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Our briefing for Tuesday September 22, 2020:
Sep 22, 2020 3:42:23 PM
- In the United States, as the coronavirus death toll reaches 200,000, the vast majority of Americans want to see their elected politicians do much more to mitigate the economic fallout from the pandemic. According to a survey from the Financial Times and the Peter G Peterson Foundation, almost 90% want Washington to pass a new stimulus package, but they are equally split on who is to blame for the delay. Thirty-nine per cent say the Democrats and Republicans are equally responsible, with 26% blaming the Republicans and 23% blaming the Democrats.
- In Canada, Prime Minister Justin Trudeau is expected to make one of his most anticipated speeches on Wednesday as he outlines his government’s plan to take the country through the next wave of the COVID-19 pandemic. Sources are saying Prime Minister Trudeau’s Throne Speech which outlines the government’s priorities – will focus on a three-pronged attack. There will be a focus on the immediate task of tackling the coronavirus, a medium-term commitment to support Canadians through the pandemic and a “resiliency agenda” to spur recovery and reconstruction. The prime minister’s speech isn’t expected to establish budget targets, which will be left to the finance minister to update later in the year.
- United Kingdom Prime Minister Boris Johnson is waving the white flag for Britons return to the office due to a surge in coronavirus cases. Addressing the House of Commons on Tuesday, Prime Minister Johnson said he is asking workers who can work from home do so for at least the next six months and is scrapping a plan to bring 80% of civil servants back to city offices, which have been abandoned during the pandemic. The government also announced a plan to close all pubs, restaurants and bars at 10 PM, starting Thursday.
- In Germany, the city of Munich has unveiled mask-wearing requirements for popular outdoor areas due to rising coronavirus cases. The capital city for the state of Bavaria has surpassed a national threshold of 50 cases per 100,000 residents for seven consecutive days, which means local governments must tighten regulations such as these. Over the weekend, Germany as a whole recorded 2,300 daily cases on Saturday, the highest total in the country since April.
- Philippines President Rodrigo Duterte has extended a state of calamity for the country by one year. By issuing this extension, President Duterte’s government can draw emergency funds faster in order to fight the COVID-19 pandemic and also call on the power of the police and military to maintain law and order. President Duterte first placed the Philippines under a state of calamity back in March due to the pandemic.
- China has sentenced a prominent real-estate tycoon in a Beijing court to 18 years in prison for alleged corruption. Ren Zhiqiang grew up as the son of a Chinese Communist party official, which granted him an opportunity to speak more freely than most, which he did, speaking critically of the government over the last several years. Earlier this year, Ren criticized President Xi Jinping’s handling of the coronavirus pandemic calling him not “an emperor in his new clothes, but a bare-naked clown.” It is comments like these that led to Ren being found guilty in a one-day trial for charges including bribery, embezzlement of public funds, and abuse of power.
Covid-19 – Due Diligence And Asset Management
Deutsche Bank to Close 20% of German Branches in Coronavirus Shift
Brief: Deutsche Bank plans to shutter one in five branches in Germany as it seeks to save costs and capitalise on the changing habits of customers during the coronavirus pandemic, an executive said. Philipp Gossow, who oversees the retail banking business in Germany, told Reuters that the reduction to some 400 branches from around 500 currently would occur primarily in urban locations and take place “as quickly as possible”. The cull comes as Deutsche Bank undergoes a broad overhaul of its global operations that began in 2019 after years of losses. German banks traditionally operate large numbers of branches compared with those in the Netherlands or Britain, where customers are more comfortable with digital banking. Banks throughout Europe are rethinking their branch strategies in the wake of the coronavirus crisis. Deutsche’s rival Commerzbank recently opted to shut 200 of its 1,000 branches and is considering closing hundreds more. “Coronavirus has further changed the demands placed on advisory services and the branch business,” Gossow said.
Citadel, United Among Lenders in Avianca’s $2 Billion Plan
Brief: The hedge fund Citadel Advisors LLC, United Airlines and an El Salvadoran air mogul are among investors offering loans as part of Latin American airline Avianca Holdings SA’s $2 billion bankruptcy financing plan, according to court documents. The companies, which were stakeholders in the air carrier before it filed for Chapter 11 protection in May, would help provide about $722 million in loans. Together with a separate tranche of roughly $1.3 billion of debt, Avianca said it has commitments for $2 billion in debtor-in-possession funding. “Securing these financing commitments is another concrete step forward in our Chapter 11 reorganization process,” said Anko van der Werff, chief executive officer in a statement. The plan needs approval from the U.S. Bankruptcy Court for the Southern District of New York. Avianca shares were flat in Bogota trading. Bonds due in 2023, which will be rolled up in the financing plan, were unchanged, according to data compiled by Bloomberg. The debt being offered by an affiliate of Citadel -- the famed hedge fund founded by billionaire Ken Griffin -- United, and El Salvadoran Roberto Kriete’s Kingsland Holdings would be eligible to roll over into common shares when Avianca emerges from the Chapter 11 reorganization, according to court filings.
Brookfield Properties’ Retail Arm is Laying off 20% of its Workforce, as Pandemic Hits Malls
Brief: One of the biggest retail real estate owners in the country, Brookfield Properties, is going through a major round of job cuts, CNBC has learned, as the coronavirus pandemic takes a toll on its business and new leasing activity at its malls dries up. “While many companies were quick to implement furloughs and layoffs at the onset of the pandemic, we made the conscious decision to keep all our team employed while we gained a better understanding of its longer-term impact on our company,” Jared Chupaila, CEO of Brookfield Properties’ retail group, said this week in an email to employees, which was obtained by CNBC. However, he said, the mall owner has now decided to make cuts “to align with the future scale of our portfolio.” Chupaila said the reductions are going to affect roughly 20% of the company’s workforce, across both its corporate headquarters and leasing agents in the field. Brookfield Properties’ retail division employees about 2,000 people. Brookfield Properties has more than 170 retail properties in 43 states, according to its website, including Brookfield Place downtown in New York City and Fashion Show Mall in Las Vegas… Brookfield Asset Management’s real estate businesses employ roughly 22,000 people globally, according to its latest annual filing, which includes other asset classes like office space.
How to Impact European Real Estate in a COVID-19 World
Brief: The economic implications of COVID-19 are yet to be fully realized, but the expectations of the detrimental impact are sobering. The pandemic has not only shaken up reality but has woken the world up to addressing underlying societal and economic issues that may have previously been dismissed. The virus is a major global threat, but it will not be the last such threat that we face in the coming years. Climate change, pollution, and growing social and economic inequality, among other issues, all have the power to massively disrupt our way of life. But from these threats comes greater awareness of the need for reinvention, and with reinvention comes great opportunity to align and contribute toward our modern, more sustainable future. A key opportunity for investors to combat the effects of the pandemic is through real estate investing. This can be achieved in a multitude of ways, such as providing low income housing options, rent-relief for hospitals and built-for-purpose medical centers for pandemic efforts, with climate change efforts at the core of each investment. During times of distress, there is a silver lining: unique industry advancements and unprecedented innovation. We have seen strides in technological development and increased private market participants, all working together to fill gaps caused by the pandemic.
Here’s What Investors With $3.4 Trillion Are Buying During Covid
Brief: Oil pipelines, hotels, convenience stores and automaker bonds are among the assets being bought by some of the world’s biggest asset managers as they look for value in a world thrown into turmoil by the coronavirus pandemic. In interviews with sovereign wealth funds, pension firms and asset managers across Asia and Europe that collectively manage about $3.4 trillion, one thing was clear: many of them are avoiding the overheated stock market. The most common outlook was one of caution. They are mindful that much of the rebound in markets and private-company valuations is thanks to ultra-low interest rates, massive central bank stimulus and government fiscal support, some of which could start to be wound back in coming months. With asset values still seen as inflated, even in some hot areas like healthcare and technology, many are waiting for a potential second downturn after stimulus measures end but before mass vaccinations enable economies to restart without risking widespread infection.
London Financial Firms See Long-Term Shift to Working from Home
Brief: The heads of Man Group Plc and Schroders Plc say the shift to working from home during the pandemic will become the new normal for financial firms. Man Group expects to have about 10% of employees back in the office next week unless the government imposes new restrictions on London, where the majority of its roughly 1,500 staff work, Chief Executive Officer Luke Ellis said at a virtual event on Monday. The world’s biggest publicly traded hedge fund firm won’t even try to get back to having more than about 70% of staff working in the office on any given day. At Schroders, about 20% of its employees are in the office now, and if that number rises to 50% in the future that would be “very positive,” CEO Peter Harrison said at the City Week event. The London-based asset manager, which has about 5,000 employees worldwide, recently loosened its rules to make it easier for staff to work from home when they need to. “We have gone forward 20 years in terms of the future of work,” Harrison said. “People don’t want to come in five days a week, and I don’t think it is helpful for them and I don’t think it is good for them.”… Ellis said that the average worker in the City of London spends about 10% of income on commuting. “If they don’t have to do that apart from occasionally, that is a significant benefit for them, that in the long run means lower cost for the company,” he said.
