MapableUSA.com: When you want to learn all about Opportunity Zone investing, you go to an Opportunity Zones tax expert! So who better than HCVT’s Blake Christian for an update on the status of the newest QOZ legislative bill, the “Opportunity Zones Transparency, Extension, and Improvement Act”? Then, listen as Mr. Christian provides all the details in his latest OZ Fund for his MIT Modular project, a project which definitely illustrates how transformational the Opportunity Zone program can be!
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(00:21):
One that works on a Mapfable USApodcast, Let's put you on the mapicis
Ron Costa broadcasting live from the MaffavilleUSA Studios in Las Vegas, Nevada,
and folks who are about that willbe going to be five years into the
QOZ program and we're going to talkabout where we're at, maybe introduce a
fund or two. But before wedo that, let's introduce Vicky Huchmala from
(00:42):
the QZ Marketplace. Vicky, howyou doing today? I'm fabulous today,
ron perfect day in in Las Vegas, a perfect guest on our podcast.
Our podcasts are reinvigorated, and todaywe're going to talk about a really project
(01:02):
that one of our favorite guests,Blake Christian, is going to talk about.
So let's get started. Yeah,let's introduce Blake. Blake is the
text partner over at HCVT and he'salso the co founder of a really cool
project coim My Team Modular, whichI think you're gonna really be interested in
hearing about. So, Blake,how are you doing today? I'm doing
(01:23):
great. I'm here in Park City, Utah, and we have a beautiful
day. Also probably a little coolerthan you have in uh, in Vegas,
but we're just waiting for the snowin a couple of months and can
be back up on the slopes there. One talks about that. Everyone talks
about parks here. They say it'sbeautiful. Can you can you go there?
In the summertime is just as nice. I mean, I know everybody
(01:46):
goes to ski. It is absolutelygorgeous in the summer, and we you
know, we have you know,a ton of visitors in the summer,
and uh, you know, it'sreally become a year round destination for sure.
Yep. Well, hopefully there's athere's a hospital by the ski lift
(02:06):
if I'm skiing there, because mylast couple of ski adventures have not been
good. But I know it's beena beautiful city, and I know that
you're really active there, and youknow, I could probably count on my
fingers a number of qoz and opportunitieson experts that really know what's going on
in the industry, and you're certainlyone of them. So let's talk about
(02:27):
you a little bit. But canwe get a little bit background on what
you're doing. Sure, well,you know I spend you know, my
day job. I'm a CPA withOldhouse Carlin and Van Triit that you mentioned,
and we were formed in nineteen ninetyone. We're a top thirty CPA
firm in the country. We havefifteen offices with about seven hundred and fifty
(02:52):
professionals throughout mainly the Western States.We have offices primarily in California, Utah,
Arizona, and Texas and UH andthen we we also because of COVID,
we have employees all over the country. So UH, but we we
focus on you know, high endtax planning. UH. I obviously specialized
(03:17):
in OS funds. We have overtwo hundred OS funds that we UH have
been involved in the setup and UHcompliance aspects. And then we have we
we're full service TPA firm with theaudit four oh one K business management and
business consulting services. Okay, andthen yeah, my weekend and is um
(03:45):
I see that will we'll talk abouta little bit later. But we convert
shipping containers into housing and address affordabilityhomeless housing. UH. We do re
kale versions and they actually are doingsome stuff for the outdoor concert venues,
(04:08):
so quite quite. That's a perfectsegue into opportunity zone. So Okay,
like I mentioned, at these startof the podcast, it's been about five
years now almost it's almost like youdon't go to college for for your degree
and you graduated with an Opportunity Zonesdegree. But so what's going on now
in this whole market? Is itsucceeding or what's the newest things going on?
(04:30):
What can you tell our audience aboutit at this point? Yeah,
So this is a timely podcast becausejust this week the federal legislature reintroduced the
OZ Transparency Act, which it's referredto, And what this will do is
(04:53):
extend the deferral period and your abilityto reinvest capital gains into an os fund
into until the end of twenty twentyeight. So twelve thirty one, twenty
twenty eight will be the deferral period, so we get two extra years of
(05:14):
deferral, you'll actually be able toinvest capital gains into twenty twenty nine.
And so so it's a real,real positive that's been floating around there for
the you know, over the overa year, but because of the dysfunctionality
(05:35):
in Congress right now, it justhas not moved forward. So by reintroducing
it, we're hoping that the legislatorswill see all these benefits, all the
money going into the program, howit's changing, Uh, these economically challenged
communities, and we'll get we'll getyou know, some more time to make
(06:00):
the investments. As far as themoney, the money that's gone in cumulatively
over this last five years is aboutthirty six billion dollars has gone and that's
just the equity piece. Now youhave to remember, on a real estate
project, you know, you usuallyhave a four to one ratio of debt
(06:23):
to equity. So if you justtake that, let's just round it to
forty billion, because that thirty sixis low. If you took forty billion
and then you added the debt componentin the capital stack, you would you
would easily be at you know,one hundred and sixty to two hundred billion
(06:45):
dollars. And the White House,the Trump white House, when they task
this their their lofty goal with onehundred billion dollars of investment, we're clearly
well over that. The other thingthat I just you know, it's just
surprising, you know that people don'tknow this, you know, even five
(07:06):
years in. But we spend alot of time. It's not just real
estate that you can invest in,but you can invest in operating businesses,
and probably twenty five percent of ourclients have operating businesses in the zone,
and MIT, which we'll talk aboutlater, is you know, as an
operating business and real estate within anopportunity zone. So we've got kind of
(07:30):
the double double play there. Youknow. I remember in the initially that
there were issues with record keeping andwho was doing what and how it was
going to work and all of that, and I'm wondering have they resolved any
of those issues in regard to thator are those still up in the air.
(07:56):
You know, they I have tosay, you know, in my
forty two years of practice the regulations, they were a little slow in finalizing
the regulations, but they gave awhole lot of guidance in real time and
they closed up most of those gapsthe you know, the practitioners in this
(08:22):
space. I have to give ashout out to Nova Graddek, who's really
spearheaded a lot of this, youknow, the regulatory process, and they
they gave us quite a bit.There were a lot of gaps they were
pointed out and they responded, youknow, I mean, we have eight
(08:45):
hundred pages of various regulations and somost of those have been cleared up.
There's a handful of issues that arestill out there that we're trying to get
results. But I would say ninetyfive percent of the you know, the
question marks on you know, howmoney flows, how you record things,
(09:09):
what kind of projects you can do, how quickly you have to invest,
all that's been pretty well settled.So but that's off the Treasury and in
Congress for acting you know, reasonablyreasonably fast that. Yeah. And you
know, initially too, everybody wasinterested in opportunity zones for the real estate
(09:33):
aspect. But now I always thoughtthat the business aspect was more lucrative,
even though real estate was a stepinto it. But you have taken the
idea of a business in opportunity zonesto the next level with MIT. So
tell us about MIT. Yeah.So, MIT is a pro Utah based
(10:01):
cause fund. And so we havea two and a half acre, twenty
thousand square foot facility where we convertshipping containers into housing UH, into retail
UH into outdoor concert venue, showers, you know, emergency shelters. Pretty
(10:26):
pretty unlimited what we can do withthem. Uh. You know, it's
it's a it's a very green processbecause we're you know, we're we're repurposing
you know, existing shipping containers andthere's you know, tens of millions of
these all over the world. They'revery standard. Everybody knows the exact size
of them. There are standards,uh in building with these. Some some
(10:50):
cities you know, are are verylenient on it, uh Mini aren't.
But you know, we we navigateall that. But they're super durable.
They are you know, they canwithstand winds of one hundred and eighty miles
an hour, they can withstand theearthquakes. And the beauty is that are
(11:13):
movable. You know, even oncethey're fastened to the ground, they can
be quickly removed. And there's certaintax advantages via depreciation that this type of
construction is is a lot better thanwhat we call stick build, you know,
the typical house that you've framed.But so so we have two elements
(11:37):
to our business. We have theyou know, we on the real estate,
so that's kind of the you know, the solid part of it.
And then you know, obviously anoperating business has more risks to it,
and we've actually separated those into twoseparate qozbs under the Qualified Opportunity Fund to
umbrella. And what that allows usto do is the there's another Code section
(12:03):
twelve oh two qualified small business stockand so the operating business after five years
of being a sheet corp, wecan actually dispose of that in fires full
ten years and bill on twelve otwo, each investor can get up to
(12:24):
a ten million dollars tax exemption ontheir game from the exit of that that
that twelve oh two doesn't apply toreal estate, So that's why we segregated
the real estate and separated. Butit's the highly efficient structure, and you
(12:46):
know, our investors are liking thedepreciation deductions as well as the long flexibility
of exiting. Oh so you twodifferent funds then, Blake, is that
right? No, it's it's oneone OZ fund. But then the QO
(13:07):
zbs, which are the subsidiary entitiesunder the OS fund, are are in
two separate legal entities so that wecan exit at different times and still avail
ourselves to r C Section twelve ohtwo. If we had them lump together
into one entity, we could notget the twelve oh two benefits which allows
(13:31):
us. Okay, okay, arethere other opportunities on funds that you know
that are combining this whole business realestate set up like you've done as well,
only those that we've consulted on.Interesting, Well, that's why you
got to go to a professional,right, who else could know this?
(13:54):
It's our motto, go to theexpert. Let's get back to some of
these legislative changes that you mentioned beforesetting up the fund itself. There's been
no changes in that, right,It's still pretty much the same process.
Correct, correct, So you knowit's you. You have to, you
(14:15):
know, set that up and fundit within one hundred and generally one hundred
and eighty days of the time yougenerated the game. Again critically important.
A lot of practitioners don't understand this, but the one hundred and eighty days
can start as late as March fifteenthof the year following the game if the
(14:35):
gain that you generated is flowing throughon a K one. So if you
if you own a partnership and theysold a property, say in January of
twenty twenty two, that one hundredand eighty days does not start picking if
you elect until March fifteenth of twentytwenty four, and that takes you to
(15:03):
September of twenty twenty four, soyou have you know, as long as
as nineteen eighteen, nineteen months ifyou had a January twenty twenty three gain
to reinvest that into an os funSo again you just have to really really
understand the rules. But a minimumof one hundred and eighty days, but
(15:26):
as long as nineteen months to reinvestthose proceeds. So a lot of people,
when we sit down with them,they're beloaning that they owe all the
capital gain tax, and then westart looking at their facts and we say,
oh, you know, you stillhave time to reinvest that, right
right? Okay, So now youknow all about these rules and everything,
(15:48):
and you're an expert in the field, and I'm curious as to how you
came up with the idea of MITmodular because it's such a great compliment to
the opportunity zones. Did you knowsomebody in the business that did this kind
of stuff or how that how didthat emerge? So it's a it's a
it's a long story about try andmake it short. So when I worked
(16:11):
in California, I worked in LongBeach and my office overlooked the ports of
Long Beach in Los Angeles, SoI was looking over shipping, you know,
tens of thousands of But but Idid. I didn't start off with
the concept of shipping containers. ButI talked to you know, because of
(16:32):
the housing crisis in Long Beach insouthern California, I talked to a lot
of uh, you know, homebuilders and things and and multi family and
I said, what you know,and my my wife's half Japanese, so
I spend some time in Japan,and you know that they they have micro
(16:53):
housing, you know, they've beendoing that for decades. And so I
said, you know, what whatif we kind of went to with the
millennials outlook, you know, andI kind of kind of view it almost
like a you know, a Starbuckskind of model where it's like they like
to hang out in, you know, some open space they can interact with
(17:15):
people if they choose, but theydon't have to. And I said,
what what if we did like amulti family you know, apartment building where
you downsize the you know, thesleeping and the kitchen areas that you had,
you know, kind of like Vegas, you know, where you have
super plush common areas, so youyou end up, you know, putting
(17:37):
more more people into that, youknow, all that square footage for your
apartment complex. But you really increasethe the the buildouts on the common area.
And you know, and and again, the millennials are kind of minimalists.
They you know, they don't needa whole lot of space, so
you you know, you make itmore of like a studio department. Maybe
(18:00):
you have a Murphy bed that youknow, when you have a guest and
so on. You don't need youknow, more of a kitchen at than
a full kitchen, those types ofthings. And then when I moved out
to Park City, I you know, every time I opened the paper the
house, it was the same housingcrisis, but it was more focused on
(18:22):
the people in the ski industry.We have in Park City. We have
we at the time, we hadthree separate areas and about thirty five hundred
people come to town for the skiseason, uh to work, to work
the lifts, restaurants, et cetera. And there's no place for them to
stay. And and so I approachedyou know, veil and in Deer Valley,
(18:48):
and I said, look, youknow we can we can supply few
housing, you know, and youknow, we'll get ten acres outside of
town, you know, build theseBut and then bust them to the ski
resorts and and they love the concept, but they want to be involved in
(19:08):
the development, and you know,I've got my full time job. So
we ended up building going it tothem and they were like, hey,
you know you you build it,you build it and we'll do a master
lease with you. But you know, again, you know, it was
just it was too too big aproject to take on. But that that's
(19:29):
that's how we how we got startedin it. I know, that's really
cool. That's that's great. AndI saw your power point your other materials
there with some of the pictures ofthese things. Were those pictures artists renderings
or are they real? To thereal structures today it's about half and half,
so you know, half of thoseare are actually our product and then
and then some of those are ourrenderings at this point. But uh,
(19:55):
you know, we get beautiful,yeah, absolutely or displake. You would
never know that they started out asa shipping container. With what they ended
up, they're absolutely beautiful. Yeah, it's funny. Uh and thanks,
thank you for that compliment. Butuh yeah, we've had many people come
(20:18):
and tour our products and they don'talways know that they're standing inside a shipping
container because of the way that wethat we clad them in things. But
what's interesting is you have some peoplethat that say, oh, you know,
we wanted to look more like ashipping container. They want the exposed
(20:40):
metal. The problem that you havewith a shipping container, though, is
if you set if you don't uh. And that's what we're we feel we're
expert in is we know how toto insulate these because if you don't insulate
them properly, you're going to haveinsight temperature that's about twenty degrees hotter in
(21:03):
the summer than the outside temperature,and in the winter it's going to be
you know, ten degrees colder thanthe outside temperature. And we have perfected
building a thermos out of these,and we get you know, our ratings,
the you know, the inflation ratings, you know in the in the
(21:23):
load of mid thirties, and andwe have you know, completely off grid
and our solar powered and we alsohave you know, we call plug and
play that's kind of a more ofan RV type plug in set up for
all the utilities. So we're flexibledepending on where these are going to be
(21:45):
plantedly, you know, that's likethe best part of a container in my
mind. It's like it's so adaptablebecause you're you're like taking it a part
in creating something else using the material, but you can make it into anything.
(22:06):
And that adaptability lends itself to anykind of project any place in the
country or the world if you can, you know, the potential is just
out there. You can do anythingwith these right, you know, And
(22:26):
and so you're preaching to the choirobviously, but the yeah, the simplest
one is just using it as whatwe call an accessory dwelling unit where you
just you have some extra space inyour backyard and you you know, want
to put you one of your adultkids back there, or it could be
(22:47):
a parent or or you could leaseit out to a third party and make
revenue. And by doing that,you have a revenue stream if you're rinting
it out. And second, youimmediately increase the value of your property by
doing that. So we can youknow, we're doing a lot design work
(23:07):
right now for twenty and forty footersto go into people's backyards. And then
the other one you mentioned the portability, and you know, so you know,
somebody could you know, have anadu and then maybe they you know,
get a job in some other state. Well, you can actually without
(23:32):
a ton of costs. You know, you can remove these you know off
you know, off of their footing, put them, put them on an
eighteen wheeler, and you know,for you know, a couple thousand dollars,
you can have it in you know, four states over. And you
know you can't do that with youknow, some young person buys a condo
(23:53):
and then gets reassigned to another state. You know, now they have to
sell that play. You know,they if the market's not right, they
could take a hit or they youknow, they rented out and have all
those hassles. But this way,you know, you could literally take your
house with you. It lends youa new dimension to packing up the house.
(24:15):
Huh right, hey, Blake,what's the status of your fund right
now? What's it called? Andand are you accepting investors? Yeah?
So you know the website it's wW W M I tmodular dot com and
uh, yes, we we are. We just you know, we just
(24:38):
took in a you know, fairlysizable convertible. Note we still have about
two and a half million equity positionsstill out there. We bought the fillam
(25:00):
for one point eight in the landfor point eight million about two and a
half years ago and the latest eightSo with the improvements that we've made,
we've increased the building substantially. Wewill by year end UH be repricing the
(25:21):
units UH to take into account thatappreciation in the building. And we are
strategically located right in the rail yardin the probo rail spur and UH there's
billions of dollars coming in to hthe Greater Salt Lake region to have a
(25:42):
a national transportation hub here. Sothe fact that we're you know, we're
in Provo, which is usually ratedcause zones in the country. UH.
And then UH and then then beingnear all this transportation is is quite quite
(26:07):
good. So Blake would all thechanges in the well, the proposed things
in the legislature is will affect yourfunds in a positive, negative or no
effect kind of thing. We thinkabout that, Oh, it would absolutely
benefit uh M I T modular andit would help I would say all funds
(26:30):
because that that extended deferral period willbe very attractive for investors. Gives gives
people more time to invest into anos fund as well as operating you know,
their their actual projects, and thetransparency portion of this where funds will
(26:52):
be required to disclose a little moreat UH information as to how many employees
they have, how they're impacting thecommunity in a positive way. Those are
good statistics for us to have froma from an economic development standpoint to make
(27:14):
sure that the program was effective.You know what we don't want to have
happened is you know that information isn'tavailable and then ten years from now,
nobody can really tell what the impactwas. So I applaud that and that
transparency piece of it was in theoriginal legislation and you know, somehow got
stripped out unfortunately, so it shouldabsolutely be in there. The other feature
(27:41):
of the proposed legislation is they willallow funds, you know, outside funds,
bigger funds to invest in directly intoOZ funds. Right now, that's
prohibited for no policy reason, butyou can only have what we call a
two tier you know OZ fund andthen the q O z B underneath this
(28:03):
would allow another you know, publicfund or private fund to invest directly into
the UH, the Qualified Opportunity Fund, so that that will be a plus.
And then and then they will alsoUh, the federal government will be
setting up a billion dollar plus fundto h to further help out these distressed
(28:29):
communities that are are designated as asOZ funds. So anyway, some good
good stuff, Blake. Let meask you a question. I think I
was confused. Did I hear yousay that if you create two separate entities,
you can have two funds managing oneup opportunity zone location, one to
(28:56):
handle the real estate part one tohandle the business as part, but on
the same location or U I meanno, you could you even under the
current law, you can have youcould have multiple qualified opportunity funds investing into
(29:17):
a common qo ZB, which iskind of the more the you know,
the real estate development company or theoperating business. When I when I was
talking earlier about am I T modularI was, I was explaining that we
have the one common qualified opportunity fundand then we have underneath there we have
(29:41):
a real estate entity legal entity,separate legal inity, and then we have
our manufacturing operation in a separate legalentity, and that the purpose of that
was just so that we can exitseparately from those two investments. But there's
no prohibition. You have unlimited qozbsunderneath an OZ fund, or you can
(30:06):
have you could have ten fifteen OZfunds investing into a single project. What
the legislation will do is allow youto stack on another fund on top of
the OZ fund, which is currentlyprohibited. Wow. So it's something.
But you know they're seeing what's goingon and how it's benefiting the original distressed
(30:33):
locations and how it's expanding. That'sa great thing. It can only get
better, right right, Yeah,Well, before I close this out,
I do want to just say Blake, I love what you're doing with the
MIP stuff. I think that it'sa great industry. It's a great something
that's really needed. And the factthat it's an opportunity zone and you're involved
(30:56):
it makes it even better I thinkfor a US, and I think everybody
should be looking into this. Again, you want to go with experts and
people know what they're doing, andlike I said at the top of a
podcast, you're certainly one of thebest out there. So congratulations on where
you're at with this, and Ireally think that you're onto something really good
for sure. Well, thank you. You guys have been so supportive over
(31:18):
the years, and I really appreciateall the great information you get out in
the marketplace. Yeah, and Vicky, we want to close us out with
another comment or question or what well, you know, It's one of the
reasons we do our Mappable podcast isbecause we want to educate our listeners,
whomever they might be, on what'sgoing on. And it's why we seek
(31:45):
out the guests on our podcasts whoare those folks that know the most about
whatever the topic is, so thatour listeners can get information from the top
people, but so that they haveat access to the experts like Blake.
If you're interested in anything that hasto do with opportunity zones, whatever that
(32:07):
might be, you go to theexpert to help you to understand it because,
like everything, it's on the surface, it's a great thing, but
once you start going into it deeper, deeper, you can see the potential
to take you anywhere you want togo, as long as you use the
(32:27):
experts that we provide for our listenersto take advantage of. And Blake absolutely
is one of those best experts inregard to opportunity zone and also just financial
planning. So we love having Blakeand Blake, you've done a great thing
with MIT as well as with opportunityzones. Congratulations and kudos to you,
(32:52):
Thank you very much. And Ijust want to insert as I closed that
about twenty five percent of our timeis spent unwinding screwed up OZ funds.
And it's it is. It isnot for the faint of heart. I
(33:13):
mean, it's it's not a supercomplicated area, but you know there there
there's definitely some landmines and if youdon't do it right, you can end
up with very bad results. Soyou know, and we play nice in
the sandbox. We we work withother CPA firms and we won't steal your
(33:35):
clients, will just help you onthe OZ stuff. But yeah, there's
there's a lot of ways you cando it wrong, and that's with anything,
with everything. Yeah, and youknow how to do it when you
don't exactly, maybe I can,uh, maybe I could borrow your insulators
too and have them come from myplace. You got hot this summer,
(33:58):
I don't think. Yep, wecan do we can. Yeah, we
can do basements and rooftop decks foryour evening stuff. But the the basement,
the basements keep it cooler. Ilove it something, all right,
well listen Blake and thanks for beinga guest from the show, and Vicki
(34:21):
thanks for co hosting this. Andfolks, you're listening to the Mappable USA
podcast at mappable USA dot com.If you go to that website, you
scroll down, you see all oursyndication sources. Just pick the one you
like best and subscribe and you'll nevermiss another one of our episodes. And
if you want to be a guestlike Blake was today, there's a guest
camp there. Fill that out.We'll see what we can do about getting
you on the show. And ifyou like what you heard, send us
(34:42):
an email I didn't fout Male USAdot com, or just leave a comment
on whatever pape we can get iton right now, so French mir support,
thanks for listening. We'll be atthe next time with another I'm on
the USA podcast. Have a breakweet, got you one.
One that works on a Mapfable USApodcast, Let's put you on the mapicis
Ron Costa broadcasting live from the MaffavilleUSA Studios in Las Vegas, Nevada,
and folks who are about that willbe going to be five years into the
QOZ program and we're going to talkabout where we're at, maybe introduce a
fund or two. But before wedo that, let's introduce Vicky Huchmala from
(00:42):
the QZ Marketplace. Vicky, howyou doing today? I'm fabulous today,
ron perfect day in in Las Vegas, a perfect guest on our podcast.
Our podcasts are reinvigorated, and todaywe're going to talk about a really project
(01:02):
that one of our favorite guests,Blake Christian, is going to talk about.
So let's get started. Yeah,let's introduce Blake. Blake is the
text partner over at HCVT and he'salso the co founder of a really cool
project coim My Team Modular, whichI think you're gonna really be interested in
hearing about. So, Blake,how are you doing today? I'm doing
(01:23):
great. I'm here in Park City, Utah, and we have a beautiful
day. Also probably a little coolerthan you have in uh, in Vegas,
but we're just waiting for the snowin a couple of months and can
be back up on the slopes there. One talks about that. Everyone talks
about parks here. They say it'sbeautiful. Can you can you go there?
In the summertime is just as nice. I mean, I know everybody
(01:46):
goes to ski. It is absolutelygorgeous in the summer, and we you
know, we have you know,a ton of visitors in the summer,
and uh, you know, it'sreally become a year round destination for sure.
Yep. Well, hopefully there's athere's a hospital by the ski lift
(02:06):
if I'm skiing there, because mylast couple of ski adventures have not been
good. But I know it's beena beautiful city, and I know that
you're really active there, and youknow, I could probably count on my
fingers a number of qoz and opportunitieson experts that really know what's going on
in the industry, and you're certainlyone of them. So let's talk about
(02:27):
you a little bit. But canwe get a little bit background on what
you're doing. Sure, well,you know I spend you know, my
day job. I'm a CPA withOldhouse Carlin and Van Triit that you mentioned,
and we were formed in nineteen ninetyone. We're a top thirty CPA
firm in the country. We havefifteen offices with about seven hundred and fifty
(02:52):
professionals throughout mainly the Western States.We have offices primarily in California, Utah,
Arizona, and Texas and UH andthen we we also because of COVID,
we have employees all over the country. So UH, but we we
focus on you know, high endtax planning. UH. I obviously specialized
(03:17):
in OS funds. We have overtwo hundred OS funds that we UH have
been involved in the setup and UHcompliance aspects. And then we have we
we're full service TPA firm with theaudit four oh one K business management and
business consulting services. Okay, andthen yeah, my weekend and is um
(03:45):
I see that will we'll talk abouta little bit later. But we convert
shipping containers into housing and address affordabilityhomeless housing. UH. We do re
kale versions and they actually are doingsome stuff for the outdoor concert venues,
(04:08):
so quite quite. That's a perfectsegue into opportunity zone. So Okay,
like I mentioned, at these startof the podcast, it's been about five
years now almost it's almost like youdon't go to college for for your degree
and you graduated with an Opportunity Zonesdegree. But so what's going on now
in this whole market? Is itsucceeding or what's the newest things going on?
(04:30):
What can you tell our audience aboutit at this point? Yeah,
So this is a timely podcast becausejust this week the federal legislature reintroduced the
OZ Transparency Act, which it's referredto, And what this will do is
(04:53):
extend the deferral period and your abilityto reinvest capital gains into an os fund
into until the end of twenty twentyeight. So twelve thirty one, twenty
twenty eight will be the deferral period, so we get two extra years of
(05:14):
deferral, you'll actually be able toinvest capital gains into twenty twenty nine.
And so so it's a real,real positive that's been floating around there for
the you know, over the overa year, but because of the dysfunctionality
(05:35):
in Congress right now, it justhas not moved forward. So by reintroducing
it, we're hoping that the legislatorswill see all these benefits, all the
money going into the program, howit's changing, Uh, these economically challenged
communities, and we'll get we'll getyou know, some more time to make
(06:00):
the investments. As far as themoney, the money that's gone in cumulatively
over this last five years is aboutthirty six billion dollars has gone and that's
just the equity piece. Now youhave to remember, on a real estate
project, you know, you usuallyhave a four to one ratio of debt
(06:23):
to equity. So if you justtake that, let's just round it to
forty billion, because that thirty sixis low. If you took forty billion
and then you added the debt componentin the capital stack, you would you
would easily be at you know,one hundred and sixty to two hundred billion
(06:45):
dollars. And the White House,the Trump white House, when they task
this their their lofty goal with onehundred billion dollars of investment, we're clearly
well over that. The other thingthat I just you know, it's just
surprising, you know that people don'tknow this, you know, even five
(07:06):
years in. But we spend alot of time. It's not just real
estate that you can invest in,but you can invest in operating businesses,
and probably twenty five percent of ourclients have operating businesses in the zone,
and MIT, which we'll talk aboutlater, is you know, as an
operating business and real estate within anopportunity zone. So we've got kind of
(07:30):
the double double play there. Youknow. I remember in the initially that
there were issues with record keeping andwho was doing what and how it was
going to work and all of that, and I'm wondering have they resolved any
of those issues in regard to thator are those still up in the air.
(07:56):
You know, they I have tosay, you know, in my
forty two years of practice the regulations, they were a little slow in finalizing
the regulations, but they gave awhole lot of guidance in real time and
they closed up most of those gapsthe you know, the practitioners in this
(08:22):
space. I have to give ashout out to Nova Graddek, who's really
spearheaded a lot of this, youknow, the regulatory process, and they
they gave us quite a bit.There were a lot of gaps they were
pointed out and they responded, youknow, I mean, we have eight
(08:45):
hundred pages of various regulations and somost of those have been cleared up.
There's a handful of issues that arestill out there that we're trying to get
results. But I would say ninetyfive percent of the you know, the
question marks on you know, howmoney flows, how you record things,
(09:09):
what kind of projects you can do, how quickly you have to invest,
all that's been pretty well settled.So but that's off the Treasury and in
Congress for acting you know, reasonablyreasonably fast that. Yeah. And you
know, initially too, everybody wasinterested in opportunity zones for the real estate
(09:33):
aspect. But now I always thoughtthat the business aspect was more lucrative,
even though real estate was a stepinto it. But you have taken the
idea of a business in opportunity zonesto the next level with MIT. So
tell us about MIT. Yeah.So, MIT is a pro Utah based
(10:01):
cause fund. And so we havea two and a half acre, twenty
thousand square foot facility where we convertshipping containers into housing UH, into retail
UH into outdoor concert venue, showers, you know, emergency shelters. Pretty
(10:26):
pretty unlimited what we can do withthem. Uh. You know, it's
it's a it's a very green processbecause we're you know, we're we're repurposing
you know, existing shipping containers andthere's you know, tens of millions of
these all over the world. They'revery standard. Everybody knows the exact size
of them. There are standards,uh in building with these. Some some
(10:50):
cities you know, are are verylenient on it, uh Mini aren't.
But you know, we we navigateall that. But they're super durable.
They are you know, they canwithstand winds of one hundred and eighty miles
an hour, they can withstand theearthquakes. And the beauty is that are
(11:13):
movable. You know, even oncethey're fastened to the ground, they can
be quickly removed. And there's certaintax advantages via depreciation that this type of
construction is is a lot better thanwhat we call stick build, you know,
the typical house that you've framed.But so so we have two elements
(11:37):
to our business. We have theyou know, we on the real estate,
so that's kind of the you know, the solid part of it.
And then you know, obviously anoperating business has more risks to it,
and we've actually separated those into twoseparate qozbs under the Qualified Opportunity Fund to
umbrella. And what that allows usto do is the there's another Code section
(12:03):
twelve oh two qualified small business stockand so the operating business after five years
of being a sheet corp, wecan actually dispose of that in fires full
ten years and bill on twelve otwo, each investor can get up to
(12:24):
a ten million dollars tax exemption ontheir game from the exit of that that
that twelve oh two doesn't apply toreal estate, So that's why we segregated
the real estate and separated. Butit's the highly efficient structure, and you
(12:46):
know, our investors are liking thedepreciation deductions as well as the long flexibility
of exiting. Oh so you twodifferent funds then, Blake, is that
right? No, it's it's oneone OZ fund. But then the QO
(13:07):
zbs, which are the subsidiary entitiesunder the OS fund, are are in
two separate legal entities so that wecan exit at different times and still avail
ourselves to r C Section twelve ohtwo. If we had them lump together
into one entity, we could notget the twelve oh two benefits which allows
(13:31):
us. Okay, okay, arethere other opportunities on funds that you know
that are combining this whole business realestate set up like you've done as well,
only those that we've consulted on.Interesting, Well, that's why you
got to go to a professional,right, who else could know this?
(13:54):
It's our motto, go to theexpert. Let's get back to some of
these legislative changes that you mentioned beforesetting up the fund itself. There's been
no changes in that, right,It's still pretty much the same process.
Correct, correct, So you knowit's you. You have to, you
(14:15):
know, set that up and fundit within one hundred and generally one hundred
and eighty days of the time yougenerated the game. Again critically important.
A lot of practitioners don't understand this, but the one hundred and eighty days
can start as late as March fifteenthof the year following the game if the
(14:35):
gain that you generated is flowing throughon a K one. So if you
if you own a partnership and theysold a property, say in January of
twenty twenty two, that one hundredand eighty days does not start picking if
you elect until March fifteenth of twentytwenty four, and that takes you to
(15:03):
September of twenty twenty four, soyou have you know, as long as
as nineteen eighteen, nineteen months ifyou had a January twenty twenty three gain
to reinvest that into an os funSo again you just have to really really
understand the rules. But a minimumof one hundred and eighty days, but
(15:26):
as long as nineteen months to reinvestthose proceeds. So a lot of people,
when we sit down with them,they're beloaning that they owe all the
capital gain tax, and then westart looking at their facts and we say,
oh, you know, you stillhave time to reinvest that, right
right? Okay, So now youknow all about these rules and everything,
(15:48):
and you're an expert in the field, and I'm curious as to how you
came up with the idea of MITmodular because it's such a great compliment to
the opportunity zones. Did you knowsomebody in the business that did this kind
of stuff or how that how didthat emerge? So it's a it's a
it's a long story about try andmake it short. So when I worked
(16:11):
in California, I worked in LongBeach and my office overlooked the ports of
Long Beach in Los Angeles, SoI was looking over shipping, you know,
tens of thousands of But but Idid. I didn't start off with
the concept of shipping containers. ButI talked to you know, because of
(16:32):
the housing crisis in Long Beach insouthern California, I talked to a lot
of uh, you know, homebuilders and things and and multi family and
I said, what you know,and my my wife's half Japanese, so
I spend some time in Japan,and you know that they they have micro
(16:53):
housing, you know, they've beendoing that for decades. And so I
said, you know, what whatif we kind of went to with the
millennials outlook, you know, andI kind of kind of view it almost
like a you know, a Starbuckskind of model where it's like they like
to hang out in, you know, some open space they can interact with
(17:15):
people if they choose, but theydon't have to. And I said,
what what if we did like amulti family you know, apartment building where
you downsize the you know, thesleeping and the kitchen areas that you had,
you know, kind of like Vegas, you know, where you have
super plush common areas, so youyou end up, you know, putting
(17:37):
more more people into that, youknow, all that square footage for your
apartment complex. But you really increasethe the the buildouts on the common area.
And you know, and and again, the millennials are kind of minimalists.
They you know, they don't needa whole lot of space, so
you you know, you make itmore of like a studio department. Maybe
(18:00):
you have a Murphy bed that youknow, when you have a guest and
so on. You don't need youknow, more of a kitchen at than
a full kitchen, those types ofthings. And then when I moved out
to Park City, I you know, every time I opened the paper the
house, it was the same housingcrisis, but it was more focused on
(18:22):
the people in the ski industry.We have in Park City. We have
we at the time, we hadthree separate areas and about thirty five hundred
people come to town for the skiseason, uh to work, to work
the lifts, restaurants, et cetera. And there's no place for them to
stay. And and so I approachedyou know, veil and in Deer Valley,
(18:48):
and I said, look, youknow we can we can supply few
housing, you know, and youknow, we'll get ten acres outside of
town, you know, build theseBut and then bust them to the ski
resorts and and they love the concept, but they want to be involved in
(19:08):
the development, and you know,I've got my full time job. So
we ended up building going it tothem and they were like, hey,
you know you you build it,you build it and we'll do a master
lease with you. But you know, again, you know, it was
just it was too too big aproject to take on. But that that's
(19:29):
that's how we how we got startedin it. I know, that's really
cool. That's that's great. AndI saw your power point your other materials
there with some of the pictures ofthese things. Were those pictures artists renderings
or are they real? To thereal structures today it's about half and half,
so you know, half of thoseare are actually our product and then
and then some of those are ourrenderings at this point. But uh,
(19:55):
you know, we get beautiful,yeah, absolutely or displake. You would
never know that they started out asa shipping container. With what they ended
up, they're absolutely beautiful. Yeah, it's funny. Uh and thanks,
thank you for that compliment. Butuh yeah, we've had many people come
(20:18):
and tour our products and they don'talways know that they're standing inside a shipping
container because of the way that wethat we clad them in things. But
what's interesting is you have some peoplethat that say, oh, you know,
we wanted to look more like ashipping container. They want the exposed
(20:40):
metal. The problem that you havewith a shipping container, though, is
if you set if you don't uh. And that's what we're we feel we're
expert in is we know how toto insulate these because if you don't insulate
them properly, you're going to haveinsight temperature that's about twenty degrees hotter in
(21:03):
the summer than the outside temperature,and in the winter it's going to be
you know, ten degrees colder thanthe outside temperature. And we have perfected
building a thermos out of these,and we get you know, our ratings,
the you know, the inflation ratings, you know in the in the
(21:23):
load of mid thirties, and andwe have you know, completely off grid
and our solar powered and we alsohave you know, we call plug and
play that's kind of a more ofan RV type plug in set up for
all the utilities. So we're flexibledepending on where these are going to be
(21:45):
plantedly, you know, that's likethe best part of a container in my
mind. It's like it's so adaptablebecause you're you're like taking it a part
in creating something else using the material, but you can make it into anything.
(22:06):
And that adaptability lends itself to anykind of project any place in the
country or the world if you can, you know, the potential is just
out there. You can do anythingwith these right, you know, And
(22:26):
and so you're preaching to the choirobviously, but the yeah, the simplest
one is just using it as whatwe call an accessory dwelling unit where you
just you have some extra space inyour backyard and you you know, want
to put you one of your adultkids back there, or it could be
(22:47):
a parent or or you could leaseit out to a third party and make
revenue. And by doing that,you have a revenue stream if you're rinting
it out. And second, youimmediately increase the value of your property by
doing that. So we can youknow, we're doing a lot design work
(23:07):
right now for twenty and forty footersto go into people's backyards. And then
the other one you mentioned the portability, and you know, so you know,
somebody could you know, have anadu and then maybe they you know,
get a job in some other state. Well, you can actually without
(23:32):
a ton of costs. You know, you can remove these you know off
you know, off of their footing, put them, put them on an
eighteen wheeler, and you know,for you know, a couple thousand dollars,
you can have it in you know, four states over. And you
know you can't do that with youknow, some young person buys a condo
(23:53):
and then gets reassigned to another state. You know, now they have to
sell that play. You know,they if the market's not right, they
could take a hit or they youknow, they rented out and have all
those hassles. But this way,you know, you could literally take your
house with you. It lends youa new dimension to packing up the house.
(24:15):
Huh right, hey, Blake,what's the status of your fund right
now? What's it called? Andand are you accepting investors? Yeah?
So you know the website it's wW W M I tmodular dot com and
uh, yes, we we are. We just you know, we just
(24:38):
took in a you know, fairlysizable convertible. Note we still have about
two and a half million equity positionsstill out there. We bought the fillam
(25:00):
for one point eight in the landfor point eight million about two and a
half years ago and the latest eightSo with the improvements that we've made,
we've increased the building substantially. Wewill by year end UH be repricing the
(25:21):
units UH to take into account thatappreciation in the building. And we are
strategically located right in the rail yardin the probo rail spur and UH there's
billions of dollars coming in to hthe Greater Salt Lake region to have a
(25:42):
a national transportation hub here. Sothe fact that we're you know, we're
in Provo, which is usually ratedcause zones in the country. UH.
And then UH and then then beingnear all this transportation is is quite quite
(26:07):
good. So Blake would all thechanges in the well, the proposed things
in the legislature is will affect yourfunds in a positive, negative or no
effect kind of thing. We thinkabout that, Oh, it would absolutely
benefit uh M I T modular andit would help I would say all funds
(26:30):
because that that extended deferral period willbe very attractive for investors. Gives gives
people more time to invest into anos fund as well as operating you know,
their their actual projects, and thetransparency portion of this where funds will
(26:52):
be required to disclose a little moreat UH information as to how many employees
they have, how they're impacting thecommunity in a positive way. Those are
good statistics for us to have froma from an economic development standpoint to make
(27:14):
sure that the program was effective.You know what we don't want to have
happened is you know that information isn'tavailable and then ten years from now,
nobody can really tell what the impactwas. So I applaud that and that
transparency piece of it was in theoriginal legislation and you know, somehow got
stripped out unfortunately, so it shouldabsolutely be in there. The other feature
(27:41):
of the proposed legislation is they willallow funds, you know, outside funds,
bigger funds to invest in directly intoOZ funds. Right now, that's
prohibited for no policy reason, butyou can only have what we call a
two tier you know OZ fund andthen the q O z B underneath this
(28:03):
would allow another you know, publicfund or private fund to invest directly into
the UH, the Qualified Opportunity Fund, so that that will be a plus.
And then and then they will alsoUh, the federal government will be
setting up a billion dollar plus fundto h to further help out these distressed
(28:29):
communities that are are designated as asOZ funds. So anyway, some good
good stuff, Blake. Let meask you a question. I think I
was confused. Did I hear yousay that if you create two separate entities,
you can have two funds managing oneup opportunity zone location, one to
(28:56):
handle the real estate part one tohandle the business as part, but on
the same location or U I meanno, you could you even under the
current law, you can have youcould have multiple qualified opportunity funds investing into
(29:17):
a common qo ZB, which iskind of the more the you know,
the real estate development company or theoperating business. When I when I was
talking earlier about am I T modularI was, I was explaining that we
have the one common qualified opportunity fundand then we have underneath there we have
(29:41):
a real estate entity legal entity,separate legal inity, and then we have
our manufacturing operation in a separate legalentity, and that the purpose of that
was just so that we can exitseparately from those two investments. But there's
no prohibition. You have unlimited qozbsunderneath an OZ fund, or you can
(30:06):
have you could have ten fifteen OZfunds investing into a single project. What
the legislation will do is allow youto stack on another fund on top of
the OZ fund, which is currentlyprohibited. Wow. So it's something.
But you know they're seeing what's goingon and how it's benefiting the original distressed
(30:33):
locations and how it's expanding. That'sa great thing. It can only get
better, right right, Yeah,Well, before I close this out,
I do want to just say Blake, I love what you're doing with the
MIP stuff. I think that it'sa great industry. It's a great something
that's really needed. And the factthat it's an opportunity zone and you're involved
(30:56):
it makes it even better I thinkfor a US, and I think everybody
should be looking into this. Again, you want to go with experts and
people know what they're doing, andlike I said at the top of a
podcast, you're certainly one of thebest out there. So congratulations on where
you're at with this, and Ireally think that you're onto something really good
for sure. Well, thank you. You guys have been so supportive over
(31:18):
the years, and I really appreciateall the great information you get out in
the marketplace. Yeah, and Vicky, we want to close us out with
another comment or question or what well, you know, It's one of the
reasons we do our Mappable podcast isbecause we want to educate our listeners,
whomever they might be, on what'sgoing on. And it's why we seek
(31:45):
out the guests on our podcasts whoare those folks that know the most about
whatever the topic is, so thatour listeners can get information from the top
people, but so that they haveat access to the experts like Blake.
If you're interested in anything that hasto do with opportunity zones, whatever that
(32:07):
might be, you go to theexpert to help you to understand it because,
like everything, it's on the surface, it's a great thing, but
once you start going into it deeper, deeper, you can see the potential
to take you anywhere you want togo, as long as you use the
(32:27):
experts that we provide for our listenersto take advantage of. And Blake absolutely
is one of those best experts inregard to opportunity zone and also just financial
planning. So we love having Blakeand Blake, you've done a great thing
with MIT as well as with opportunityzones. Congratulations and kudos to you,
(32:52):
Thank you very much. And Ijust want to insert as I closed that
about twenty five percent of our timeis spent unwinding screwed up OZ funds.
And it's it is. It isnot for the faint of heart. I
(33:13):
mean, it's it's not a supercomplicated area, but you know there there
there's definitely some landmines and if youdon't do it right, you can end
up with very bad results. Soyou know, and we play nice in
the sandbox. We we work withother CPA firms and we won't steal your
(33:35):
clients, will just help you onthe OZ stuff. But yeah, there's
there's a lot of ways you cando it wrong, and that's with anything,
with everything. Yeah, and youknow how to do it when you
don't exactly, maybe I can,uh, maybe I could borrow your insulators
too and have them come from myplace. You got hot this summer,
(33:58):
I don't think. Yep, wecan do we can. Yeah, we
can do basements and rooftop decks foryour evening stuff. But the the basement,
the basements keep it cooler. Ilove it something, all right,
well listen Blake and thanks for beinga guest from the show, and Vicki
(34:21):
thanks for co hosting this. Andfolks, you're listening to the Mappable USA
podcast at mappable USA dot com.If you go to that website, you
scroll down, you see all oursyndication sources. Just pick the one you
like best and subscribe and you'll nevermiss another one of our episodes. And
if you want to be a guestlike Blake was today, there's a guest
camp there. Fill that out.We'll see what we can do about getting
you on the show. And ifyou like what you heard, send us
(34:42):
an email I didn't fout Male USAdot com, or just leave a comment
on whatever pape we can get iton right now, so French mir support,
thanks for listening. We'll be atthe next time with another I'm on
the USA podcast. Have a breakweet, got you one.
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