Qatar First Bank (QFB) has announced the successful exit of Jefferson Square, its first syndicated real estate investment located in the heart of Baltimore, Maryland, US.
QFB acquired Jefferson Square, a Class A multifamily residential building, in June 2017 as part of its Shariah-compliant real estate investment programme.

Sheikh Faisal bin Thani al-Thani, QFB chairman

Jefferson Square marks the second US real estate exit for QFB following the successful exit of Kennedy Flats, Connecticut in October 2021. The property is one of the few Class A multifamily residential properties in central Baltimore with more than 300 apartments and in close proximity to John Hopkins University, making it a very attractive investment opportunity for the bank in the year 2017.
The anticipated holding period for this investment was five years, however, QFB considered the favourable US Real Estate market outlook and decided to exit earlier. QFB shall be returning capital with profit to investors generating more than 8% IRR for its investors.
QFB chairman Sheikh Faisal bin Thani al-Thani said, “We are happy to announce the successful exit of our third Shariah-compliant investment in less than five years after acquisition. This is yet another testament to the success of our new business model cementing QFB’s position as the premier choice for US real estate investment in Qatar.

Abdulrahman Totonji, QFB CEO

“As a result of our investment strategy, we have achieved profitable outcomes with a good return and we are committed to continue diversifying our portfolio in Qatar, and the region.”
QFB CEO Abdulrahman Totonji added: “Alhamdulillah, it is a blessing that we have been able to complete our first exit in 2022 with the changing market conditions. I would like to thank the team at QFB for their efforts to make our long-term business strategy a reality and the trust our investors have placed with the bank. Today, we have exited the first real estate investment QFB ever made to generate attractive profits for its investors in the Project.
“We are committed to continuing sourcing new investments and expand our portfolio with a stronger presence in the US real estate market and other markets through our unique products. We aim to build a stable and sustainable product suite, tapping into different asset classes in Qatar and the region.”
Qatar First Bank is the first independent Shariah-compliant bank authorised by the QFC Regulatory Authority (QFCRA) and a listed entity on the Qatar Stock Exchange.
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Momentum

Property tech (PropTech) has gained new ground and momentum in the last 12 to 24 months, some developments and evolutions driven by legislative changes, others in response to the record-breaking fast pace of the residential property sector.

The long-awaited roll-out of the HM Land Registry’s Digital Local Land Charges Register is now well underway, and for those councils already on board, estate agents and property professionals are reporting a ‘revolution’ in the work and time efficiency of local land searches.

Among the next changes are the new rules governing upfront material information. The ‘Improving the Disclosure of Material Information in Property Listings’ was first published in February this year, and took effect at the end of May. This sets out the key information estate agents should display so that buyers are given enough information to make informed decisions about properties, with the aim of reducing fall-throughs and helping to speed-up the time between when an offer is accepted, and the sale agreed.

Adoption

Whether the property market remains at current buoyant levels or not, estate agents are very busy, and more than ever need reliable systems to guarantee a speedy, efficient, compliant completion on every house purchase and sale – now is the time for proven, robust property tech to help.

As in every sector and profession, the adoption and use of technology varies – from those embracing it at every possible opportunity, to others who use it as much as is necessary to ensure compliance, especially if paper-based alternatives are still an option.

To succeed with tech, estate agents and property professionals must be given more training and education on individual property tech products, and how and why to make full use of them throughout the conveyancing journey. HNWI are among the most discerning of clients, are savvy, street wise, and have high expectations for the very best in client service when buying a luxury, expensive, new or second home.

USA

Looking beyond the reality TV programmes about the big-ticket, high-end real estate sector in the US, UK property professionals can learn from how realtors in America use and maximise PropTech.

Before starting Index West Midlands, I was CEO of a real estate agency in California for seven years. The US real estate sector is a mixture of what a conveyancing solicitor does in the UK, coupled with negotiation and contract review, including interpreting title reports and property searches, always with a keen eye on economic climate changes to enable clients to be nimble, agile and responsive to opportunities.

My company specialised in high-end waterfront properties, commercial and agricultural property, and our work won us ‘Best Realtor in Delta’ two years running, and a place in the top 1% for sales in California and Hawaii.

The differences between the UK and US residential property sector aside, the experience was a true journey of learning and knowledge development for me – significantly, that prop tech is central to real estate transactions. I learned much that informs my work with UK estate agents today, and so I speak from experience when saying that estate agents really can benefit from training on using property tech so they too can feel the positive impact it will make operationally, to their reputation, and to boosting client service.

Onboarding and checks

For example, US real estate agents have used technology with new clients for years, because it speeds-up client onboarding and checks, with all the basics done at the outset. It saves hours for agents and solicitors, and earns kudos.

With the ‘personal wallet’ coming soon in the UK – probably Q4 of this year – and which will include Anti Money Laundering (AML) information, estate agents have another opportunity to embrace property tech to save time, as well as costs: currently buyers and sellers have AML searches run at each stage of the transaction, so by the estate agent, solicitor and mortgage lender; if they have a personal wallet, the AML will only have to be run once, with other companies paying a small fee to access the information, saving time and money on repeating these highly crucial and necessary checks.

The UK is also getting on board with the best time to complete the TA6 form, and by whom. Again in the US, this step has long been done by the real estate agent with the client, and this works really well, making sense from a time and efficiency point of view.

The Homebuyers and Sellers Group is currently trialling TA6 form completion by estate agents here in the UK, and so far the feedback is positive. However, if adoption by all estate agents is to be effective, this is a specific area where training is essential, so that estate agents understand every aspect of the TA6, including the questions on big issues like Japanese Knotweed; this can be a nasty legacy for sellers, their agents and conveyancers, if there are future problems with this invasive weed, and it wasn’t spotted or declared at the time of the sale.

Capital allowances

PropTech not only enables estate agents to add value at the start of the sales process, it can also be powerful further along the conveyancing journey. For instance, estate agents can use its integration to help clients identify and use any potential capital allowances, and as part of the overall house purchase ‘solution and service’. This is a tangible and relatable benefit for top end, HNWI clients purchasing premium properties, but again estate agents do need support in understanding how and why, and at what stage to talk to clients about it.

*Kate Bould is Managing Director of Index West Midlands, the regional operation of the national group Index Property Information, the UK’s number one provider of conveyancing searches and reports, technology and compliance, to the property industry, and a partner to The Law Society for CQS guidance. 

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(JetClosing Photo)

JetClosing, a 6-year-old Seattle startup that digitizes the home closing process for buyers, sellers, and realtors, is shutting down, GeekWire has learned.

The company is closing June 15, according to an email viewed by GeekWire that was sent from a JetClosing employee to a customer. In the email, the customer was encouraged to take their business to another title company.

GeekWire called JetClosing’s corporate phone number and reached a receptionist, who wasn’t able to provide comment when asked about the company’s shutdown. GeekWire has reached out to others at the company, and its investors, and will update when we hear back.

The company, founded in 2016, was one of the first spinouts of Seattle startup studio Pioneer Square Labs and was part of a growing trend in real estate to shift the homebuying experience online.

JetClosing used machine learning, cloud computing, and other technology to digitize the title and escrow process and eliminate loads of paperwork. Its competitors — incumbent title and escrow services — could do the same job, but JetClosing sold itself on being able to do it faster, cheaper, on mobile, and with more transparency.

The company charged a flat escrow fee to both sides for each transaction and made additional revenue on issuing owners and lenders title insurance policies. It also helped homeowners refinance.

The startup benefited from a strong U.S. real estate market as well as habits ushered in during the COVID-19 pandemic, where people relied more on digital tools to skip in-person meetings and complete home transactions from anywhere in the world.

However, JetClosing was also battling larger incumbent competitors and a recent cooling housing market affected by rising mortgage rates. Some high-tech mortgage startups such as Better and Blend have laid off staff this year.

JetClosing CEO Anna Collins. (JetClosing Photo)

Economic uncertainty is also causing tech startups across various industries to trim expenses and slow hiring. 

JetClosing is led by President and CEO Anna Collins, who took over for original co-founder and CEO Daniel Greenshields last year. Collins previously led Bulletproof, the lifestyle company with a brain-boosting coffee product, as president and COO. She spent about six years at Amazon, including as GM of Worldwide Prime Membership, and also held leadership roles at PhotoRocket, Microsoft, drugstore.com, and aQuantive.

Greenshields previously spent nearly 15 years helping run ShareBuilder, a company sold to Capital One (which later sold it to Etrade) that digitized and sped up the process of buying stocks, bonds, mutual funds, 401(K) plans, and more.

“It’s a very consumer friendly product. We specialize in drama-free closing,” Greenshields said about JetClosing during an episode of the “GeekWire Elevator Pitch” in 2018. He envisioned a “massive expansion opportunity” at the time.

JetClosing is licensed to operate in Arizona, Colorado, Nevada, Florida, Pennsylvania, Texas, and Washington. The company has offices in Seattle, Las Vegas, Phoenix, Austin and San Antonio, Texas.

The company raised $20 million in a Series A round in 2018 and was nominated for Startup of the Year at the GeekWire Awards that year. It closed an $11 million Series B round in March 2021 and had raised $44 million to date at that time.

The company’s investors included PSL Ventures, T. Rowe Price, Imagen Capital Partners, Trilogy Equity Partners, and Maveron.

A year ago, JetClosing employed about 80 people. The company now has 65 employees according to LinkedIn.

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JP Morgan converts $1.1bn REIT-focused mutual fund to an ETF

May 27th, 2022 |
By James Lord, CFA |
Category: Latest news

ETF STRATEGY NEWS! ETF Strategy is delighted to announce the launch of ETF Strategy Hub (hub.etfstrategy.com), an on-demand repository of webcasts, videos, podcasts and white papers. Debuting with Special Series on Technology & Innovation in China and the Digital Economy.

JP Morgan Asset Management has converted a $1.1 billion mutual fund focused on the US property market into an actively managed fully transparent ETF.

The ETF takes a purely bottom-up approach to investing in the US real estate market.

The JPMorgan Realty Income ETF (JPRE US) has been listed on NYSE Arca with an expense ratio of 0.50% which is 28 basis points cheaper than the fees charged under the mutual fund structure.

The fund is managed by portfolio managers Scott Blasdell and Jason Ko who collectively bring 48 years of financial industry experience including 43 years at JP Morgan.

The strategy continuously screens the entire universe of US-listed real estate investment trusts (REITs), selecting REITs that show superior financial strength, operating revenues, and attractive growth potential. Both equity REITs and mortgage REITs are eligible for inclusion.

The portfolio managers focus purely on a bottom-up approach to security selection rather than considering top-down factors such as sector and thematic strengths.

Individual REITs are selected based on a comparison of current price to long-term value which is determined based on the REIT’s normalized earnings (projected earnings adjusted to reflect what the company should earn at the midpoint of an economic cycle) and growth potential.

The ETF’s introduction follows last month’s conversion by JP Morgan of an inflation-managed core fixed income fund, also housing around $1.1bn in assets, into an ETF. The firm has further announced plans to move another two mutual funds housing $7bn to the ETF structure in June.

The conversions highlight a growing trend amongst large asset managers to repurpose popular mutual fund strategies into the more tax-efficient, typically lower-cost ETF vehicle.

Tags: Active ETFs, Alternatives, ETF and Index News, ETF Industry News, ETF Launch, JP Morgan, Real Estate, REIT, United States and Canada
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USCIS promises foreign investors seeking visas — whose investments were redeployed by their sponsoring regional centers in order to maintain their capital at risk — will be safe from retroactive geographic restrictions announced in USCIS’s recent policy clarification

WASHINGTON, May 26, 2022 /PRNewswire/ — Investment firms Civitas Capital Group and EB5 Capital jointly announced today they are voluntarily dismissing, without prejudice, concurrent litigation against the U.S. Citizenship and Immigration Service (USCIS). The dismissal was granted in light of assurances by the agency to the Court and the plaintiffs in the EB5 Capital case that it would not apply its previously stated policy to deny any investor petitions based on redeployment of an investor’s capital beyond the geographic scope of their sponsoring regional center.

Dallas (TX)-based Civitas and Bethesda (MD)-based EB5 Capital in April 2021 each filed suit against USCIS in response to the geographic restrictions USCIS had imposed retroactively on redeployed EB-5 investments, which could have negatively impacted thousands of pending petitions.

Since the Immigration and Nationality Act’s regulations and precedential decisions define the regional center geography requirement for initial investor fund deployment based on whether a job is created, and the laws do not limit the future redeployment of funds based on geography, the geographic limits the USCIS threatened to place on redeployments had to be eliminated, the firms argued.

Attorney Ron Klasko, of Klasko Immigration Law Firm, represented the firms. He noted that the EB-5 Reform and Integrity Act of 2022 (as part of H.R.2471 – Consolidated Appropriations Act, 2022), signed into law by President Biden on March 15, which reauthorized the EB-5 immigrant investor regional center program through September 2027, specifically removed any geographic restriction on redeployments with respect to new investors. The litigation sought to ensure that the new policy would be applied retrospectively as well as prospectively. He called the agreement to dismiss litigation a win not only for the EB-5 firms and regional centers represented but an enormous win for EB-5 investors and the industry at large.

“Since the government stated on the record that it had no intention of denying existing investors on the basis of redeployment geography, we believe the best course of action was dismissal of both lawsuits without prejudice,” says EB5 Capital President Brian Ostar.  “It essentially means we are taking the government at its word. However, we will remain vigilant on behalf of our investors. We reserve the right to bring the case back to court if necessary.”

The decision to bring litigation – and the promise that should the government not uphold its word, the firms will once again sue – emphasizes how seriously the EB-5 industry stakeholders take compliance with rules, says Civitas Capital Group CEO Daniel J. Healy.

“It also shows just how seriously we take our obligations to protect our investors. This is a win for our investors and the industry.”

Between 2008 and 2021, the EB-5 Program helped generate $37.4 billion in foreign direct investment to create and retain U.S. jobs for Americans, all at no cost to the taxpayer.

About Civitas Capital Group

Civitas Capital Group is a nimble alternative investment manager, founded in 2009, offering compelling, niche opportunities in U.S. real estate. Civitas exists to create opportunities that enrich our communities, investors, and employees alike. Driven by relentless creativity, Civitas digs deeper to uncover opportunities that others miss. Follow Civitas Capital Group on LinkedIn. Learn more at civitascapital.com.

About EB5 Capital

EB5 Capital provides qualified investors from around the world with opportunities to invest in job-creating commercial real estate projects to obtain U.S. permanent residency, as well as private equity investments and secondary passports. For more information, follow EB5 Capital on LinkedIn and visit www.eb5capital.com.

SOURCE Civitas Capital Group

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Although we have always stressed the importance of applying the appropriate degree of skepticism with the new home sales data—either strong or weak—given the sampling methodology, large confidence interval, high rate of standard error, and frequent revisions, one figure that did garner significant attention from the report was the substantial jump in months of supply of inventory (MOS). We recognize that MOS can be heavily influenced by a strong or weak unit sales figure. That said, in keeping with the time-tested motto of “never let facts get in the way of a good story,” the MOS figure became a source of significant consternation in the analyst community.

According to the Census Bureau: “A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in non-permit areas and a sales contract has not been signed nor a deposit accepted.”

This definition is key to understanding the true inventory conditions on the ground. The impacts of COVID, the disruption in supply chains, and the ongoing shortages of skilled labor have forced homebuilders to significantly increase cycle times to build homes and to sell homes much later in the construction process. As such, the true MOS of homes that are actually available for sale is 2.8 months, well below long-term averages. The substantial extension of the home sale process has resulted in a significant mix shift away from completed homes as a percentage of inventory actually being for sales.

Although we continue to believe the substantial increase in both home prices and mortgage rates will cool sales activity and likely lead to a slowing in the rate of price appreciation, the supply and demand imbalance, including the dearth of MOS of existing homes will be supportive of a continued reasonable outlook for the US housing market. In our view, barring a significant recession, a broad relaxation of lending standards or the imposition of adverse federally mandated policies, the US housing market is not in danger of witnessing a repeat of the post-2007 collapse.

Main contributors: Jonathan Woloshin, CIO Equity Strategist, US Real Estate & Lodging

Content is a product of the Chief Investment Office (CIO).

Original blog – US housing inventory: Less than meets the eye, 25 May, 2022.

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The recent price decline of 16% in Redfin Corporation’s (NASDAQ:RDFN) stock may have disappointed insiders who bought US$1.1m worth of shares at an average price of US$10.54 in the past 12 months. Insiders buy with the expectation to see their investments rise in value over a period of time. However, recent losses have rendered their above investment worth US$939k which is not ideal.

While insider transactions are not the most important thing when it comes to long-term investing, logic dictates you should pay some attention to whether insiders are buying or selling shares.

Check out our latest analysis for Redfin

Redfin Insider Transactions Over The Last Year

The Independent Director Bradley Singer made the biggest insider purchase in the last 12 months. That single transaction was for US$560k worth of shares at a price of US$11.20 each. So it’s clear an insider wanted to buy, even at a higher price than the current share price (being US$9.39). It’s very possible they regret the purchase, but it’s more likely they are bullish about the company. We always take careful note of the price insiders pay when purchasing shares. It is generally more encouraging if they paid above the current price, as it suggests they saw value, even at higher levels.

While Redfin insiders bought shares during the last year, they didn’t sell. The chart below shows insider transactions (by companies and individuals) over the last year. By clicking on the graph below, you can see the precise details of each insider transaction!

NasdaqGS:RDFN Insider Trading Volume May 25th 2022

There are always plenty of stocks that insiders are buying. So if that suits your style you could check each stock one by one or you could take a look at this free list of companies. (Hint: insiders have been buying them).

Redfin Insiders Bought Stock Recently

It’s good to see that Redfin insiders have made notable investments in the company’s shares. Overall, two insiders shelled out US$1.1m for shares in the company — and none sold. This could be interpreted as suggesting a positive outlook.

Insider Ownership

Many investors like to check how much of a company is owned by insiders. We usually like to see fairly high levels of insider ownership. Redfin insiders own about US$35m worth of shares. That equates to 3.5% of the company. While this is a strong but not outstanding level of insider ownership, it’s enough to indicate some alignment between management and smaller shareholders.

So What Do The Redfin Insider Transactions Indicate?

It is good to see recent purchasing. And an analysis of the transactions over the last year also gives us confidence. But on the other hand, the company made a loss during the last year, which makes us a little cautious. Given that insiders also own a fair bit of Redfin we think they are probably pretty confident of a bright future. In addition to knowing about insider transactions going on, it’s beneficial to identify the risks facing Redfin. Case in point: We’ve spotted 3 warning signs for Redfin you should be aware of.

But note: Redfin may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.

For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body. We currently account for open market transactions and private dispositions, but not derivative transactions.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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The United States is no stranger to capital from foreign
investors. Perhaps in South Florida especially, this is no more
evident than in the real estate market, particularly when it comes
to investors from Latin America. Over the years, however, foreign
clients have diversified their tastes, as we have seen more and
more money flow into U.S. capital markets. More recently, we’ve
also seen foreign investors diversify their holdings even further,
dipping into the U.S. private equity market. This post quickly
highlights some of the U.S. tax considerations that are relevant
for foreign clients making U.S. private equity investments, which
at the root will typically be structured through some type of U.S.
company (commonly referred to as a “fund” in the private
equity setting).

For most foreign clients, the most pressing question is likely to
be: “How will the income or gain from my investment be taxed
in the U.S.?” This is an income tax consideration. With
respect to the income generated by an investment, the answer lies
in the type of income that the investment is producing. Foreign
investors are only subject to U.S. income tax on their U.S. source
income, and that income can be divided into two main categories:
(i) passive income (things like interest and dividends from passive
investments); and (ii) active income (income that is related to, or
connected with, an active trade or business in the United States).
In tax terms, these types of income are respectively referred to by
the acronyms “FDAP” or “FDAPI” (which stands
for fixed, determinable, annual, or periodical income) and
“ECI” (which stands for effectively connected
income).

In the case of FDAPI, foreigners are generally subject to U.S.
income tax under a withholding regime in which a 30% withholding
tax is imposed on the income at source.1 Importantly,
this withholding tax applies on a gross basis, meaning that
deductions cannot be taken to offset the
income.2  ECI, on the other hand, is subject to tax
at the same rates that apply to U.S. taxpayers and is taxable on a
net basis, meaning that deductions can be taken in
arriving at the amount of taxable income for U.S. tax
purposes.3

With respect to gain from an investment, here again, the type of
asset generating the gain will ultimately determine how a foreign
investor is taxed. While a full discussion of the topic is beyond
the scope of this article, the following are some general guiding
principles:

• Gains from portfolio investments in non-real estate related
  U.S. corporations and most publicly traded securities are not
  subject to U.S. income tax (e.g., a foreign person sells shares of
  Apple at a gain).
• Gains derived in the active conduct of a U.S. trade or business
  (whether conducted directly by a foreign investor or indirectly by
  being a partner in a partnership that is engaged in a U.S. trade or
  business) are generally treated as ECI and taxed accordingly.
• Gains from the sale of U.S. real estate or investments in U.S.
  corporations that own mostly U.S. real estate are automatically
  treated as ECI under the Foreign Investment in Real Property Tax
  Act of 1980 (commonly referred to as “FIRPTA”) and taxed
  accordingly.

In addition to these substantive tax aspects, the U.S. income
tax return filing requirements are likely to be of interest to a
foreign investor. In the case of FDAPI, provided the U.S. tax
obligation is fully satisfied by withholding (meaning, the payor of
the income does its job and remits the full withholding amount to
the IRS), the foreign investor is not required to file an income
tax return to report the income. In the case of ECI, however, a
foreign investor must file an income tax return to report the
amount of income and pay the U.S. tax owed. This filing obligation
takes on added significance, because available deductions cannot be
claimed unless an income tax return is timely filed.

With this backdrop in mind, foreign investors should understand
what type of investment they are making and what the anticipated
returns consist of. For example, is the investment a debt
investment that is just producing interest? Is the investment a
passive portfolio investment where the return will consist largely
of gain upon a sale? Or is the investment into an actively managed
and operated business (which might typically be seen in the case of
a commercial real estate investment)? To get these answers, foreign
investors can look to the private equity fund’s offering
materials, which should contain a general discussion providing a
broad overview of the nature of the investment. The U.S. tax
ramifications and considerations can often be found in a fund’s
Offering Memorandum (or Private Placement Memorandum), which
typically contains a section discussing the “Tax Risks”
or “Tax Considerations” related to the
investment.4

For those funds that are larger in scale or are professionally
managed, the fund sponsor or manager may already have structures in
place that are suitable for foreign investors from a U.S. tax
perspective in order to maximize tax efficiencies (e.g., use of a
U.S. “blocker” corporation for certain types of
investments). Like most things when it comes to U.S. tax planning,
however, every foreign investor’s case may be different, and
what makes sense for one foreign investor may not be ideal for
another.

In addition to the foregoing considerations, which focus on U.S.
income tax considerations, a foreign investor should also keep in
mind U.S. estate tax considerations with respect to the investment.
Similar to the income tax, foreign investors are only subject to
U.S. estate tax with respect to those assets located in the U.S. at
the time of death (or to put it in tax terms, those assets that
have a U.S. “situs”). For an investment into a U.S. fund
structure made directly by a foreign investor, there may very well
be U.S. estate tax exposure, whereas an investment made through an
appropriate and properly administered non-U.S. holding vehicle can
provide U.S. estate tax protection. Although it may not be intended
for this purpose, in the private equity context, an entity referred
to as a “foreign feeder fund” may serve as a suitable
vehicle from a U.S. estate tax planning perspective.

Taking it one step further, a foreign investor should also consider
his or her estate or succession planning with respect to the
investment. For example, who will inherit the investment upon the
foreigner’s death? Foreign beneficiaries? U.S. beneficiaries? A
mix of both? Does the foreign investor have a succession plan in
place, either via a will or a trust? Consideration will also likely
need to be given to the U.S. tax implications for the beneficiaries
who inherit the investment, particularly any U.S.
beneficiaries.

While it would be impossible in one article to touch on every U.S.
tax planning consideration that will be of importance to a foreign
client making a U.S. private equity investment, below is a list of
some of the more common questions and considerations that are
likely to be of interest to foreign investors based on our past
experience (in no particular order of importance):

• Is the investment a debt investment or an equity
  investment?
• If a debt investment, will the interest be subject to U.S.
  income tax, or does it qualify for an exception?5
• If an equity investment, does the investment relate to a
  passive holding in a portfolio company or an actively managed trade
  or business in the United States?
• How is the fund generally structuring entry for its foreign
  investors, and in particular, is the fund implementing any
  alternative vehicles or structures with respect to those
  investments in an active U.S. trade or business?6
• Is the fund utilizing a foreign feeder fund, and, if so, how is
  that foreign feeder fund classified for U.S. tax purposes?
• Are there any holding period requirements (i.e., must an
  investor stay invested in the fund for a certain period of time),
  and what is the anticipated exit strategy for the investment?
• What is the process (or does the fund even allow) for switching
  from the “foreign” or “offshore” side of the
  fund to the “domestic” or “onshore” side of the
  fund (e.g., if a foreign investor moves to the U.S. while still
  holding the investment or if a U.S. beneficiary inherits the
  investment).

While private equity offerings may present attractive investment
opportunities for foreign investors (which is something for each
investor to evaluate independently), the related U.S. tax
implications should be considered well in advance before making an
investment.

Footnotes

1 The 30% withholding tax can be reduced or eliminated
under certain income tax treaties with other countries, but in
terms of Latin America, practitioners should keep in mind that the
U.S. has income tax treaties in force only with Mexico and
Venezuela (with the fate of the U.S.-Chile income tax treaty
remaining uncertain for the time being).
2 For example, a foreigner receives a $100 dividend from Microsoft.
Out of that $100, a $30 withholding tax will be remitted to the
IRS, leaving the foreign investor with $70 of after-tax
income.
3 In the case of a real estate business, for example, this would
generally include things like depreciation, insurance, property
taxes, mortgage interest, maintenance and repairs, etc.
4 Such fund documentation does not constitute legal advice to the
foreign investor, however, and sometimes there could be a tax
position that is being taken by the fund on which different
opinions could exist amongst practitioners. Foreign investors
should therefore seek their own U.S. tax advice prior to making the
investment.
5 The most relevant exception in this arena is interest which
qualifies for the “portfolio interest exemption,” but
that is a discussion for another post.
6 The answer to this question has relevance both for the
substantive U.S. income tax outcomes for a foreign investor as well
as the related U.S. tax filing requirements.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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Investing in stocks comes with the risk that the share price will fall. And there’s no doubt that Zillow Group, Inc. (NASDAQ:ZG) stock has had a really bad year. The share price is down a hefty 64% in that time. However, the longer term returns haven’t been so bad, with the stock down 1.1% in the last three years. The falls have accelerated recently, with the share price down 29% in the last three months. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.

On a more encouraging note the company has added US$549m to its market cap in just the last 7 days, so let’s see if we can determine what’s driven the one-year loss for shareholders.

See our latest analysis for Zillow Group

Because Zillow Group made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last twelve months, Zillow Group increased its revenue by 226%. That’s well above most other pre-profit companies. In contrast the share price is down 64% over twelve months. Yes, the market can be a fickle mistress. This could mean hype has come out of the stock because the bottom line is concerning investors. We’d definitely consider it a positive if the company is trending towards profitability. If you can see that happening, then perhaps consider adding this stock to your watchlist.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

NasdaqGS:ZG Earnings and Revenue Growth May 24th 2022

Zillow Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Zillow Group in this interactive graph of future profit estimates.

A Different Perspective

While the broader market lost about 11% in the twelve months, Zillow Group shareholders did even worse, losing 64%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.2% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider risks, for instance. Every company has them, and we’ve spotted 1 warning sign for Zillow Group you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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Real estate investment-management firms Barings LLC and Canvass Capital LLC have formed a joint venture (JV) to acquire and develop self-storage in the Southeast. The partnership has already purchased three facilities in the area around Lake Norman, North Carolina, as well as a development site in Hilton Head, South Carolina. The companies intend to invest up to $250 million of equity over the next several years, according to a press release. Canvass operates the SafeNest Storage platform.

The North Carolina facilities comprise 163,000 rentable square feet in 1,129 units. Built on more than 16 acres, the sites will be expanded through the addition of climate-controlled buildings and covered boat/RV storage. The JV will also pursue capital improvements including technology investments and sustainability enhancements, such as solar panels and other energy-efficiency projects, the release stated.

In Hilton Head, the companies intend to build a new self-storage facility on the 3.8-acre site. It’ll comprise about 150,000 rentable square feet in 1,231 units. The project is expected to break ground this fall.

The JV has additional properties under contract that offer either value-add expansion opportunities or new-development potential, according to John Ockerbloom, head of U.S. Real estate equity for Barings. “We are excited to enter into this strategic partnership with Canvass Capital and target the high-growth self-storage market,” he said. “The Lake Norman assets and Hilton Head development will be Barings’ first self-storage assets in the eastern U.S.”

“Partnering with a global real estate leader like Barings reinforces our creative approach to investing and strengthens our reach across the capital structure,” said Pete Campbell, managing partner for Canvass.

“Barings has strong conviction in the opportunities available in the fragmented self-storage property sector. The sector’s variety and mix of demand drivers has exhibited strong resiliency through economic cycles, particularly during the pandemic as self-storage needs increased,” the release stated. “The expansion of self-storage on excess land, retail conversions, and upside from technological and operational efficiencies present long-term growth potential.”

Barings is a global investment manager that specializes in building long-term portfolios across diversified markets including public and private fixed income, real estate, and specialist equity. A subsidiary of MassMutual Financial Group, the company has more than $371 billion in assets under management.

Based in Charlotte, Canvass is a real estate private-equity firm with interests in industrial, medical-office, mixed-use, self-storage and other property types. SafeNest operates 16 locations in the Carolinas.

Source: PR Newswire, Barings and Canvass Capital Announce $250M Self-Storage Joint Venture

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