Triple net leasing is a common commercial real estate investing strategy. Unfortunately, it doesn’t qualify for the purposes of Opportunity Zone investing. But double net leasing does. And for some investors, it can offer a shortcut to OZ cash flow.

Axel Adler, a commercial real estate broker at Centennial Advisers, joins the show to explain how newly constructed NNN lease properties located in Opportunity Zones can be acquired pre-CO and renegotiated as double net lease agreements to fully qualify as an OZ investment.

Episode Highlights

• Why triple net leasing doesn’t qualify as an Opportunity Zone investment, but double net leasing does.
• The 6-step process to investing in pre-TCO double net lease properties in Opportunity Zones.
• Three case studies that demonstrate the successful applications of double net leasing as an OZ investment.
• Why pre-TCO deals are experiencing growth as an Opportunity Zone investment strategy.

Guest: Axel Adler, Centennial Advisers

• Axel Adler on LinkedIn
• Centennial Advisers
• Contact Axel: (949) 514-9410 | [email protected]

Also Featured On This Episode

• Only The Rich Can Play, by David Wessel
• David Wessel on The Opportunity Zones Podcast
• OZ Insiders calendar of upcoming events

About The Opportunity Zones Podcast

Hosted by OpportunityDb founder Jimmy Atkinson, The Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in the Opportunity Zones industry.

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Show Transcript

Jimmy: Welcome to the “Opportunity Zones Podcast.” I’m Jimmy Atkinson. Triple net leasing is a very popular type of commercial real estate investing strategy, but unfortunately it doesn’t qualify as an eligible Opportunity Zone investment. Now, double net leasing, however, works just fine, and today’s guest is gonna explain all of this to us. He is a commercial real estate broker at Centennial Advisers. He advises OZ investors on double net leasing strategies. Axel Adler joins us today from Newport Beach, California. Axel, it’s great to see you again. Thanks for coming on the show, and welcome.

Axel: Thank you very much, Jimmy. Appreciate it. It’s a pleasure to be here. I will start off by saying that when I started working in the OZ space, couple years ago now, I got a lot of information from your website, your database, and your podcast. So, appreciate that. And it’s an honor to finally be here myself. So, it’s great.

Jimmy: Well, thanks. That’s flattering. And, you know, thanks for following, and it’s great to have you here as well. Axel, I’m gonna have you introduce yourself a little bit more in a moment here, but I think probably a lot of our audience might already be familiar with you and Centennial Advisers, as you’ve been involved with Opportunity Zones for quite a while now. And by the way, you and I ran into each other a couple of times recently. We were with each other in Washington, D.C., at the Novogradac Opportunity Zone Summit last fall, and then more recently, you joined my Opportunity Zones mastermind group, OZ Insiders, and you were able to meet with me and the rest of our group at our OZ networking dinner in Dallas, last month. That was great. It was great seeing you there, and getting to learn a little more about your Opportunity Zone strategy at Centennial Advisers, and we’re gonna get to that strategy in a moment, but first, can you tell our audience a bit more about yourself, and your firm, Centennial Advisers?

Axel: My pleasure. So, I’ll start from the beginning. I was born in London, United Kingdom. When I was three years old, I moved to Hong Kong. So, I grew up in Hong Kong from 3 to 17. Went to a French international school there, and played for a local soccer team. That led me to get recruited to play Division 1 soccer, at UC Irvine, right here in Orange County. And so, that’s why I made my way over to the U.S. Played at UCI for four and a half years, and after that, it was time to get into the real world. So, I got into commercial real estate, and found a lot of similarities between sports and business, which helped me along the way for the beginning of my career, so, it was a… That’s a little bit about myself, my background.

I’ve now been at Centennial Advisers for two and a half years. When I first joined, my managing director, Justin White, who kind of is the, you know, created Centennial Advisers six years ago now. He used to manage offices for Marcus & Millichap, on the West Coast, for 25 years. And when I joined, he saw that I was hard-working and coachable, and so that’s why I went into the Opportunity Zone, kind of, team department, and grew it from what we had to what we have now, which has grown significantly over the past two and a half years, specifically thanks to the strategy that we’re gonna be talking about today.

Jimmy: That’s amazing. So, not only are you an anteater, first of all, UCI, but also you’ve spent your entire career working in Opportunity Zones, which I don’t think any of my other guests could say, but that’s fascinating. I wanna dive in and talk a little bit more about triple net leasing, double net leasing. As some of our listeners are probably aware, an Opportunity Zone investment has to be an active trade or business. It has to stimulate economic revitalization in certain neighborhoods all around the country, that have been designated as Opportunity Zones, and the IRS said, in 2019, I believe it was, when they came out with the final regs, that a triple net leasing investment strategy did not rise to the level of an active trade or business. There wasn’t enough that the investor or the manager of the property was actually doing to stimulate that local economy.

It’s rather unfortunate, because I do think, you know, you could argue that, you know, if you’re bringing in a tenant that is revitalizing the area just by their presence of being there, what does it matter if the investor is engaged in active trade or business or not? The tenant is engaged in an active trade or business, but anyways, that’s enough about me, being on my soapbox about that. I’ve never really fully understood why that is, but suffice it to say, it is that way. Triple net leasing is not in a qualifying Opportunity Zone investment. However, double net leasing is. Basic question, first of all, actually, Axel, before we get into your strategy and you break that down. Could you explain what all of this stuff means? Like, what is net leasing, what is single net leasing, what is double net leasing, what is triple net leasing, and, you know, how does it fit into the portfolios of various types of real estate investors?

Axel: Yeah. For sure. So, I’ll start with, here at Centennial Advisers, I would say that 80% of our business is 1031 exchanges. The other 20% is probably Opportunities Zones and myself. But, yeah. What we’ve been doing for our clients for six years now is basically helping them sell properties in California that they’ve owned for a long time. Maybe they don’t wanna have the management. Maybe they’re out of depreciation, etc. And what we’ve, in most cases, what we do is we help them 1031 out of state, and in most cases, it’s triple net leases. So, what that means is that you’ve got a tenant, let’s say, Chipotle, and they are going to be the tenant for the next 10, 15, 20 years, depending on the lease term, and they will be taking care of property taxes, insurance, and maintenance. So, what that means for our clients, for example, who do those 1031 exchanges, they’re leaving California, where maybe they had 15 units where it was very management-intensive, and they’re buying, their up leg is a, you know, Popeyes, Chipotle, in a more income, or more tax-friendly or legislative-friendly state. Texas, Florida, Tennessee are the usual suspects. And so, yeah. All they have to do, when the transaction’s done, is that they just have to check their bank accounts, make sure that the money is in there every month, and that Chipotle or whoever the tenant is is paying their rent monthly. Whatever happens to, you know, the property, Chipotle will pay for. Insurance and property taxes, Chipotle will pay for. So, that’s…

Jimmy: It’s a far cry from managing your own property, or your portfolio of properties, where you have to deal with the 3Ts, right, tenants, toilets, and trash, and you gotta go fix the smoke alarm, or you gotta go fix the toilet for your various tenants at smaller multifamily buildings. You get out of that. You exchange into this triple net leasing type of strategy, where your tenant is now a Chipotle or a Starbucks or a Dollar Store that, or a 7-Eleven. I mean, there’s whole variety of different tenants that engage in this type of triple net leasing strategy, and now, it’s basically just mailbox money, right?

Axel: Yep. Exactly. Exactly. And then…

Jimmy: You still… Go ahead. Go on.

Axel: Well, I mean, and then, obviously, you know, you can have modified gross, double net, single net. Depends on, you know, what the tenant wants, what the buyer wants, and we’ll go into it during the OZ strategy that we’re implementing, but the key thing here is to renegotiate the lease from a triple net to a double net, to make sure that our client has enough management, active management in the property, so that it qualifies for the OZ benefits. So, yeah. We’ll get to that.

Jimmy: Right. So, just, before we get to that, just what is the difference between a triple net and a double net, typically? You said a triple net, the tenant’s taking care of the property taxes, the insurance, and the maintenance. So, is a double net the tenant is only taking care of two of those things? Am I understanding that correctly?

Axel: Yep. That’s exactly right. Whatever it is. You know, they can take care of insurance and property taxes, and the client takes care of maintenance. Whatever way you wanna do it. You know, they could take care of property taxes and maintenance, and not the insurance. Yeah. Exactly. That’s what it is.

Jimmy: And then, is there such thing as a single net, or did I just make that up?

Axel: I don’t see a lot of them. No.

Jimmy: All right. So, I just made that up. So, it’s pretty much triple net is like the standard bearer. That’s, like, the most popular type of investing strategy of this type. And it’s particularly popular with 1031 exchange investors, but double net leasing strategy is particularly important if you’re an Opportunity Zone investor. So, now I wanna hear from you, Axel, who are your typical clients? Why is he or she coming to you? And then what is your process for steering them into these types of, not triple net leasing, but double net leasing strategy, that are Opportunity Zone-eligible?

Axel: Yes. So, I would say that the typical client is anyone who has had a capital gain event, you know, recently. I’ve dealt with clients who sold their businesses for a large amount of capital gain, and they’re looking into Opportunity Zones, for obvious reasons, all the tax benefits. Some of my clients have come from real estate. They’ve sold, you know, a building, got a large gain, or maybe they’re in a 1031, and… A couple of my clients actually were working with other brokers and, you know, failed their 1031. They missed the window. And they think they need to, you know, pay the taxes, and it…

But I basically tell them that not only can you kind of buy the same type of property, like a Starbucks, like you were gonna do on the 1031, but on top of that, you get all the OZ benefits. One of my clients referred to the strategy as a 1031 on steroids. So, that’s kind of who the best, or… The typical clients are, one of my clients sold crypto, and he liquidated all his crypto, when it was high a couple weeks ago, and now we’re going out and buying a couple gas stations for him. So, yeah. Just, anyone with capital gains. In every single case, I would say there’s a lot of education that goes behind it, depending on the background. You know, if they were art collectors for their entire life, sold art, and don’t know anything about real estate, then, you know, it’s my job to educate them about the strategy, Opportunity Zones, pros, cons, dos, don’ts, etc.

Jimmy: I particularly like the crypto into gas station example. You’ve got this wealth built up on this asset that, I don’t know, doesn’t really even exist. Is it even real? It’s very speculative, and, cash out when you can, and then invest in something that’s actually real and tangible. That’s really cool. So, you have what you’ve dubbed the “Golden Opportunity Zone Strategy.” It’s a six-step process. Step one is generate a capital gain event. So, I think you already kind of walked us through that, but what are the rest of the steps involved with going from being an investor in, whether it’s real estate, crypto, art, maybe privately-held business, maybe a stock market investor, any type of capital gain-triggering event, and then going all the way through the process of becoming an investor in a double net lease property?

Axel: Yes. So, in Opportunity Zones, you can go down two routes. You could go down the, what I call the DST-type OZ fund, where there’s a project with 200 units, multifamily, and you’re investing with hundreds of other people. Sometimes it’s 100, 200, 300. That’s one option. In that situation, most of my clients have told me that what they don’t like is they don’t have much control over the process, or decisions. And so, the second step of our strategy is setting up a captive Opportunity Zone Fund, or some, you know, I’ve heard self-directed OZ Fund. It’s basically an LLC, with some language in the contract that qualifies it as an Opportunity Zone Fund. When that happens… And we’ve got attorneys. I’ve worked with a lot of attorneys that set those up pretty easily. And what they like about that is that they have the entire control, and, you know, they can kind of pick and choose what they wanna buy.

When you pick the captive OZ Funds, then there’s another two routes. There’s one where you can buy some land and develop it, and take advantage of the OZ benefits that way. Or there’s another way where you could basically go out and find close-to-completion, brand-new construction buildings. And that’s kind of our focus. The reason why we focus on that is, the client that I’ve worked with, a lot of times, they tell me, you know, between the time that they buy the land, they entitle it, they develop it, and, you know, they stabilize it and they actually start getting money from it, it could be a two-year process, sometimes, depending on where you’re at. In the brand-new construction scenario, basically, as soon as you close, you can get some fast cash flow. There’s a bit of a buffer there, and I’ll go into that, because that’s the third, fourth and fifth step. But it’s a very close, you know, it’s a couple weeks, couple months, whenever you might want it to be, between when you close and actually receive some cash flow. So, that brings us to step three, is basically …

Jimmy: Yeah, let me… Well, let me just interrupt you there. That’s brilliant, because so many Opportunity Zone strategies are not cash-flowing for at least two, three, maybe four years, because they’re ground-up development, you’re taking on a lot of construction risk, a lot of development risk. And then there’s the lease-up period that has to occur, even after the property is completed and put into service, right? But this, you’re getting access to an under-construction property, that’s nearing completion. Oftentimes, the lease is already lined up with the tenant. I think, that, so, it’s, your strategy, this double net leasing strategy, is basically a shortcut to cash flow. You’re forgoing a lot of the development risk, a lot of the construction risk. So, I think…I just wanted to make that clear what was going on there. I have a follow-up question, also, about under-construction properties. How do you locate them? What kind of properties are you typically finding, and why do they need investors at this stage in the game?

Axel: Absolutely. Over the past two and a half years, I’ve been calling brokers, developers, tenants, everyone, and that’s how I’ve built, kind of, the pipeline of deal flow. So, I know, just last week, for example, a developer gave me a call and told me that between now and the end of the year, he’s gonna have six 7-Elevens that are gonna be completed. Three of those are in an Opportunity Zone, and since we’ve done deals with them before, he’s telling, basically tells us, you know, since we have to close before the building is done, we can make something happen, you know, off-market, basically. So, that’s how I’m… I mean, it’s a combination of what’s on the market, of kind of what I’ve gathered over the past couple years, the people I’ve talked to, the relationships I’ve built, that kind of gives me access to all these deals that are under construction. Why do developers want to sell them before they’re done? Because I have yet to see a developer who doesn’t want to sell their project as soon as possible. So, in most cases, when I, you know, when I talk to them, I tell them we’re willing to buy this before it’s actually done. Obviously, in the contract, we need assurance that it’s gonna be done. We have that language in there. But they always say yes. No one has said no yet.

Jimmy: Pretty good success rate. Okay. So, just to recap, the steps that we’ve covered so far, your client generates a capital gain. Then you help that client create a captive OZ Fund, which is essentially an LLC with some special language in the operating agreement, and it has to file one or two different specific tax forms every year. And then, you identify for the client a property located in an Opportunity Zone, that’s under construction. What’s next after that?

Axel: What’s next after that is taking control of the deal, going back and forth on LOIs, pricing and terms. Once we agree on that, we go to the contract. And the LOI, at the very beginning, this concept of closing before their certificate of occupancy, and having the double net lease, is a non-negotiable for us. It’s in there at the very beginning. It’s even, I even talk, when I talk to developers or brokers or whatever it is, I tell them from the get-go. I’m like, “If… My clients are motivated. They need to buy properties like this because they’ve got tax implications. And they will buy one. Whether that’s with you or with someone else, they will buy that. If you want it to be you, then it has to be pre-CO, and double net lease.” Those are the two things that have to happen. So, there are…

Jimmy: So, if it doesn’t have both of those two things, then it’s not Opportunity Zone-eligible.

Axel: Nope. Nope.

Jimmy: Right.

Axel: So, you know, when I find a deal, and I call up the developer, I’m like, you know, first question, “Is this open and operating? Is this under construction? Under construction. Great. When is the CO coming?” You know, “How long till you get the CO?” Thirty days, 60 days, 90 days. Gives me enough time to kind of, you know, strategize with my clients, to see at what point do we wanna kind of engage, and strike on the deal. Because, as we mentioned, kind of, one of the benefits is that, if you have the timing right, if you do the timing right, the disruption in cash flow can be very minimal. So…

Jimmy: Is that it? Is that the whole process?

Axel: Yeah. So, basically, LOI, contract. While we do the contracts, that’s when the attorneys, I don’t renegotiate the lease, but the attorneys renegotiate the lease from a triple net to a double net. Different ways to renegotiate it. And our personal favorite is the maintenance net. So, the tenant takes care of insurance and property taxes, and my client will take care of maintenance, whether that’s roof, structure, parking, landscaping, janitorial services. Kind of depends on the client’s comfort level with the strategy. If he wants more, great. If he’s, you know, whatever he’s comfortable with, we can accommodate. Once we’ve kind of told the tenants that we’re gonna renegotiate the lease, it’s a negotiation. So, everything’s kind of up for negotiation. So, that’s great.

The one thing we haven’t renegotiated is the rent. You know, the rent is whatever the rent is, but the fact that the tenant is gonna have less responsibility, and my client is taking on more responsibility, that’s also why we haven’t really come across tenants who say no, because in most cases, they’re telling me, “Oh, your client wants more responsibility? Sure. That’s fine. We’ll do that.” So, that’s great. Once the contract is drafted up, that’s usually when we go to the fifth step, which is, kind of, financing the property. The reason why we add debt on the property, I’m sure a lot of your viewers are aware, but in case someone doesn’t know, if you buy a property, you know, with your capital gains, all cash, you don’t have any basis in that property. So, in order to create basis for the property, you have to add debt. And so now, we’ve got this track record of these deals, to where I’ve got a list of lenders that are lined up, that are willing to lend pre-CO. So, what they do is, you know, for a $4 million property, for example, my client puts $2 million of capital gains, and then he bridges the other $2 million until the CO, until the close, until they pay rent, and then that turns into a perm loan. And then you’ve got that basis that you can depreciate along the way.

And last but not least, the last step is closing pre-CO. So, yeah. I went over a lot, but you’re right. Capital gain event, number one. Number two, create a captive OZ Fund. Number three, identify an under-construction OZ property. Number four, renegotiate the lease from a triple net to a double net. Number five, finance the property. Number six, close pre-CO. And then you’re good to go.

Jimmy: It’s just that simple, and that’s really cool. I haven’t heard a lot of… I think you’re the only person I’ve heard of that is doing something quite like this. It’s really unique. Yeah. I mean, it’s crazy that the, yeah, you’re not even renegotiating the rent. I suppose you could go back and ask for a little bit of a rent increase, but why bother? I mean, you’re… Because your client’s only taking on either property taxes or insurance. You’re usually letting the tenant continue to handle the maintenance… I’m sorry. I’ve got it the other way around, right? Got the other around. You’re continuing to handle the… You say it again. Recap it again for me.

Axel: So, we take the… my buyer takes the maintenance net. The tenant is in charge of property taxes and insurance. My client takes care of maintenance. In most cases, roof and structure. What’s great with that one is that it’s a brand-new construction. Not much to do on a brand-new construction, roof or structure, for the first 5, 10, 15 years, potentially. And in most cases, we like to go out and get warranties as well. So, you know, a little bit more expensive on the front end, but definitely worth it.

Jimmy: Because you’re taking on the maintenance, or your client’s taking on the maintenance. The tenant continues to take care of the property taxes, the insurance. You ever negotiate the double net lease so that your client’s taking on any of the property taxes or the insurance, or is it usually that your client’s taking on the maintenance?

Axel: So, we looked into that, but we prefer the maintenance because there’s a lot more active management that we can bake into the maintenance part of things. Insurance and property taxes, it’s more just financial, and there’s not much active management that you can do, where…

Jimmy: And so that might not rise to the level of being an active trade or business for the purposes of being a OZ-eligible investment. Okay, that makes sense. So, you take on the maintenance, and then you figure that now rises to the level of an active trade or business, and you’re good to go. Sorry, I tripped over my words there a minute ago. I think we got it all sorted out now. Thanks for correcting me. I know you have some case studies that you wanted to show. If you’re ready, we could start walking through some of those. By the way, if you’re listening to this podcast on Apple, or Spotify, or some other listening app, the next few minutes is gonna be visual. You can switch over to YouTube. You can find us at youtube.com/OpportunityDb. I’m gonna share a few slides from Axel’s presentation deck, starting with this one right here. This is a Starbucks in Bryant, Texas. Why don’t you tell us a little bit about this one, Axel?

Axel: Yeah. Of course. So, this first one, as you can see, is a Starbucks. So, I’ll give you a bit of a background on the client. His family, or the family that came to me, located and based out of Texas. And so, they had capital gains from a variety of different investments, and they were looking at Opportunity Zones for a while, I think about a year or so, and a lot of the people they were talking to told them, you know, “Just buy some land and develop it.” They weren’t the biggest fan of that. They didn’t have much development experience. That wasn’t their forte. And so, when I reached out to them and kind of explained to them this strategy, they told me that it would work perfectly. They were on a time crunch, because there was a certain, you know, time frame that they had to make sure they invest their capital gains within. And so, this was the third deal that we bought, or that I helped them buy.

About this deal, I found it when it was under construction. It was actually, the developer reached out to me and told me about it three weeks before certificate of occupancy, and my client absolutely loves the area. What I will say is that my expertise and my forte is finding the best-located Opportunity Zone deals in the country. In most cases, yes, there are lower-income areas, that need revitalization, but there are also a handful of Opportunity Zones that are great, that are really, really good. And this is one of them. This Starbucks is located in Bryan, Texas, the city right next to College Station. College Station, home to Texas A&M. So, this Starbucks is about 3 miles away from Texas A&M. There you go. Seventy-four thousand students. Just a lot of people in that area. And it’s continuously growing. I think that the Bryan/College Station area is the 8th-fastest growing college town in the U.S. So, looking 10 years down the road, as well, these areas with a lot of growth is kind of what I’m focusing in on as well.

So, yeah. So, three weeks before the CO, we engaged. His nephew goes to Blinn College, which is the Community College in Bryan, and his plan is to transfer two years in to Texas A&M, so he knew the area very well. And the day we put it under contract, his nephew just drove by, took a couple pictures, and sent it over to our client and myself, so we could, you know, have the latest on the construction update, make sure everything’s, you know, going according to plan. So, that would be the first deal. For a Starbucks, 5%, 5.75% cap is pretty high. I would say that the stronger the credit of the tenant is, the lower cap rate you get. The one tenant that comes to mind is 7-Eleven. 7-Elevens have traded between 5% and maybe 5.25%, forever. There are very little 7-Elevens that trade above that. And so, Starbucks is kind of the same area, 5.25% to 5.5%. So, getting a 5.75% for a Starbucks, for a 10-year lease, which is perfect for the OZ benefits, was a home run for this particular client.

Jimmy: Yeah, that’s great, Axel. And this is a pretty cool case study you have here. So, Byran, Texas. I pronounced it “Bryant,” but it’s Bryan, Texas, the one next to College Station. Let’s go to the next one here you wanted to show us, CMC Metals, I believe, so… Let’s see. No, this is Caliber Collision. This one here, right? Caliber Collision… CMC Metals we’ll do third. Go ahead with Caliber Collision now.

Axel: Perfect. Similar concept. What I will start with is, one of the areas, or one of the Opportunity Zone areas that I focus on are universities. The reason being, college students don’t make a lot of money, so, you know, it’s considered lower-income. But we all know that universities and, in and around universities are great areas to invest in. There’s a lot of growth and a lot of innovation in those areas. This particular client was…built his business. He has a wind turbine business, and…domestically, here in the U.S. And he sold it back in 2022, for a significant amount of capital gains, obviously. And so, we went out and helped him acquire this Caliber Collision. But on top of that, three 7-Elevens and a car wash. The reason why we’ve picked those properties is because of bonus depreciation. Back in 2022, it was 100%. Last year, it was 80%, this year is 60%. What happens with bonus depreciation in the future, who knows. But he was able, basically, to really take full advantage of the depreciation that these properties offer, to offset the capital gains tax he was gonna pay in 2026. So, we wiped that out completely for him.

This particular property, Caliber Collision, once again, 3 miles away from Purdue University, over 45,000 students, and only a mile away from the Purdue Research Park, where you’ve got huge companies, you know, innovating every day. They’ve got a lot of people, a lot of employees, a lot of jobs out there. And so, another, in my opinion, and my client would agree, another home run for him, in West Lafayette, Indiana. West Lafayette, Indiana, between Chicago and Indianapolis, right there. And, yeah. That’s a little bit about that one. One of my personal…

Jimmy: That’s another good one. Fun fact, I have been to Bryan, and I’ve also been to West Lafayette, Indiana, so… But let’s keep going. McCarran, Nevada. I don’t think I’ve ever been here, actually. This is right outside Tahoe-Reno, it looks like. So, tell us about this one. This is CMC Metals, in McCarran, Nevada.

Axel: So, the last one was one of my favorites. This is my favorite. It’s, yeah, 30 minutes east of Reno. And I don’t know if you’ve heard of the Tahoe-Reno Industrial Center, but basically, it’s an entire county that was designated as an Opportunity Zone. It’s Storey County. And the Tahoe-Reno Industrial Center, we call it the TRIC, is, I think, one of the largest industrial centers in the world right now. It’s spanning over 100,000 acres.

Jimmy: I’m gonna go out on a limb, too, and say that, of all 8700-plus Opportunity Zones, I think this one is the most famous one. Or perhaps the most infamous one. There was the “New York Times” article written about this one, about five years back, but, anyway.

Axel: Exactly.

Jimmy: Enough about that. You go on.

Axel: In David Wessel’s book, “Only the Rich Can Play,” this is one of the Opportunity Zone that he talks about. He actually also talks about the West Lafayette one…

Jimmy: Ah, very good.

Axel: …within two pages of each other. So, the fact that, ended up doing deals in both of those was funny, and, yeah. Personally, I’m pretty excited. So, yeah. The reason why this Opportunity Zone is so great is, your neighbors are Tesla, Walmart, PetSmart, Google, Switch. I mean, you’ve just got huge, huge companies that are moving to this area. A lot of development. I’ve been out there three times now, and every time I go, there’s more buildings coming up in right, left, and center of the main roads over there. And a little bit about CMC Metals, I mentioned, you know, Google, Switch, Tesla, they’re huge, but CMC Metals is the largest manufacturer of steel reinforcement bars in the U.S. Originally, it’s a Polish company, but they’re kind of the main guys when it comes to rebar. So. highways, stadiums, buildings, they produce those things. And so, they’ve been contracted a lot, in the TRIC, to supply the rebars for the buildings that are coming up in that area. So, definitely one of my favorites. Looking 10 years down the road, once again, the growth is gonna be amazing. I’ve built great relationships with some developers out there, that have very exciting projects, whether that’s industrial, whether that’s workforce housing, multifamily, retail, obviously. A couple gas stations coming on in that area very soon. Some fast food, QSRs, Popeyes, Chick-fil-A, Starbucks, the usual suspects. They’re all coming to this area, and, yeah. Definitely one of my personal favorites right here.

Jimmy: Think it’s a good one, for sure. “Only the Rich Can Play,” David Wessel. Had on my bookcase, right behind me. Actually had David on the podcast when this book first came out, a couple years back. Really interesting stories in here. A bit of a sensationalistic take on, and maybe a little bit overly negative, about what Opportunity Zones are doing, but it’s all about Opportunity Zones. And the first couple chapters in particular go back to the beginning of Opportunity Zones, and some of those first few conferences. So, it’s a pretty fun trip down memory lane, if you were involved in the industry early on. I recommend at least the first couple chapters. But read it with a grain of salt, I would say. Axel, that was great, hearing about the strategy, getting some of those case studies, Tahoe-Reno Industrial Center, West Lafayette, Indiana, Bryan/College Station, Texas. You know, before we conclude, wrap up the episode today, a few more questions for you. Wanted to get your… Great insights so far, by the way. Great strategy, as I mentioned. Broader question, I kind of wanted your take on, are there any overall trends in Opportunity Zone investing that you’re seeing, or that you’re keeping an eye on? You know, what are your thoughts on OZ investing overall?

Axel: Yeah. So, since I’ve been in this space for a couple years now, I would say that there’s a lot of different ways and avenues you could go down. You know, as we mentioned, buying land, developing, or brand-new construction. I’ve talked to a lot of accountants, a lot of attorneys. From their perspective, it sounds like OZ investing has kind of died down these past couple months, which, I have kind of seen the opposite. I’ve seen it ramp up. And I think the main reason for that is the strategy. A lot of people look at OZs and might get scared, might think that there’s too much work to do, too much compliance. It’s gonna cost a lot…whatever the objection might be. And this strategy offers something relatively simple, that works, and that’s why I’ve seen a lot of activity these past couple months. And it’s very, I mean, you mentioned it. We’re the only ones doing this in the country. I’ve talked to thousands of people, and no one has heard of it, or if they have heard of it, they don’t know anyone who’s actually doing it and implementing it. So, we’re definitely focused in that niche, and we’re running away with it.

Jimmy: That’s tremendous. Yeah. I think pre-TCO, or pre-certificate of occupancy investing, in Opportunity Zones, is a trend that is definitely worth keeping an eye on. I think it’s a growing strategy, as you just mentioned. It eliminates a lot of the construction risk. It’s harder to get construction financing, debt financing these days. If you can get a building that’s nearing completion, or maybe it’s already been completed, but just hasn’t received it temporary certificate of occupancy, its TCO, or, in some jurisdictions, that’s called a C of O, a certificate of occupancy. You can acquire it right before that happens, and then you can immediately put it into service like that. It starts cash flowing very rapidly. It eliminates a lot of complication that a lot of these other Opportunity Zone Funds encounter. Not to say that there isn’t room in some investment portfolios for ground-up construction, but this is definitely a good option for a lot of investors out there. Axel, it’s been great having you on the show today. Thank you so much for sharing your strategy and your insights. Where can our audience of Opportunity Zone investors and advisors go to learn more about you and Centennial Advisers?

Axel: Best place to go would be cell phone. Give me a call. My cell phone is 949-514-9410. I’m sure Jimmy will add my email, my LinkedIn, to the show notes as well. But for Centennial Advisers, www.centennialadvisers.com. That’s the best thing. And then, give us a call. We’re happy to help you, kind of educate whoever needs education about the strategy, 1031 exchanges. I would say that the goal and the vision is to, you know, genuinely help people in their real estate career, whether that’s their first commercial property that they’re buying, or they’re very experienced, we can help in every way. And in some cases, OZs aren’t the right thing for you. We’ll tell you how it is. So, yeah. That’s where everyone can find us, and looking forward to doing a lot more, you know, work with you, and then kind of seeing where the OZ Insiders takes us as well. I will definitely try to get out there in Chicago. I think it’s mid-May?

Jimmy: May 17th. Thanks for teeing me up. Yeah. We’ll get together at Gibsons Steakhouse in Chicago, Illinois. It’s the OZ Insiders next Opportunity Zone networking dinner, May 17th, 2024. If you’re interested in attending the dinner, and you’re already an OZ Insiders member, just shoot me an email. If you’re not already an OZ Insiders member, you can learn more about joining OZ Insiders, you can learn more about our calendar of upcoming online master class meetings, as well as our in-person events, by heading over to ozinsiders.com. Axel, thanks for giving me the little alley-oop, for that plug there. For our listeners and viewers out there today, in addition to all of the great content we have on ozinsiders.com, I also produce show notes for all of our podcast episodes. Those are available at opportunitydb.com/podcast, and I’ll make sure I link to all of the resources that Axel and I discussed on today’s show. I’ll put his phone number and his email address and his LinkedIn account on there, too. Please be sure to subscribe to us on YouTube or your favorite podcast listening platform, to always get the latest episodes. Axel, thanks again so much for being here today. It’s been a pleasure.

Axel: Thanks so much for having me, Jimmy. Appreciate it.