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Credit Suisse Investment Bank Sees Abu Dhabi, Saudi Interest

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(Bloomberg) — Abu Dhabi and Saudi Arabia are weighing whether to put money into Credit Suisse Group AG’s investment bank and other businesses to take advantage of depressed values, people with knowledge of the matter said.

The oil-rich emirate and its Gulf neighbor are separately exploring potential investments through sovereign wealth funds such as Abu Dhabi’s Mubadala Investment Co. and Saudi Arabia’s Public Investment Fund, the people said, asking not to be identified as talks are private. A deal could also come through other vehicles in which each country owns significant stakes, the people said.

Deliberations are at an early stage and it isn’t clear if they’ll lead to firm offers. Potential investors are wary about the risk of future losses or legal issues, they said.

Credit Suisse shares rose as much as 8.7% in New York trading and 4.1% in Zurich. They were up 2.9% to 4.54 francs as of 4:50 p.m. in Switzerland, having lost about half their value this year.

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The bank is less than two weeks away from revealing details of its latest restructuring, including the potential separation of the advisory and leveraged finance business. A potential investment in that entity has been discussed at the highest levels of government in Abu Dhabi, one person said.

“We have said we will update on progress on our comprehensive strategy review when we announce our third quarter earnings,” Credit Suisse said in a statement. “It would be premature to comment on any potential outcomes before then.” Abu Dhabi’s media office and the PIF in Saudi Arabia didn’t immediately have representatives available to comment. Mubadala declined to comment.

Bloomberg reported earlier this month that the bank is seeking to bring in an outside investor to inject money into a spinoff of its advisory and investment banking businesses.

A separation of the dealmaking and underwriting unit would effectively break the troubled investment banking division into three pieces, with Credit Suisse keeping a shrunken trading unit while hiving off its securitized products group and other assets it wants to offload.

As part of the changes, investment banking head Christian Meissner is set to leave the firm in coming weeks, with his departure likely announced alongside the overhaul on Oct. 27, people with knowledge of the matter said earlier.

He was hired by Credit Suisse in Oct. 2020 to co-run a newly created group connecting clients of the wealth management unit with investment-banking services after a career that spanned Goldman Sachs Group Inc. and Bank of America Corp. He then became investment bank chief after the departure of Brian Chin following the losses from Archegos Capital Management.

Credit Suisse has long counted on wealthy Middle Eastern investors as top shareholders, including the Qatar Investment Authority and Saudi Arabia’s Olayan Group. They’ve often invested in times of need, including the QIA’s participation in Credit Suisse’s approximately $2 billion convertible notes issuance in April 2021. That helped shore up the balance sheet after Archegos.

An outside backer of the new separate unit could help alleviate the cost for the bank of retaining and attracting talent for a business that is almost entirely driven by key rainmaker’ relationships, people with knowledge of the matter said earlier this month.

Michael Klein, a former Citigroup Inc banker, who is also a board member at the struggling Swiss lender, is helping spearhead the plan to find external investors for the investment banking unit, the people said. Klein, who is well connected in Saudi Arabia, has done several deals in the kingdom, including the initial public offering of Saudi Aramco, which is the world’s largest-ever share sale.

(Adds share chart, investment bank CEO departure)

©2022 Bloomberg L.P.

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Why Ontario buyers are scooping up investment properties in Calgary – CBC.ca

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The days of Alberta bleeding residents to other provinces are gone, at least for now. In the second quarter alone, the province saw a net gain of about 10,000 people thanks to moves from other parts of the country, especially from Ontario.

But people aren’t just moving themselves and their families to Alberta — a high number are moving their money. 

In recent years, Calgary has seen a spike in out-of-province homebuyers scooping up investment properties they can rent out, with the primary motivator being comparatively cheap real estate.

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“Prices in Toronto and those other cities are completely out of reach, not just for end users but for investors as well,” said Kyle Dovigi, a Toronto-based real estate broker who markets himself as the “Condo Millionaire” and who deals primarily in investment properties. 

“So people look outside of their markets [and] Calgary is a very, very appealing market.”

And depending on whether you’re an investor, a renter or a buyer, the phenomenon may mean different things for your bottom line.

On the one hand, out-of-province real estate speculation has the potential to drive up prices for would-be homebuyers who actually live in Calgary.

On the other, the trend could be viewed as a vote of confidence in the Alberta economy — and a source of much-needed rental properties in an increasingly tight market. 

What’s driving it

‘I have spoken to someone from Ontario almost every single day’ in the last two years, said Calgary investment Realtor Natasha Phipps. (Paula Duhatschek/CBC)

The influx of out-of-province investment began just before the pandemic, right as the Calgary economy began to recover from the 2014 oil crash and rents started to rise. 

“Just before COVID, [in] 2019, I [was] first starting to see the trickling of investors, and then that slowly started to speed up,” said Natasha Phipps, an investment specialist Realtor with CIR Realty in Calgary.

“[By the] spring of 2022, I felt like we were having, like, planefuls of people coming from Ontario to invest in Alberta,” said Phipps, who said about three quarters of her sales in the last year have been from out-of-province buyers — and she was fielding a call from a Toronto area code during an interview with CBC News. 

Even as home prices in Calgary have risen, it’s remained more affordable to buy a Calgary condo than in other major cities, she said. And it’s also more likely that investors can cover their expenses through rent without having to fork out a chunk of cash every month from their own pockets.

“In many other Canadian markets that’s just not possible anymore,” she said.

In Calgary, the average condo sale price is about $297,000, whereas it’s just over $720,000 in the Toronto region and $769,000 in the Metro Vancouver area, according to the regions’ local real estate boards. 

Still, the lure is about more than cheap condos. Buyers in Alberta don’t face land or property transfer taxes as in Ontario or B.C., where they run between one and three per cent of the final sale price on properties that cost more than $55,000. There’s also no cap on rent increases and housing legislation can be seen as beneficial to property investors.

A COVID-19 outbreak has been declared at Verve, a condo building in Calgary’s East village. (Google Maps)

“The tenancy laws really favour landlords to a much greater extent than elsewhere in Canada,” said John Andrew, a real estate consultant and retired professor at Queen’s University in Kingston, Ont. 

“There’s a very strong economic outlook right now for Calgary, wages are relatively high, so it’s pretty favourable at the moment for people in other parts of Canada — especially in Toronto — to be investing in Calgary real estate.” 

‘Unprecedented’ interest

Cole Haggins, president of the multi-family developer Cedarglen Living, says the amount of out-of-province investment is ‘extremely unprecedented’ for his business. (Paula Duhatschek/CBC)

Developer Cole Haggins said about 70 per cent of his sales lately have been from Ontario buyers, the majority of them investors.

“[It’s] extremely unprecedented,” said Haggins, president of the multi-family home builder Cedarglen Living, who said the trend kicked off about a year and a half ago. “We have seen investors in the past, but they’re usually Calgary-based investors and not nearly at the same level.”

Paul Battistella, a managing partner at Battistella Developments, has noticed a similar trend. The developer is building a condo complex near Calgary’s downtown and said about half the buyers have been from Ontario. 

Developer Paul Battistella says his condos are attracting a high amount of interest from buyers in Ontario. (Paula Duhatschek/CBC)

“We’re becoming a rental building, but it’s not one owner that’s holding it — it’s, you know, 100 owners that are having these individual [units] for rent,” he said. 

There’s been a huge spike in the number of Ontario real estate agents applying to become licensed in Alberta. The Real Estate Council of Alberta typically gets about 100 “labour mobility” applications per licensing year, but in the 2021-2022 year it had almost 600, the vast majority of them from Ontario, with B.C. coming in second. 

The trend has also meant more demand at the Calgary property management firm Hope Street Management Corp. 

President and CEO Shamon Kureshi described the company’s typical client as a “jet-setter” — for example, a Calgarian who has recently taken a new job in Texas or Silicon Valley and wants to rent out their home — but these days, he’s fielding more calls from clients in Toronto and Vancouver.

“The ratio of those jet-setter-type clients that we’re used to is going down, and the ratio of investor type clients is going up,” said Kureshi, who added that a silver lining to the trend is a rise in the pool of available rental stock in the city. 

Looking ahead

In the last six months, Shamon Kureshi, president and CEO of the property management firm Hope Street Management, has received a ‘huge spike’ in inquiries from condo owners who want to rent out their properties. About a third of them have been from Toronto and Vancouver. (Paula Duhatschek/CBC)

As winter sets in, there are signs the trend has started to cool and there is debate about whether it’s a temporary slowdown that will pick up again in the spring.

At the outset of 2022, Calgary mortgage broker Josh Higgelke was getting “a ton of calls” from investors in Ontario and B.C. Nowadays, he said, that’s changed — he still gets plenty of out-of-province inquiries, but most of them are from people who are actually planning to set up new lives in Alberta.

“With the increase in interest rates that we’ve seen, the market has somewhat softened for the investor,” said Higgelke. 

John Andrew, a real estate consultant based in Kingston, believes there will continue to be strong demand for income properties in Calgary, especially if immigration trends continue.
Real estate consultant John Andrew predicts buyers will continue to seek out income properties in Calgary, especially if current population trends continue. (Submitted by John Andrew)

Some maintain the long-term outlook for the Calgary market is solid. The oil and gas sector, always a core part of the economy, is raking in cash these days, but the local tech industry is also growing

And as long as people are moving to Alberta, whether it’s for work or in search of a different lifestyle, they’ll need places to live. 

“It’s probably a pretty good bet that there will be growing demand for these income properties,” said Andrew of Queen’s University. 

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The new rules of investment – The Economist

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High inflation, amid warnings of a global recession, is forcing investors to tear up the rule book. Since the financial crisis, bonds have been seen as a safe bet—even if they did not promise much of a return. Equity markets, led by soaring tech stocks, were where fortunes were made. Both have plunged this year.

In a world where rising interest rates have left governments worrying about how to afford their debts, and companies will struggle to raise cash, investors need new strategies.

On this week’s podcast, hosts Alice Fulwood, Soumaya Keynes and Mike Bird ask what those new rules of investing look like. Wei Li, global chief investment strategist for the world’s biggest investor, BlackRock, argues this new macroeconomic era is here to stay. And Mohamed El-Erian, chief economic adviser to Allianz, says investors need to focus on picking winners within stocks and bonds. Runtime: 39 min

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Sign up for our new weekly newsletter dissecting the big themes in markets, business and the economy at www.economist.com/moneytalks

For full access to print, digital and audio editions, subscribe to The Economist at www.economist.com/podcastoffer

Listen on: Apple Podcasts | Spotify | Google | Stitcher | TuneIn

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Proposed sovereignty act could scare off investment: Calgary chamber – Calgary Sun

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‘We still don’t see how an act like this contributes to economic growth,’ said chamber President and CEO Deborah Yedlin

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The Alberta Sovereignty within a United Canada Act, tabled by Premier Danielle Smith on Tuesday, could drive investment out of the province, the Calgary Chamber of Commerce warns.

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Chamber president and CEO Deborah Yedlin said the bill, which would allow cabinet to issue directives to disregard federal initiatives, would not help businesses attract investment or employees should it pass the legislature.

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“We still don’t see how an act like this contributes to economic growth,” said Yedlin, adding that Alberta competes around the world for labour and capital, and that any hints of uncompetitiveness or uncertainty could cause the province to be seen as an unfavourable jurisdiction to invest in.

The act was the keystone policy of Smith’s leadership campaign this summer. If passed, Bill 1 would allow ministers to bring motions forward to the Alberta legislature to debate whether a federal initiative is unconstitutional or harmful to Alberta. If the initiative is deemed as such, the legislature could pass a resolution that would direct cabinet to take action, which could include issuing directives to public entities to not enforce the federal policy.

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Government documents argue the bill would not do anything to harm Alberta’s economy. The premier’s office did not return requests for comment Wednesday.

  1. Alberta Premier Danielle Smith makes her way to a press conference after the Speech from the Throne in Edmonton, on Tuesday, November 29, 2022.

    Smith introduces flagship Alberta Sovereignty Within a United Canada Act, giving cabinet new power

  2. Prime Minister Justin Trudeau at the APEC summit in Bangkok, Thailand on Friday, Nov. 18, 2022. THE CANADIAN PRESS/Sean Kilpatrick

    Trudeau says Ottawa ‘not looking for a fight’ on Alberta Sovereignty Act

  3. Alberta Premier Danielle Smith speaks at a press conference after the Speech from the Throne in Edmonton, on Tuesday, November 29, 2022.

    A look at how Alberta’s proposed sovereignty act would work

  4. The Fourth Session of the 30th Legislature opened on November 29, 2022, with Her Honour the Honourable Salma Lakhani, Lieutenant Governor of Alberta, delivering the Throne Speech.

    Alberta Lt.-Gov. Salma Lakhani delivers Throne Speech focused on affordability, health-care reform, jobs, and fighting Ottawa

Speaking Tuesday, Smith said the bill is intended to put Ottawa on notice about provincial jurisdiction and ensure they are equal partners within Canada’s Constitution.

Yedlin argued the act does not allow for constructive conversations with the federal government and that all levels of government need to collaborate to make Alberta an attractive place to invest and to work, stating the province has to compete with jurisdictions from all corners of the globe.

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“This could cause us problems within Canada with other provinces, as well as with Ottawa. That’s not what we need right now,” said Yedlin. “We have worked with Ottawa in the past, perhaps not to Premier Smith’s satisfaction, but I would argue that, you know, let’s dial back.”

Yedlin said Quebec lost investment when that province grappled with the idea of separation. She said that while Smith’s bill makes it clear it is not about separating, just the idea of uncertainty could cause investors to look elsewhere.

Calgary Chamber CEO Deborah Yedlin.
Calgary Chamber CEO Deborah Yedlin. Azin Ghaffari/Postmedia

Lisa Baiton, president and CEO of the Canadian Association of Petroleum Producers, said they are taking time to review the bill with their members. She said they are concerned about any policy that has the potential to create uncertainty for investors.

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“It is important for governments at all levels to work together with the industry in order to attract investment back into Canada,” said Baiton.

Finance Minister Travis Toews was critical of the sovereignty act while he ran against Smith in the leadership contest. At the time, he argued the bill would bring “economic chaos” to Alberta.

On Wednesday, he acknowledged he had legitimate concerns during the summer but said he has since had full opportunity to participate in the development of the bill along with his caucus colleagues, and that it addresses his previous concerns.

For me to support this bill it has to be constitutional, support the rule of law and not create business uncertainty. This bill, as proposed, addresses these concerns,” Toews said in a statement.

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Alberta Finance Minister Travis Toews, file photo.
Alberta Finance Minister Travis Toews, file photo. Darren Makowichuk/Postmedia

Meanwhile, several groups that could fall under the “public entity” definition of the act and could be subject to ministerial directives said they need to read the bill further before providing comment.

University of Calgary representatives said the school was reviewing the bill and will seek clarity on its application if passed. Mount Royal University representatives said they, too, are reviewing the bill and will work with the province on how it applies to post-secondary institutions.

The Rural Municipalities of Alberta declined to provide comment. While speaking at an unrelated news conference, Leduc Mayor Bob Young said they hadn’t had a chance to look at the bill and how it would affect municipalities.

Alberta Municipalities said they are reviewing the bill and that it appears to allow the cabinet to direct municipalities to not enforce federal laws. They said they may have more to say once their analysts have fully reviewed the legislation.

dshort@postmedia.com

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