- U.K. REITs So Ready for Hard Brexit That Soft One May Hurt More
The U.K.’s biggest real estate investment trusts are so well prepared for a rough Brexit, they could suffer if it doesn’t turn out to be all that bad.
The six largest London-focused REITs, including Land Securities Group Plc, British Land Co., and Great Portland Estates Plc, have hoarded cash equal to about a third of the total spent annually on central London office buildings, Bloomberg Intelligence senior industry analyst Susan Munden wrote in a note Tuesday. Spending it wisely will be a challenge if Brexit doesn’t cause prices to drop as much as expected, she wrote.
The U.K.’s vote to leave the European Union triggered panic withdrawals from property funds amid concerns that demand for commercial buildings would fall. Deal volumes recovered in the last quarter of 2016 as demand for office space held up better than expected and investors kept their faith in real estate and the premium returns it offers over stocks and bonds.
“The outlook for London offices remains a challenge, but losses of about 50,000 workers phased over several years could be absorbed with modest rent and value declines,” Munden wrote. “Some U.K. REITs are so well positioned for the downside that they face re-engagement risks if a crash doesn’t materialize.”
Land Securities, the U.K.’s largest REIT, announced in 2014 it would not start any new London offices without securing tenants in advance. Like many of its rivals including British Land and Great Portland Estates, it has also been selling large buildings to reduce debt and raise cash for purchases when prices fall.
Brexit’s impact on the London office market has been exaggerated, with deals and rents gradually declining from a 2015 peak, according to a note published by fund manager Fidelity International Tuesday. Banks haven’t been a significant source of demand for new office space for several years and the loss of some jobs will therefore have less impact than cyclical factors like the rising supply of new buildings in the City of London financial district, the fund manager said in an email.
Offices in the City will generate total returns, value increases combined with rent revenue, of 5.3 percent a year from 2017 through 2021, Fidelity head of research Matthew Richardson said in an email. “Medium-term performance will be driven largely by property market fundamentals rather than fallout from Brexit,” he wrote.
Developers like Shaftesbury Plc, Derwent London Plc and Workspace Group Plc will find it easier to navigate the uncertainty caused by Brexit as they typically focus on small or medium developments, which are lower risk, according to Munden. Large buildings usually require leasing agreements prior to construction or venture partners to reduce risk, she wrote.
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.
The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.
The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.
The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.
Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.
The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
Oil Prices Recover from 4 Percent Decline as Joe Biden Wins
Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.
This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.
Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.
On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.
“Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”
The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.
“There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.
“Either you’re crimping energy demand or consumption behavior.”
Nigeria, Other OPEC Members Oil Revenue to Hit 18 Year Low in 2020
Revenue of OPEC Members to Drop to 18 Year Low in 2020
The United States Energy Information Administration (EIA) has predicted that the oil revenue of members of the Organisation of the Petroleum Exporting Countries (OPEC) will decline to 18-year low in 2020.
EIA said their combined oil export revenue will plunge to its lowest level since 2002. It proceeded to put a value to the projection by saying members of the oil cartel would earn around $323 billion in net oil export in 2020.
“If realised, this forecast revenue would be the lowest in 18 years. Lower crude oil prices and lower export volumes drive this expected decrease in export revenues,” it said.
The oil expert based its projection on weak global oil demand and low oil prices because of COVID-19.
It said this coupled with production cuts by OPEC members in recent months will impact net revenue of the cartel in 2020.
It said, “OPEC earned an estimated $595bn in net oil export revenues in 2019, less than half of the estimated record high of $1.2tn, which was earned in 2012.
“Continued declines in revenue in 2020 could be detrimental to member countries’ fiscal budgets, which rely heavily on revenues from oil sales to import goods, fund social programmes, and support public services.”
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