Real Assets Adviser

June 1, 2023: Vol. 10, Number 6

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From the Current Issue

Major CRE player takes bullish stance on the future of office

Even as many investors and managers warn the office sector will never be restored to its pre-pandemic status, one of commercial real estate’s longtime players is betting that it’s making a comeback — and that the Big Apple, the nation’s premier office market, is ground zero for that recovery.

Last Word: Housing market is stabilizing, not crashing

It’s been a housing market roller coaster the past few years with no shortage of news about record-high prices, outrageous negotiations (like all-cash deals and cars), and questions about if there’s a bubble and if it’ll burst. The pendulum swung from a buyer’s market to a seller’s market as a result of the pandemic changing people’s behaviors.

Investing in professional sports franchises

Historically, investing in sports franchises, at least in the United States, was mainly dominated by wealthy families or passed down through generations. As valuations in sports franchises ballooned, these properties became extremely valuable assets and have now attracted the attention of institutional investors that in the past had not considered sports as an investible asset class.

Regulation Update: UPREITs keeping real estate investments in play

Asset managers know there’s more than one way to invest in real estate, and many of them manage multiple funds with different strategies and structures to give investors options. Those choices might include either a Delaware Statutory Trust (DST) or a real estate investment trust (REIT) — tax-advantaged alternative investment products that grew in popularity after the economic crisis of 2007-2009.

The continuing evolution of office

The impact of the COVID-19 pandemic on the office market is hard not to notice. Many office buildings sat empty for months on end, and now that some employers have adopted hybrid working environments, it begs the question: Where does that leave offices in the near term and beyond?

Making sense of sustainability in a political world

It is a wee bit ironic that the term “sustainability” has been associated with a liberal political orientation, when the act of “sustaining” something is an essentially conservative one. Sustainability is designed to preserve the status quo or restore a prior state of equilibrium or resource availability.

Venture capital investing for the masses

Venture capital and retirement funds share long-term investment time horizons, making them ideal complements to one another. Individual retirement accounts (IRAs) are long-term investment vehicles, and venture capital aims to earn outsized returns over the long run.

Tax Update: Transfer pricing and foreign legal restrictions

Foreign legal restrictions have often confused multinational taxpayers, particularly in countries like Brazil, whose transfer pricing regulations seemingly depart from the arm’s-length principle by capping royalties and setting ranges for tangible transfers. This has spurred controversy between taxpayers and the Internal Revenue Service regarding the impact of foreign legal restrictions on the arm’s-length amount to be recognized in controlled transactions. On Feb. 9, 2023, the tax court sided with the IRS in 3M Co. vs. Commissioner, upholding requirements in Treas. Reg. Sec. 1.482-1(h)(2) regarding when a taxpayer may consider foreign legal restrictions for determining the arm’s-length amount in a transaction between controlled taxpayers.

The next stage in nuclear power

Today I’m in the town of Kemmerer, Wyo., to celebrate the latest step in a project that’s been more than 15 years in the making: designing and building a next-generation nuclear power plant. I’m thrilled to be here after all this time because I’m convinced that the facility will be a win for the local economy, America’s energy independence and the fight against climate change.

Will the U.S. dollar go digital?

On March 15, the Federal Reserve announced a new payment service called FedNow. Shortly thereafter, claims began to circulate that FedNow is tantamount to a central bank digital currency, or CBDC. The announcement came roughly a year after President Biden signed an executive order tasking the Federal Reserve with looking into a CBDC for the U.S. financial system.

Research Roundup: June 2023

How do the wealthy invest, and what can the rest of us learn from them? A new paper from Origin Investments interestingly notes that investment strategies favored by the wealthy have changed. Learn more here.

Real asset allocations in the post-60/40 environment

For generations, the “60/40 rule” of thumb — that an investor’s portfolio should be three-fifths in equities and two-fifths in bonds — has served well enough and lent macro diversification to nest eggs. An investment plan incorporating both growth and income instruments generally provided a reasonably safe passage to building wealth while reducing risk.

Profile: Stephen Biggs, managing director and head of alternative investments at The Mather Group

Never discount the influence of happenstance. It’s an influence Stephen Biggs became acquainted with after earning his master’s degree in business and finance at San Diego State University in the mid-’90s, after which he started his career as an equity analyst at the Montana Board of Investments. The pension fund’s investments included some KKR funds, which was where Biggs became acquainted with alternative investments. At one conference he attended, Biggs — young and shy at the time — sought out a quiet table. In short order, two men joined Biggs and started peppering him with questions.

A bright, shining ambition: Chinese solar development off to rapid start in 2023

Chinese clean energy investments continued to outstrip the United States and Europe’s combined spend in 2022, pushing total solar deployment in Asia's largest economy close to 400 gigawatts (GW). China has already surpassed that milestone in the new year, with the first two months of 2023’s buildout of solar capacity running at a much faster clip than in the same period a year ago. China is keen to improve renewable power generation domestically and continues to look toward Africa to expand development abroad.

Banking on gold: The silver lining in the U.S. regional banking storm

According to the official rules of Monopoly, the bank can never run out of money. Obviously, that’s not always the case in the real world. We’ve already seen three regional banks fail in the United States so far this year, and we may see more as depositors continue to move cash from smaller institutions to those perceived to be safer. According to the latest data, bank deposits are shrinking at the fastest pace on record, having hit –5 percent year-over-year in April.

Bank failures fueling crypto adoption

Cryptocurrency adoption in the United States increased amid fears of a full-blown banking crisis, a new poll finds. According to Morning Consult, 22 percent of Americans said they owned at least one form of crypto in April, representing an increase of 4 percentage points from January.

Automation and robotics reaching well below Fortune 500-scale companies

While large organizations have been investing heavily in robotics for years, the vast majority of companies with 500 or fewer employees have not had that luxury. Thankfully, that equation is changing. Increased availability of smaller sensors and faster processors has enabled the development of smaller, cheaper, more flexible robots that are easier to instruct and safer to operate than their heavy industrial counterparts. This reality has set the stage for the next wave of adoption: innovative small and midsize enterprises (SMEs).

5 Questions: Client/adviser matchmaking and the essentials of the relationship

Financial advisers don’t always have the best reputation, in some cases because they talk down to clients, they put their interests ahead of their clients, and they fail to return phone calls or reply to emails. Clients sometimes become part of the problem by withholding information or panicking during market corrections. One of the keys to a fertile adviser/client relationship according to Nick Stuller, a 35-year veteran of the financial services industry and the founder and CEO of MyPerfectFinancialAdvisor, is to more carefully match clients with suitable advisers.

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