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4 Top Scotch Whisky Investment Tips To Avoid Cask Scammers – Forbes

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Over the last decade, Scotch whisky has gone through a remarkable transformation. Overall, the global Scotch whisky market has seen explosive growth while records for the most expensive bottles have been constantly shattered. As a result, new businesses and firms have introduced opportunities allowing eager consumers to invest in bottles and casks.

Casks in particular have received a lot of recent attention as an investment vehicle. However, along with opportunity comes risk. Marketing materials and social media ads from a plethora of new firms and brokers promise enormous returns on whisky casks, reflecting Scotch whisky’s huge market growth. If these claims are to be believed, investing in whisky casks seems almost like free money. Most recently, that potential was highlighted by a story showing how a lucky cask owner managed to make a huge return on a cask purchased in the 1990s.

However, profit is far from certain. The truth is that while buying a Scotch whisky cask can lead to returns down the line, the market for casks is not as explosive as some would imply. There’s also serious risk involved. Many cask investment firms and brokers use murky technicalities around ownership that put investors’ money into more risk than they know. Scammers are also out in force again, trying to trick people into paying too much for unremarkable casks.

So here’s a list of tips that can help anyone who is interested in buying a whisky cask, whether for profit or pleasure, on how to do so safely.

1.    Avoid firms that mention a ‘586%’, ‘564%’, or ‘562%’ 10 Year ROI

Many cask investment companies mention that whisky is a high-performance alternative investment vehicle, claiming either a figure of 586% or 564% 10 year ROI.

This figure is often displayed prominently on ads and websites, and it comes from the Knight Frank Rare Whisky Index, which only tracks the changing prices of 100 rare and desirable bottles of whisky, a measurement created by whisky consultants Rare Whisky 101. Note that this doesn’t include casks, and is a poor indicator of the potential market performance of whisky casks.

The Knight Frank Wealth Report itself, which publishes the Index, is also dismayed about how their data is misused by these companies. In a recent excellent Whisky Magazine article about cask investment firms and their alarming practices, the report’s editor Andrew Shirley stated: “Our index is tracking 100 bottles of rare and valuable whisky – it has absolutely nothing to do with cask whisky.”

Companies using the index in their promotional materials are therefore either pretty clueless or intentionally providing badly contextualized information to potential cask purchasers.

2.    Beware claims of ‘guaranteed returns’

Some firms have quoted anywhere between 10-20% annual returns on cask investments, but this is misleading, and any company that promises this should know better. There are also, at the time of writing, no reliable or recognised measurements of overall cask investment performance.

In these cases, specific historic data is being twisted into what seems like official information about overall returns on casks. This kind of misinformation is a real pet peeve to whisky cask broker Mark Littler, who facilitates cask purchases between sellers and buyers and strongly believes that increased transparency of information is necessary in cask investment. While he recognizes that some casks rapidly increased in value over the last few decades, especially certain casks purchased in the 90s, he cautions that the market is also rapidly shifting today:

“The health and buoyancy of the market in 2021 is significantly different to how it was in the mid 1990s. For instance, Springbank had only just started intermittent distilling in 1987 after being closed since 1979. Single malt Scotch whisky is now an internationally recognised luxury asset, so the gains that have historically been possible are not necessarily going to be possible going forward.”

3.    You don’t really own a Scotch Whisky cask without a Delivery Order

There’s a few legal documents and designations that form the heart of Scotch whisky cask ownership, and it’s useful to be familiar with them.

One is the register of Warehousekeepers and Owners of Warehoused Goods Regulations, also known as a WOWGR. Anyone that is buying and selling whisky casks as a business (classified by UK tax law as a ‘revenue trader’) needs to be on the registry, which is a complicated process. Individuals buying a couple of casks as a long-term investment do not, though the distinction between an individual investing in a few casks and a ‘revenue trader’ can be a legal grey area.

A Delivery Order is also important. This is a written contract between the cask seller and buyer, and addressed to the warehouse keeper who is storing the cask, confirming the transfer of ownership. Without a DO, a buyer doesn’t legally own the cask. A few brokers and companies issue an ‘ownership certificate’, however it doesn’t have any legal merit, it’s just a fancy piece of paper.

This isn’t to say that a company that doesn’t issue a DO is a scammer, however it does mean that you’ve got a much higher risk of losing your investment if the company actually owns ‘your’ cask goes bust. Whisky consultant and cask broker Blair Bowman illustrates the conundrum:

“Most of these cask companies are simply not set up to issue DOs as this would mean that the warehouse keeper would also have to set up a new account for every cask owner…all of this is quite onerous for all parties involved, hence the reasons companies are not going down this route.”

One more important note. If an investor is not a UK resident then they need someone to act as their duty representative, someone who is on the WOWGR registry and is responsible for communicating with the HMRC (the UK’s tax authorities) about their warehoused cask.

4.    The scams are still around

The UK’s Financial Conduct Authority doesn’t regulate cask whisky investment, making it a space where scammers can thrive. At the start of the new millennium, there were many fraudulent companies in operation, many of them making similar promises of large profits as some cask investment firms today. In the whisky world the names of Nant Whisky, Grandtully, Cavendish/Hamilton Spirit Management, the Napier Spirit Company and others are uttered along with curses for the way they swindled investors not too long ago.

Littler finds that the pitches made today for whisky casks, and the practices to sell them, often echo the scammers of the past: “The resemblances to these old scams, including inflated sales prices, no transfer of ownership, misleading sales information, manipulated/falsified returns, and Ponzi selling, to the practices of some firms today is quite remarkable.”

A big problem is that cask purchasers won’t realize they have a problem until years from now when they want to cash in on their investment after the whisky has matured for a while. As Bowman explains: “My biggest fear is that these companies will continue to pull in naive investors in the short term but when the bubble bursts they’ll be long gone with all the cash they generated today. I have a strong suspicion that many of these companies will no longer exist by the time an investor looks to sell their cask.”

This means that the ‘cask owner’ will be in a tough situation in a few years when they are ready to cash in on promised profits, especially without that DO.

Though investing in a Scotch whisky casks is a riskier proposition than may be advertised, it’s still possible to do so responsibly and enjoy the results years down the line. However, like any investment situation, it’s important to do the proper research first before putting money down.

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AG Mortgage Investment Trust (MITT) Q2 2021 Earnings Call Transcript – Motley Fool

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Image source: The Motley Fool.

AG Mortgage Investment Trust (NYSE:MITT)
Q2 2021 Earnings Call
Jul 30, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to AG Mortgage Investment Trust second-quarter 2021 earnings call. My name is Sylvia, and I’ll be your operator for today’s call. [Operator instructions] Please note that this conference is being recorded. I will now turn the call over to Jenny Neslin.

Jenny, you may begin.

Jenny NeslinGeneral Counsel and Secretary

Thank you, Sylvia. Good morning, everyone, and welcome to the second-quarter 2021 earnings call for AG Mortgage Investment Trust. With me on the call today are David Roberts, our chairman and CEO; and T.J. Durkin, our president; Nick Smith, our chief investment officer; and Anthony Rossiello, our chief financial officer.

Before we begin, please note that the information discussed in today’s call may contain forward-looking statements. Any forward-looking statements made during today’s call are subject to certain risks and uncertainties, which are outlined in our SEC filings, including under the headings cautionary statement regarding forward-looking statements, risk factors and management’s discussion and analysis. The company’s actual results may differ materially from these statements. We encourage you to read the disclosure regarding forward-looking statements contained in our SEC filings, including our most recently filed Form 10-K for the year ended December 31, 2020, and our first-quarter 10-Q.

Except as required by law, we are not obligated and do not intend to update or to review or revise any forward-looking statements, whether as a result of new information, future events or otherwise. During the call today, we will refer to certain non-GAAP financial measures. Please refer to our SEC filings for reconciliations to the most comparable GAAP measures. We will also reference the earnings presentation that was posted to our website this morning.

To view the slide presentation, turn to our website, www.agmit.com, and click on the link for the second-quarter 2021 earnings presentation on the home page in the investor presentation section. Again, welcome to the call, and thank you for joining us today. With that, I’d like to turn the call over to David.

David RobertsChairman and Chief Executive Officer

Thank you very much, Jenny, and good morning to everybody. Since our last call, AG Mortgage Investment Trust has made great progress in our transition to a company focused on residential mortgage origination and securitization. On the buy side of our business, in the second quarter, we purchased $446 million of non-QM loans from our affiliate, Arc Home, as well as third parties. In June, we completed a non-QM securitization of $224 million, raising non mark-to-market, non-recourse financing on these assets.

Additionally, Arc Home doubled its production of non-QM loans during this quarter to $376 million. Going forward, we intend for our business model to be fueled primarily by non-QM and other residential origination followed by securitizations on a quarterly or more frequent basis. On the sell side of our business, we have sold all of our CMBS and certain RMBS positions throughout the quarter and subsequent to quarter end, supporting our continued transition. We also have good reason to believe we are progressing toward being paid off on our two remaining commercial real estate loans.

The CMBS sales have resulted in favorable gains during and subsequent to quarter end, and potential payoffs of the commercial loans are expected to be favorable to our second-quarter remarks. These completed and anticipated sales provide ample liquidity to fund continued expansion of our go-forward business model. In terms of our financial results for the quarter, our book value increased by 3%, driven by earnings of $0.70 per share. This is after accounting for the declared second-quarter dividend of $0.21 per share.

Both per share numbers are on a post-split basis. Core earnings for the quarter were approximately breakeven. However, the definition we use for core earnings does not capture important elements of our go-forward business strategy. Specifically, core earnings do not include MITT share of the gain that Arc Home recognizes when it sells loans to us, nor does it include earnings that MITT recognizes when we securitize the loans purchased from both Arc Home and third parties.

As I mentioned before, the sales of commercial assets have and are expected to continue to increase our liquidity. This comes at the short-term cost of reduced net interest margin. But more importantly, in the longer term, this liquidity will enable us to continue growing our origination securitization strategy, a strategy, we believe, offers a superior risk reward to AG Mortgage Investment Trust and its shareholders. For our dividend policy going forward, we will be looking most closely at those earnings metrics that most accurately reflect the evolution of our business strategy.

And as we always do in our dividend policy, we will consider not only the current quarter but our outlook for earnings over the intermediate term. Thanks very much. And with that, I will turn it over to T.J. Durkin.

T.J. DurkinPresident

Thank you, David, and good morning, everyone. To dig a bit deeper into the company’s activity during the quarter, we were active in purchasing $446 million of non-QM loans during the quarter from five originators, including our mortgage affiliate, Arc Home, which originated $376 million during the quarter with MITT purchasing approximately 50% of that production. MITT contributed loans into two securitizations during the quarter, and we intend to be very disciplined with regards to the pacing of our securitizations to de-risk our warehouse lines. In other asset classes, we continue to prudently dispose of non-core assets and repositioning to MITT’s forward-looking strategy by selling CMBS and other RMBS securities where we don’t have any control or access to the underlying whole loans.

During the quarter, we also reduced our exposure to agency MBS as we thought the basis had reached a point where further tightening was unlikely. Subsequent to quarter-end, we sold the remaining CMBS positions and a slight gain from Q2 marks, generating gross proceeds of $34 million, or approximately $15 million of equity proceeds. And moving on to our capital activity during the quarter, we successfully utilized our ATM program to raise $3.1 million of fresh capital by issuing 226,634 shares at an average price of $14.21 per share adjusting for the split. We also completed our fifth exchange with a preferred holder, exchanging 240,861 shares of preferred for 429,802 shares of common.

This brings our cumulative preferred to common exchange notional at approximately $51 million of par value. And lastly, we completed a one-for-three reverse stock split, which went effective July 22 with the ultimate goal of reducing volatility in the stock price into the future. Now, turning to slide six. Our investment portfolio grew slightly over the quarter based on the rotation I previously mentioned out of agency MBS and CMBS into non-QM whole loans.

Turning to slide seven. We made progress increasing our allocation to non-QM by nearly doubling the fair value as a percentage of our investment portfolio from 19% to 37% this quarter. Also, given the strength in the housing market, we are seeing solid performance with regard to our land-related financing, and we expect lot takedowns to run this asset class off organically over the coming 12 to 18 months while we earn a healthy yield. On slide eight, we present our CMBS and commercial real estate exposure.

As previously mentioned, subsequent to quarter end, we exited the single asset, single borrower CMBS securities for gross proceeds of $33.7 million. Currently, MITT only has two remaining commercial real estate loans left under our commercial designation, and we wanted to provide some more detail today. Commercial loan K is a first lien construction loan to a recently completed and fully opened destination hotel in Times Square. The loan continued making interest payments during COVID, but its original maturity date was due in May of this year.

MITT’s loan exposure is part of a larger consortium and is actively engaged with the lender group on working toward a productive resolution in the near term. However, we can’t guarantee such resolution will occur. We are very comfortable with our basis in the finished product. Commercial loan L is a fully drawn loan to a hotel located off the Magnificent Mile in Downtown Chicago.

Immediately following the initial COVID shutdown, we completed a modification with the sponsor in September of 2020, turning off the cash coupon and letting the deferred interest accumulate. However, we did not accrue interest income during this quarter — during this period. In exchange for the interest deferral, we received an additional $2.1 million of equity. We remain in close contact with the sponsor and have seen operating metrics continue to improve into the larger reopening.

On slide nine, you can see we continue to be able to create an agency MBS book with better prepayment performance due to our size and selectiveness when purchasing specified pools. A reduction in agencies was solely based on relative value, not based on performance. We will continue to use agency MBS to absorb excess liquidity when at prudent valuations and to meet our ’40 act tests. And lastly, in June, we entered into an agreement to sell all our remaining excess MSRs, which we’ll settle during the third quarter.

With that, I’ll turn the call over to Nick.

Nick SmithChief Investment Officer

Thank you, T.J., and good morning, everyone. Turning to slide 10. Year to date, we’ve acquired over $650 million of non-QM loans with over $250 million acquired from our affiliate Arc Home. In July, we increased our uncommitted warehouse capacity to $1.1 billion to accommodate future acquisitions while simultaneously terming out approximately $224 million of non mark-to-market and non-recourse debt.

We also securitized approximately $171 million of non-QM loans alongside other Angelo Gordon funds within an unconsolidated joint venture. The remaining assets held in this joint venture are primarily retained interest from other prior — or from prior securitizations. The tables on this page show the continued delinquency curing over the past year for our non-QM portfolio, along with collateral characteristics of our current borrower base. Subsequent to quarter end, we also entered into agreements to acquire GSE-eligible nonowner-occupied pools.

In connection with these acquisitions, we added $500 million of uncommitted warehouse capacity specifically for GSE-eligible loans. We expect these credits to continue to offer attractive risk-adjusted returns and look forward to adding additional sellers and capacity. Moving on to slide 11. This page provides a high-level summary of the performance of our credit-sensitive loan positions over the past 12 months.

As you can see, this portfolio has benefited from strong housing tailwinds and historically low mortgage rates. Prepayment speeds have increased significantly and approximately 75% of the borrowers that received COVID-related assistance are either contractually current or making payments on a loss mitigation plan. Over the past year, approximately 30% of the portfolio has been liquidated through a combination of opportunistic loan sales, voluntary and involuntary prepayments. Turning to slide 12.

As mentioned in previous quarters, Arc Home, our licensed mortgage origination affiliate, continues to benefit from being one of the first originators to reenter the non-QM business. The tables below clearly show the benefit of these early investments as Arc Home’s non-QM volumes offset declines in agency volumes and was able to mitigate margin compression during the quarter. Mark-to-market losses in Arc Home’s MSR portfolio driven by lower nominal yields and a full flattening of the curve generated pre-tax net losses of $3.7 million resulting in $2.7 million of losses from MITT, which does not include $1.4 million of gains recognized by Arc Home in connection with its mortgage loan sales to MITT. With that, I’ll turn it over to Anthony.

Anthony RossielloChief Financial Officer

Thank you, Nick, and good morning. Before providing an update on the second quarter, I wanted to reiterate that we completed a one-for-three reverse stock split post quarter end, which became effective on July 22. This reduced our common shares outstanding from approximately 48.5 million to 16.2 million. As a result, you will see that we adjusted all common share and per share metrics within our press release, earnings presentation and 10-Q on a retroactive basis to reflect the reverse split for all periods presented.

With that being said, during the first quarter, we reported net income available to common stockholders of approximately $10.9 million or $0.70 per fully diluted share. Earnings during the quarter were driven by mark-to-market gains on residential and commercial assets within our portfolio, along with realized gains from the sales of certain RMBS and CMBS. These gains were offset by mark-to-market losses within our interest rate swap portfolio driven by the decline in interest rates during the quarter, as well as the previously mentioned loss from our 45% equity method investment in Arc Home, resulting from mark-to-market losses on its MSR portfolio. Operating expenses increased slightly from the first quarter.

However, this was attributable to transaction expenses related to the non-QM securitization that occurred in June. On slide 14, we provide a reconciliation of our book value per common share, which increased by $0.41 during the quarter. This increase reflects our current quarter earnings offset by the preferred and common dividends declared during the second quarter. And you’ll also see the increases related to a preferred stock exchange transaction entered into during the quarter, as well as net proceeds raised from issuing common stock through our ATM program approximating $3 million.

As discussed on our previous earnings call, we also disclosed adjusted book value per common share of $14.72, which is computed based on total equity less the entire liquidation preference of our preferred stock. Turning to slide 15. We disclosed a reconciliation of GAAP net income to core earnings for the second quarter, where you will see core earnings was breakeven for the quarter. One item to note is that core earnings does not include $1.4 million of gains Arc Home recognized during the quarter on loans sold to us.

Lastly, we ended the quarter with total liquidity of $71 million, which is inclusive of $64 million of cash, and $7 million of unlevered agency RMBS. This improvement in liquidity from the first quarter was a result of the previously mentioned two non-QM securitizations transacted along with the sale proceeds on our MBS portfolio offset by the purchase activity to grow our non-QM portfolio. This concludes our prepared remarks, and we would now like to open the call for questions. Operator?

Questions & Answers:

Operator

[Operator instructions] And our first question comes from Doug Harter from Credit Suisse.

Doug HarterCredit Suisse — Analyst

Thanks. Can you just talk about the level of competition kind of in the QM market today and how that — how returns still look today versus kind of the early days where Arc was one of the first movers?

Nick SmithChief Investment Officer

Of course. There certainly is more competition. That being said, capacity has returned to the market as sort of agency stuff has run off or refis have runoff, and we still see plenty of opportunity to buy these assets and others at attractive levels. And we don’t see that changing in the near future.

Doug HarterCredit Suisse — Analyst

Got it. And then could you just compare the relative attractiveness of returns of kind of non-QM versus nonowner-occupied loans and kind of which is a more attractive opportunity today?

Nick SmithChief Investment Officer

We see them fairly comparable. If anything, in the non-QM side, a lot of those positions are investor properties already and they’re fairly similarly priced. On the agency side, we just — it’s one of those things where we expect that to be opportunistic and to be sort of interesting opportunity for the coming years, and we expect pricing to come in and out, and we’ll obviously keep the relative value between the two products in mind.

Doug HarterCredit Suisse — Analyst

Got it. And then just one kind of accounting question. You mentioned that there was the negative MSR mark at Arc Homes. What was the size of that? And I guess how would the profitability of Arc have looked if you excluded the net MSR mark?

Anthony RossielloChief Financial Officer

The net MSR mark was down about 4 million for the quarter. So if you think about pulling that out from earnings, you’d probably be around plus 2 million — 2 to 3 million during the quarter without the MSR markdown.

Doug HarterCredit Suisse — Analyst

Great. And then so even if you stripped out the 1.4 million of gains, I guess, the contribution to you would be, I guess, closer to slightly positive to closer to breakeven versus the two point — or versus the loss you mentioned?

Anthony RossielloChief Financial Officer

That’s correct. One clarification of the mark-to-market loss that I mentioned was pre our 45% share. So that $4 million, we would only get 45% of that.

Doug HarterCredit Suisse — Analyst

OK. That makes sense. Thank you very much.

Operator

Next question comes from Bose George from KBW.

Bose GeorgeKBW — Analyst

Good morning. Actually, just first, just a clarification. You mentioned that the mid-quarter earnings doesn’t include the sales of the Arc Homes to MITT. Can you just remind me what from Arc is included in the core earnings?

Anthony RossielloChief Financial Officer

Their operating business, which is their gain on sale on the agencies and the non-QM that are not sold to us are included in core.

Bose GeorgeKBW — Analyst

And is there — like, in terms of what you buy from them, is that percentage going to remain stable because it seems like if it increases, you almost kind of hurt your core income, right, because it won’t count?

Anthony RossielloChief Financial Officer

Yeah, that’s correct. It has remained stable. We have bought approximately 50% of the production from non-QM from them, but your thinking is correct.

Bose GeorgeKBW — Analyst

OK. Great. And then if you just — sort of looking forward, I guess what are kind of the things that need to happen to get to a more whatever normalized core number? I mean, obviously, from an economic return, your returns are good, but I feel like a lot of people focus on core. So just what’s the best way to kind of think about that?

David RobertsChairman and Chief Executive Officer

This is David Robert answering that. I think the best way to think about this is that this quarter, and in all likelihood, the next few quarters, we’re in a transition to the new business model or to the go forward, I should say, business model. So it’s a mix of the two. We’ve got legacy assets that we’re rotating into first cash and then into our origination securitization business, and that’s going to take some time.

Bose GeorgeKBW — Analyst

OK. That makes sense. Great. Thanks.

Operator

Our next question comes from Trevor Cranston from JMP Securities.

Trevor CranstonJMP Securities — Analyst

Hey. Thanks, good morning. I wanted to clarify something on the commercial loans, and thanks for all the additional detail on those. In the prepared comments, I think you made the comment that you were hopeful that there could be a payoff on those in the near term.

I just wanted to clarify, was that comment related to both of the loans? Or was that maybe more directed toward the construction loan in particular?

T.J. DurkinPresident

Yeah. I mean, I would say it’s more — it’s obviously, we’re working with the borrower on the maturity issue on that loan in particular. I think obviously on the other loan, we fully anticipate that coming out of the modification period, it will remain contractually current, and they could pursue other financing options at that point.

Trevor CranstonJMP Securities — Analyst

OK. And can you remind us when that period ends?

T.J. DurkinPresident

Yeah. It was a one-year modification from last September. So it will end this September.

Trevor CranstonJMP Securities — Analyst

OK, got it. And then, on the GSE non-owner — GSE-eligible non-owner-occupied loans, can you maybe talk about that opportunity a little bit more and help us think of kind of what the potential market size is there relative to the sort of more traditional non-QM opportunity?

Nick SmithChief Investment Officer

Yeah, certainly. So historically, the supply of — or origination of investor properties via the GSEs or Fannie and Freddie has ranged from approximately 75 to 95 billion a year. It’s not had — it doesn’t have nearly sort of the same sort of cyclical impacts. So if anything, if this refi comes off, essentially, you’re lowering your denominator of other nonowner acquired assets.

So as that denominator goes lower, that 7% cap that’s been instituted in the latest PSPA or amendment with Fannie and Freddie, the assumption is that that will sort of normalize and that excess will be higher. So if — obviously, if the number goes to 12%, you have to solve for that excess of 7%. That being said, even prior to this, a good portion of GSE loans actually best expect and offered attractive returns for investors like ourselves. And our expectation is as originators get more familiar with selling to the private markets away from Fannie and Freddie that this space could grow.

Now, exactly how much of sort of the overall market, we’ll ultimately see, there’s a lot of factors that go into it. But at least it’s a decent sized notional.

Trevor CranstonJMP Securities — Analyst

Got it. OK. That’s very helpful. And then last thing, I think you noted that you guys had a short TBA position in the second quarter.

Can you say how large that position is and if you’re still carrying that into the third quarter?

Anthony RossielloChief Financial Officer

The position size is 130 million notional on the TBA that went on at quarter-end.

Trevor CranstonJMP Securities — Analyst

All right. Thank you.

Operator

Our next question comes from Jason Stewart from JonesTrading.

Jason StewartJonesTrading — Analyst

Hey. Good morning. A couple of follow-ups. On commercial loan, is the mark at 6 30 at 86% of part reflective of the coupon or your confidence in the payoffs?

T.J. DurkinPresident

Well, the mark — we use third-party vendors to help us determine the mark. So it’s 86% of par, which is a $51 million notional.

Jason StewartJonesTrading — Analyst

So is your thinking updated that you’re going to get a full par payoff at September 30 when the modification period is over?

T.J. DurkinPresident

Well, no. At September 30, their coupon will turn back on. And I think we’ll see what pricing vendors, how they view this sort of modifications that are all starting to expire, if you will, right? We’re kind of getting to that point in the calendar from a year ago. So I don’t have any certainty into how they’ll look at that, but we would expect that based on our conversations that the loan will start cash paying come Q4.

Jason StewartJonesTrading — Analyst

OK. So not necessarily a payoff, but it will be turned back on. OK, got it. And then if you can update us on book value quarter to-date, if you don’t mind.

Anthony RossielloChief Financial Officer

Yeah. Book value quarter-to-date was up 3%, approximately, and that was primarily driven by some of the mark-to-market gains that we’ve been talking about in the resi and commercial portfolio, as well as some of the realized gains through the sales that we mentioned during the quarter.

David RobertsChairman and Chief Executive Officer

Was your — I’m sorry, was your question about this third quarter that we’re in now? Or was it looking back to the third quarter?

Jason StewartJonesTrading — Analyst

Yeah, David, to the latest point available.

David RobertsChairman and Chief Executive Officer

Yeah, we’re not — we’re just going to stick with what we’ve reported.

Jason StewartJonesTrading — Analyst

OK. And then on the Arc MSR, when we look at that portfolio, can you give us any detail in terms of what SATO looks like or maybe like what a plus 50 or 100 move in the rates market looks like for the valuation of that MSR?

T.J. DurkinPresident

Well, just to be clear, so we sold the third-party purchased MSR. So the volatility going forward will be lower. And I would say we’re not, at this point, really reporting like SATO or shifts. The goal is really to reduce that volatility in that business and really have them focused on the origination side.

Jason StewartJonesTrading — Analyst

OK. OK. Last one for me then. I guess I understand sort of the rationale for the TBA sort of given valuations in the space, but how does that fit into the overall hedging strategy? And what’s your propensity to carry that position going forward?

Nick SmithChief Investment Officer

This is Nick. So part of the TBA short is the contemplation that we’ll be selling debt off of the recently acquired GSE positions. And when you think about when you sell that debt, it’s benchmarked versus TBA. So when you actually go sell that debt to third parties in the market, your benchmark is TBA because you’re selling loans backed by agency collateral.

So it’s really just a hedge similar to other hedges we put on against non-QM loans.

T.J. DurkinPresident

So Jason, yeah, I mean basically the pricing convention for traditional non-QM debt is off of swaps. And then for AAA seniors on the agency-eligible, it will be benchmarked off TBAs.

Jason StewartJonesTrading — Analyst

OK. Thanks for taking the questions. Appreciate it.

Operator

Our next question comes from Eric Hagen from BTIG.

Eric HagenBTIG — Analyst

Thanks. Good morning. Hope you guys are well. Within the debt and equity of affiliates, can you give a snapshot of what the balance sheet looks like there, including the amount of capital that’s sitting at Arc Home?

Anthony RossielloChief Financial Officer

Sure. In that line item, Arc Home is approximately $51 million of equity in that balance and then we also have approximately $30 million investment in a joint venture where we historically acquired non-QM. If you recall, we’re now acquiring the non-QM directly into the REIT. And then the other asset in there is approximately $80 million of the land-related financing that T.J.

mentioned earlier.

Eric HagenBTIG — Analyst

Got it. OK. That’s helpful. And then on the non-QM securitizations, how much leverage are you guys applying to the retained tranches to get to the return profile that you outlined in the deck?

Nick SmithChief Investment Officer

Somewhere between one and a half to two and a half turns.

Eric HagenBTIG — Analyst

OK. And are those mark-to-market, refill?

Nick SmithChief Investment Officer

Correct.

Eric HagenBTIG — Analyst

Right. All right. Thank you.

Operator

Our next question comes from Jim DeLisle from Seven Canyon [ph].

Unknown speaker

Good morning, folks. The MSI, I’m presuming that Arc continues to carry some MSR on its self-generated portfolio.

Anthony RossielloChief Financial Officer

Yeah, that’s correct.

Unknown speaker

And that would be in the $50 million or so line item you just referenced to Eric Hagen.

Anthony RossielloChief Financial Officer

It’s embedded within — the way that we account for it is we bring — we show the net equity that we own of Arc, we don’t look through into Arc Home’s balance sheet within our financials, but the asset would be flowing up into that net equity.

Unknown speaker

Right. Can you give us some understanding as to what percentage of that $50 million carrying value of your holding of Arc is represented by the MSR of their self-generated portfolio?

T.J. DurkinPresident

Jim, we don’t have that number in front of us, but we can look into that.

Unknown speaker

Great. Thank you very much. That’s my only question.

Operator

We have no further questions at this time. I’ll now turn the call over to our host for closing remarks.

Jenny NeslinGeneral Counsel and Secretary

Thank you, Sylvia. And thank you for — to everyone for joining the call today. Enjoy the rest of your weekend.

Operator

[Operator signoff]

Duration: 35 minutes

Call participants:

Jenny NeslinGeneral Counsel and Secretary

David RobertsChairman and Chief Executive Officer

T.J. DurkinPresident

Nick SmithChief Investment Officer

Anthony RossielloChief Financial Officer

Doug HarterCredit Suisse — Analyst

Bose GeorgeKBW — Analyst

Trevor CranstonJMP Securities — Analyst

Jason StewartJonesTrading — Analyst

Eric HagenBTIG — Analyst

Unknown speaker

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Canadian private sector sees drop in investment from 2015-19: report – Toronto Star

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7 of 15 Canadian industries experienced an overall decline in investment from 2015 to 2019, according to a new analysis by the Fraser Institute, an independent non-partisan Canadian think tank.

“In a troubling trend, a wide range of industries in Canada have experienced a decline in investment, which is bad news for the economy,” said Steven Globerman, a senior fellow at the Fraser Institute and co-author of Industry-Level Private Sector Capital Expenditures in Canada: 1990-2019.

From 2015 to 2019 more domestic industries experienced decreases in capital investment than at any time since 1990. This, despite the absence of a significant recession similar to what Canada experienced in the early 1990s and 2008-09. The oil and gas industry experienced the most significant decrease at -48%. Other industries that experienced significant decrease included agriculture, forestry, and fishing -19%, utilities -19%, and retail trade -11%.

“If policymakers in Ottawa and across Canada want to help improve private-sector investment performance, they should enact tax and regulatory reforms, particularly now as Canada emerges from the COVID recession,” said Globerman. There’s some fear that an associated decline in investment in equipment, machinery and intellectual property will also affect productivity and property standards.

Mohsin Abbas, The Milton Reporter

contact@miltonreporter.ca

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Telehealth investments soar even as market matures – Healthcare Dive

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Dive Brief:

  • Spurred by the COVID-19 pandemic, investments in telehealth reached a record $5 billion in the second quarter of this year, according to a new report by CB Insights. The investments are more than double what they were in the second quarter of 2020. Six telehealth firms also reached unicorn status.
  • However, it appears the sector is reaching a level of maturity. According to CB Insights, late-stage investments outpaced money going into early-stage deals. Moreover, investor exits also reached a record high.
  • Investments in traditional telemedicine platforms also saw an investment decline, with virtual care, remote monitoring and telepharmacy reaping growing shares of investments. Nevertheless, providers are still investing heavily in telemedicine to improve the experience for their patients.

Dive Insight:

It’s currently telehealth’s day in the sun. With a large portion of the world eschewing face-to-face contact in 2020 due to the COVID-19 pandemic, millions of patients flocked to telehealth for their care needs. Large companies such as Amazon also heavily invested in telehealth pilot programs for its employees.

Overall, global telehealth investments increased 169% from the second quarter of 2020, and were up 17% from the first quarter of 2021. The five largest deals were worth $1.6 billion, out of roughly $5 billion in total.

The CB Insights report also noted that there has been a shift in the way money is flowing into the segment. The teletherapy, coaching and care management segments accounted for 40% of all deals during the quarter. Meanwhile, investor exits from telemedicine platforms hit a record, while funding declined 43%. There was a similar level of activity for virtual and digital care enablement.

Nevertheless, traditional providers are still moving into the virtual space. About 60% of healthcare organizations are adding new digital initiatives, while 42% are accelerating some or all of their existing digital transition plans. And 75% say they are currently investing in telemedicine to improve their patient experience. That compares to 42% in 2019. The level of attention being paid to telemedicine by providers is currently higher than investments in EHR interoperability and patient portals and messaging systems.

Meanwhile, CB Insights has concluded that the use of telemedicine is stabilizing for the longer term. They comprised about 5% of medical claims as of April of this year, compared to 7% in January. The figure is similar to September of last year, as the pandemic hit a trough after its initial first waves.

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