Property investment in Brisbane remains a hot topic in the real estate industry. Given the city’s growing economy, strategic location, and appealing lifestyle, it’s no wonder investors are flocking to the region. This comprehensive guide uncovers Brisbane’s top 10 emerging hotspots for property investment in 2023.

Ipswich City
Ipswich City, situated near the Brisbane CBD and the airport precinct, is an attractive investment destination. Significant infrastructure developments, such as the improvements to the Warrego and Cunningham Highways and the Ipswich Motorway, bolster the city’s growth.

Potential Growth
Ipswich City has shown a strong price growth history, with prices rising significantly in the five years leading up to 2009. The city is now poised for another period of growth, following significant increases in sales activity in 2021 and the first half of 2022.

The ‘Olympic Precinct’ Suburbs
Suburbs in the ‘Olympic Precinct’ are already experiencing the benefits of the massive construction associated with the multi-billion-dollar economic development known as Australia TradeCoast.

Potential Growth
Research indicates that suburbs closest to the major event venues experience the greatest uplift in property prices. This suggests that Brisbane suburbs such as Ascot, Wilston, and Highgate Hill are in high demand and will likely increase property values, leading to the 2032 Olympic Games.

Southern Moreton Bay Islands
The Southern Moreton Bay Islands offer a significant lifestyle appeal at a much lower price than nearby suburbs. This affordability and the islands’ natural beauty have resulted in solid buyer demand over the past two years.

Potential Growth
The islands have experienced steady price growth over the past few years, making them an attractive prospect for long-term investors.

Logan City
Logan City is one of Queensland’s fastest-growing communities. With two of Queensland’s Priority Development Areas at Greater Flagstone and Yarrabilba, Logan City will experience a property demand boom.

Potential Growth
Logan City is predicted to reap substantial benefits from the ongoing infrastructure projects totalling $18bn, making it a hotspot for property investment in Brisbane.

On September 20, 2023, the Securities and Exchange Commission (“SEC”) adopted amendments to Rule 35d-1[1] (the “Names Rule”) under the Investment Company Act of 1940, as amended (“1940 Act”), as well as amendments to certain investment company registration forms, Form N-PORT and certain recordkeeping requirements (collectively, the “Adopted Rules”). Under Section 35(d) of the 1940 Act, a registered investment company, such as a mutual fund, exchange-listed closed-end fund or an ETF, may not use a name that the SEC finds as materially deceptive or misleading. Rule 35d-1, initially adopted in 2001, required among other things that certain funds using names suggesting investment in certain types of investments or securities, or in certain countries or geographic regions, to adopt a policy to invest at least 80 percent of its assets in those investments, securities, countries or geographic regions (the “80-Percent Policy”). As noted in the Adopting Release, these rule changes are intended to improve and broaden the scope of funds subject to the 80-Percent Requirement.

The Adopted Rules follow amendments and rules proposed by the SEC on May 25, 2022, which we summarized in our Client Alert “SEC Proposes Amendments to Rule 35d-1 under the 1940 Act.”

Various aspects of the Adopted Rules are discussed below.

80-Percent Policy Requirement

Broadening the 80-Percent Policy Requirement to Funds with Names Suggesting an Investment Focus

The Adopted Rules expand the scope of Rule 35d-1 to require a registered investment company to adopt an 80-Percent Policy if its name includes terms suggesting that it focuses on investments in a particular industry or group of industries, that have, or whose issuers have, particular characteristics,[2] such as “growth” and “value,” as well as thematic terms or terms that suggest one or more ESG related considerations play a role in the investment decision-making process. These terms are in addition to terms covered by the current Rule 35d-1, that is, names suggesting investments in a particular type of investment or investments or particular countries or geographic regions.

The Adopted Rules also maintain current Rule 35d-1’s prohibitions on names suggesting:

• A guarantee or approval by the U.S. government, including any name that uses the words “guaranteed” or “insured” or similar terms in conjunction with the words “United States” or “U.S. government,” and
• That the registered investment company’s distributions are exempt from federal income tax or from both federal and state income tax unless the registered investment company invests at least 80 percent of its assets in investments, the income of which is exempt from federal or state taxation, or at least 80 percent of the income its distributes is exempt from federal or state taxation.

The Adopting Release notes that the terms “growth” or “value,” or terms indicating that the fund’s investment decisions incorporate one or more Environmental, Social or Governance (“ESG”) factors are examples of the expansion of the scope of Rule 35d-1, and there may be other situations where Rule 35d-1 would also apply. For example, the Adopting Release states that is it expected that Rule 35d-1 would apply to any terms that reference a thematic investment focus. While in the past, certain funds have stated that Rule 35d-1 does not apply to them because a term in the name suggests an investment strategy rather than a type of investment, the Adopting Release notes that Rule 35d-1, as amended, applies to those funds whether or not such terms connote an investment strategy and not a specific type of investment.

If a fund’s name includes multiple terms that would suggest an investment focus, the 80-Percent Policy must address each term, but the Adopting Release notes that a fund may take a reasonable approach to specify how it would incorporate each such element. As an example, the Adopting Release notes that the “XYZ Technology and Growth Fund” could have an investment policy that each investment that is intended to comply with the 80-Percent basket must be in both the technology sector and meet the fund’s growth criteria, or it could have an investment policy that at least 80 percent of its assets be invested in a mix of securities that are either technology investments, growth investments or technology and growth investments.

The Adopting Release also provides a fund with flexibility to describe in its prospectus how it defines the terms used in the name and the criteria that the adviser uses to determine if an investment meets the criteria to be included in the 80-percent basket. With respect to determining if a security is in a specific industry, the Adopting Release notes that there must be “a meaningful nexus between the given investment and the focus suggested by the name.” An example provided in the Adopting Release is that a fund could define a security to be issued by a company in a particular industry if such company derives more than 50 percent of its revenue or income from, or owns significant assets in, the industry. The Adopting Release does note that there could be times when a smaller percentage could be sufficient, such as, for example, if the company is an acknowledged leader in the industry. Conversely, the Adopting Release notes that using text analytics to assign issuers to an industry based on the frequency of certain terms in their disclosure documents would not be a reasonable method to use on its own.[3]

The Adopting Release also notes that there are certain fund names that remain outside Rule 35d-1 and thus, their funds will not be required to adopt an 80-Percent Policy. In particular, names that reference a portfolio’s characteristics as a whole, rather than the specific characteristics of investments – such as “balanced”, “real return”, managed risk, or a name indicating that a fund seeks to achieve a certain portfolio duration (e.g., “intermediate term”) – remain outside the scope of Rule 35d-1. In addition, names that reference investment techniques, such as “long/short”, or “hedged,” or names that reference asset allocation determinations that evolve over time, such as target date funds or sector rotation funds, remain outside the scope of Rule 35d-1. Additionally, fund names that include “global” and “international,” without more, remain outside of Rule 35d-1 and thus, will not require an 80-Percenrt Policy.

With respect to fund of funds or acquiring funds, the Adopting Release notes that it would be reasonable for the fund to include the entire value of its investment in an appropriate acquired fund when calculating compliance with the 80-Percent Policy without looking through to the acquired fund’s underlying holdings, provided that the acquired fund has an 80-Percent Policy that covers the names used by the acquiring fund.[4]

Departures from the 80% Investment Requirement

As is currently the case, for purposes of Rule 35d-1, whether or not an investment fits within the 80-percent basket is determined at the time the investment is made (“time-of-investment test”). Subsequent changes in the market value of the investment or other changes in the issuer or the characteristics of the investment or the fund (such as changes in assets under management) do not cause a position to fall outside of the 80-percent basket. Moreover, if the portfolio would not satisfy its 80-Percent Policy if measured on any particular day, then under normal market circumstances, the fund would need to limit its future investments to positions that comply with the 80-Percent Policy.

However, in a change from current practice, a fund subject to the 80-Percent Policy will have to, at least quarterly, review the fund’s portfolio investments to determine whether they continue to be consistent with the fund’s 80-Percent Policy as measured on that date. If it is identified that a fund is no longer in compliance with its 80-Percent Policy, either during the quarterly review or outside of that quarterly review, the fund will be required to take appropriate action to bring the fund back into compliance “as soon as reasonably practicable” but no longer than 90 consecutive days (the time being measured from when the fund identifies a departure from complying with its 80-Percent Policy). This may require the fund to dispose of securities that no longer fit into its 80-percent basket. The Adopting Release notes that a fund could apply for exemptive relief if it believes it is appropriate and consistent with the protection of investors for the fund to depart from its 80-Percent Policy for a limited amount of additional time past the 90 days.

In “other than normal” circumstances, a fund will be allowed to intentionally deviate from its 80-Percent Policy. In the Adopting Release, the following are noted as events that could fall outside of normal circumstances[5]:

1. Temporary departures as a result of market fluctuations, index rebalancing, cash flows/inflows or temporary defensive positions (for up to 90 consecutive days).
2. Repositioning or liquidation of assets in connection with a reorganization (there is no specific time limit for this type of departure).
3. During a fund launch (fund must be in compliance within 180 consecutive days).
4. When a notice of a change in a fund’s policy in certain circumstances has been provided to fund shareholders (fund must be brought into compliance at the end of the notice period).

The Adopting Release notes that whether or not an event is outside of normal circumstances is based on the specific facts and circumstances and therefore a fund has flexibility to determine what would be considered outside of normal circumstances.

Considerations Regarding Derivatives in Assessing Compliance with Amended Rule 35d-1

Amended Rule 35d-1 generally requires that a fund, when calculating its assets for purposes of determining compliance with the 80-Percent Policy, use notional amounts to value derivatives, with certain adjustments. However, a fund must exclude from the calculation certain derivatives that hedge the currency risk associated with a fund’s foreign investments. A fund must exclude currency derivatives if they are: (1) entered into and maintained by the fund for hedging purposes; and (2) the notional amounts of the derivatives do not exceed the value of the hedged investment (or the par value thereof, in the case of fixed income investments) by more than 10%.

Additionally, in calculating notional amounts, a fund will have to convert interest rate derivatives to their 10-year bond equivalents and to delta adjust the notional amount of options contracts. Further, a fund is permitted to exclude any closed-out derivatives positions, whether or not from the same counterparty, when calculating assets for purposes of determining compliance with an 80-Percent Policy, if those positions result in no credit or market exposure to the fund.[6]

A fund will be permitted (but is not required), in determining compliance with its 80-Percent Policy, to deduct cash and cash equivalents and U.S. Treasury securities with remaining maturities of one year or less from assets (i.e., the denominator in the 80% calculation), up to the notional amounts of the fund’s derivatives investments.

Additionally, the amendments allow a fund to include in its 80-percent basket derivatives that provide investment exposure to one or more of the market risk factors associated with the investments suggested by the fund’s name, in addition to derivatives that provide investment exposure to the investments suggested by the fund’s name. The Adopting Release notes however, that including derivatives in the 80% bucket which create exposures inconsistent with a fund’s name could be considered materially deceptive and misleading. For example, including a derivative in the 80-percent basket that eliminates the primary risk factor associated with a fund name would be inappropriate.[7]

Unlisted Closed-End Funds and BDCs

With respect to unlisted closed-end funds and BDCs, the amendments to the Names Rule prohibit a fund with an 80-Percent Policy from changing that policy unless there is approval of the majority of the outstanding voting securities of the fund. However, there is an exception from this requirement for a shareholder vote if: the fund conducts a tender or repurchase offer in advance of the change, the fund provides at least 60 days’ prior notice of any change in the 80-Percent Policy in advance of that offer, that offer is not oversubscribed, and the fund purchases shares at their net asset value.

The Adopting Release notes that the SEC believes this is appropriate because of the inability for shareholders to be able to quickly redeem out of these investments if they do not want to remain invested in a fund that has changed its investment policy.

Effect of Compliance with an 80-Percent Policy – the 20% Bucket

The amendments to the Names Rule include a new provision codifying that a fund’s name could be materially deceptive or misleading under section 35(d) even if the fund has adopted and complies with an 80-Percent Policy. In the Adopting Release, the SEC notes that depending on how a fund invests the other 20% of its assets, the fund name could be misleading; for example, if the fund invests in a way such that the source of a substantial portion of the fund’s risk or return is different from what an investor would reasonably expect based on the fund’s name.

As another example, the Adopting Release notes that terms used in fund names that reference well-known organizations, affinity groups, or that reference a specific population of investors may not require an 80-Percent Policy, but such funds will continue to be subject to section 35(d)’s prohibition on materially misleading or deceptive names. Therefore, there should be sufficient disclosure explaining the connection such organization, affinity group or population of investors has to the fund.

Prospectus Disclosure Defining Terms Used in Fund Name

The Adopting Release also includes amendments to fund registration forms that require each fund that must have an 80-Percent Policy to include disclosure that defines the terms used in its name, including the specific criteria the fund uses to select the investments that the term describes, if any. For this purpose, “term” would mean any word or phrase in a fund’s name, other than any trade name of the fund or adviser, related to the fund’s investment focus or strategies. While funds will have flexibility to use reasonable definitions of the terms in their names, the Adopting Release notes that such definitions cannot be inconsistent with their plain English meaning or established industry use.

For open-end funds that file on Form N-1A, these definitions should be summarized in the summary prospectus and more fully disclosed in the statutory prospectus.

Modernizing the Names Rule’s Notice Requirement

The notice requirements under the Names Rule generally remain consistent with the current requirements, with a few modifications.

• The notice must continue to be provided separately from any other documents.
• If the notice is delivered in paper form, it may be provided in the same envelope as other written documents.
• The notice must have the following, or similar clear and understandable statement, in bold-face type: “Important Notice Regarding Changes in Investment Policy [and Name]. If the notice is delivered in paper form, this statement must be on both the notice itself and the envelope in which the notice is delivered. If the notice is provided electronically, the statement must be in the subject line of the email communication that contains the notice.
• The notice must describe, as applicable, the fund’s 80-Percent Policy, the nature of the change to the 80-Percent Policy, the fund’s old and new names and the effective date of any investment policy and/or name changes.

Funds may not simply post the notice of the changes to their websites without also delivering the notices to shareholders.

Form N-PORT Amendments

The Adopting Release includes amendments to Form N-PORT that require registered management investment companies and exchange-traded funds organized as unit investment trusts, other than money market funds and small business investment companies (collectively, “N-PORT funds’) to report additional information regarding such fund’s compliance with its 80-Percent Policy. N-PORT funds that have an 80-Percent Policy must report on Form N-PORT, with respect to each portfolio investment, whether or not that investment was part of the 80-percent basket, and must report the definitions of the terms used in the fund’s name, including the specific criteria the fund uses to select the investments the term describes, if any. N-PORT funds must also report the value of the fund’s 80-percent basket, as a percentage of the value of the fund’s assets.

Recordkeeping Requirements

Funds that are required to comply with Rule 35d-1 have to maintain certain records documenting their compliance with the rule. Funds will also need to maintain certain records documenting any times that the fund was determined to not be in compliance with its 80-Percent Policy.

Transition Period

The compliance date for the amendments is 24 months following the effective date[8] for larger entities[9] and 30 months following the effective date for smaller entities[10].

A Note on ESG Integration Funds

The Adopting Release notes that, at this time, the SEC is not taking action on the names of funds using ESG integration strategies, which had been part of the proposed rules. The Adopting Release stated that names of funds using ESG integration strategies will be addressed when it comes out with its final rules on ESG disclosures by investment companies and investment advisers. Rule 35d-1, as amended, nevertheless, applies to funds whose names include terms indicating that the funds’ investment decisions include one or more ESG factors.

Property investments remain one of several viable strategies in the lifelong pursuit of building wealth.

The U.S. real estate market is expected to grow at a compound annual rate of almost 5% over the next few years, opening the door for plenty of investment opportunity. However, drawbacks to buying property abound. Not only does it require a large outlay of cash initially, but property isn’t liquid.

In fact, current conditions suggest shaky ground for the property market. With mortgage costs trending higher, the incentive to purchase is missing. The result has been a decline in property values as affordability becomes a much larger concern. Therefore, it makes sense to think about ways to invest in property without buying a house.

The stock market offers opportunities to invest not only in income-generating property portfolios but also property market beneficiaries. Benefits include a much smaller upfront investment. The following options are bought and sold on the stock market, meaning accessing your cash is much easier. 

House Builders 

Source: ARMMY PICCA/ShutterStock.com

One of the most beneficial ways to invest in property without climbing the housing ladder is purchasing stock in a house building company.

These firms buy up parcels of land and then sell them off as individual properties. While the business model is relatively simple, remember that not all house builders are equally lucrative.

First, investors carefully analyze target markets when evaluating house building stocks. Those catering to high net-worth clientele are less likely to feel the sting of an economic downturn. By contrast, builders offering median pricing could see their customers slide down the value chain, or potentially hold off a purchase altogether.

Also, location is a key factor to consider. House builders may see margins decline as house prices sputter, but in certain locations, housing shortages prop up demand. For example, the U.K. faces an enormous housing shortage, making house builders relatively confident of firm market demand.

REITs

Source: Vitalii Vodolazskyi / Shutterstock

A Real Estate Investment Trusts (REIT) presents another smart option to invest in property without actually buying a physical building.

Generally trade publicly, REITs offer investors a well-rounded portfolio of income-generating properties. Similar to a mutual fund, a manager oversees the portfolio, picking and choosing opportunities.

REITs are also bound by certain rules. These include requiring primarily property investments that derive most of their income from rent or real estate sales and paying out the bulk of their revenue to shareholders.

This investment method holds advantages in addition to the liquidity mentioned above. The key benefit is diversity. While one might be able to afford a single investment property, the average investor is unlikely to build a portfolio of several investment properties. This offers some insulation if one of the properties suddenly becomes unprofitable.

Keep in mind that most REITs specialize in a particular area of the property market, so a slowdown for one tenant is likely to signify a wider issue. 

Materials Makers

Source: bogdanhoda / Shutterstock.com

Widening your investor lens, you could consider the building suppliers if you want to invest in property without buying a house. Materials makers can thrive, particularly in times of economic turmoil.

Given they’re a step removed from the housing market, the companies supplying the bricks and machinery needed to build houses are slightly more insulated. This holds particularly true in areas of solid demand such as housing shortages. Further, materials makers don’t depend quite as heavily on house prices. As long as houses are being built, they get paid. 

Plus, many materials makers have their hands in several pies. While builders tend to focus solely on one demographic, materials makers supply a whole range of customers within both residential and commercial properties. But the pendulum swings both ways. Although materials makers will benefit from an uptick in demand, they don’t always make money when house prices rise sharply. So although a safer bet than house builders, materials makers can still feel a pinch in a volatile housing market. 

On the date of publication, Marie Brodbeck did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

The focus on its existing stock comes as L&Q has faced increased scrutiny of late after the Housing Ombudsman ordered it to pay out £142,000 in compensation after a special investigation uncovered a “prolonged period of decline” in its repairs and complaint-handling. 

Waqar Ahmed, group director – finance at L&Q, said: “L&Q, and the wider housing sector, has experienced significant financial pressures at a time when we are making record levels of investment to improve the safety, quality and sustainability of existing homes, transform services, deliver a realistic year-on-year increase in new affordable homes, and continue providing additional support to help improve the lives of residents who need it most.

“These financial pressures mean we have to prioritise where investment is directed, but through new approaches to working in partnership with residents, we are ensuring the investment is directed where residents need it most.”

Mr Ahmed explained that despite economic headwinds and market uncertainty, the final quarter of 2022-23 saw early signs of recovery in the landlord’s sales rates, alongside a pick-up in land sales activity.

He added: “With the end of the Help to Buy, we have seen, and continue to expect, an uplift in demand for shared ownership as evidenced by higher reservation rates and higher than expected first tranche percentages sold.

“In the medium term, we are committed to lowering our risk profile and are targeting lower debt metrics through a reduction in gross capital expenditure. 

“Our focus remains on our existing development pipeline rather than new approvals, meaning we expect to continue to reduce the number of sites that we are operating from and homes in the development pipeline.”

Liverpool have announced a new injection of cash into the club by way of taking onboard a minority investor.

Current owners Fenway Sports Group (FSG) insist that they retain a “long-term commitment” to the club and that the funds coming in will be used to pay down debt accrued by the organisation over the past few years, including during the Covid pandemic, as well as on capital expenditure for the expansion of Anfield stadium, the new training base at Kirkby and repurchasing their old training centre, Melwood, which is now the home of Liverpool Women.

In addition, Liverpool’s statement noted that “acquisitions during the summer transfer window” – where they spent close to £150m on Dominik Szoboszlai, Alexis Mac Allister, Wataru Endo and Ryan Gravenberch – also contributed to the debt which will be paid down through Dynasty Equity’s involvement. As such, it effectively suggests the money coming in has already been outlaid by the club.

There was no mention made about the total percentage of Dynasty’s stake in the club, only that they were listed as having a “strategic common equity minority investment”. The Telegraph reported the value of the investment at “up to £164m”. In 2011, LeBron James took a 2% minority stake in the club for a reported £5m – but the overall value of Liverpool FC has risen many times over since then, after winning both the Premier League and Champions League.

Dynasty are a “global investment firm” who focus on taking minority stakes in clubs and organisations across a range of sports. David Ginsberg is listed as a Senior Advisor of the American company, while he is also the vice chairman at FSG, Liverpool’s owners, as well as vice chairman of the club itself.

“Our long-term commitment to Liverpool remains as strong as ever,” FSG president Mike Gordon said upon the announcement of the deal.

“We have always said that if there is an investment partner that is right for Liverpool then we would pursue the opportunity to help ensure the club’s long-term financial resiliency and future growth.

“We look forward to building upon the long-standing relationship with Dynasty to further strengthen the club’s financial position and sustain our ambitions for continued success on and off the pitch.”

Dynasty’s chief executive K. Don Cornwell added: “Liverpool is one of the most iconic football clubs in the world with a passionate fanbase and significant global reach. Dynasty is privileged to support the club and work alongside FSG to execute on the tremendous growth opportunities ahead.”

On September 27, 2023, it was reported that Rothschild Investment Corp IL had reduced its holdings in Starwood Property Trust, Inc. (NYSE:STWD) by 5.1% during the second quarter. According to their most recent Form 13F filing with the Securities and Exchange Commission (SEC), the institutional investor now owns 101,833 shares of the real estate investment trust’s stock after selling 5,500 shares during the quarter. The value of Rothschild Investment Corp IL’s holdings in Starwood Property Trust was estimated at $1,976,000 as of its most recent filing with the SEC.

In addition to this development, there was news regarding President Jeffrey F. Dimodica who sold 20,111 shares of the company’s stock on Thursday, September 21st. The shares were sold at an average price of $20.48 per share, resulting in a total value of $411,873.28 for the transaction. Following this sale, President Dimodica now holds 1,035,984 shares in Starwood Property Trust worth approximately $21,216,952.32. This transaction was disclosed in a filing with the Securities & Exchange Commission and can be accessed via a provided link. Company insiders currently hold about 5.40% of the stock.

Furthermore, it has been announced that Starwood Property Trust will be paying a quarterly dividend on Monday, October 16th to shareholders of record as of Saturday September 30th. The dividend payout will amount to $0.48 per share and represents an annualized dividend yield of approximately 9.68%. It is important to note that investors should take note of the ex-dividend date which is set for Thursday September 28th.

Overall market watchers were keen to analyze these recent developments related to Starwood Property Trust and its shareholders’ activity as they play a crucial role in assessing the company’s financial performance and future prospects.

Changes in Investor Base and Performance Analysis of Starwood Property Trust (STWD)

Starwood Property Trust, a real estate investment trust (REIT), has recently experienced some significant changes in its investor base. Large investors such as BlackRock Inc., State Street Corp, Norges Bank, Bank of New York Mellon Corp, and Principal Financial Group Inc. have all made adjustments to their positions in the company.

BlackRock Inc. increased its holdings in Starwood Property Trust by 54.6% during the first quarter, acquiring an additional 10,468,050 shares and now owning 29,655,633 shares worth $524,608,000. Similarly, State Street Corp lifted its holdings by 83.4% during the same quarter, adding 3,902,840 shares to its portfolio and bringing its total ownership to 8,584,507 shares valued at $155,952,000.

Norges Bank entered a new position in Starwood Property Trust during the fourth quarter with a value of $30,110,000. Meanwhile, Bank of New York Mellon Corp increased its stake by 56.6% during the first quarter and now owns 3,703,445 shares worth $65,514,000.

Principal Financial Group Inc. saw a staggering increase in its position as it raised its ownership by 4.3% during the first quarter. This move brought their share count to 1,2235BiercingBarrett458 shares valued at $21Bef1997esaleusp$643betweenQuartermillion .nvestorThe institutional gabuShareholdersba own a majority stake of upbentguyen tock49.of60%STTimpRWTany’sWD’wionthetheaSEcompanyCR/RWrecentlyAEUfilemURLdBANvicSinformation tlarhay wasEah disclosedZyAinDa filingicwithalizthePTSecuritiesVE&hExchangeEpBuilderCnDepartment,ea whichion.canacbebtaccessedycCrthroughOLthisLzlink. eR

The company’s stock, STWD, opened at $19.84 on Tuesday, with a fifty-day simple moving average of $20.40 and a 200-day simple moving average of $18.83. Starwood Property Trust has a quick ratio and a current ratio of 2.40, indicating the company’s short-term liquidity positions match its current liabilities. The REIT also has a debt-to-equity ratio of 2.98.

With a market capitalization of $6.21 billion and a P/E ratio of 11.34, Starwood Property Trust commands a sizable presence in the real estate investment market. The company also has a beta coefficient of 1.60, suggesting it is more volatile than the broader market.

In recent news, President Jeffrey F. Dimodica sold 20,111 shares of Starwood Property Trust on September 21st at an average price of $20.48 per share, totaling $411,873.28 in value. After completing this transaction, Dimodica now holds 1,035,984 shares in the company worth approximately $21,216,952.

Several research firms have provided insights into the performance and potential of Starwood Property Trust’s stock (STWD). JPMorgan Chase & Co., for example, raised their target price from $18.50 to $21.50 in their research report released on July 24th. JMP Securities lowered their target price from $26 to $24 and assigned a “market outperform” rating to the stock on July 14th.

StockNews.com initiated coverage on Starwood Property Trust on August 17th and issued a “hold” rating on the stock. Lastly,

BTIG Research increased its target price from $19 to $21 in their report published on June 30th. Overall, analysts have provided a consensus rating of “Moderate Buy” for Starwood Property Trust, with a consensus price target of $21.70 according to data from Bloomberg.com.

In conclusion, Starwood Property Trust has experienced significant changes in its investor base, with large institutions adjusting their holdings in the company. The stock’s performance attributes, such as market capitalization and price-to-earnings ratio, indicate its significance within the real estate investment market. Furthermore, recent insider selling by President Jeffrey F. Dimodica and analysis from research firms contribute to the ongoing evaluation of the stock’s potential. Investors and stakeholders should consider these factors when making informed decisions regarding Starwood Property Trust (STWD).

What Are Cap Rates & What Do They Mean For Real Estate Investing?

Conshohocken, United States – September 28, 2023 / Fairmount Funding – Private Lending for Real Estate Investors /

In the real estate industry, choices can make or break fortunes. With a lot of options, each with its own price and potential rental earnings, investors face the challenge of figuring out which property will give the best return for their money. This is where the cap rate steps in.

Cap rate helps investors figure out how much money they can make from a property compared to how much theyre investing, no matter how expensive or cheap the property is. With this, investors can make smarter choices and properties that fit their investment strategy like a glove. Lets dive into how exactly the cap rate works and how its a game-changer for real estate investors.

How Can Capitalization Rate Help Property Investors?

Cap rate stands for capitalization rate, and its a common metric used in real estate investment to evaluate the potential return on an investment property. Cap rate helps investors compare the potential return of different investment properties regardless of their purchase price. A higher cap rate generally implies a potentially higher return on investment, but its essential to consider other factors like location, market trends, property condition, and potential for appreciation.

Its worth noting that cap rates are used primarily for quick initial assessments and comparisons. They do not take into account factors like financing costs, potential changes in property value, or individual investor preferences and strategies. As a result, cap rates should be used in conjunction with other financial analyses when making investment decisions.

Computing a Property Investments Cap Rate

The cap rate is expressed as a percentage and is calculated by dividing the propertys Net Operating Income (NOI) by its current market value or purchase price.

Mathematically, the cap rate formula for real estate is:

Cap Rate = (Net Operating Income / Property Value) * 100

Heres a breakdown of the components:

• Net Operating Income (NOI): This is the income generated by the property after subtracting all operating expenses (such as property taxes, insurance, maintenance costs, property management fees, etc.) from the total income generated by the property (rental income, leasing fees, etc.).
• Property Value: This is the market value of the property, often referred to as the purchase price or the appraised value.
• Expressed as Percentage: The last stage involves transforming the outcome of your division into a percentage by multiplying the outcome by 100.

Click here for our Cap Rate Calculator for real estate investors.

Interpreting a cap rate in terms of recovering the investment involves understanding how the cap rate relates to potential returns and the timeframe for recouping your initial investment. A lower or higher cap rate can indicate different scenarios for recovering your investment:

• Lower Cap Rate (Higher Price, Lower Return): A property with a lower cap rate typically has a higher purchase price relative to its net operating income (NOI). This could mean that the property is considered more desirable or has lower risk factors. However, a lower cap rate also implies a slower rate of return on your investment. It might take a longer time to recoup your initial investment through the propertys rental income.
• Higher Cap Rate (Lower Price, Potentially Higher Return): A property with a higher cap rate usually has a lower purchase price in relation to its NOI. This might indicate a riskier or less attractive property. However, a higher cap rate suggests a potentially faster rate of return on your investment. You could recoup your initial investment more quickly through the propertys rental income.

In essence, the cap rate is used to quickly evaluate and compare investment opportunities based on current property values and incomes. For financial analyses to estimate the future value of an investment property at the end of a specified holding period, investors use the terminal cap rate. This incorporates assumptions about income growth and market conditions.

What Are The Market Factors That Affect Cap Rate In Real Estate?

Numerous elements can exert influence on the cap rate. Below are some of the factors that can affect cap rates:

• Location: The propertys location plays a significant role in determining its cap rate. Properties in desirable, high-demand areas often command lower cap rates due to their potential for stable and appreciating rental income. On the other hand, properties in less sought-after locations might have higher cap rates to attract investors despite potential risks.
• Real Estate Market Size: In larger markets with a higher population and greater economic activity, cap rates tend to be lower as investors are willing to accept lower returns for more stable investments. In contrast, in smaller markets, the demand might be more limited, which could lead to higher cap rates as investors seek higher returns to compensate for the perceived risk of potentially fluctuating returns.
• Asset Stability and Risk Perception: Investors often associate stable property values with lower investment risk. When a propertys value is expected to remain stable or increase, investors might be willing to accept lower returns on their investment, leading to lower cap rates. This is because they perceive the investment as having less risk of significant loss in value.
• Capital Liquidity and Initial Investment: The amount of capital an investor injects into a property represents their initial financial commitment. If an investor invests more capital upfront to improve the property, increase rental rates, or decrease operating expenses, the NOI might rise. As a result, the cap rate could be lower, indicating a potentially lower return on investment but a more stable and improved property.
• Property Type: Cap rate real estate differs among different types of assets. Multifamily and industrial structures typically exhibit the lowest cap rates. Moreover, economic indicators hold varying significance depending on the asset class. For instance, personal income significantly affects multifamily and retail properties, whereas durable and nondurable goods spending takes on particular importance for industrial properties.

While the cap rate is a valuable metric for assessing the potential return on a real estate investment, its important to acknowledge its limitations. One significant limitation lies in its simplicity. Cap rates provide a quick snapshot of an investments income potential, but they dont account for several other factors that can impact the investments overall performance. For instance, cap rates do not consider the effects of financing, mortgage interest rates, or the time value of money. This means that two properties with the same cap rate might have vastly different financing arrangements, resulting in divergent net cash flows for investors.

Another limitation is that it does not incorporate potential changes in property value over time. They assume a static property value, which might not hold true in a dynamic real estate market. Properties with higher appreciation potential might initially appear less attractive based solely on their cap rates, leading to missed opportunities. So, while cap rates offer a starting point for evaluating investments, they should be used in conjunction with more comprehensive financial analyses.

Multifamily Cap Rates In 2023

According to CBRE, the opening quarter of 2023 brought about notable shifts in the real estate landscape. The multifamily sector, in particular, witnessed significant changes in multifamily cap rates. The average initial cap rate for multifamily properties experienced a 23 basis point uptick, reaching a level of 4.72%. This comes on the heels of a sequence of consecutive quarterly increases39, 36, and 38 basis pointsmarking a departure from this trend. Notably, this change coincides with the Federal Reserves initiation of a new round of interest rate hikes. Looking ahead to the second quarter of 2023, the average prime initial cap rate for multifamily properties saw a modest increase of just 1 basis point, settling at 4.73%. Simultaneously, exit cap rates saw a reduction of 5 basis points. Interestingly, the analysis also noted that underwriting expectations for annual rent growth over the upcoming three years remained steady at 2.9% during the second quarter.

Impact Of Loan Interest Rates On Your Cap Rate

The interplay between cap rates and interest rates is a significant aspect of real estate investing. Generally, when interest rates rise, borrowing costs increase, potentially reducing demand for real estate and leading to higher cap rates. Conversely, lower interest rates can lead to lower financing costs, potentially resulting in lower cap rates. However, its important to note that the relationship between interest rates and cap rates is not always linear or immediate. The impact of interest rates on cap rates is a complex interplay that underscores the interconnectedness of financial markets and real estate investments. Investors must consider these complexities when assessing the impact of interest rates on cap rates and making strategic investment decisions.

Cap Rates FAQs

Is the cap rate the same as the return on investment?

While return on investment and cap rate are related, these two metrics are not the same and serve different purposes in investment analysis. Return on investment provides insight into the potential earnings an investment might yield within a defined timeframe. On the other hand, the capitalization rate offers a current or expected representation of the actual return on an investment.

What is a good cap rate?

A good cap rate varies based on factors like location, property type, and investor goals. Generally, cap rates around 4% to 10% are common, with lower rates in stable, desirable areas and higher rates in riskier or less sought-after locations. Youll want to consider market conditions and individual investment strategies when determining a suitable cap rate.

When is the best time to use the cap rate?

The cap rate is best used during initial property evaluations to quickly compare investment opportunities. It helps investors assess potential returns and risks without delving into complex financial details. However, it should be supplemented with more comprehensive analyses for making well-informed investment decisions.

Cap Rate Illuminates Profitability In Real Estate Investment

While cap rate doesnt include all of the factors for a comprehensive financial analysis, it remains an indispensable initial tool that offers valuable insights. It might be simple, but it is like a fast lane to understanding how much money a property could make. Beyond its mere mathematical essence, the cap rate holds the key to unlocking a deeper understanding of the profitability embedded within a property. As a savvy investor, you know that comparing properties is more than a numbers gameits about seizing opportunities that align with your financial goals.

KEY TAKEAWAYS

• Cap rate is used to evaluate the potential return on an investment property.
• The cap rate is determined by dividing the net operating income of a property by its present market value.
• While cap rates provide an initial foundation for investment evaluation, they should be combined with in-depth financial analyses for a more thorough decision-making process.

Contact Information:

Fairmount Funding – Private Lending for Real Estate Investors

500 Fayette St. #202
Conshohocken, PA 19428
United States

Max Fisch
(215) 515-6966
https://fairmountfunding.net

Original Source: https://fairmountfunding.net/cap-rate/

COMTEX_441116138/2827/2023-09-28T02:00:18

Not all trends are real — especially in ad tech

If 2023 has done anything for advertising so far, it’s been a year of separating the wheat from the chaff for trends. Kawaja has been keeping score. He called out Web 3.0 as just a fancy term, questioned the practicality of crypto, said blockchain isn’t a great fit for ads and compared NFTs to fancy JPEGs with a backstory. The underlying message here isn’t that these technologies are inherently flawed, but that their applications in advertising have yet to hit the mark. As Kawaja explained, “This is all real tech actually, but its application to media and marketing just simply doesn’t work.”

The era of big tech exceptionalism may be over 

Even as online media behemoths like Google, Meta, Amazon and others continue to amass staggering wealth, they’re realizing that what propelled them to their dominance in the past may not be the same recipe for future success. They’re now venturing beyond familiar territories, notably into AI, cloud services, gaming and video, seeking new avenues for sustained growth. As a result, competition in the space is intensifying as these dominant platforms go head-to-head in new revenue growth areas also populated by insurgent start-ups. 

“I would argue that these companies have largely operated as monopolies in their own channels and yet now they all seem to be getting into each other’s shorts, whether that be media, cloud or data,” said Kawaja. 

To make matters even more challenging, these strategic pivots are happening under the watchful eyes of regulators on both sides of the Atlantic. It’s a two-edged challenge for the platforms, as regulators seek to rein them in over their market dominance and their handling of consumer data. These concerns are not just peripheral, but deeply intertwined with the very fabric of how these platforms operate, according to Kawaja. However, the tech giants have a different perspective. 

“They’re essentially telling governments, ‘You need to choose one side or the other because if you move the [regulatory] sword toward privacy then it hurts antitrust and vice versa,’” continued the investment banker. 

Needless to say, it’s important for ad execs to understand the interplay between those two modes of attack on the platforms. 

CTV craze is slamming into reality

Even as the industry continues to trumpet the potential earnings from connected TV, the undeniable truth for Kawaja is that it ultimately generates less revenue compared to traditional linear TV. For starters, streaming services feature significantly fewer ads, typically around four to six minutes per house compared to the 16 to 18 minutes per hour seen on linear TV. While these figures may fluctuate depending on the market, the overarching reality persists, said Kawaja.

He expanded on the point: “Even as companies like Disney, Netflix and HBO Max mitigate the lack of inventory available with their own ad-funded services, the future of TV in terms of monetization will still mean there’s less ad inventory available than previously,” he said.

Nevertheless, this scarcity of ad inventory is being creatively addressed by ad execs who are redefining what qualifies as TV in the digital realm. The truth, as ever in advertising, appears to adapt to the narrative of those who shape it, irrespective of actual circumstances.

“We call it the recategorization of TV and we think it’s something you should be all on the watch for,” said Kawaja. “You’re going to see these other digital channels replace that inventory. In the history of business, no one has ever left tens of billions of dollars on the table, they pick it up.”

In fact, this recategorization was one of the main storylines to unravel during this year’s upfront season.

“You saw it in the pitches from the platforms whereby they’re trying to replicate and supplant this inventory as television,” said Kawaja. 

Ever since Google put third-party cookies on notice back in 2020, the expected outcome has been a division in the market. One part consists of high-quality ad inventory with first-party IDs and user consent within walled gardens, while the other comprises a long tail of less-targeted impressions in the open web where advertisers are vulnerable to fraud and malvertising. But what if there was something in between this proverbial rock and a hard place? Enter the so-called “hedge gardens.”

This is what happens when a business protects their own customer data but depends on programmatic vendors to funnel data and ad revenue between their walled garden and the open market. It’s not a fully enclosed garden, yet it’s not entirely accessible either, explained Kawaja. 

Retailers, in particular, are adopting these models, anticipating increased demand for their data as third-party data dwindles. However, they recognize the limitations of their data’s scalability, leading them to operate like hedged gardens. If retailers can stick the landing here, then they stand to be one of the big beneficiaries of the coming addressability storm. 

Measurement is moving from post-bid to pre-bid

If post-bid optimization was predicated on marketers understanding what ad they bought and subsequently using that intel to optimize for the next outcome, then pre-bid optimization is all about marketers figuring out what they should buy and optimizing for every outcome.

This rationale drove deals like Integral Ad Science’s acquisition of CTV ad server Publica and DoubleVerify’s acquisition of AI startup Scibids, said Kawaja, who worked on the latter deal. Both companies spy an opportunity to shift from ad verification to activation as tracking in online advertising swings from precision to prediction. 

“If you’re a business that can do all the optimization before the bid then you save unnecessary waste, and who doesn’t want to eliminate the massive amount of waste that occurs in the bitstream?” asked Kawaja. “Not only is it good for the planet, it’s also a way to make more money. Either way, it’s green.”

AI FTW

AI and ad tech were made for each other, saia Kawaja. His reasoning is straightforward: “It’s because AI works better the bigger the data set that you provide for it and there’s no larger data set [in advertising] than real-time advertising,” he said.

Ad tech vendors strongly agree with the sentiment, and they have fully embraced AI for various purposes, including enhanced data access, automated media optimization, operational efficiencies and automated creative. Among these, automated creative has particularly captured Kawaja’s interest.

“It’s the big daddy [of benefits],” he said. “An ad has to answer three questions: the what [the creative], the where [the medium] and the who [the audience], and, when it comes to the last two, we’ve seen hundreds of deals worth billions of dollars of investment and acquisition on media and data.”

But those deals have only really yielded marginal improvements to efficiencies because they ultimately focused on trying to do things cheaper, not better. 

“It’s normally in the 10x realm,” said Kawaja. Whereas focusing on the creative, or making the ad better, could have a monumental impact on efficacy, continued the investment banker. He expanded on the point: “I think a newfound potential focus on creative technology, which is long overdue, will be the element that does that,” he said.