The International Energy Agency tasked developed nations with leading the world into renewable energy and other sustainable living efforts. Under the International Energy Agency agreement, countries within the Organization for Economic Co-operation and Development (OECD) will achieve national zero net emissions by 2035 and global energy-related carbon dioxide emissions to net zero by 2050. Among other founding OECD members, Germany has presented an aggressive plan to meet or exceed recommendations related to renewable energy improvements.
Germany Introduces Osterpaket
Germany has proven to be both committed and proactive with plans to reduce fuel consumption and focus on creating viable renewable energy programs. Under the newly revised Renewable Energy Sources Act, at least 80 percent of electricity consumed within Germany will come from renewable sources by 2030. This aggressive target ensures Germany will meet OECD guidelines and be 100 percent operational using strictly renewable energy by 2035.
The recent public unveiling of Osterpaket, the updated legislation which outlines the revised energy plan, comes as a partial response to the military conflict in Ukraine. German national leaders support being completely dependent on reliable renewable energy sources by 2035 and stated that renewable energy enhances national security efforts and is in the best interest of all people.
Germany, along with Canada, are leading the efforts against global warming and are serving as a role model for other OECD countries.
Offshore Wind and Other Renewable Energy
Germany has already invested significant resources into renewable energy, particularly offshore wind farms. Engineers and program executives spared no effort in uncovering top talent to design and construct the first offshore wind farms.
Many construction and maintenance contracts are around twenty years, which offers long-term security to both parties. Companies were invited to the bidding process under strict guidelines and benefits to the winning bids included future invitations and admission to German national workforce opportunities.
The Offshore Wind Energy Act is just one measure in a new package of legislation designed to encourage quality competition in the renewable energy markets. Contracts for difference and other subsidy enhancements are still under review and will likely be offered to local operators throughout the country. Such policies will help support economic change by empowering operators and securing high quality production and maintenance techniques.
In addition to the offshore wind farms, various areas have been identified as designated land-based wind farm locations. Alternative fuels are continually being developed and tested for private automotive and public transportation needs.
Germany has also made substantial advancements in the solar energy arena, including safe solar storage packs. Overall, Germany is well on the way to meeting or exceeding the International Energy Agency recommendations. Their commitment to clean energy, climate control, and sustainability is quickly becoming the global act to follow.
Appraising Renewable Energy
Private investors and project managers must evaluate all phases of a renewable energy investment before making final decisions or awarding contracts based on current or future production. Government-operated facilities require independent oversight and appraisal services to ensure due diligence is met across the board.
At Appraisal Economics, we offer a full line of valuation services for power generating facilities.
Steve Cohen is a bit of an anomaly among team owners. His love of the sport makes him an advocate for the New York Mets, and his finesse with investment strategies makes him a master in the financial growth arena.
Combining these two initiatives may seem unconventional, but Cohen is just the man to make it happen. How can a hedge fund and a major league baseball team coexist? Mutual love for the game and the city is a good starting point.
Asset Management Fields a Curveball
Point72 Asset Management began as SAC Capital Advisors in 1992 and gradually transformed into a premier hedge fund under the leadership of Steve Cohen. Today, this financial guru is experimenting with his management techniques on a very different kind of asset. Utilizing his tenured and capable staff, Cohen is planning to make some major improvements to the New York Mets.
The organization has suffered in recent years due to dated technology and infrastructure. Areas for improvement have not been fully disclosed, but range from physical plant issues to scouting for new talent. Cohen is beefing up the Mets staff with his own hedge fund leadership in an effort to increase profit margins in upcoming seasons.
Stretching Specialization Efforts
Mark Brubaker, the newly appointed Chief Technology Officer, expresses enthusiasm and competence for his new role with the Mets. Under the leadership of Steve Canna as the CFO and Treasurer, the financial status of the organization is likely to improve swiftly and sustainably.
These adept managers are equally talented and versatile, able to effectively transfer their unique skill sets into this new field. It is unclear if the human resources assigned to various roles will remain on staff with the Mets after the special projects are complete, but there is virtually no risk to investors since Cohen is footing the bill for the unconventional staff changes from his personal account.
Potential Return on Investment
Investors are primarily concerned with the potential return of an investment opportunity relative to the associated risk. Strategies for analyzing the risk differ for short term investments, such as individual company stock purchases, and longer term opportunities like commercial real estate development projects. The review and process will be slightly different for each investment style and opportunity.
Measuring the investment risks and rewards associated with a major sports franchise is an entirely different operation because there are so many variables involved. Steve Cohen is taking a revolutionary approach to keep the team financially viable and give them a real chance to enter the World Series. Under the Point27 leadership strategies, both initiatives seem to be within reach.
The healthcare industry is currently leading the world in M&A activity. To fully understand the current landscape, it is important to review some of the most common reasons these transactions are taking place, and how they’re shaping the future of healthcare.
M&A is nothing new to the healthcare industry, but these days, deals are replicating at a rather rapid rate. Healthcare M&A volume rose 16 percent in 2021, with value increasing at a staggering 44 percent. That steep jump in value contributed to another record-breaking figure. Last year, healthcare witnessed the announcement of eighteen megadeals, or transactions with a value greater than $5 billion. With the cost of acquisitions going through the roof, deal multiples are at an all time high, forcing buyers to work harder and smarter to deliver on deal value.
Overall, the total value of healthcare M&A transactions totaled at least $440 billion in 2021. This deal acceleration is generating demand for greater scale, focus and specialization.
What’s Driving Healthcare M&A?
As we appear to be sitting stagnant in a mid-pandemic reality, it is not much of a mystery as to what could be driving the hike in healthcare M&A. While innovation and proficiency have long been hallmarks of medicine, those elements have never been more critical than they are now.
Portfolio optimization is one of the leading driving factors in healthcare M&A. The number of companies and organizations who are looking to add a new capability to their outfit has risen dramatically. Strategic acquisitions as a proportion of total transaction volume for 2021 is up 7 percent compared to four years prior.
Pharmaceutical companies are especially eager in this aspect, seeking out industry contenders who can help support their primary agenda while improving patient treatment. Today, that means linking up with companies that specialize in mRNA, gene and cell therapies, and digital analytics capacity.
Those digital analytics are especially crucial as the healthcare industry moves toward the digitization of the patient experience. The demand for innovation and expertise in technologies like smart health devices, healthcare practice management software, and consumer-centric delivery models is incredible as healthcare professionals race to keep pace with evolving technology. The need to modernize business and practice models has led to major cross-sector transactions, combining the best of medicine and technology.
Environmental, social, and governance considerations are also making an unexpected impact on the rise in M&A activity. Investors and stakeholders are more future-focused than ever, actively seeking partnerships with organizations that contribute to worldwide societal challenges. It is fair to say that health industries have been on the frontlines of that battle for some time, without so much as a glimmer of rescue, contributing the brightest minds and most dedicated workers to the resolution of our greatest challenge in recent history.
Key Healthcare Sectors
The pandemic swiftly and permanently changed the face of healthcare, especially in the specialties of biotechnology and life sciences. Research and clinical trials commenced at lightning speed to create viable vaccines and understand the COVID-19 virus. Even as our comprehension and action has sharpened, the work is far from done.
As we continue to witness the prolonged effects of the pandemic, it is almost certain that the demand for vaccine research and development will remain high. mRNA manufacturing is high on the list of desired features for innovative therapeutics driven by biotech companies. At this point in 2022, pharma is still leading the pack as the healthcare sector with the greatest M&A transaction value and volume.
Healthcare services are still high on the list, and will continue to see increased rates of M&A activity throughout the year. As telehealth continues to assert a dominance on standard practice, so does the demand for technology and serious innovation to join forces with healthcare services.
Healthcare M&A on the Horizon
Healthcare companies across every sector are expected to continue searching for strategic partnerships and acquisitions wherever possible. To take full advantage of the M&A frenzy, it’s more important than ever for healthcare professionals and their new peers to embrace innovation, change, and opportunity. With digitization becoming a major part of both the patient and provider journey, change is bound to happen more quickly than ever before. However, it appears these major adjustments are well overdue and poised to make a major impact on the present and future of healthcare in the best way possible.
The team at Appraisal Economics has extensive experience in the healthcare industry and offers superior valuation services for medical equipment and all related real property. With more than three decades of experience in the medical, pharmaceutical, and biotech sectors, our team of experts can assist you with confidence.
The housing market has experienced many ebbs and flows since the bubble of 2007, and the resulting regulatory oversight that resulted from multiple investigations.
Since the early stages of the pandemic, real properties are again facing fairly dramatic swings. Housing prices continue to rise as construction projects slow due to rising costs and supply chain challenges. Industrial, commercial, and retail properties sit idle or empty due to forced closures. Circumstances could indicate another housing bubble on the horizon.
Economic Impact of Housing Trends
The national economy has a close connection with the housing market. The shifting relationship may be parallel or opposite, depending on the current trends. As the bank rate and mortgage interest rates fluctuate, so does the demand for residential housing.
During periods of positive growth, the mortgage interest rates are generally low enough to make it easy for borrowers to be approved for a purchase or refinance a loan. The ease with which a consumer can borrow money is directly linked to economic growth.
On the other end of the economic spectrum, the opposite is true. Generally speaking, as the cost of borrowing money rises, the housing market experiences decreased demand. Housing bubbles are created when the market has been pushed to its maximum capacity through the natural laws of supply and demand. Loan originators and underwriters facing pressure to move quickly may cut corners or become less than meticulous about necessary paperwork and loan verification documents. The resulting financial strain in previous housing bubbles produced hundreds of real estate investment funds made up primarily of defaulted mortgage notes.
Bursting the Bubble
Evidence suggests that the national economy may be experiencing another housing bubble. However, improved regulatory oversight has been instituted to avoid the far reaching fallout that occurred in 2008. Internal checks and balances exist within the mortgage industry and bankers continue to be selective and consistently perform their due diligence when selecting underlying investments for their portfolio mix.
Real estate opportunities span across residential, commercial, industrial, raw land, and special use. A well rounded portfolio should have several avenues for residual income streams, such as rental payments. Due to the illiquid nature of real property, investors and business owners must carefully consider their real estate investment strategy.
Project Real Estate Values
As the housing market ebbs and flows, the American economy shifts in response and anticipation. Traditionally bullish and bearish investors both find good reason to follow the housing market and other real estate trends. Considering the high degree of volatility associated with the national housing market and real estate investment projects, a comprehensive valuation is a necessary part of the sale or purchase of real property.
Our team has decades of experience in the real estate industry, from entertainment complexes to multi-family residential to complex industrial properties. Contact us today to learn more.
As the world watched Russia quickly escalate military action in Ukraine, political strategists began planning their appropriate responses.
President Biden was among the world leaders who decided to introduce sanctions in protest of the war. Effects from the recent ban on Russian gas, oil, and coal are already being felt throughout the nation. Consumers feel the pain every time they’re standing at the gas pump, and the U.S. energy sector is experiencing growing pains as a result of the new demand on domestic resources.
Current Restrictions Imposed
As of the initial announcement Biden communicated on March 8th, the U.S. ban on Russian energy sources covers two major scenarios. First, the ban blocks imports of coal, oil, and liquified natural gas (LNG) from Russia. Second, restrictions implemented by the U.S. forbid any new investments into the energy sector in Russia.
There is no way to determine how far-reaching the restrictions will become in either situation. Further bans and embargos could be introduced by the U.S. and other nations who oppose Russian forces in Ukraine. As these developments continue to unfold, trade partnerships are expected to change trajectory or dissolve completely.
As expected, the price of crude oil has sharply increased and impacted fuel prices around the globe. Commodity trading, especially in futures, reacts swiftly to announcements that impact market fluctuation.
Global economic factors drive pricing through supply and demand, but also through policy changes and other diplomatic agendas. Countries such as Germany and the Netherlands who historically depend on Russia for their crude oil will now compete in the marketplace with many other nations.
As these factors drive the price per barrel upwards, consumers will pay the price at the pump. With this conflict coming on the heels of a global pandemic, investors and consumers around the world are already feeling the effects of inflation. For individuals, the financial fallout is anticipated to worsen over the next several months.
Various nations will respond to this crisis in several different ways, specifically with regard to their energy programs. Some may see continued suffering while others will use the escalation as an impetus for positive change in their cleaner energy resources.
Clean Energy Initiatives
Although the United States historically does not purchase bulk amounts of oil from Russia, the ban will significantly impact several key agenda items. Most notably, the shift toward clean energy will likely change direction.
The U.S., among other nations, will accelerate the push toward green solutions in the wake of recent changes. The US energy sector may use the current political climate as a catalyst to focus on energy independence. Developing nations may experience a delay in their green energy plans as they struggle to maintain stability amid the present volatility.
Navigating Through the Crisis
Business owners, investors, and even property developers with an interest in power plants and renewable energy sources are keeping a close eye on global developments. Financiers and entrepreneurs consider the possibility of investing in physical plants and the technology behind alternative energy.
Power plants feature lucrative income opportunities but must be carefully evaluated to fully understand their investment potential as well as any drawbacks that cause concern. The team at Appraisal Economics offers more than three decades of experience conducting national and international power plant valuations. Our skilled engineers review everything from project financing to ongoing accounting requirements.
If you would like to learn more, please fill out our contact form and we will be in touch.
Modern marketing efforts place a large emphasis on predicting consumer behavior. Utilizing software programs, cookies, and other advanced technology tools, businesses can work to reach their target audiences.
E-commerce sites have completely embraced the benefits of big data to dominate the retail sector and generate revenue. Although the collection and interpretation of big data produces exponentially higher returns than traditional marketing methods, finding the audience does not equal converting prospects to customers. Both sales and marketing executive teams still have to put in the work to produce the results.
Specialty Retail Products
The evolution of the retail industry took decades to gain momentum. From the general store to the corner store, entrepreneurs typically used one single approach to their business planning methods. Business owners simply wanted to provide a product or service that met a need for their local community. Since even the earliest industry pioneers intended to turn a profit, the retail sector has consistently experienced continual growth.
Around the same time as the advent of computers, visionaries began to develop plans for the future of the retail industry. E-commerce was introduced into the global marketplace well before the personal computer was available to the masses.
Technology companies like CompuServe and Boston Computer Exchange were among the first to test these unpredictable waters. The advanced technologies certainly made it easier for companies to do business, but the end results were not geared toward consumers as the primary users.
Growth of E-commerce
The evolution of the retail industry may have had a relatively slow start, but the recent growth is impressive.
Each year, hundreds of new candidates enter the e-commerce market and cover virtually every imaginable industry. Consumers depend on the availability of rare items, flexible shipping options, and even convenient subscriptions that make purchases for them on a recurring basis. In 2021, retail e-commerce sales amounted to approximately 4.9 trillion U.S. dollars worldwide. This figure is forecast to grow by 50 percent over the next four years, reaching about 7.4 trillion dollars by 2025.
One prominent reason for the continued exponential growth is that marketing tools have become so precise and useful. Big box stores and e-commerce giants are not the only entities cornering the marketplace today. Virtually any business owner can build an interactive website with shopping cart technology. Couple that low-cost investment with digital marketing services and big data for an income generating asset.
A shrinking global economy and multiple shared e-commerce sites has proven that entrepreneurs from anywhere in the world can bring their goods and services to the world market.
Appraising Retail Potential
The retail industry can be difficult to navigate, especially for businesses who are considering moving between brick and mortar and e-commerce. From appraising fixed assets and capital costs to evaluating the startup or investment costs of moving to e-commerce, our team has proudly served a number diverse clients for more than three decades. We understand the nuances of each industry and provide reports that consider all relevant circumstances based on the request and needs of our clients. Let our valuation experts help you make informed decisions!
Financial institutions offer a plethora of products and services for individuals and business entities. Options range from interactive checking accounts to comprehensive insurance policies. Loans are among the most popular offerings from a traditional financial institution, and many individuals believe that banks are the only way to originate a new loan. This is not true.
Alternative lending sources have become increasingly more popular over the past few years and new opportunities for non-bank loans are entering the market on a regular basis.
Alternative Lending Solutions
Startups, new business enterprises, and existing small businesses sometimes have difficulty obtaining a loan through traditional business and retail banking outlets. Loan approval could be delayed or denied altogether based on a number of different factors, such as business or personal credit history, collateral, outstanding debt, and projected revenue analysis.
Non-bank, or nonbank financial institution (NBFI), loans are a viable alternative for business owners seeking temporary financial support. Peer to peer lending options, similar to crowdfunding solutions for individual agendas, have become a popular investment vehicle for modern investors interested in expanding their portfolio. Alternative loan options are available from a group of individual investors or an institution well versed in specialized lending situations.
Alternative Lending Benefits
Alternative lenders are of specific interest to borrowers considering loan options. Borrowers who are operating a small business or opening a micro business may have difficulty providing adequate documentation within their first few years of operation. Alternative lenders have their own specific criteria which may not be as restrictive as traditional bank options and underwriting approval processes.
Since NBFI lenders usually do not have full service banking licenses, they are not subject to some of the regulatory guidelines that limit offerings from regular banks. Contemporary businesses look much different from enterprises that began just a decade ago. A majority of the largest traditional banks were established by the early 1900s and still use many of the same principles in lending. Modern business practices and the technology used in daily operations demand a different style of financial support.
A Balancing Act
Investors and lenders who operate in the alternative realm are on the cutting edge of a fast moving trend. Demand for alternative lending sources is expected to continue growing over the next several years.
Although there are obvious benefits to both parties engaged in an alternative lending arrangement, there are also potential disadvantages that must be considered before entering into a new transaction. Borrowers must carefully review loan documents to fully understand the repayment terms and any potential consequences for late or missed payments.
Alternative lenders offer a unique and valuable service to micro and small business owners across a wide range of industries. Lenders are often tasked with making loan approval decisions when they do not have direct experience with the type of business or industry. Such instances create apprehension for investors when it comes to accurate review and appraisal of collateral and other supporting documents.
Appraisal Economics provides a reliable solution for all lenders. Our experienced staff members offer expert advice and accurate appraisals on virtually any collateral, helping lenders make sound financial decisions with confidence. To learn more about our services, please visit us on the web.
Few industries were hit harder by the ripple effects of COVID-19 than the manufacturing sector. Continued lack of natural resources and ongoing supply chain issues have innumerable repercussions for manufacturing centers around the globe. Some positive signs of improvement have begun to emerge, and the outlook for manufacturing is slowly looking stronger. Full recovery will take some time, as there are several key areas that must be redeveloped.
Manufacturing Center Shutdowns
Massive closures, whether mandatory or not, had a major impact on the manufacturing industry. Fabrication plants, warehouses, and logistics centers were all at a standstill during the pandemic. These unexpected closures wreaked havoc on front-end personnel and forced a halt to supply chains moving forward. The slow trickle led to a bottleneck that is just now in the process of reopening.
Transportation and Storage Woes
The constant demand for products from China has put excessive strain on the transpacific ocean transport industry. Shipping prices from Asia to the United States more than doubled since the onset of the pandemic. In addition to the exorbitant price increases, lengthy delays were inevitable. Bottlenecked cargo containers sat in wait as ports struggled to keep up with the flow of imports and exports. Many ports were further complicated by COVID outbreaks and forced to work with minimal staff. Some ports temporarily closed without warning.
Storage solutions are typically a year round booming business. Due to the various supply chain challenges and closures of busy overseas manufacturing centers, many storage facilities sat vacant. Limited inventory drove prices well beyond what a traditional market could bear. Pandemic related circumstances impacted manufacturing and storage facilities, all resources, and the general workforce.
Better Days Ahead
Although there is no insight into when the threat of COVID will subside, there is some good news ahead for the manufacturing industry. Supply chains are steadily reopening, and manufacturing centers are busy working their way back up to maximum capacity. Many industry experts anticipate a return to reliable output by early in the second quarter of 2022.
The elusive microchips that served everything from automobiles to video game systems are back in production and have begun to trickle into the marketplace once again. Agricultural products and services are also slowly returning to pre-pandemic levels. The transportation lines have increased routes and more drivers are returning to work in an effort to bring finished goods to end users.
Accurate Appraisal and Valuation Services
Manufacturers and agricultural leaders have been disadvantaged during the COVID downturn. Our team at Appraisal Economics continues to provide this community with comprehensive valuation reports that accurately capture external market forces.
A recent court decision issued in the Commonwealth of Pennsylvania has healthcare providers across the nation apprehensive about the future. The Tower Health opinion was the first to challenge the non-profit status of certain hospitals in the state. Although the opinion will likely be appealed, this precedence is more than enough to cause hospital administrators and healthcare providers to spring into defensive action.
Identifying as a Non-profit Healthcare Entity
Non-profit statuses and designations such as the 501(c)(3) require a significant amount of reporting. The Internal Revenue Service (IRS) provides special conditions under these organizational tax structures and require specific behavior. Non-profit hospitals, such as the three Tower Health locations in Pennsylvania, are tasked with providing healthcare services to communities in need. The implication is that services are provided at little to no cost when patients are unable to afford care and do not have health insurance coverage.
Charitable organizations such as non-profit hospitals are able to provide profitable services and pay reasonable salaries to executive staff members and essential administrators. Federal guidelines implemented and enforced by the IRS stipulate that these Board members cannot be paid in excess of one million per year without an excise tax penalty.
Non-profits and Property Taxes
Traditionally, non-profit healthcare entities were afforded a break on property taxes. In most cases throughout Pennsylvania, property taxes were nil or completely waived as long as the hospital met the criteria set forth by the IRS. For more than one hundred years, the Commonwealth has allowed non-profit healthcare entities the flexibility to largely operate without micromanagement. Judge Jeffrey Sommer detoured from previous hospital tax decisions by reviewing the status of the Jennersville Hospital.
As the sole corporate member of the three Tower Health locations, the Jennersville location was largely responsible to uphold the non-profit stipulations. Mountains of evidence pointed to infractions such as salary overpayments, exorbitant management fees, and other overhead costs which were not authorized within the charitable organization status. Further, Sommer concluded that health services provided to the community did not count as charitable because there were administrative and managerial fees associated with services rendered. The civil decision did not fully withdraw tax benefits, but did order Tower Health to pay millions in property taxes.
Lessons Learned for Healthcare Organizations
The unfortunate circumstances faced by Tower Health has prompted similar non-profit healthcare institutions to review their financial portfolios and organizational structure. The defensive measures are partially to avoid the same fate, but also to provide transparent and accurate details in case of potential audit. Hospitals and healthcare structures are often located in high rent districts and unexpected property tax payments could result in serious consequences, including bankruptcy or closures.
At Appraisal Economics, we have successfully served the healthcare community through extensive property tax valuations for several healthcare and non-profit community entities. Whether you are facing IRS tax review or simply want to ensure that your organization is properly structured, feel free to contact us today for a free consultation.
Preliminary analysis indicates that the SPAC market is still on a downward trajectory. The continued decline is likely to lead to a new trendline of around one hundred per quarter. Considering that the year began with nearly three times that amount, the trending activity could mean a significant shift in the market.
SPAC Deal Volume This Year
First quarter 2021 boasted 317 SPAC IPO completions. Multiple industries showed promise of rebounding and several newcomers entered the scene. SPAC activity was ripe with opportunity. Beyond the first quarter, activity continued to dwindle and the market mimicked the challenges of the natural laws governing supply and demand. General investors are still showing great interest in the opportunities to invest at the IPO stage and are not obviously dissuaded by the decline.
As the results trickle in for the final quarter, there is no expectation that SPAC investments will be on par to the 2020 tally of more than $50 billion. Despite the sharp decline in activity, the SPAC IPO future still holds hope. In addition to the natural ebb and flow of investment opportunity, SPAC investments were also hindered by regulatory oversight. The new warrant valuation process slowed investment groups during their search for viable new companies.
Popular SPAC Industries
The technology, media, and telecommunications sector contained the most SPAC activity, 34 percent to be exact, at the end of quarter three. Healthcare and Life Sciences followed with about 13 percent of SPACs looking for target companies. Nearly 70 percent of the SPACs looking for target companies have less than eighteen months to finalize their deals.
While the sectors, investors, and activity levels naturally ebb and flow, the looming deadlines are a fairly new statistic. Mergers and target companies are usually readily available for SPACs in the marketplace. For the sake of perspective, consider that in 2020 SPACs made up more than half of the IPO activity in the overall market.
Regulation and Speculation
Investors choose SPACs as an investment vehicle because they offer flexibility and a relatively active management structure. When the Securities and Exchange Commission (SEC) recently announced the warrant valuation process changes, SPAC activity slowed but did not lose pace for long. Additional reporting requirements are in place and can be independently verified. Fourth quarter findings and subsequent research will determine whether the new regulations drastically impacted activity.
At Appraisal Economics, we offer complete and reliable valuations for SPACs. Whether it be warrants or fairness opinions, trust us to provide a fully disclosed and comprehensive report.