| The property sector has been a punching bag for the world in the past couple of years. After the obviously terrible impact of Covid on the sector, 2021 saw a strong rebound in fortunes and excellent returns for investors who punted at this sector. Sadly, things have deteriorated since then, with macroeconomic pressures causing investors to bail out of property funds. This is especially true in industrial property funds, which were truly the darling of the pandemic. I'm afraid that timing really is everything in the market, particularly in this volatile climate we find ourselves in. When you are buying REITs at a share price in excess of the NAV per share, you are looking for trouble. I've said it multiple times and I'll keep saying it. Fortress REIT has a problem on its hands beyond just the macroeconomic pressures. With a dual-share class struct ure that was last in fashion when people thought face masks were only for fancy dress parties, the company is throwing everything at an attempt to collapse the structure into a single share class. It sounds benign enough, until you get into the specifics. If the shareholders don't vote to collapse the structure, it is likely that Fortress will lose its REIT status. This would be the first such example on the JSE of a property fund losing REIT status by not meeting distribution requirements. The likely outcome in such a scenario would be pension funds and other institutional investors dumping the stock, which would destroy immense value for all involved. This is a complicated issue. Fortress opted for a fancy webinar with Bruce Whitfield to try and explain the key issues. Dressed in suit jackets with no ties, the team went for the Important but Approachable look on this particular video. To save you from watching the whole thing, I wrote this feature article that summarises the core issues. As always, Ghost Bites deals with the rest of the stories on the JSE, including results from Sephaku Holdings as well as RECM and Calibre. Read it here. Wichard Cilliers, Head of Market Risk at TreasuryONE, has pointed out to us that significant spikes in oil often precede a recession. This is because higher oil prices tend to lead to inflation and an interest rate hiking cycle to curb inflation, leading to lower demand and redu ced economic activity. The so-called "smart money" in the market is on a recession in the medium-term, as the current low-growth environment is not conducive to many interest rate hikes. Brent Crude managed to turn upwards again, trading yesterday at $111.50 per barrel. The TreasuryONE team also notes that the markets have hardly batted an eye at the testimony from Fed Chair Jerome Powell, trading sideways with the rand in a tight range between R15.95 and R16.05 for most of yesterday. With no important data or events out today, the team expects the sideways approach to continue into the weekend. Remember, you can speak to TreasuryONE about a variety of treasury and market risk solutions. As is customary on a Friday, the DealMakers team has provided us with great summaries of the week's corporate finance activity (mergers and acquisitions, capital raises and more). There's also an article from Michael Avery about an infrastructure fund that is looking to take advantage of government's improved stance towards private investment in infrastructure. There is a fresh new episode of Magic Markets for you to indulge in. For those of you who are serious about improving your knowledge of finance and investments, we welcomed the team from Westbrooke Alternative Asset Management back to Magic Markets to talk about "hybrid capital" structures. These are investments that combine different instruments to achieve a return somewhere between debt and equity. These types of learning opportunities are rare, so I highly recommend that you make time to engage with the content. If you aren't sure about something, pop through a question and we will try to answer it! You can listen to the episode at this link. Finally, if a return of 11.7% per annum sounds appealing to you in this environment (which it should), then read this article from Fedgroup about the Fedgroup Secured Investment product. A minimum lump sum of just R5,000 applies. That's it for this week. Have a lovely weekend! | 