Diamond Resorts International to Acquire Intrawest Resort Club Group

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Diamond Resorts International, Inc., announced that it has entered into a definitive agreement to purchase Intrawest Resort Club Group (“IRCG”) from Intrawest Resorts Holdings, Inc. (NYSE: SNOW) for $85 million, subject to certain closing date adjustments. The transaction is expected to be completed by the first quarter of 2016.

IRCG develops, sells interests in, and manages a points-based timeshare vacation club called Club Intrawest. The transaction includes the management contracts with Club Intrawest, the current balance of notes receivable, approximately four acres of undeveloped land, and the current balance of points available for sale. Club Intrawest consists of nine resorts across North America and more than 22,000 members.

“We are acquiring a business with a very strong member base and a set of high quality resorts that will complement our portfolio, and we look forward to building a mutually beneficial relationship with Intrawest beyond this transaction,” said David Palmer, President and Chief Executive Officer, Diamond Resorts International. “The purchase of Intrawest Resort Club Group follows our recent acquisition of Gold Key Resorts, both providing us with significant value creation opportunities through synergies, sales innovation and cost savings. We are confident that acquisitions such as these will enhance our financial profile and create long-term shareholder value.”

“We are excited to enter into this agreement and believe this is a strategic move for both the vacation club business and Intrawest,” stated Tom Marano, Chief Executive Officer of Intrawest Resorts. “With the additional cash from this transaction, we are well positioned to continue driving organic growth at our mountain resorts and adventure businesses while also actively pursuing strategic acquisitions and evaluating opportunities to unlock the value of our real estate holdings over time. We are committed to working closely with Diamond Resorts to execute a seamless transaction and look forward to a long-term relationship with Diamond Resorts that we believe will benefit club owners and our resorts alike.”

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US Hotel M&A Answers Private Equity Capital Conundrum, Says Fitch

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Corporates, or strategic buyers, may participate in more merger and acquisition (M&A) transactions in the U.S. lodging industry if the capital conundrum for private equity (PE) firms persists, according to Fitch Ratings.

Lower investor demand for high yield bonds and loans caused by recent capital markets volatility, if continued, would increase the cost of debt capital for PE firms, making it more challenging for them to deploy their significant uncalled investment capital, or dry powder.

Total PE dry powder was $1.34 trillion as of October 2015, up 12.9% from year-end 2014, according to Preqin. Uncalled capital for real estate (RE) funds totaled of $255.4 billion in October 2015, up 30.1% from the end of last year.

Two recent deals — one corporate and the other financial sponsored — highlight some of the dynamics at work and may foreshadow how future consolidation will unfold in the lodging industry. These include Marriott International, Inc.’s (Marriott) $12.2 billion acquisition of Starwood Hotels & Resorts Worldwide, Inc. (strategic buyer) and The Blackstone Group LP’s (Blackstone)’s $3.9 billion purchase of Strategic Hotels & Resorts, Inc. (financial buyer).

Fitch expects further hospitality and travel industry consolidation in light of the evolving competitive landscape that includes distribution channel consolidation (i.e. Expedia Inc.’s acquisition of Orbitz Worldwide, Inc. and HomeAway, Inc.) and rapid growth in alternative lodging accommodations, primarily Airbnb and other short-term rental websites. Therefore, M&A event risk remains elevated for lodging C-Corps, with corporate combinations more likely than financial sponsor LBOs.

For C-Corps, consolidation can strengthen competitive positions by reducing cost structures and/or accelerating top-line growth. Fitch believes the recent acquisitions by Marriott and Expedia Inc. discussed above have elements of both.

However, execution risk remains and any missteps can makes it difficult for companies that lever-up to de-lever within a reasonable time frame. Companies may permanently alter their financial policies as a result and/or abandon their commitment to current credit ratings.

Fitch expects PE firms to primarily target asset owners (i.e. REITs) to the extent the play a role in future lodging industry consolidation due to better access to low cost debt. Discounted market valuations relative to net asset value and generally available, low cost property-level debt make REIT privatizations an attractive, feasible investment avenue for PE firms. Alternatively, corporate combinations within the hotel REIT sector have historically been less common, primarily due to narrow relative valuation multiple spreads for the companies in the sector as well as social issues.

Many buyout shops have bolstered their commercial real estate platforms in recent years, raising record amounts of capital that they are now putting to work, including through REIT privatizations. According to Preqin, fund-raising for private PE, a subsegment of total PE activity, amounted to $86.9 billion in the first nine months of 2015, compared with $76.0 billion for the first three quarters of 2014.

The Blackstone Group LP’s (Blackstone) $3.9 billion purchase of Strategic Hotels & Resorts, Inc. (Strategic) is a good recent example. Blackstone-affiliated funds have struck deals to acquire two other public, non-hotel REITs this year for a combined value of $6.8 billion in addition to its $3.9 billion acquisition of Strategic. Lone Star Funds completed its $7.6 billion acquisition of Home Properties, Inc. Also in October, Starwood Capital Group agreed to buy Landmark Apartment Trust, Inc. in a joint venture with Milestone Apartments Real Estate Investment Trust.

Unlike many lodging C-Corp bonds, REIT bond indentures typically include key structural protections that limit M&A event risk for investors. The strict financial covenants in most REIT bond indentures generally impede PE firms from achieving their targeted returns by levering up with secured property-level debt and reducing overhead costs. Therefore, PE firms often have little choice other than to negotiate with bondholders to tender for the bonds at premiums and eliminate reporting requirements via consents. Although few REIT bonds provide for change of control, most contain language generally prohibiting prepayment without yield maintenance to insure predictable yields for investors.

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Walgreens Earns Top Marks in 2015 Corporate Equality Index

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Walgreens received a perfect score of 100 percent on the 2016 Corporate Equality Index (CEI), a national benchmarking survey and report on corporate policies and practices related to LGBT workplace equality, administered by the Human Rights Campaign Foundation. This marks the 11th year Walgreens has earned a perfect score from the CEI index.

“As a company that aims to champion everyone’s right to be happy and healthy, we understand that this also includes fostering the growth and development of all employees, regardless of individual differences,” said Stevens Sainte-Rose, Chief Human Resources Officer of Walgreens. “It is an honor to be acknowledged once again by the Human Rights Campaign for our commitment to diversity and inclusiveness. Thank you to our team, especially our WPride and Allies business resource group, for continuing to evolve policies and practices for more than a decade to help ensure a welcoming workplace for all.”

The 2016 CEI rated 851 businesses in the report, which evaluates LGBT-related policies and practices including non-discrimination workplace protections, domestic partner benefits, transgender-inclusive health care benefits, competency programs and public engagement with the LGBT community. Walgreens efforts satisfied all of the CEI’s criteria resulting in a 100 percent ranking and the designation as a Best Place to Work for LGBT Equality. Fortune 500 companies that participated in the survey had an average rating of 88. Walgreens joins the ranks of 407 major U.S. businesses which also earned top marks this year. For more information on the 2016 Corporate Equality Index, or to download a free copy of the report, visit www.hrc.org/cei.

The Human Rights Campaign is America’s largest civil rights organization working to achieve lesbian, gay, bisexual and transgender equality. By inspiring and engaging all Americans, HRC strives to end discrimination against LGBT citizens and realize a nation that achieves fundamental fairness and equality for all.

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Envestnet Completes Acquisition of Yodlee

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Envestnet, Inc, a leading provider of unified wealth management technology and services to financial advisors, and Yodlee, Inc., the leading cloud-based platform driving digital financial innovation, announced that the acquisition, originally disclosed on August 10, 2015, has been completed.

“We warmly welcome the Yodlee team to the Envestnet family. Yodlee’s pioneering data aggregation solutions greatly strengthen Envestnet’s broadly integrated wealth management platform and solve a mission critical problem that advisors and their clients are facing today – efficient client onboarding and comprehensive planning over all of the client’s assets,” said Jud Bergman, Chairman and Chief Executive Officer of Envestnet. “Advisors seeking solutions that will enable them to serve and add value to their clients for their lifetime will find the combined Envestnet-Yodlee offerings to be compelling.”

“The entire Yodlee team is excited about this next chapter for the combined company,” said Anil Arora, Chief Executive, Envestnet|Yodlee. “The combination taps Yodlee’s expansive ecosystem of financial institutions and financial technology innovators utilizing our industry-leading financial data platform, APIs, and solutions to drive their continued business success and to also fuel our new combined company’s strength and momentum in the wealth management space.”

The completion of the acquisition follows the receipt of all necessary regulatory approvals and approval of the transaction by Yodlee’s stockholders, which was obtained at a special meeting of Yodlee stockholders held on November 19, 2015.

Yodlee stockholders will receive $11.51 in cash and 0.1889 of a share of Envestnet common stock per Yodlee share. Based upon the volume weighted average price per share of Envestnet common stock for the 10 consecutive trading days ending on (and including) November 17, 2015, the second trading day immediately prior to completion of the transaction, Yodlee stockholders will receive consideration with a value of $17.49 per share, representing fully-diluted equity value of approximately $610 million. As Yodlee has approximately $72 million in cash and cash equivalents, the transaction reflects an enterprise value of approximately $538 million.

Envestnet will pay approximately $371 million in cash and issue approximately 6,084,000 shares of Envestnet common stock in the transaction. Additionally, there were approximately 1,058,000 shares issued in connection with unvested employee equity awards. Envestnet is funding the cash portion of the purchase price with available balance sheet cash and approximately $160 million of bank borrowings.

Anil Arora, CEO and a director of Yodlee is today joining Envestnet as Chief Executive Envestnet|Yodlee and the Envestnet board, as Vice Chairman.
As a result of the completion of the transaction, Yodlee’s common stock will no longer be listed for trading on the Nasdaq Global Select Market or any other securities exchange and Yodlee’s reporting obligations under Sections 13(a) and 15(d) of the Securities Exchange Act of 1934 will be suspended.

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State Street’s GX Private Equity Index Shows Fund Distributions Continue to Outpace Capital Drawdown

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State Street Corporation announced the results of the GX Private Equity IndexSM (PEI), a benchmark for comparative analysis of private equity performance, which includes a comprehensive data set dating back nearly three decades.

In the second quarter of 2015, the index saw an overall return of 4.2 percent. The index is based on directly sourced limited partnership data and represents more than $2.2 trillion of private equity investments, with 2,492 unique private equity partnerships, as of June 30, 2015.

“Throughout the last three years, from October 2012 to September 2015, we have witnessed significant amounts of capital distributions with the ratio of distributions to paid-in capital reaching an historical high of 1.78x,” said Will Kinlaw, Head of State Street Associates. “When we looked at the year-to-date figures in our GX PEI database, which we estimate covers approximately 60 percent of the total asset class, we saw that as of September 30 2015, distributions had exceeded $188 billion.

“European-focused private equity’s 7.78 percent return this quarter reversed the almost 3 percent decline from the first quarter of this year. This was partially due to the 3.7 percent euro appreciation during the second quarter, but we also saw the ratio of distributions to paid-in capital reach 2.85x during the quarter,” added Kinlaw.

For additional insights, or to learn more about the GX Private Equity Index please visit http://www.ssgx.com/peindex.

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Amazon Web Services Announces Amazon Wind Farm US Central

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Amazon Wind Farm US Central in Ohio is Amazon’s fourth major renewable energy project in 2015 and is expected to generate more than 320,000 MWh of energy annually.

Amazon Web Services, Inc. (AWS), an Amazon.com company (NASDAQ:AMZN), announced that it has contracted with EDP Renewables to construct and operate a 100 megawatt (MW) wind farm in Paulding County, Ohio, called the Amazon Wind Farm US Central. This new wind farm is expected to start generating approximately 320,000 megawatt hours (MWh) of wind energy annually starting in May 2017, or enough to power more than 29,000 US homes in a year. The energy generated will be delivered into the electrical grid that supplies both current and future AWS Cloud data centers.

In November 2014, AWS shared its long-term commitment to achieve 100 percent renewable energy usage for the global AWS infrastructure footprint. In April 2015, AWS announced that approximately 25 percent of the power consumed by its global infrastructure was from renewable energy sources with a goal of increasing that percentage to at least 40 percent by the end of 2016. As part of its renewable energy push, AWS continues to work on ways to increase the energy efficiency of its facilities and equipment, and to launch projects aimed at increasing the availability of renewable energy resources on the electrical grid that supplies power to current and future AWS Cloud data centers in Virginia and Ohio.

Specifically, in January 2015, Amazon announced a renewable project with the Amazon Wind Farm (Fowler Ridge) in Benton County, Indiana, which is expected to generate 500,000 MWh of wind power annually. In April 2015, Amazon announced a pilot of Tesla’s energy storage batteries that are designed to help bridge the gap between intermittent production, from sources like wind, and the datacenter’s constant power demand. Also in April 2015, AWS joined the American Council on Renewable Energy (ACORE) and the U.S. Partnership for Renewable Energy Finance (US PREF) to work with state and federal policymakers and other stakeholders to enable more renewable energy opportunities for cloud providers. In June 2015, the company announced Amazon Solar Farm US East in Virginia, which is expected to generate 170,000 MWh of solar power annually. In July 2015, AWS announced Amazon Wind Farm US East in North Carolina, which is expected to generate more than 670,000 MWh of energy annually.

Now with Amazon Wind Farm US Central announced, Amazon’s renewable projects will be responsible for delivering more than 1.6 million MWh of additional renewable energy into electric grids across the central and eastern US, or roughly the equivalent amount of energy required to power 150,000 US homes.

“We continue to pursue projects that help to develop more renewable energy sources to the grids that power AWS datacenters and bring us closer to achieving our long term goal of powering our global infrastructure with 100 percent renewable energy,” said Jerry Hunter, Vice President of Infrastructure at Amazon Web Services. “Our previously announced renewable energy projects put AWS on track to surpass our goal of 40 percent renewable energy globally by the end of 2016. This latest project, Amazon Wind Farm US Central, pushes our renewable energy percentage ever higher.”

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Boston Private Equity Firm to Raise New $100M Fund

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Fenway Capital Partners LLC, a Boston-based private equity firm that invests in real estate and restaurants, is in the process of raising a new $100 million fund, according to regulatory filings. Private equity real estate has experienced a surge of capital over the past decade, as institutional and private investors seek higher yields.

The goal of $100 million was listed on a regulatory filing with the Securities and Exchange Commission on October 7, 2015.

“Boston’s real estate market is one of the most thermogenic in the country, with most of that demand coming from renters between the ages of 20 and 35,” said Gary J. Kovner, Managing Partner of Fenway Capital Partners LLC.

Fenway Capital Partners LLC develops new or rehabilitates old residential and commercial properties for rental or for sale. Their aim is to provide out-of-the-ordinary and environmentally friendly places to live and work at reasonable prices and to give their tenants responsive and professional services. Fenway Capital Partners LLC creates opportunities for people to live in affordable homes, improve their lives and strengthen their communities.

The Boston region is without a doubt in the midst of one of its biggest residential building booms in living memory. Most of these proposed and under-construction residences are apartments; and most of those apartments are on the luxury end. In many other markets, apartment building is booming to try to keep up with the demand created by the under-35 crowd, but Boston’s apartment pipeline is relatively unhurried compared to the vigorous condominium development. That’s driving up rents of the apartments that are going up, and in turn driving young families and those 35 and older outside of the Boston and Cambridge metro areas in search of more affordable housing.

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Bank of America Names David Leitch as Global General Counsel

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Bank of America announced that David G. Leitch will succeed Gary G. Lynch as Global General Counsel beginning January 1. Leitch, who will be based in Charlotte, will be a member of the company’s management team reporting to Chief Executive Officer Brian Moynihan.

Lynch will remain a member of the management team as Vice Chairman, a position to which he was named in July. He will continue to be an advisor to senior leaders of the company and the board of directors, focusing on the evolving international regulatory environment, corporate governance, and shareholder-related matters.

“Gary led our team in resolving the most complex and pressing legal issues our company has faced,” said Moynihan. “We will continue to benefit from his seasoned judgment and sound guidance.”

Leitch has served as general counsel of Ford Motor Company since April 2005, where his department has captured several industry awards. His experience includes private practice as well as public service. He served as Deputy White House Counsel for President George W. Bush; Chief Counsel for the Federal Aviation Administration; Deputy Assistant Attorney General in the U.S. Department of Justice, Office of Legal Counsel; and Law Clerk to the late U.S. Supreme Court Chief Justice William H. Rehnquist.

“David is a proven executive and leader who will add impressive legal acumen and experience to our team,” said Moynihan.

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Excessive Alcohol Use Continues to Be Drain on American Economy

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Excessive alcohol use continues to be a drain on the American economy, according to a study released by the Centers for Disease Control and Prevention (CDC).

Excessive drinking cost the U.S. $249 billion in 2010, or $2.05 per drink, a significant increase from $223.5 billion, or $1.90 per drink, in 2006. Most of these costs were due to reduced workplace productivity, crime, and the cost of treating people for health problems caused by excessive drinking.

Binge drinking, defined as drinking five or more drinks on one occasion for men or four or more drinks on one occasion for women, was responsible for most of these costs (77 percent). Two of every 5 dollars of costs — over $100 billion — were paid by governments.

“The increase in the costs of excessive drinking from 2006 to 2010 is concerning, particularly given the severe economic recession that occurred during these years,” said Robert Brewer, M.D., M.S.P.H., Head of CDC’s Alcohol Program and one of the study’s authors. “Effective prevention strategies can reduce excessive drinking and related costs in states and communities, but they are under used.”

Excessive alcohol consumption is responsible for an average of 88,000 deaths each year, including 1 in 10 deaths among working-age Americans ages 20-64.

Excessive alcohol use cost states and the District of Columbia a median of $3.5 billion in 2010, ranging from $488 million in North Dakota to $35 billion in California. Washington D.C. had the highest cost per person ($1,526, compared to the $807 national average), and New Mexico had the highest cost per drink ($2.77, compared to the $2.05 national average).

The 2010 cost estimates were based on changes in the occurrence of alcohol-related problems and the cost of paying for them since 2006. Even so, the researchers believe that the study underestimates the cost of excessive drinking because information on alcohol is often underreported or unavailable, and the study did not include other costs, such as pain and suffering due to alcohol-attributable harms. 

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Americans Concerned About the State of the Middle Class

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Americans view a strong middle class as vital to the country’s well-being, however, most are concerned that the state of the middle class has weakened, reflecting a new reality of financial volatility for many across the nation. This according to a new study of 1,000 American adults released by Elevate, a leading provider of innovative online credit solutions.

Middle Class Under Pressure

A significant majority (88 percent) of those surveyed believe that a strong middle class is important to the U.S. economy and three-quarters (76 percent) of respondents identified as middle class. While most consider themselves to fall within the middle class, 80 percent say it is harder to be middle class today than it was 25 years ago and 71 percent believe the middle class is weaker today than it was in the past.

The concerned sentiment toward the middle class likely reflects financial challenges that have emerged in a post-recession environment with declining household income and reduced savings. Thirty-five percent of Americans across all income levels reported having financial difficulties within the last six months. Additionally, almost two-thirds (61 percent) of Americans report spending half or more of their income on basic living expenses, including 11 percent who are unable to cover basic living expenses.

The data indicates that despite good intentions to maintain financially stability, today’s economic landscape presents challenges that some fiscally responsible Americans simply cannot avoid. An overwhelming majority of respondents (88 percent) report that they have a good understanding of how to manage their finances and 66 percent say they keep to a strict budget and regularly monitor and manage their credit score.

“Challenges presented by wage stagnation and income volatility mean that today’s New Middle Class is characterized by more sporadic and immediate financial needs than the middle class of years past,” said Ken Rees, CEO of Elevate.

“Today, it is not uncommon for those at both the higher and lower ends of the spectrum to run into financial stress that can have a real impact on their ability to meet financial responsibilities. The good news is that we are gradually starting to see this reality reflected in the financial services realm as more participants like Elevate tap into new technologies to better serve the needs of non-prime consumers.”

Characterizing the New Middle Class

Survey respondents generally agreed that the middle class encompasses a relatively wide-range of income levels. Three-quarters (77 percent) agreed that someone with a net worth over $1 million is not middle class and that someone who makes $20,000 per year or less is not middle class. While the middle class of the past may have been characterized by many as having a solid foundation of general savings and retirement funds, only half of survey respondents that identified as middle class reported having a retirement account and most do not have an emergency fund (60 percent).

Americans who identified as middle class pointed to the biggest financial roadblocks keeping them from achieving financial security as healthcare costs (25 percent), housing (23 percent), credit card debt (23 percent) and inconsistent employment opportunities (18 percent).

Respondents at the upper echelons of society report using the most financial products (e.g., checking accounts, credit cards, savings accounts, loans, etc.), using an average of five different products. In contrast, middle class Americans reported using only two financial products, on average.

“The disparity in use of financial products between upper-class Americans and those on shakier financial ground illustrates the void in financial solutions that meet the needs of those who have less financial security,” Rees said.

“Many of these Americans are turning to alternatives that may not be as responsible and certainly will not help them progress and build credit over the long-term. It is time to bring financial services for the non-prime consumer out of the shadows and into the mainstream with responsible, innovative and regulated products that help them create a brighter financial future.”

Additional findings from the study include:

Americans appear unconvinced that elected officials are on the side of the middle class. Eighty-four percent of those surveyed said they believe that most elected officials are not middle class and 62 percent believe that when politicians talk about the middle class, they are talking about someone else.
Sixty-three percent of Americans agree that anyone can be middle class by working hard.
Having a stable job was the defining characteristic that most respondents (58 percent) agreed determines whether someone is middle class.

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