(54) How Institutional Capital Thinks About Real Estate Development Risk - Jeff Thomas - KingSett Capital

In this episode, Jeff Thomas, Group Head of Development at KingSett Capital, explains how the Canadian private equity firm invests in Canadian commercial real estate through development, joint ventures, and lending. He describes transitioning from brokerage (co-founding and selling Ashler Urban to Cushman & Wakefield) to development, emphasizing that long-term relationships, trust, transparency, and early delivery of bad news are critical to managing risk across KingSett’s roughly 55 projects with a small internal team. Thomas discusses “premium risk-weighted returns” as achieving strong returns relative to managed, less volatile risk. He details Toronto’s 50 Wilson Heights affordable-housing project (about 750 units in phase one, half affordable) on a prepaid ground lease, involving over 50 initial agreements, CMHC financing, and geothermal sustainability, and notes construction is in early structural work. He says Toronto condos are “dead” due to a large gap between resale and new-launch pricing, with development charges and HST seen as key barriers. He advises smaller builders to get close to customers and highlights modular/precast delivery at West Square as a path to speed, standardization, and affordability, while wishing policymakers would truly prioritize housing.

00:00 Meet Jeff Thomas
00:56 From Brokerage to KingSett
03:17 Relationships and Trust
06:55 Picking Deals and Pricing Risk
10:06 Transparency Builds Trust
13:14 Risk-Weighted Returns Explained
15:30 Inside 50 Wilson Heights
20:52 Construction Progress Update
22:17 Lessons From 50 Agreements
24:51 Condo Market Reality Check
26:22 Costs Fees And Taxes
29:36 Midrise Developer Playbook
30:57 Know Your Customer First
33:27 Modular Project Deep Dive
35:04 Standardization Versus Red Tape
41:44 Partnering With KingSett
44:43 Trends To Be Optimistic
48:22 Magic Wand Policy Wish

#RealEstateDevelopment #PurposeBuiltRental #DevelopmentRisk #AffordableHousing #TorontoRealEstate 

For more information, please refer to RealEstateDevelopmentInsights.com

Take our Free Assessment at: DevelopmentReadinessAssessment.com

Transcript

payam_1_03-03-2026_105428 0:01

Hello everyone and welcome to another episode of the Real Estate Development Insights podcast, where we bring you ideas, experiences, and best practices from the real estate development industry. My name is Payam nhi. My guest for this episode is Jeff Thomas. Jeff is the group head for development at King Set Capital. Jeff joined King Set in 2018 and he's responsible for the vision execution of the firm's development business. In addition to acting as fund manager for King Set, affordable housing, LP, and also residential development lp, Jeff has been a member of the firm's management team since 2025. Prior to joining King Set, Jeff was managing partner at a brokerage, a commercial brokerage firm that was sold to Cushman Wakefield back in 2015 In his 15 year career as a broker, Jeff was active in office leasing, investment sales, and infill land development in downtown Toronto. We're gonna dive into all of those things today and get a better understanding of what they do as an institutional investor, as a partner, as someone who brings a lot to, some of the most. Important projects that are happening right now instead of Toronto. And for context, King. Set Capital is a Canadian private equity real estate investment firm that creates and co-invest in real estate investment solutions and manages multiple strategies such as growth, income, urban. Mortgage, residential development and affordable housing. As always, you can find more information about this episode and our guest on our website, realestate development insights.com. Realestate development insights.com. That's all one phrase, and please remember to subscribe and also please remember to tell others about us and help us grow the show together. Thank you and enjoy listening.

1:48

Hi, Jeff, welcome to the show. How are you doing today? Fantastic. Thank you for being here. I know you're a very busy guy. Uh, can you please introduce yourself to our audience? Who's Jeff? And we go from there. What does that mean? Gotcha. So you come. Your personal background is not development. You come from, uh, the world of brokerage. You've worked there quite a while. You sold, um, your brokerage, I believe, to Wickman, uh, the Cush field team there, if I'm not wrong. Walk us through that. How did that happen? How did that transition? Why the transition? What were, what does it, what was that like? What were some of Yes, yes. I'm sure they are. Just for context, I've, because I've, I've been involved on the development side, but not the other side. What would you say is the main difference in the types of relationship or the length of the relationship that you're having? Like at the end of the day, you're, you're right, like on the. It's definitely a team sport. You have dozens of people, if not hundreds of people involved in the development project from the, from beginning to finish. How is that different or maybe identical to the previous setup? I like that word, trust. Um, the, uh. I think John, John C. Maxwell has a great book on leadership and, um, he defines trust, breaks it down into, basically makes an acronym out of it. And a t the first team trust in his definition stands for time. And that's, that's what he just said. Like the more you spend time, the more length of time you spend time with people and do business together, obviously that helps to build the trust even more, uh, with. Business travels at the speed of trust. That is true. Very true. Yeah, that's, that's, that's good that, that's, that's very true. And like, you just got me thinking that's very true. Like I've, I've been fortunate enough to work with some of the clients for like fifth project or fourth project right now. And the, the first project was a little bit bumpy. The second project got better, and, but not by the time fourth or fifth, like, we kind of finished each other sentences in a professional way, if you may. And that really helps speed things up. Yes, you're right. With that being said, 55 projects all across Canada, a large team, a lot of risk, a lot of opportunity, a lot of, a lot of things that could go right or wrong. I guess. Lemme go zoom out and say, how do you, how do you decide which projects to go into? What does it, what does a good deal look like from your perspective? I'm not trying to do that. So is it fair if I wanted to summarize that answer, is that because you're, you're basically swimming in an ocean of risk factors. You're trying to minimize some of them by picking the right party and having. Having the trust, like you mentioned, that that party is gonna take care of those risks or minimize them or mitigate them. Is that a fair way of putting it? Very true. Y. Yeah. Wow, Parkinson's. That's, that's, that's actually, that's a very rare thing that happens. And to your point, um, it was the transparency and the clear the. The quality of the messages that are coming through and the fact that they, you don't want to hear the cleaned version of the reality that that really helps. That really helps with, even for us on the construction side and running from the construction side of the projects, you always want to get to the bottom of things, not the cleaned version that people. Think you want to hear, and because it's typically missing some context. Interestingly enough, I was listening to, uh, Uber's, uh, CEO not too long ago, had a episode on the podcast, and he basically said the same thing. That the, the one of the keys to success at Uber has been transparency from ground up and the fact that tried to communicate that non cleaned version of the mess so people can actually do something about it. With, with that, with that being said. There When you go through king set's, um, verbiage and website and the documents that you guys have out there, there's something that it keeps coming up. It's a pr, it's a premium risk weighted return. What does that mean? Like what, for, for layman terms for someone who's not necessarily in the financial world, what you guys are offering in our investment opportunities in terms of, and it's called like it's, it comes up as risk weighted returns. What is that? So you're, you're, I guess that means that translates into less surprises or fewer surprises down the road for investors and the returns and, and potentially the fact that you've analyzed risk enough and built it into a system enables you to, to be more proactive, like you said, and do make better decisions knowing what they are. Is that the favorite way of putting it? Fantastic. Okay. I want to dive into 50 Wilson Heights. This project is a massive project that you guys are doing and there are a whole bunch of different partnerships going on. Can you walk us through the project? It's a big project. I think it's an important project because it has lots of moving parts and it will set up some precedence for other people and other projects hopefully to come in the future. Can you walk us through that project, what it is? Units, partnerships, structure where we are. I'm go from there. That's the, that's what I gathered from the 50 agreements before getting started. So can you, can you tell me what stage are you at right now? How long have you been involved in this deal and Woodward stage? Are you guys at Yeah, that's a surprise. Most, most fun exercise. Yes. Yes. Does this. That's pretty exciting to hear that that's moving. So looking back at this, these 50 agreements and getting to this point, if you were to document some of the lessons learned for yourself, your team, or for other our listeners who might, and hopefully who will eventually enter into these types of partnerships, because I think as you mentioned, this is a great opportunity for Citi to basically utilize. Underutilized or properly utilize the, the, the parcels of land, which there were not few, there are quite a bit of them around the city and, and even further out in the region. Uh, what are some of the lessons learned from this process and all the agreements and all the counterparts that you've dealt with? And I can, I can only imagine. It's with the number of parties involved and the complexity of the situation it has, and everyone can get really creative in things in terms of things that needs to be allowed for, accounted for in the contract contracts and agreements. So I guess. Building on that, we, not too long ago, we had um, uh, someone from CMHC on the podcast and we went through their most recent report on housing for the 2026 to 2028 market and their forecast basically. How are you seeing that changing? Like what is your take on it for the next two, three years on the market conditions? How are you guys underwriting projects? Obviously we know at this very moment in time, the condo market is. Not if entirely, that is very close to debt. And, um, what are, what is your take on that? What is King said thinking in terms of underwriting new projects? To your point, the, the HST, just the, the good news I guess on the HST for the first time home buyer rebate was increased very recently. Still probably takes time to make its way to the actual ground and we. You what the actual implications are. Um, if I want to go and look at that, the look at the current environment and say, okay, this is what we just talked about. Condos are not starting. The, the purpose-built rentals are pretty much the only thing that is happening. If that is happening, are you, or like if you're talking to, uh. Smaller developer. If you're talking to someone who's, who's been trying to, or is trying to, um, get a smaller six story 60 unit building going, because that's what City of Toronto is these days focusing on, they're allowing it, the whole discussions about the major streets and everything else. Do you have any suggestions, red flags, or maybe just would you tell 'em to stop and don't do anything for a while, or how would you, how would you advise them if someone wants to start a midrise project these days, regardless if it's condo or PBR. I, I love that answer. It actually reminds me of a quote from Airbnb founder, I think his name. Is Brian Jetski and he, she said, uh, focus on the unscalable. 'cause to your point, the things that can be scaled bigger boys have already figured out a way to do it. The things that, that cannot be scaled, uh, such as the ones that you were just mentioning, going and meeting the local residents, getting to know the community that will potentially buy those units or rent you those units from, from you. That's not something that you could do at scale, but you could do it at a 30 to 60 unit range and is. Definitely possible. It's probably not, it's, it's not gonna be easy, but it's gonna be doable. It's definitely doable. So I think I, I take that as a great advice there. Can we talk about. You're focused on modular. When you and I were talking offline, you obviously, we touched on your project. I think it's in Valhalla. It's called Valhalla Village, if I'm not wrong. And uh, you guys are using modular. Can you talk us about that project? What are the parameters, why, why modular? How do you like it? What are the challenges? Gotcha. It, it. I think one of the things that happens, uh, has happened over the past 10, 15 years is that we kept. Adding and adding and adding and increasing the number of criteria to the pile of criteria for approving a new building. And we started, I think one of our pre previous guests, uh, put it very nicely that we started optimizing for a hundred different things and we forgot to optimize for the actual affordability of it. Is that like you're, you're trying to get everything under the sun to the perfect, uh, degree possible. But then you just can't build it. You can't get scale, you can't repeat it. Every other, every building is gonna be different than the next one. And, um, to your point, I, I can definitely see where you're coming from because the modular by definition is putting some constraints on, on some of those variables and say, listen. We can't do just, we just can't do that. So don't ask us to do that. If you're in the municipality, if you're asking us for curved corners, we just can't do that. If you want us to do that in like, past timber or CIP or cast in place concrete or, or sorry, not, um, cast in place the, yeah. Precast concrete, uh, walls and floors. So you kind of have to make a trade off and it gives them, I guess I'm just, sorry I'm ranting here, but it almost gives them an excuse to say, listen, what do you want me to do? These guys can't do it any other way. You have to stick to their criteria. And it reminds me of that old saying that no one got fired for buying from IBM because there was no other option. Like this is the option you, you buy from them. And yeah. Agreed. I, I, I think it's, it's not happening yet, and it's. It's not happening yet. It seems to be missing some political will. It will it, it will upset a number of stakeholders on the grander scheme of things because they're always pushing for changes and improvements, which I can definitely, like you said, no, no single policy is probably bad in itself. It's just when you add a thousand of them together and tried to make a. Project pencil, then that's where things go wrong because it just doesn't work. You don't have that much money to split between all those criteria that are eating it up. Um, going back to my avatar for, uh, a new developer who's doing a midrise project and who's trying to put together, if they want to come to you and for some sort of partnership, either financing, jv. You name it, whichever would be possible, and it might not be on that one project, which is, which might be too small for you guys, but at some point in the future, they want to aim to come and talk to Jeff and say, listen, we want to do something with King Set. What would they need to have at that point in time to make them a good candidate? From your perspective, and I'm, I'm mainly, I know we talked about trust and track record and reputation, but I'm mainly also asking about. Systems, infrastructures and stuff like that is, do you think about that stuff or like what do you think about when someone comes to you and asks that question?

payam_3_03-03-2026_120639 46:30

Let me ask you this question. When you look into the future and or the current situation in market, are there any industry trends that you feel excited about that you see? You know what, yeah. We're in hard times right now. Markets are not, we need to be, but in 1, 2, 3, 5 years from now, this is gonna happen. Do you see any of those trends that make, that gets you going?

jeff-thomas_2_03-03-2026_120642 46:57

Yeah, actually there's a lot i I am really excited about right now, I think in and broadly in the market. I think what's what's really cool is just, you know, we, we had this lack of expertise in Canada for people who were building rental buildings. Like there's, you know, there a small handful who've continued to do it over the last 40 years, you know, but a lot of new businesses that have grown and grown relatively quickly around rental. And more people looking to do more rental, you know, and it, and it's a lot different than doing, you know, a high-rise condo versus high-rise rental and needs a different skillset, you know? And so I think from an industry perspective, like it's super cool that, you know, we've got all kinds of people and businesses who are like learning and obtaining these skills, which quite frankly, you know, make you a better developer because you have to compete, you know? Take on a lot of risk, you know, articulate and underwrite very narrow margins, which you've gotta be perfect on. You know, and frankly, probably over a period of time, you know, the industry grew so much and probably got a little lazy, you know, were we competing head to head really well on, you know, some of the condo product, like, I'm not so sure. And so I think we're gonna emerge through this. You know, at a point in time where there are low, uh, limited amount of supply coming online, some rentals coming online, and then a whole industry that knows how to do this extra product type a whole lot better, you know? And so I think, you know, the customer will return. Um, it's an inevitability like Canada will continue to grow at some pace. Toronto is likely to continue to grow at some pace. Um, we will continue to have lots of old and obsolescent things that will be replaced with newer things as well, just, just out of obsolescence. So there's going to be like a lot of work to do. Um, you know, and I think the industry will emerge more resilient and stronger. Um, you know, and hopefully also on the construction side. You know, we'll have an opportunity to, for teams to sort of retool and reset and, you know, get their, A teams are great and they're busy and they're working, you know, and their B teams have an opportunity to sort of reset and get, you know, tighter and better so that you come out of it with two A teams and you know, that allows for a lot more productivity as well. So like, I think the future fundamentals in the market in terms of supply demand. Super favorable. I think as an industry, you know, you always emerge stronger when you go, you, you emerge from a tougher period of time. Um, you know, and we're picking up a skillset that, you know, not too many people had before. So, you know, I think in that sets a table for different creativity to do different things. Um, and so we should emerge doing a lot of really exciting things I think in the future.

payam_3_03-03-2026_120639 50:08

That's good news. Thank you for sharing that. Uh, we have a closing tradition on the podcast. Uh, we you a magic wand for about five minutes and we asked you to make a wish that wish, just whatever you like in terms of getting us in a better position. In terms of our housing crisis, affordability, and uh, it could be a change in regulation. It could be a policy, it could be a mind mindset shift, a paradigm shift, whatever you want it to be. What would that wish be?

jeff-thomas_2_03-03-2026_120642 50:42

My wish would be that, uh, policy makers would recognize and prioritize housing rather than just say it. So there's all kinds of things that you can do, but. It's too much posturing. I would be ecstatic if people would just realize it was something they actually wanted to do and go do it. 'cause the government can do amazing things when it wants to, and if it wanted to do something, it would've.

payam_3_03-03-2026_120639 51:20

Amen. Amen. Thank you for the wish. Thank you very much for being here, Jeff. I'm hoping that we can have a part two of this conversation in a couple years and have better news and

jeff-thomas_2_03-03-2026_120642 51:30

good.

payam_3_03-03-2026_120639 51:30

conditions going on there. Thank you for your time.

jeff-thomas_2_03-03-2026_120642 51:33

We'll get through it.

payam_3_03-03-2026_120639 51:34

We'll get together through it together. We're all in together. Thank you.

jeff-thomas_2_03-03-2026_120642 51:39

Thanks.