Forgestone fund moves into Canada’s property financing gap as big lenders pull back
“Pension funds are effectively maxed out on Canadian real estate,” said Trevor Blakely at Forgestone Capital — yet his firm is preparing to raise fresh capital into the very same market.
According to Bloomberg, Canada’s property sector is in a deep reset, with prices down about 17 percent from their peak and development pipelines in Toronto and Vancouver back to levels last seen in the mid-2000s.
Against that backdrop, Blakely views the dislocation as a chance to step in where traditional capital is pulling back.
Blakely told Bloomberg that Forgestone is launching the Forgestone Diversified Real Estate Fund to plug what he calls a “huge chasm” in Canada’s property-finance market as major lenders and institutional investors cut exposure.
“Existing funds have to pay down debt or sell assets at the wrong time,” he said. “We’re coming in clean.”
The new vehicle is targeting $400m (US$290m) over the next two years, reported Bloomberg, with a first close expected next month.
The fund will seek condo inventory loans, purpose-built rentals and select industrial assets in Toronto, Vancouver and Halifax.
It plans to invest across the capital structure — senior and mezzanine debt, preferred equity and common equity — with a goal of generating 8 percent to 12 percent annual returns, net of fees, according to Bloomberg.
Blakely said the long-term aim is to allocate roughly 60 percent of the fund to debt and 40 percent to equity, but he expects to lean more heavily into credit during the first two years.
Forgestone is betting that a shrinking lender base and over-allocated institutions have left a financing gap that specialized private vehicles can occupy.
The firm sees about a two-year period to put money to work before competition and institutional flows “normalize.”
“There’s a shortage of capital, and we can drive better terms today than we’ve been able to get over the last 10 years,” Blakely said.
Commercial real estate investment in Canada fell 22 percent year-over-year in the first half of 2025, according to a report from Altus Group cited by Bloomberg.
The data firm attributed the pullback to economic uncertainty.
At the same time, rising borrowing costs and softer risk appetite have left many developers and fund managers constrained by leverage or dealing with redemption backlogs, creating what Blakely described as an “extraordinary” window to deploy capital.
Forgestone already oversees about $2.5bn and has completed roughly $8bn in transactions, according to Bloomberg.
The firm counts eight of Canada’s 20 largest pension plans as investors in its previous vehicles.
With the new fund, Forgestone intends to extend its investor base into the accredited-retail market while co-investing alongside pension mandates in institutional-grade loans.
Despite the reset, the underlying construction market remains sizable.
Across Canada, total investment in building construction reached about $264bn over the past year, according to Statistics Canada figures cited by Bloomberg.
Roughly $180bn of that total came from residential projects, including new builds, renovations and rebuilds undertaken by households, businesses and governments.
Within that environment, Blakely characterizes the current imbalance between demand for capital and available supply as particularly acute.
“Other private equity or private credit funds are gated or dealing with liquidity problems. There’s tremendous demand for capital and not a lot of supply,” he said.
