ROCHESTER, NY – July 25, 2023
“The city’s mega-office landlords are panicking, pivoting, and shedding what’s worthless,” is the description of the office real estate scene in New York City by a writer for New York magazine. Real estate firm JLL estimates the nationwide average office building vacancy rate to be around 20% as of March 31, 2023. In larger cities, the vacancy rate is worse. For instance, in Manhattan’s Financial District, the vacancy rate is 25.6% as of the end of Q1 2023. It is estimated that the amount of available for lease office space in all of Manhattan is larger than the available for lease office space in the cities of Houston and Dallas-Fort Worth combined. Another real estate firm, CBRE, expects that companies looking for office space will focus on Class A office space in attractive areas while at the same time, fewer tenants will be looking to rent office space in older buildings in less attractive areas, which as a result will see particularly high vacancy rates. CBRE notes that the number of conversions of office buildings to residential use underway in 2023 is nearly double compared to the amount done in 2021. While many office real estate owners locked in mortgage loans on their buildings at affordable rates prior to the recent interest rate hikes, borrowing costs may become more expensive in the future for office building owners needing to refinance or extend the maturity of their existing borrowings. Lastly, many regional banks, which have already had losses following the failure of First Republic Bank and Silicon Valley Bank, may have large exposure to the office real estate sector. Several banks recently exceeded regulatory thresholds for office property loan holdings, resulting in office building owners having fewer options of financing to support them during high vacancy periods. In summary, the combination of excess office supply and lower tenant demand, higher financing costs, and regional bank overexposure may mean the outlook for office real estate is negative.
Midas Fund The Fund’s holding of Silver Lake Resources, an Australian gold mining company with operations in Western Australia, performed well in the past month. Shares of Resolute Mining Ltd., an Australian gold mining company with operations in Mali and Senegal, underperformed in the past month.
The Fund seeks primarily capital appreciation and protection against inflation and, secondarily, current income.
Under normal circumstances, in pursuit of its investment objectives, the Fund’s investment strategy is to invest principally in (I) securities (e.g., common and preferred stocks, bonds, convertible securities, etc.) of companies primarily involved, directly or indirectly, in the business of mining, processing, fabricating, distributing or otherwise dealing in gold, silver, platinum, other precious metals, or other natural resources (“Natural Resources Companies”); and (ii) gold, silver, and platinum bullion and coins; provided, however, that the Fund’s investment adviser, Midas Management Corporation (the “Investment Manager”), may invest in any type of equity security (e.g., common and preferred stocks) and in companies of any size, industry or sector, including both domestic and foreign companies, that the Investment Manager believes may achieve the Fund’s investment objectives. Up to 35% of the Fund’s total assets may be invested in fixed income securities of any issuer, including U.S. government securities, of any credit quality or maturity, although the Fund has no current intention of investing more than 5% of its total assets in fixed income securities rated less than investment grade (also known as “junk bonds”). The Fund concentrates its investments by investing at least 25% of its total assets in Natural Resource Companies.
Midas Magic The Fund’s position in Robert Half International Inc., a talent solution and business consulting firm, performed well in the past month. The Fund’s holding of Encore Wire Corporation, an American wiring and cable manufacturing company, hindered the Fund’s performance in the past month. Each of Mastercard Inc. Class A and Alphabet Inc. Class A currently comprise more than 20% of the Fund’s net assets.
The Fund seeks capital appreciation. Under normal circumstances, in pursuit of its investment objective, the Fund may invest in any security type (e.g., common and preferred stocks, bonds, convertible securities, etc.) and in companies of any size, industry, sector, including both domestic and foreign companies. Relative to the S&P 500, the Fund’s portfolio currently is more weighted in economically sensitive sectors, such as communications, and cyclical sectors, financial services, and is underweight in defensive industries, such as utilities.
How to Invest in Gold?
Three alternatives investors often consider when seeking the advantages of gold are gold bullion, stocks of gold mining companies, and funds that invest in gold and gold-related securities, such as Midas Fund. Using a disciplined approach, Midas Fund seeks to emphasize gold and other natural resource companies offering financial strength, expanding production profiles, strong free cash flow, and promising exploration potential. The Fund’s portfolio is focused on what we believe to be some of the best companies in the sector and so we view Midas Fund as currently well positioned to seek capital appreciation and protection against inflation.