SANTÉ Investments

This distress indicator suggests: 1) more pain to come, 2) no one is immune, and 3) more multifamily problems than any other sector. ---- What triggers loan defaults? ---- Commercial mortgage defaults generally occur (i) when property values fall below the outstanding loan amount AND there's a loan maturity or (ii) when debt service exceeds property income. In other words, challenging LTVs drive defaults at maturity, and challenging DSCRs drive defaults over loan terms. Pundits who estimate distress often focus on LTV-based defaults because we have relatively good data on property values (at least property value estimates) and on loan maturities. But maybe they're missing something by not focusing on DSCRs. ---- Institutional properties not covering debt service ---- The NCREIF Property Index is one of the most frequently tracked industry indicators because it reflects institutional properties and goes back 40+ years, providing a unique historical perspective. On balance, these institutional properties are 90%+ leased and 42% leveraged. On the LTV side of the NPI, office leads distress (as measured by underwater loans), but on the DSCR side, multifamily leads the industry. i.e., institutions have more multifamily properties that can't cover debt service than any other property type, including office. StepStone recently highlighted: "Coverage ratios are also deteriorating. Multifamily represents the greatest share. Unlike post GFC era, declining rates are not likely to solve the problem..." This brings up a few important questions: 1) If institutions with 40% LTV properties aren't covering, what does this say about more levered owners who borrowed at 60-75%? 2) How long are they willing to feed these properties before selling them or giving them back to lenders? TLDR, don't sleep on the magnitude of multifamily challenges that could emerge.

Totally agree with this. Beat (and hardest) time to invest is when prices have softenened, but fundamentals support this thesis. Globe: “A condo rebound would be driven by lower mortgage rates and pent-up demand from both investors and people who want to both own and occupy their units. CIBC sees potential for “significant upward pressure on condo prices” as rising demand meets inadequate supply of new condo units.”

I've found a lot of success lately educating investors about diversifying across (or down) the "CAPITAL STACK". You are not as diversified as you think you are if all of your investments are in common equity positions (see photo below). By moving down the capital stack, you lower your risk by limiting your exposure in a deal. Essentially you are moving from being last to get paid closer to first to get paid. This is next level diversification and investors looking to take less risk but stay in alternative assets are looking for more opportunities to move farther down "the stack". Are you looking for more capital raising opportunities like this one for your investor base? If so, shoot me a dm to learn more about how to partner with Aspen Funds through our Private Credit opportunity!

I've estimated $148B in data centre projects are in the pipeline in Saudi Arabia. This includes the buildout of new facilities, upgrades, services and other related technologies. ⏹ My guess is the commerce generated around this infrastructure in the coming years is easily 10-fold but I won't attempt to estimate that, yet. A few of you reached out with questions after the last post, about some of the projects and other initiatives going on in the Kingdom. ❇️ So I've put together a list of some noteworthy initiatives and partnerships: → Odoo and Google Cloud introduced a local data hosting solution utilizing Google's data center in Dammam for SaaS services → MIS - Al Moammar Information Systems Co. (MIS) and Microsoft partnered with the Saudi Data Centre Fund to provide co-location and data center service → iDreamsky Technology, SCCC | Alibaba Cloud, SCAI | سكاي and eWTP (electronic World Trade Platform) signed a MOU to boost gaming and e-sports in KSA → Fortinet and Google Cloud: Partnered to launch Google's cloud region in Saudi Arabia, offering low-latency cloud services → stc, Korea Telecom (KT) and Hyundai Engineering Co. Ltd. signed a 50-year MoU to construct data center facilities → INGENIOUS.BUILD and Google Cloud partnered to accelerate digital transformation in the Saudi construction sector → Mobily and Zenlayer: Agreed to deliver high-performance edge computing and connectivity services within Saudi Arabia → Saudi Call Company Call, China Mobile International Limited, and Lumaotong Group signed an MoU to develop Tier III and Tier IV data centers in Jeddah, Riyadh, Dammam, and NEOM → center3 and Oracle partnering to host and expand Oracle Cloud regions in Riyadh and Jeddah → Edgnex Data Centers by DAMAC and Cinturion: Developed a digital infrastructure hub in King Abdullah Economic City (KAEC), including a cable landing station and submarine cable project → Saudi aramco and Zoom partnered to construct a new data center facility to support digital transformation across KSA → Tencent and Mobily: Agreed to provide cloud solutions and services, with Mobily managing data center hosting and infrastructure → Lenovo and Edarat Group : Entered a strategic partnership to deliver advanced Bare Metal solutions tailored to the needs of Saudi businesses, supporting the Kingdom's digital transformation goals → Groq and aramco digital Digital are partnering to establish the world's largest AI inferencing data center in Saudi Arabia, supporting billions of tokens daily by the end of 2024 and scaling further in 2025 -- Now that the data centre 'rush' has started - investors, developers and operators are all scrambling to build out portfolios of this asset class. Almost like a digital gold mine. ⏺ But like with other sectors we've seen develop, the picks and shovels segments offer some of the biggest opportunities. ✳️ Incredible time for those servicing this value chain to step up and establish partnerships.

There was a recent article that came out saying over a certain long period investing in the stock market it outpaced real estate (think 1,300% for the stock market vs. 1,100% for real estate). Without disputing the number (which are typically carefully chosen based on the start and end dates that will best make the financial planning author’s point), the false comparison was so blatant that I asked my 10 year old and teenager to tell me why this wasn’t logical in the real world (yes I had to motivate them with a trip to get ice cream cones for playing this game with me!). Rather quickly they asked if you can get a mortgage on the stock market. I laughed as I responded, “no but if you’re an aggressive investor you can use what’s called Margin for up to 50% of the stocks you already own.” They then smartly asked “well what percent of a loan can you get on real estate?” I smiled as I answered, “at least 65% and sometimes up to 80% of the value.” They thought that they were close to solving this game and getting their ice cream. But then I asked them “do you know that when you invest in real estate the government makes you use depreciation to reduce your taxes?” “Why would they do that?” my youngest asked. Responding with “Well, one example is that the country needs housing, so the government incentivizes people to build and own apartments.” The teenager then asked, “How much depreciation does the government let you use for owning stocks?” I chuckled and said “well that the thing, they don’t!” Figuring this was a good enough financial lesson for the day, I restated the question, “So is it a better investment to buy stocks that go up 1,300% or real estate that goes up only 1,100%. Both shouted, “Real estate!” Off to get their cool ice cream reward we went . . . Next lesson will really surprise them when we discuss diversification! ;-)

"This is the most optimistic outlook we've seen" from family offices, said Hannes Hofmann. Nearly half of family offices are expecting double-digit returns this year and 39% plan to increase their exposure to stocks, according to the Citi Private Bank 2024 global family office survey. Private equity is still their favorite investment for 2024, with 47% planning to increase their exposure. The latest from my Inside Wealth newsletter, www.cnbc.com/insidewealth or read the article here https://lnkd.in/eqdQNaJA #familyoffice #familyoffices #wealth #wealthmanagement