Real Assets Adviser

December 1, 2023: Vol. 10, Number 11

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From the Current Issue

Profile: John Ockerbloom, head of U.S. real estate at Barings

If you happen to run into John Ockerbloom — at an airport or investment conference or hotel lobby — he is likely to have an acoustic guitar in his hands. That would be a Taylor GS Mini manufactured by Taylor Guitars. Ockerbloom isn’t a virtuoso, but he is a romanticist, having started taking lessons on the instrument at age 48 with the intent of singing the Elvis Costello arrangement of the song “She” to his wife Amber for her 50th birthday. That gave him a few years to become conversant with the instrument and get his vocal cords attuned to Mr. Costello’s distinctive pitch and delivery. (Some of you might remember the song as the number played during the ending montage of the movie Notting Hill, staring Hugh Grant and Julia Roberts.)

U.S. manufacturing resurgences faces headwinds

While nearshoring and reshoring activities have increased from both businesses and governments, the sector is facing significant headwinds in achieving meaningful impact, according to Cushman & Wakefield. “Disruptions to supply chains across the world have been the norm over the past three years, bringing the impacts of globalization and the importance of well-functioning supply chains into sharper focus,” said David Smith, head of Americas insights.

Threat assessment: Critical infrastructure under attack in Finland and beyond

In early October, the Baltic Connector, a 48-mile undersea Finnish-Estonian gas pipeline, experienced a sudden drop in pressure and was subsequently shut down. A telecommunications cable connecting Finland and Estonia also was found to be damaged. After further investigation, the Finnish government believed the damage to be “human made,” likely caused by an external force that was mechanical in nature, but not an explosion.

Forecast 2024: The year of transition

The wailing and gnashing of teeth over inflation and recession and uncertainty is coming to an end. Inflation has become stubbornly persistent, but it seems to have turned the corner and is lower than last year. The potential for recession — at least a severe one — has faded. And uncertainty has simply become a fact of life. As such, 2024 is shaping up to be a year of transition from impatience (waiting for the economy to turn around) to grudging acceptance (that low interest rates are a thing of the past, consumer and worker shifts are here to stay).

Regulation Update: Understanding common FINRA violations

While brokers diligently strive to adhere to FINRA’s rules, there are times where they inadvertently violate them. Brokers can also face unjust accusations and unfounded claims. In these cases, brokers can find themselves facing unwarranted or false allegations that tarnish their records and professional reputations. Compliance with FINRA rules is crucial. With that in mind, here are some of the most commonly violated rules.

The crypto winter thaws: Revisiting digital assets and the blockchain

The cryptocurrency and blockchain universe is a lot larger than bitcoin. Nevertheless, bitcoin is the poster child for the entire sector and, until recently, the year 2023 was definitely on the icy side for bitcoin trading ranges. Add to that prominent digital denizen Sam Bankman-Fried, who was in and out of the headlines all year, after the collapse of his cryptocurrency exchange FTX — a debacle made all the more unsettling to the general public because of its indecipherability. Bankman-Fried, worth an estimated $26 billion when 2022 started, is presently penniless, convicted of fraud and awaiting his March 28, 2024, sentencing date, during which he faces up to 110 years in prison.

Proposed legislation blights outlook for overseas investment in U.S. farmland

U.S. farmland has drawn significant interest over the past decade from investors looking for alternative real estate investments. In light of post-pandemic concerns about supply chain and food security, federal lawmakers are increasingly scrutinizing such investments, particularly where foreign investors are involved. To date, foreign ownership of agricultural land has been lightly regulated at the federal level and by a patchwork of state laws that run the gamut from outright bans to simple reporting requirements; however, growing tension with certain countries (most notably China) has made foreign ownership of U.S. real property, including farmland and other agricultural assets, a key talking point on Capitol Hill, and legislative proposals have proliferated. While much attention has been focused on China, these proposals are varied, creating a new and growing regulatory regime that all investors and asset managers will need to grapple with to reap the returns of investments in U.S. farmland.

What is a virtual power plant? An energy expert explains.

After nearly two decades of stagnation, U.S. electricity demand is surging, driven by growing numbers of electric cars, data centers and air conditioners in a warming climate. But traditional power plants that generate electricity from coal, natural gas or nuclear energy are retiring faster than new ones are being built in this country. Most new supply is coming from wind and solar farms, whose output varies with the weather.

Water works: Private capital is stepping in to address the substantial global need for investment in water infrastructure

The planet has plenty of water. In fact, more than 70 percent of the Earth’s surface is covered with it. But digging further into the issue of water reveals a global crisis that is generating massive investment opportunities for infrastructure investors. Experts agree the need for investment in water infrastructure globally is at an unprecedented level. According to the Global Commission on the Economics of Water, up to $400 billion of additional investment per year is needed in low- and middle-income countries to achieve universal access to clean drinking water, sanitation and hygiene by 2030.

Tax Update: What’s new and newly important in REIT tax benefits

As real estate investment trusts (REITs) proliferate in both public and private real estate sectors, there’s a growing list of benefits they can provide when compared with partnerships. Today’s changing landscape for owning and operating real estate is bringing new, and renewed, awareness for the key tax benefits for REIT structures — and their tips, tactics and pitfalls.

Talking Points: Quotations from people in the news

Darren Woods, CEO of ExxonMobil, on the company’s efforts to start producing lithium in 2027 from underground seawater: “We have, since the very beginning, stayed focused on what I’d say is the molecule side of the equation — in carbon capture and hydrogen and biofuels. Lithium — and production of lithium from brine water — is … really an extension of a lot of the current capabilities that we have in our upstream.”

A tale of two offices markets: Can conversions solve the surplus office problem?

In Manhattan, the Vanbarton Group is in the process of converting a 24-story office tower at 160 Water St. to a premier apartment building. The new project will add five new floors to create 588 units. Across the country, Hines is transforming the 217,000-square-foot South Temple Tower in Salt Lake City into a 255-unit luxury multifamily tower. Its conversion plan includes stripping the existing office building to its core and shell and repurposing the building structure to create an efficient residential floorplan.

Research Roundup: December 2023

Goldman Sachs has a new podcast about achieving a “more disciplined IPO market.” How are large investors thinking about equity capital markets and the trajectory for the overall economy? Lizzie Reed, global head of the equity syndicate desk in Goldman Sachs Global Banking & Markets, dives into the findings of the team’s survey. Listen here.

Branching out: The appeal of timberland for portfolio diversification

One of the fascinating things about timberland, the forest land asset class, is the resilience of its investment thesis. Timberland has historically provided attractive risk-adjusted returns and portfolio diversification benefits, in part due to its low correlation with other asset classes, such as bonds and equities. Its relative safety and insulation from financial markets has made it a coveted staple of institutional portfolios with long investment horizons. The fundamentals driving core investment returns remain steadfast, but the asset class is now drawing in investors who are looking to deliver impact and sequester carbon while making financial returns.

EV sales growth points to oil demand peaking by 2030

Electric vehicle sales are growing faster than expected around the world, and sales of gas- and diesel-powered vehicles have been falling. Yet, the U.S. government still forecasts an increasing demand for oil, and the oil industry is doubling down on production plans. Why is that, and what happens if the U.S. projections for growing oil demand are wrong? I study sustainability and global energy system transformations. Let’s take a closer look at the changes under way.

What money can’t buy, and what to do about it

The most common complaint I hear from private wealth advisers and the people at their firms responsible for investment program selection is that they constantly feel overwhelmed by the demands on their time. This is true even for those blessed with large staffs — although for most of you, you also feel plagued with a lack of suffi­cient staff resources. Many of you effectively are one-person shows. And some of you have no staff at all, running the whole shooting match by yourself.

Air travel in a rut: Is there any hope of recapturing the romance of flying?

Amelia Earhart broke a transcontinental speed record 90 years ago, in July 1933, by flying her signature red Lockheed Vega from Los Angeles to New Jersey in just 17 hours, seven and a half minutes. Earlier that year, Earhart had flown as an observer on a Northwest Airways winter flight across the United States, testing the possibilities of a “northern transcontinental” route.

5 Questions: What is ‘dequity’ and why is it needed?

Eric Brody, a New York City developer with almost 20 years of experience, has built around 800 units across the Big Apple, totaling nearly $1 billion in real estate projects. Brody, the son of an architect, began recognizing the challenges facing developers, including inefficient processes and limited credit access, and decided to establish ANAX Real Estate Partners, a privately held New York City-based real estate developer, lender and investment firm dedicated to recapitalization, project completion and stabilization.

The advantages and impediments to adopting performance reporting systems

Among the impediments to financial advisers’ ability to integrate alternative investments into client portfolios is the ability to generate timely, accurate and meaningful information for clients. That’s the bad news. The good news is technology has given birth to a host of performance reporting systems that accomplish the task at hand — diversifying portfolios, tracking performance and reporting the results to clients in a telling manner. Imagine being able to build personalized reports with an intuitive drag-and-drop interface.

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