8.05 million from investors once you account for transaction and offering costs, structured with a 7 percent cumulative preferred return and a promote above it, over a five-year hold.

The specific numbers below are illustrative, not a real fund’s actual results, but they are built from realistic fee and leverage assumptions, and the mechanics are the point.

In a strong scenario, where the property outperforms and sells at a slightly improved capitalization rate, a $100,000 investor ends up with roughly $143,700 back, a 1.44 times multiple on invested capital, working out to roughly an 8 percent annualized return.

In a base scenario, where the property performs close to what was underwritten but capitalization rates drift modestly against sellers, the same $100,000 investor ends up with roughly $100,900, essentially their money back, a 1.01 times multiple, an annualized return close to 0.2 percent, after five years of risk, illiquidity and paperwork.

In a weak scenario, where net income disappoints and capitalization rates expand meaningfully, that same $100,000 comes back as roughly $45,200, a 0.45 times multiple, or an annualized loss of roughly 17 percent.

The lesson here is not the specific numbers, which depend entirely on the assumptions you feed in. It is what the spread between those three outcomes tells you: a property can perform reasonably close to what the sponsor underwrote, not disastrously, just modestly worse than hoped, and still leave the limited partner with essentially nothing to show for five years of illiquid, concentrated risk, once leverage, transaction friction, ongoing fees and the waterfall have all taken their cut.

The base case above is not a disaster scenario. It is what happens in this particular model when things go roughly as planned and the fee stack still eats most of the profit.

Taxation outside a registered account

There is no such thing as a single “private REIT tax treatment,” and any article or sponsor pitch that implies otherwise is oversimplifying.

Tax treatment depends entirely on the legal wrapper.

If you hold units of a trust, your annual T3 slip can contain a blend of interest income, rental or business income, dividends, capital gains, foreign income and return of capital, with the tax treatment depending on the amounts allocated or designated to you.

If you hold limited partnership units, you generally receive a T5013 instead, and the partnership’s income or loss can be allocated to you under the partnership rules whether or not the same amount of cash actually reaches your bank account. CRA specifically notes that partners report their share of partnership income whether it is received in cash or credited to their capital account.

If you hold shares of a mortgage investment corporation, the “dividends” you receive are generally taxed as interest income rather than qualifying for the dividend tax credit that applies to ordinary taxable Canadian corporate dividends.

Return of capital deserves its own careful explanation, because it gets marketed as a benefit without much explanation of the mechanics.

Say you invest $100,000 and later receive a $5,000 distribution classified as return of capital. That $5,000 is generally not taxed as income when you receive it. Instead, your adjusted cost base in the investment drops from $100,000 to $95,000.

This continues, distribution after distribution, until your adjusted cost base eventually reaches zero, at which point further positive cost-base adjustments can result in a capital gain. Whenever you eventually sell or your units are redeemed, your reduced adjusted cost base also affects the capital gain or loss you calculate.

Return of capital can defer tax.

It is a timing mechanism, not free money, and it is absolutely not the same thing as your investment having earned a profit.

A fund can distribute investors’ own capital without the underlying property having created an equivalent amount of new economic value.

Can I actually hold this in my RRSP or TFSA?

Sponsors love the phrase “RRSP eligible,” and it is worth understanding precisely what that phrase is and is not telling you.

Under the Income Tax Act, and as CRA’s qualified-investment guidance lays out, ordinary unlisted private limited partnership units generally do not fall within the normal categories of “qualified investment” for an RRSP, RRIF or TFSA.

There are real exceptions, and the exact legal structure matters.

Certain private trusts can qualify where they meet the Income Tax Act’s mutual fund trust requirements, which helps explain why many private REITs are structured that way rather than simply as limited partnerships. Shares of a mortgage investment corporation can qualify where the statutory conditions are met. Securities listed on a designated stock exchange can qualify, which is why Starlight’s listed unit classes could qualify while its unlisted classes required separate analysis under the tax rules.

Two things follow from this that are worth saying plainly.

“RRSP eligible” is a narrow technical classification about legal structure, not a quality rating or a safety signal, and calling something a REIT does not by itself make it a mutual fund trust; that status has to actually be met and maintained.

And “eligible” does not necessarily mean your ordinary discount brokerage will custody it.

Ordinary discount brokerages generally are not set up to custody arbitrary unlisted private securities inside a registered account. Canadians who want to hold these investments inside an RRSP or TFSA may need a specialist self-directed trust company, along the lines of Olympia Trust, that charges its own separate administration and transaction fees on top of the fees the fund itself charges.

That is friction investors should understand before subscribing.

The 10 percent trap

There is a second, sharper trap buried in the registered-account rules, and it deserves a short, precise explanation rather than a vague warning.

If you, together with people who are not dealing with you at arm’s length, such as a spouse, end up holding a significant interest, generally meaning 10 percent or more of an issuer, an investment that was otherwise qualified can become what the Income Tax Act calls a “prohibited investment.” CRA explains the rules in its prohibited-investment guidance.

This is easier to trip into than it sounds in a small private vehicle: you own some, your spouse owns some, and non-arm’s-length holdings count when determining whether you have a significant interest.

The consequences are real but narrower than people sometimes assume.

A prohibited investment generally triggers a tax equal to 50 percent of that investment’s fair market value when it was acquired or when it became prohibited, which can potentially be refunded if the statutory conditions are met, including generally removing the investment by the end of the following calendar year and not having known or reasonably been expected to know it was prohibited.

Separately, there is a 100 percent advantage tax on income and capital gains attributable to the prohibited investment.

That second tax applies to the income and gains the prohibited investment generates, not to the entire underlying holding.

It is a serious rule, and it is exactly the kind of thing worth checking with an accountant before you or your spouse gets close to a meaningful ownership stake in a small private fund, but the 100 percent figure is not a second tax on the investment’s principal.

The RRIF problem nobody talks about

Here is a genuinely underdiscussed angle, and it matters more the older you get.

Once you convert an RRSP to a RRIF, the government requires you to withdraw a minimum percentage of the account’s value every year, rising steadily with age, roughly 5.4 percent at 72 and climbing well into the double digits by your nineties.

That withdrawal has to happen regardless of what is in the account or how liquid it is.

Picture a 72-year-old with a $500,000 RRIF, $475,000 of it in a private real estate fund and only $25,000 in cash or liquid securities.

The minimum withdrawal at 72 works out to roughly $27,000, so the $25,000 of liquid assets falls a little short in year one, before fees.

Now suppose the fund’s distributions are suspended, as KingSett’s Canadian Real Estate Income Fund announced it would do in late 2024, and redemptions are capped, as Centurion’s ordinary cash redemptions are.

Depending on what the custodian and investment terms allow, one possible solution may be an in-kind withdrawal of fund units. An in-kind RRIF withdrawal is taxable based on the applicable fair market value. With a publicly traded security, an observable exchange price is readily available. With an unlisted private security, fair market value may depend on the issuer’s NAV, its valuation policies, appraisals and other evidence rather than a continuously observable market price.

Either way, you can end up reporting taxable RRIF income while holding an asset that is difficult to turn into cash.

Illiquidity that is a mild inconvenience at 45, when you have decades of income ahead of you and no legal requirement to touch the account, becomes a genuinely awkward, recurring problem inside a RRIF in your seventies and beyond, when the withdrawal requirement does not care whether the underlying asset can actually be sold.

What an exempt-market dealer actually protects you from

Many private offerings reach investors through an exempt-market dealer, and it is worth being precise about what that firm’s involvement means and does not mean, because the assumption people quietly make is that someone independent has already checked the deal for them.

Exempt-market dealers have real regulatory obligations under Canadian securities law: know-your-client rules, know-your-product rules, suitability obligations, conflict-of-interest requirements, and responsibility for determining whether the applicable prospectus exemption is available.

Those are genuine investor protections, and they are not nothing.

What that involvement does not mean is spelled out in Canadian offering documents: no securities regulator has assessed the merits of the investment simply because it is being sold under a prospectus exemption.

A dealer’s suitability process does not guarantee that the property was purchased at the right price, that the sponsor’s return projections will prove realistic, or that you cannot lose your entire investment.

Suitability is a regulatory obligation, not an outcome guarantee, and the distinction is worth remembering exactly at the moment someone is telling you how strong the deal looks.

Failure is not the same thing as fraud

Canada’s recent private real estate history gives us examples across a real spectrum, and lumping them all together, or ignoring them entirely, does readers a disservice.

Romspen, one of the country’s longest-running private mortgage lenders, is a useful Canadian example of a liquidity mismatch without a regulatory fraud finding.

The fund offered monthly redemption mechanics against a portfolio of real estate loans that could not necessarily be monetized on the same timetable. In September 2022, Romspen moved a large group of redemption requests into a run-off mechanism. Then, in November, Romspen announced that it was temporarily deferring redemption payments, citing elevated redemption demand, slower loan repayments and difficulty monetizing underlying collateral.

I found no regulatory or court finding of fraud against Romspen in connection with those events.

That is important because it demonstrates something the more sensational failure stories do not: a legitimate private real estate structure can encounter a serious liquidity problem without anyone stealing investors’ money.

At the other end of the spectrum, Ontario’s Capital Markets Tribunal made an adjudicated finding of securities fraud against Go-To Developments and its principal Oscar Furtado. The Tribunal found five frauds connected with one of the limited partnerships, including undisclosed personal benefits, impermissible preferential repayment and misuse of other partnerships’ assets.

In March 2026, the Capital Markets Tribunal ordered Furtado and his companies to disgorge $22.2 million, along with administrative penalties and market-participation bans.

That is a real, adjudicated fraud finding, not an allegation, and it belongs in a different category from Romspen’s liquidity problems.

In between sit governance and disclosure problems that fall short of proven fraud, and cases still working their way through receivership where allegations have been made but not adjudicated.

The important lesson across all of it is that a perfectly legitimate, honestly run private real estate investment can lose a substantial amount of money without anyone stealing a dollar.

Interest rates can rise. Refinancing can become harder. Property values can fall. Borrowers can default. Leveraged real estate can lose money.

Treating every Canadian private real estate loss as evidence of fraud is as misleading as pretending fraud and conflicts never occur.

Private REIT versus public REIT, honestly compared

	Private REIT / syndication	Public REIT
Pricing	Periodic NAV/appraisal process	Continuous market price
Liquidity	Capped, gated or fixed-term; can be suspended	Sell any trading day
Reported volatility	Often smoother because it is repriced less frequently	Higher because it is priced continuously
Diversification	Can range from one property to a large portfolio	Depends on the REIT or ETF selected
Leverage	Deal-specific and can be substantial	Disclosed at the company level
Fees	Multiple potential layers: acquisition, asset management, property management, financing, offering and dealer costs, and sometimes performance fees	ETF-level cost can be low and transparent (XRE’s MER is 0.60 percent), though it does not capture every operating expense inside the underlying REITs
Redemption	Governed by fund terms and potentially restricted under stress	Immediate at the available market price
Tax reporting	T3 or T5013, potentially complex	Usually a T3
RRSP/TFSA access	Conditional on structure	Straightforward for securities listed on a designated exchange
Minimum investment	Often substantial	Cost of one unit
Ability to exit under stress	May be restricted	Immediate, at whatever price the market offers

The public side of that table has its own real numbers worth putting on the page rather than taking on faith.

As of August 31, 2026, the iShares S&P/TSX Capped REIT Index ETF, ticker XRE, had delivered a net-asset-value total return, meaning distributions reinvested, of roughly 0.02 percent annualized over the trailing five years, 4.53 percent over ten years, and 7.82 percent since its October 17, 2002 inception.

Turned into dollars, $100,000 invested five years earlier would have grown to roughly $100,100, essentially flat.

The same $100,000 invested ten years earlier would have grown to roughly $155,800.

Since inception, it would have grown to roughly $603,000.

Those are historical illustrations, not a forecast, and the five-year figure in particular shows how a full decade can be split into one very strong half and one essentially flat half.

And public REITs have their own ugly years

None of this should be read as an argument that public REITs are the safer choice.

They are simply differently risky, and their downside is easy to point at precisely because it is visible.

XRE fell 13.6 percent in 2020, with a worst three-month stretch, the initial COVID shock, of negative 26.62 percent. It rallied 34.2 percent the following year. It fell 17.4 percent in 2022 as rates rose, the same 2022 in which the private appraisal-based index barely moved.

That volatility is the direct cost of the thing that makes daily liquidity possible: the market reprices real estate risk continuously, in real time, whether you want to look at it or not.

A private investor in broadly similar assets may, on paper, be spared much of that visible movement.

Whether they were actually spared the underlying economic pain, or simply had some of it deferred to a later valuation update, refinancing or sale, is precisely the question this whole article is built around.

Price is not the same thing as net asset value, in either direction

One more nuance is worth getting right, because it cuts against a lazy version of the argument above.

Canadian REITs have traded at meaningful discounts to their own reported net asset value through parts of 2024 through 2026: roughly 19 percent in RBC Capital Markets’ 2025 outlook, around 12 percent for CIBC’s coverage universe at the end of 2025, and about 10 percent by May 2026, according to financial-press reporting of that research.

I want to flag clearly that these figures come from news coverage of the bank reports, not from the original reports, which I did not review, so treat them as directional rather than exact.

What that discount tells you is that the market is not simply saying “your buildings are worth 15 percent less than the appraiser says.”

It is pricing expectations about future capitalization rates, refinancing costs, management, capital allocation and the price investors are currently willing to pay for the REIT structure.

A REIT trading 15 percent below its stated net asset value has not necessarily seen its actual buildings lose 15 percent of their value. The market may be anticipating further deterioration, demanding a discount for uncertainty, or disagreeing with the assumptions behind the reported NAV.

Equally, a private fund’s stable net asset value does not represent a price at which every investor could necessarily sell today, as investors in gated funds have discovered.

Neither number, the discounted public price or the smooth private appraisal, is simply “correct.”

They answer somewhat different questions.

The most concrete price is the one at which an actual transaction can occur, and that is exactly the information a liquid public market provides continuously and a gated private fund cannot.

Private real estate versus buying a rental property yourself

For readers weighing private syndication against simply buying a rental property directly, here is the comparison on a rough $250,000 equity stake in either.

Buying directly gives you full control over financing, timing, tenant selection and improvements, but it also means concentrated risk in one building, direct responsibility for the mortgage, active management or the cost of hiring it out, meaningful transaction costs on the way in and out, and full responsibility for your own rental-income reporting, though you also control your own deductions and capital cost allowance claims.

For anyone considering that route, the mechanics of actually acquiring Canadian property are a separate subject; I cover them in The Home-Buying Process in Canada.

A private fund gives you passivity, professional management and, in multi-property vehicles, real diversification across properties, in exchange for giving up control, accepting the sponsor’s leverage and fee decisions, and accepting whatever liquidity terms the fund happens to offer.

Direct ownership is a second job with a mortgage attached.

A private fund is a passive position with someone else holding the keys.

Neither is automatically the better choice; the honest answer depends on how much control you actually want to give up, and what you are getting paid for giving it up.

How I would actually read one of these offerings

Before anyone puts real money into a private real estate offering, here are the questions worth working through, roughly in the order that matters, before looking anywhere near the projected internal rate of return on page one.

1. What do I legally own: trust units, limited partnership units, or shares? That single fact affects your tax treatment, registered-account eligibility and legal position.
2. How much debt is on the property, and at what loan-to-value?
3. When does that debt mature, and is the rate fixed or floating?
4. What happens contractually if refinancing at maturity requires more equity than the fund has?
5. Who determines net asset value, how often, and using what process?
6. What are my actual redemption rights, in dollars and in timing, not in marketing language?
7. Is the stated holding period contractual, or is it a target the general partner can extend?
8. Who has the legal right to extend the fund’s term, and under what conditions?
9. What does the stated preferred return actually guarantee, and what does it not guarantee?
10. What is the complete fee stack, and what is each fee calculated against: purchase price, equity, gross asset value, revenue, debt or profits?
11. Which parties on this deal are affiliated with the sponsor, and how many separate fees does the sponsor collect across the life of the deal?
12. How much of the sponsor’s own money is invested, on what terms, and does it receive the same economics as mine?
13. What happens if the general partner or asset manager becomes insolvent, or a key person leaves?
14. What has this sponsor’s track record actually realized on completed, sold investments, not on properties still sitting at an internal appraised value?

Read the redemption provisions, the related-party disclosures, the valuation policy and the risk factors before you read the projected return.

The glossy IRR on the cover page is the sponsor’s model of the future.

The fee stack, leverage and liquidity provisions are part of the contract you are actually signing.

Who this structurally suits, and who it does not

I am not going to tell you whether you personally should do this; that depends on your own finances in ways I cannot see from here.

But the structural fit is worth describing plainly.

Private real estate tends to make more sense for someone who genuinely does not need this money for years, who has substantial liquid assets sitting elsewhere so a gate or an extension is an inconvenience rather than a crisis, who has actually read the fee stack and the waterfall rather than the summary slide, and who is deliberately seeking exposure to a specific property type or strategy that public markets simply do not offer in the way they want it.

It tends to be a poor fit for money you might need on a defined timeline, for someone whose liquid net worth is mostly this one investment, for someone already heavily concentrated in real estate through their home and perhaps a second property, for someone drawn in mainly by the headline distribution number, or for someone who reads “preferred return” as a promise rather than a place in line.

The concentration problem specific to Canadians

There is one more angle worth raising before wrapping up, and it is specific to this country’s own balance sheet.

As of the second quarter of 2026, Statistics Canada put household residential real estate at roughly $8.5 trillion against total household net worth of approximately $19.1 trillion nationally.

Housing already makes up an enormous share of what Canadians own.

If you already own a principal residence, and perhaps a cottage or a rental property on top of it, adding another real estate investment gives you another exposure to many of the same underlying forces: interest rates, construction costs, housing policy, credit conditions and the broader property cycle.

If the private fund owns foreign properties, as Starlight did, some of the geographic and economic exposures obviously change. But you are still increasing your household’s allocation to real estate as an asset class.

You can own several different buildings, in several different cities or even countries, and legitimately improve diversification within real estate.

That is still not the same thing as diversifying away from real estate.

Property diversification is not necessarily asset-class diversification.

For Sovereign Canadian readers who already carry meaningful property exposure through their home, that distinction may matter more than the specific fund’s advertised distribution rate.

Back to the $100,000

Go back to the choice at the top of this article.

The investor who puts $100,000 into a public REIT ETF is accepting daily repricing, visible volatility, and whatever the market’s mood happens to be on any given morning, in exchange for immediate price discovery, low friction, and the ability to actually leave whenever they decide to, at the price the market is offering.

The investor who puts the same $100,000 into a private syndication is accepting illiquidity, a manager-directed valuation process, a more complicated fee stack layered several levels deep, and a holding period that may run longer than targeted, in exchange for the possibility of specialized access, active value creation, and genuinely patient capital that may not be available through a public-market alternative.

Neither trade is automatically the wrong one.

The question worth actually asking, before you sign anything, is not which structure sounds calmer.

It is this:

What, specifically, am I being paid for giving up my liquidity?

And is that payment coming from real value the sponsor is creating in an actual building, or does the whole thing simply look smoother because nobody is putting a market price on it every afternoon?

This article is for general information and does not constitute investment, tax or legal advice. Anyone considering a private real estate investment should review the actual offering documents and speak with a qualified advisor about their own circumstances.