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DEER ISLE: Insights, Flows & Investment Trends (March 2022)

by Dianna Raedle March 14, 2023

Oil: Oil prices continue to surge toward $150+/barrel, the level we highlighted in last month Insights.

Chinese Interest Rates: While rates in the rest of the world are rising, Chinese interest rates are falling. In fact, Chinese 10-year bond yields are trading near pandemic all-time lows. Is the Chinese economy weaker than the market expects? And could this weakness spill over into the OECD countries? With rates hovering around 2.75%, if we see a break below 2.5%, watch out!

Crypto Markets are seeing outflows from liquid instruments (i.e., ETFs) and into wallets. A bullish sign that crypto is being stored rather than sold (i.e., holders are not signaling that they need liquidity).

Real Estate/Hotels: Can currently buy good branded midsized hotels with 200/300 rooms in stabilized (midsized urban centers) at 10 cap rate given COVID impact, whereas long term average is closer to 8. Also have the opportunity for increasing NOI as travel returns to normal. For comparison, Multi-family is 3 to 5 cap rates.

Reps & Warranties Insurance: While it is widely known that R&W insurance is gaining adoption in lower middle market deals, one lesser-mentioned implication is that diligence expense and time may increase due to the presence of R&W – e.g., a recent deal found that capital providers were satisfied with a sell side quality of earnings, but the R&W carrier was not.

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Deer Isle Group

info@deerislegroup.com

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Founded in 2007, Deer Isle is an innovative investment bank that equips capital market participants with the tools they need for transparent, seamless, and efficient capital markets transaction success.

Since our inception, we have facilitated over $5 billion in capital transactions through Deer Isle Capital, LLC—our FINRA-registered broker-dealer—for companies and funds across various security types, sectors, and geographies.

At the core of our approach are effective, unbundled capital solutions, offering expertise and guidance that can be customized to meet each client’s unique needs. Our services, available on an "as-needed" basis, include:

  • Strategic Capital ConsultingTM (“Outsourced Strategic CFO services, Deer Isle Executive Management/Board Bootcamp or Sprint”) to prepare for a capital or M&A transaction leveraging the Deer Isle proprietary AI enhanced 4 pillar capital framework and real-world experience.
  • Beacon (“Proprietary Technology”) offers White-label and Turnkey Capital Provider engagementwith customized content and data analyticsfrom a relevant subset from a universe of 17,000+ institutional (fiduciary) capital markets organizations/50,000+ institutional capital market people.
  • Closing Advisory/Guidance (including “Shepherding”) expertise, through Deer Isle Capital, for structuring, negotiating, and completing a successful capital/M&A transaction.