Canada: Real Estate Funds: What You Need To Know

Last Updated: April 10 2019
Article by The Lay of the Land, Charlene Schafer and Arie van Wijngaarden

Most Read Contributor in Canada, March 2019

Real estate funds are one of the hottest trends on the investment landscape.  Real estate funds  are primarily limited partnerships which pool a number of properties within a portfolio  in order to generate returns for investors.  Given the intensity of the Canadian market and increased competition, there are many niche fund offerings such as those focused on home building, development, mortgage funds or those focused on specific asset classes such as hotels, and seniors residences.  In addition, traditional models with broader based portfolios of commercial and corporate properties remain attractive for investors. 

Types of Real Estate Funds

There are different types of real estate funds.  Real estate funds are usually classified by the type of assets comprising the fund, including:

  • Core Funds– These funds generally invest in stabilized, fully leased, income-producing assets in strong metropolitan areas.  Core funds are typically unleveraged, meaning they carry less risk.  The tradeoff is that there is less potential return for investors.
  • Core Plus Funds – These funds invest in core properties as noted above, but usually require some type of improvement or enhancement in order to increase the properties' value.  For example, a Core Plus fund may acquire an under-leased, multi-tenant office building in a large financial centre, with the goal of re-leasing the building to generate a higher rate of return.  Core Plus funds typically have a moderate risk/return strategy.
  • Value Add Funds – Value Add funds purchase properties with the goal of improving them in some way and selling when the market is high. Properties selected for a value-add portfolio typically would have either operational or management issues or require some type of physical improvement. These funds have a medium to high risk and return strategy.
  • Opportunistic Funds – Opportunistic funds purchase properties requiring a high degree of improvement or are development/raw land properties which have a high-risk and high-return.  There are now many of these funds operating in urban areas, such as Toronto and Montreal focusing on development and infill.

A fund may further refine its focus by specializing in residential, industrial, rental, or office properties. 

Funds can be open or closed ended which relates to the timeline and investment horizon of the fund and there will be various considerations to take under advisement when structuring either a closed-end or open-ended fund.

Legal Considerations

There are various items to consider when structuring a real estate fund and the most appropriate structure will depend on the purpose of the fund, tax considerations, liability concerns, privacy issues, the life cycle of the fund, the nature of the investors, and the amount of capital raised, amongst other things.

It is most common for a limited partnership to be used as the preferred structure for implementation of a real estate fund as it allows for flow through of profits and losses from an income tax perspective and also serves to protect the investors by offering limited liability.  A limited partnership structure has the additional benefit of protecting the investment asset from the insolvency of other investors, since the investor only has a limited interest and not a direct interest in the assets of the limited partnership.  There can also be securities considerations, regulatory considerations, and pension benefits law considerations depending on the nature of the fund and its investors. 

Pension funds are subject to a number of restrictions and rules under the Pensions Benefit Act  and Income Tax Act that they must follow when investing in real estate.  Often there are unique considerations to focus on and negotiate when pension fund investors are involved, given that they are only permitted limited exposure to real estate under the legislative framework and also depending on the nature of the particular real estate fund they are investing in.  Some funds allow for employee participation as a performance incentive, which creates additional structuring considerations. 

In terms of governance, a general partner will manage the fund on behalf of the limited partners.  It is often a heavily negotiated point as to what level of authority will be delegated to the general partner and what decisions will require the approval of the limited partners (and at what threshold of approval, i.e. unanimous, 66 2/3, majority).  In some funds, an affiliate of the general partner also acts as asset and/or development manager, which raises a whole host of other considerations and points to be negotiated.

The Real Estate funds market continues to be an active sector for investment in Canada, with many different types of funds and many different fund strategies.  It is important to remember that even though they are popular, real estate funds remain complex investment vehicles which carry significant legal risks in their formation and operations.  As a result, experienced counsel should be sought out when forming or investing in a new fund. 

To view the original article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions