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Oil rescues world's biggest investment banks' commodities profits as gold income tumbles – The Globe and Mail



The world’s 12 biggest investment banks cashed in on commodity price volatility caused by the coronavirus in the first quarter, with big increases in income from oil offsetting a tumble in precious metals, consultancy Coalition said.

The banks’ net revenue from trading, selling derivatives and other activities in the commodities sector was around $1.5 billion over January-March, the financial industry analytics firm said.

That compares to around $1.2 billion in the same period in 2019, it said.

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The first quarter was marked by huge swings in commodities markets as the coronavirus spread across the globe, shutting industry, confining people to their homes and paralysing supply chains.

Prices of oil, metals and some other key commodities slumped, while gold prices in London and New York, the two main bullion trading centres, saw their biggest divergence in decades.

Investment banks are often able to profit from volatility because it can make clients more active and they can bet on prices moving in a certain direction.

The 12 banks did best in oil, with net revenue almost doubling from the first quarter of 2019 to around $700 million, Coalition research director Amrit Shahani said.

Precious metals revenues, however, plunged to less than $100 million from close to $250 million a year ago, he said.

What had been a very profitable quarter was hammered in late March when prices of New York futures rose sharply above London rates and the value of banks’ positions across the two markets fell sharply, Shahani said.

Banks’ revenues from commodities increased in 2018 and 2019 after a decade of decline since the global financial crisis as heightened government regulation and poor performance made them shrink their commodities businesses.

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The 12 banks Coalition tracks for its quarterly reports are Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, Societe Generale and UBS.

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Volkswagen closes $2.6 billion investment in self-driving startup Argo AI –



(Reuters) – German automaker Volkswagen AG has closed its $2.6 billion investment in Argo AI, the Pittsburgh-based self-driving startup disclosed in a blog post on Tuesday.

Argo, founded in 2016 by Bryan Salesky and Peter Rander, is now jointly controlled by VW and Ford Motor Co, which made an initial investment in Argo shortly after it was founded.

Details of the VW investment, which does not include an agreement to purchase $500 million worth of Argo stock from Ford, was announced last July.

VW’s agreement includes the transfer to Argo of its Munich-based Autonomous Intelligent Driving unit, which boosts Argo’s employment to more than 1,000, according to Salesky.

Last week, VW disclosed that its supervisory board had approved several projects in a multibillion-dollar alliance with Ford that also was announced last July.

Ford created Ford Autonomous Vehicles LLC in 2018, pledging to invest $4 billion until 2023 and had sought outside investors to help share the spiraling cost of developing autonomous vehicles.

(Reporting by Paul Lienert in Detroit; Editing by Nick Zieminski)

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Estoppels are critical in a CRE investment purchase – Real Estate News EXchange



If you’ve purchased a commercial or residential condo, you would have encountered an estoppel certificate.

There are many reasons for obtaining a condominium estoppel (the information I discuss here is applicable only to single- and multi-tenant investments, excluding multifamily rentals):

* they provide insight into the project’s reserve fund;

* illustrate if there are any unpaid contributions or arrears;

* and determine if its bylaws and policies are in good standing.

Estoppels are just one of many due diligence items I encourage buyers to ask for.

Let’s look at the importance of obtaining estoppel certificate(s) during your investigation of an investment property.

A recent example

A landlord and tenant negotiated a tenant improvement allowance which was to be paid to the tenant once they had completed their improvements. The tenant was a national company with a few different departments handling various elements of the lease administration.

The tenant did complete the work but somehow forgot to thereafter ask for the agreed-upon amount of cash. The property was subsequently sold to another investor.

The investor did not obtain an estoppel certificate from the tenant during its due diligence period.

Sometime after the sale, the tenant realized they had failed to request the tenant improvement amount at the appropriate time.

Had the buyer requested an estoppel certificate from the tenant at the time of purchase, they would have insulated themselves from this problem.

How open do you think the previous owner is to paying this significant sum of money after the sale?

The tenant improvement allowance was amortized into the lease, which increased the tenant’s lease payment.

The buyer does not feel obligated to pay it, because they paid more for the property due to the cap rate applied to that increased rent.

Elements of an investment property estoppel certificate

The certificate must be executed by the tenant and may include, but is not limited to, the following declarations:

* the lease constitutes the entire agreement between both parties;

* the amount of security deposit held;

* any additional signage rent;

* there is no litigation outstanding between the two parties;

* there are no existing lease defaults by either party;

*  any improvements required to made by the landlord have been completed;

*  any amount agreed to be paid by the landlord for tenant improvements has been paid.

We use estoppel certificates that can be one or several pages long.  It typically depends on the complexity of the transaction, number of tenants involved and the sophistication of the buyer.

Getting an estoppel in place

A landlord typically does not want to go through the work and disturb the tenants until the buyer has removed all conditions.

A buyer doesn’t typically want to remove conditions until the estoppels have been provided.

A remedy can be to provide the certificates after the buyer has removed conditions, provided there is a process agreed to if something surfaces within the estoppel that requires a resolution prior to completion of the deal.

There are many issues that can surface if estoppels are not included within a commercial real estate investment sale.

If a seller is reluctant to allow this requirement to be written into the purchase agreement, treat this as a red flag.

It could be in your best interests to walk away before investing your time and money.

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Construction investment up in March on P.E.I. despite pandemic –



P.E.I. ran against the general trend in Canada, and contrary to the expectations of the COVID-19 pandemic economy, to post strong numbers in the construction sector in March.

P.E.I. had the biggest increase in construction investment in the country, up 9.9 per cent in March. It was the only province to post an increase in non-residential construction investment, up 1.4 per cent.

Nationally, investment was down 3.6 per cent.

Construction has been on a steep growth curve on P.E.I. for several years. Sam Sanderson, general manager of the Construction Association of P.E.I., said the pandemic has not slowed it down significantly.

“We’re not foreseeing any kind of a downturn in April,” said Sanderson.

“Our members are still crazy busy. There’s still a shortage of skilled people, We’ve got many members looking for many people right now and have been all throughout COVID-19 to date. So it’s looking very promising.”

The first quarter of 2020 was up 22.1 per cent over the same period in 2019. Growth in investments in single-family homes and industrial buildings was particularly strong.

Investment in apartment buildings was down. Sanderson said he expects those numbers to go up again, as there have been several recent announcements of new apartment buildings in both Charlottetown and Summerside.

More from CBC P.E.I.

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