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Coronavirus Diligence Briefing

Our briefing for Friday March 5, 2021:

Mar 5, 2021 3:44:11 PM

  • The United States Senate was voting on a series of amendments to the $1.9 trillion coronavirus relief package on Friday. The bill, which now differs from the House version passed last week, will see jobless Americans get a smaller weekly boost to unemployment benefits but receive those payments for an additional month under the last-minute revisions. Progress on the overall bill paused as senators negotiated various issues within the bill. The lawmakers self-imposed deadline of March 14th is fast approaching as that is when unemployment benefits in the two programs set-up during the pandemic start to run out.

  • Canada received good news on the COVID-19 vaccine front on Friday with a fourth being cleared for use and a plan to accelerate deliveries for a previous approved inoculation. Health Canada gave the green light to use Johnson & Johnson’s COVID-19 vaccine, which is widely seen as one of the easier to distribute because it only requires one dose and can be stored for longer periods of time at regular refrigeration temperatures. Just hours after the Health Canada announcement, Prime Minister Justin Trudeau confirmed that Pfizer had agreed to move up 3.5 million doses of its COVID-19 vaccine – originally scheduled to arrive in the summer – to the next three months. 

  • In the United Kingdom, a court order showed on Friday that Prime Minister Boris Johnson “misled parliament” over the publication of coronavirus contracts. The prime minister had claimed the contracts were in the public domain, for everyone to see, however a High Court order showed the government only published “608 out of 708 relevant contracts”. Critics of Prime Minister Johnson said unless contract details are published, they can’t be properly scrutinized and there’s no way of knowing where taxpayers’ money is going and why. 

  • France’s Health Minister Olivier Veran said the country may follow suit with Italy in regard to blocking future COVID-19 shipments. “Of course, I understand what Italy did. We could do the same thing,” said Veran during an interview. Veran went on to add, “we are closely discussing with Italians, as well as with all our European partners to have a European approach to the issue. Since the first day, France has believed in a shared European approach.” On Thursday, Italy pulled backed a shipment of 250,000 AstraZeneca COVID-19 doses to Australia, thus sparking concerns of vaccine nationalism.

  • In response to Italy and the EU’s move to block vaccine shipments, Australia is seeking assurances that future shipments of vaccines won’t be blocked by the executive arm of the bloc of nations. While Australian Finance Minister Simon Birmingham acknowledged the country received 300,000 doses of the AstraZeneca vaccine last week that would see its current distribution plan work, “we are obviously very disappointed and frustrated by this decision. It is very much a reminder of the desperation that exists in other parts of the world, compared with the very good position we found ourselves here in Australia.”

  • Brazil’s President Jair Bolsonaro was at it again on Thursday, telling supporters in the midwestern state of Goias, where nearly 9,000 people have died due to the pandemic, to “stop all this fussing and whining. How long are you going to keep on crying?” The tone-deaf leader of Latin America’s largest COVID-19 outbreak continues to go downhill with the World Health Organization (WHO) weighing in on Friday, stating the epidemic in Brazil is “very, very concerning”. “If Brazil is not serious, then it will continue to affect all the neighbourhood there and beyond, said WHO chief Tedros Adhanom Ghebreyesus. The Guardian was reporting President Bolsonaro’s outlandish statements were seen to distract the media and Brazilians from his son’s recent purchase of a luxury mansion.

Covid-19 – Due Diligence And Asset Management

NYC’s Financial District Faces Office Glut as Tenant Exits Loom

Brief : New York’s Financial District is suffering as a glut of office space builds with the pandemic keeping workers home. JPMorgan Chase & Co. is the latest high-profile tenant to look for an exit from the neighborhood, a historic part of lower Manhattan that is home to the New York Stock Exchange and Federal Reserve. S&P Global and Fitch Ratings Inc. are also marketing big blocks of offices, driving an 80% surge in the amount of sublease space available. That’s more than double the rate in Midtown, according to data from CoStar Group Inc. “The sublet spaces currently on offer at deeply discounted rates is a veritable flood of biblical proportions, with more likely to come online soon,” said Ruth Colp-Haber, chief executive officer of brokerage Wharton Property Advisors. Manhattan’s office market has taken a big hit in the past year, with the pandemic emptying out skyscrapers and pushing cost-conscious companies to reconsider how much space they need after months of remote working. In Midtown, where there’s been a 36% increase in sublease space, roughly 18% of office space is currently available, either because it’s empty or a company is trying to unload it. There’s a similar amount space for rent in lower Manhattan. The area had been clawing its way back after being battered by the 9/11 terrorist attacks and the global financial crisis. In 2011, when the magazine publisher Conde Nast announced a move to the rebuilt World Trade Center from Times Square, it was a pivotal moment in the bid to draw companies downtown.

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Working at Home Won’t Last Long After Covid, BOE’s Haskel says

Brief: Most companies in the U.K. will ask employees to return to the office after the pandemic because working from home hurts productivity, a Bank of England policy maker said. Jonathan Haskel, a member of the central bank’s monetary policy committee, said information and communications technology is the only industry that indicating that staff can get more done from home. He analyzed data from an Office for National Statistics survey. “A net balance of firms across the vast majority of industries does not intend to use home working as a permanent feature,” Haskel said in a webinar on Friday. “It’s likely that the majority of industries will return to the workplace when the pandemic restrictions are lifted, lessening the impact of structural change from this quarter.” The remarks help explain why more people are traveling to work during the U.K.’s third national lockdown. Almost half of people reported leaving home for jobs at least once this week, reducing the portion of home working over the past few weeks. The number of people in offices now is similar to what it was in June when pandemic rules were looser. Prime Minister Boris Johnson plans to slowly loosen restrictions through the middle of the year, starting with reopening schools on March 8. He’s urged people to stick to the rules until the rules are loosened.

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Why ‘Vaccine Passports’ Could Be Complicated to Pull Off in the US

Brief: While both the European Union and China are committed to moving ahead with "vaccine passports," a government-mandated system for citizens to prove they’ve been inoculated against COVID-19 could be complicated to carry out in the U.S. because of privacy, equality, and practical concerns. This week, European Commission president Ursula von der Leyen said the EU would propose a “digital green pass” for EU citizens. China’s government said it intended to develop a certification program for citizens to show proof of vaccination or negative test results. And in February, Israel initiated its “Green Badge” system to exclude non-vaccinated individuals from certain activities. While some experts say there's a chance the U.S. government could pull off a successful and legal certification scheme, data privacy and anti-discrimination hurdles, as well as technical ones, could make a federal vaccine passport system tough to impose on Americans.

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Insurers Rewrite Business Policies After Pandemic Legal Tussles

Brief: U.S. insurers are strengthening language in policies that cover business losses to protect them from future claims related to the coronavirus pandemic or other widespread illnesses that disrupt operations, industry sources say. New policies and renewals now define terms like “communicable disease” or “microorganism” – something existing policies often lacked, and which led to a flood of lawsuits that insurers have so far largely won. An exclusion drafted by the Lloyd’s Market Association, for example, says insurers will not cover any claim “directly or indirectly arising out of, attributable to, or occurring concurrently or in any sequence with a Communicable Disease.” Another, used by Farmers Mutual Hail Insurance Company of Iowa, excludes losses from even the “fear or threat” whether “actual or perceived” of a communicable disease or “any action in controlling, preventing, suppressing” it.

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BentallGreenOak Raises $1 Billion for Real-Estate Lending Fund

Brief: BentallGreenOak has raised 869 million euros ($1 billion) for its latest European real estate debt fund as the private equity firm muscles in on property lending amid a retreat by banks. The fund, which started raising cash before the onset of the pandemic, exceeded its initial target of 800 million euros, according to a statement Thursday. It issues loans secured against offices, warehouses and homes in Germany, the Netherlands, the Nordics and Ireland. “Post-Covid we have faced a lot less bank competition on the lending side,” said Jim Blakemore, a London-based managing partner and global head of debt. “This is a good market to be a lender in today.” The outbreak prompted banks to make hefty provisions for soured loans as widespread lockdowns threatened borrowers’ rent collections and their ability to repay loans. That’s diminished their appetite for new real estate lending, particularly to malls, stores and hotels that have seen their income wiped out. Non-bank lenders have spied an opportunity to step in and back investors seeking to reinvent those impaired properties. GreenOak Europe Secured Lending Fund II has so far lent 382 million euros, the statement said. The eight loans agreed to date have been for properties in the Netherlands and Ireland.

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Energy Hedge Fund Deep Basin Returning Capital After Retail Rout

Brief: Energy hedge fund Deep Basin Capital LP is returning capital to investors after retail traders drove market volatility to extreme levels, overwhelming the fund’s positions, according a letter to investors reviewed by Bloomberg News. “I do not believe that risk markets are functioning properly and am deeply concerned about the immediate investment climate,” Matthew J. Smith, managing partner of the Stamford, Connecticut-based fund, wrote in the letter. “Further, the market structure has changed and become more dangerous in ways that at this point are difficult to quantify and understand, and I cannot fully study these changes while taking risk with partner capital,” he wrote. Hedge funds have struggled to make money for much of the last decade as equity markets surged, and there have been more hedge funds closures than launches since 2014, according to Hedge Fund Research. During the first three quarters of 2020, 619 funds shut compared with 364 that opened. Stock rallies driven by retail investors caused pain for short sellers this year, with funds like Melvin Capital Management and Maplelane Capital losing billions during January’s GameStop Corp. short squeeze. Melvin made up for some of its losses after gaining 22% in February. A spokesperson for Deep Basin declined to comment. An influx of retail traders weighed on the fund’s stock picks, with retail flows in stocks and options exceeding 50% of the daily volumes in Deep Basin’s positions.

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Castle Hall has a range of due diligence solutions to support asset owners and managers as our industry collectively faces unheralded challenges. This is not a time for "gotcha" due diligence - rather this is a time where investors and asset managers can and should work together to share best practices and protect assets. Please contact us if you'd like to discuss any aspect of how Covid-19 may impact your business.

Topics:Coronaviruscovid-19