Challenges for Smaller Opportunity Zone Developers, with Garth Everhart

Garth Everhart

What are some challenges that smaller Opportunity Zone project developers face? And are there benefits to investing in a smaller OZ fund?

Garth Everhart is president of The Everhart Company and the developer and promoter of the Ceeley Opportunity Fund, a small, single-asset, project-specific fund located in greater Portland, Oregon.

Click the play button below to listen to my conversation with Garth.

Episode Highlights

  • How Opportunity Zone investors are a different class of investor.
  • The challenge for smaller Opportunity Zone funds to convince investors of regulatory compliance and funding.
  • The status of bank construction lending during the current economic crisis.
  • The challenges with raising real estate capital from non-real estate investors who are more familiar with stock market investing.
  • The burden that the investor deadline extension has had on Opportunity Zone capital raising efforts this year.
  • The challenges of Opportunity Zone development in smaller markets.
  • The burden that additional reporting requirements might place on smaller Opportunity Zone developers.
  • Some of the benefits of investing with smaller developers in smaller projects outside of primary markets.
  • Background on Garth’s Ceeley Fund project investing in Fairview Village.

Featured on This Episode

Industry Spotlight: Ceeley Opportunity Fund

The Ceeley Opportunity Fund is a single-asset, project-driven fund, raising $3.5 million for construction of 4-story mixed use building at the center of the 91-acre Fairview Village project in Portland’s east metro.

Learn more about the Ceeley Opportunity Fund project:

About the Opportunity Zones Podcast

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

Show Transcript

Jimmy: Welcome to the “Opportunity Zones Podcast.” I’m your host Jimmy Atkinson. Today’s episode will focus on the perspective of a small developer trying to raise opportunity zone capital. Joining me today is the developer and promoter of the Ceeley Opportunity Fund. Garth Everhart. Garth joins us today from Vancouver, Washington. Garth, welcome to the show.

Garth: Hi Jimmy, thanks for inviting me. I appreciate the opportunity to talk about the project and some of the issues we’re facing as a smaller developer.

Jimmy: Absolutely, yeah. Happy to get your story here, Garth, you and have been working together trying to promote your opportunity zone fund and opportunity zone deal in Fairview, Oregon just outside of Portland for the past several months. And it’s been a little bit of a struggle at times you’ve learned a lot of lessons though I think that you can share with a lot of our listeners today, many of whom may be in a boat very similar to yours. So before we really get rolling, actually, I’d like to kind of backup and get a little bit of background on you, Garth, and on your Ceeley Opportunity Fund. Can you spend a minute just giving us a little bit of your background, your experience, and what your project is?

Garth: I started in real estate in 1985 out of graduate school in the Seattle area. I worked in heavy construction management, Gail’s Waterfront. I worked for Boeing and all these different projects than I transitioned for a 10-year career as a shopping center developer with a group out of Bellevue, Washington. We did primarily focused on neighborhood community shopping centers in Oregon and Washington in smaller communities, these are 30,000-foot shopping centers in a grocery store and drugstore kind of format. And I was pretty comfortable in that because it was smaller communities which kind of mirrors the community I was raised in so I could speak with the planners and investors and kind of work everything out.

Then I moved into high-density housing in downtown Portland in the Hawthorne District doing some of the first row-house projects as Portland changed its landings code to promote density and infill. And then I ended up spending probably 15 years working on a project called Fairview Village, which was the first privately developed new urbanism project on the West Coast. The 91-acre project we built out City Hall, post office, library, Target, 20 or 30 mixed-use row houses, 3 apartment buildings, and a couple hundred homes or 150 homes, just kind of a walking environment. The focus was on reducing vehicle traffic. And then I did a stint in Maui, five or six years in Maui doing, oh, an estate farm project with a focus on promoting local agriculture on the North Shore of Maui. And then I’ve always kept a home in the Fairview, Portland area and came back and I’ve been working on various mixed-use projects in the area. And I find myself ready to go with the Ceeley project with a 4-story, mixed-use building, 33 apartments with a ground floor office at the main intersection in this 91-acre project here at the village.

So it’s a wide smattering of experience in a real estate as a developer, promoter, contractor, and is a new venture in terms of opportunity zones or opportunity funds are interesting, intriguing, I like the concept. The product is the same kind of product that we’ve developed before but this has some different wrinkles to it. And it’s been interesting and challenging, not just because of COVID, but just because of some of the IRS and all those issues that come up. And generally, small developers who rely on investors don’t really deal with at that level.

Jimmy: Right. Yeah. And I’m gonna ask you more about your Ceeley Opportunity Fund project and the deal you have out in Fairview a little bit later toward the end of the show. But let’s dive into some of the issues that you face as a smaller developer. So, some questions that have come up with you from potential investors from conversations that you and I have had in the past, Garth, you tell me that many investors are worried about smaller developers’ ability to stay compliant so that the investors themselves don’t end up losing their opportunity zone tax benefits if the deal gets blown. So how do your investors know, and how do small developers, investors in general, know that a project like yours will be funded and remain compliant with the opportunity zones regulations?

Garth: The way I handled it, it took me a while to recognize that OZ investors are a different kind of investor than I’m used to. I’m very much used to working with smaller investors that are…you know, it is a part of the normal investing cycle to invest directly in real estate in new build projects. So that’s kind of the world that I’ve lived in and operated in the last 10 or 15 years. The OZ investors kind of a different kind of approach because a lot of those people are investing capital gains that they earn through the stock market. So they may have invested in a company or a series of companies. They didn’t really invest necessarily in the final product, like a piece of real estate, but they invested in the company. And the company did well, now they have some capital gain.

But they seem to kind of look at it like, if I’ve been asked to, you know, prepare prospectuses with returns from the last five or six real estate deals that I’ve done, that’s hard for a small developer to do. If you’re a large developer with 40 or 50 employees and you manage 50 or 100 projects, you have a lot of records that you can put together and create, like, fun prospectuses. But for the small developers that I know, many of us have private clients that would be loath to see actual returns are used in promotions for other projects that they’re not involved in.

So it’s kind of, you know…and I can get it. I can understand it, but I just never dealt with investors who are not already in what I call the new build real estate development arena. So they’re obviously savvy investors. But it’s almost like I’m speaking New English and they’re speaking Louisiana English or something like that. There’s just a little difference in terms in what they’re expecting. So I’ve had a hard time confronting that. So the way I addressed it is to over-raise. We’re raising $3.5 million for a project that has about, I think, an $8.4 million cost, we’re leaving roughly a million dollars in equity as a developer to provide encouragement to the investors.

But that gets us to a loan to cost ratio of about 60%, which is very feasible even in today’s construction on new market. We’re leaving equity in the deal, which helps a lender when they look at the developer. And we have debt coverage ratio of 1.8. I mean, normally, you’d see you could probably borrow, loan to cost, somewhere around 75% as long as you have a debt coverage ratio of at least 1.3, you’d be fine. So by raising more equity, it does drive down the returns a little bit. But what it does do, allow you to walk in to various construction lenders, and they see that you’re liquid, you have more equity than perhaps is needed, which makes a lender happy. And so with equity and a happy lender, you can get under their construction. And once you start construction, there are risks, but those risks pale in comparison to a lot of risks that you have to overcome to get to that point.

Jimmy: Right. Yes. And that brings me to my second question or a follow-up question on that first point, you know, what has been the status of lending lately in the current post-COVID economic environment that we find ourselves in? Has it been tougher to get financing these past five or six months here?

Garth: It’s getting better. And the reason I know it is some of the quasi-hard lenders that lend at 8% or 9% on construction loans, the private funded groups, they’ve been very, very aggressive. And so during the height of COVID, everybody is drawn back, and clearly, banks drew back. The general…most of the banks are pretty busy with the PPP money. I don’t know if people know that all the money that came out of the Treasury, the banks that distributed it, they added a 1% fee. So that’s free money to banks to distribute government money. So they were busy with that.

And then friends that I know in the business, a lot of banks are focusing on refinancing existing customers. So there has been kind of a shortage of lending for new customers or for new projects. So what’s happened is the quasi-hard money people, the private bank people have become very aggressive in terms of reaching out to projects like mine, saying, “Hey, you know, we think the economy is getting much better and we’re gonna turn the corner.” And so they see an opportunity to get in there and move in that business before the typical bank construction lenders re-enter the business.

Jimmy: Right. Yeah, that makes sense. That’s interesting though the effects that the post-COVID environment has had on lending due to the PPP, that’s been a big time-suck for the banks, profitable for them for sure, but has been at the expense of other potential customers, I suppose.

Garth: It works for everybody involved because a lot of employers had bank relationships through their banking. So there was a conduit between banks and existing business owners. And quite frankly, the government’s not in a position to put that money out. And so you have to pay for that service. And I think it made a lot of sense, and the banks weren’t lending anyway. They didn’t know what was gonna happen. And there was a lot of doom and gloom, foreclosures and evictions. And then I saw, up in the Northwest they said, “Well, you know, rents are gonna be down by 20%.” Well, they weren’t. I mean, I have a project, a 17-plex. And over the last five months, we’ve had two people late and we were leasing. It’s a block from the site and we were leasing. We’ve had two people who were late, we’re not charging them late fees. The governors put on some eviction moratoriums and things like that. But we’re doing fine. And in my property manager says, the experience they’re having with a lot of his other clients, it didn’t turn out to be nearly as bad as the experts thought it was gonna be.

And I think banks, you know, there’s a herd mentality and it’s not their money, it’s the depositors money so they’re very prudent about it. But the key thing is, is these private lenders are swooping in. In nature, it’s not like a vacuum. And right now, the economy’s getting better, there’s pilots ready to go, but the banks aren’t quite ready because they’re busy doing other things. And so that’s the signal to me that construction lending by banks will probably be returning before the end of the year.

Jimmy: Good. Well, that’s some good news on all fronts there. So Garth, in some ways, the opportunity zone incentive is geared to shift primarily stock market investors with little or no real estate investing into real estate because this is a place-based economic policy. Many of the funds are focused on real estate, as we’ve noted on this podcast over and over again. What are some of the challenges with raising capital from non-real estate investors for a real estate project?

Garth: For myself, or I think probably typical of many small developers, we just cannot put up the paperwork, the 10 or 15 years of operating history because we’re small developers who develop one or two projects at a time, they’re privately funded. So I don’t release the financial returns on any of my private projects. Because my investors, you know, they don’t expect to see me using their returns on a project invested publicly. But as long as I’ve worked with some of the larger companies, the big developers that have been very experienced in the syndication market where that’s a lot more transparent, and they’re used to it, and they have the means and the people to do it. There’s just so many things that smaller developers can do today and these investors, I mean, let’s face it, many of them may be working with a Fidelity or Vanguard or any number of private brokers that can produce reams of information on every stock that they’ve ever dreamed of investing in or considering or funds.

And so that’s their expectation of materials when making very important investing decisions. It’s juts we’re producing a product that’s gonna generate money in the future. A lot of people buy stocks that are gonna produce dividends in the current year and some appreciation. It’s just, yeah, not everybody’s a real estate investor. And so I think it takes a little education by developers so investors understand where the flows come from and why there’s a delay because there’s construction that has to occur to generate these new projects, which is, you know, that’s the basic premise of using programs is create new projects. And developers have to change. I mean, I’ve had to, kind of, change and really examine the information I’m giving and provide a lot more data about vacancies and things like that. So they feel like they can have the assurance because when they buy a stock or stock fund, there is a history that gives them some kind of assurance about what is likely to occur, but that doesn’t necessarily occur with small developers and small development.

Jimmy: Right. Yeah, it’s a whole different world once you move into private investing away from publicly traded securities like the stock market is. Earlier this year, Garth, the IRS issued an extension for investors. They essentially did away with a 180-day window for most investors recognizing a capital gain this year, and instead just pushed back most investors’ deadlines to December 31, 2020, year-end, end of this year. What does that been like for you? Has that caused any problems on your end? Or has that potentially delayed any inbound capital-raising efforts on your end? Have you gotten any pushback from investors because of that?

Garth: I think so. The only reason I think I could say that is, we’ve been communicating with investors, your website’s been very good about finding people that are interested in our project, and we’re sending them information and additional information. But there’s kind of an unwillingness to pull the trigger or to either say yes or no. I mean, I’d rather have no than maybe, or a no than silence. I mean, if somebody says, “This is not my cup of tea, I’ll let you know.” Like, I talked to a guy yesterday, he said, “We’re not gonna invest in Oregon. We’re really focusing on the East Coast.” I said, “Okay, great.”

Now, they’d inquired about the site for the project, but upon some further reflection or refinement, they’ve decided to focus on a geographic erea. I think that’s great. It’s like, thank you for your time. You know, that’s the kind of response, either yes, or no, or yes, we need more information, or maybe we see some more information. That’s great. What I’m getting a lot of right now is just no response. And these are people that have inquired about our project. And I could accept no very gracefully, I don’t wanna waste their time or my own. So it seems to me, you know, and I’ve had two people along the same lines over the last two weeks of me making calls say, “We’re just kind of waiting to see what’s gonna happen the election.”

And I did not get personal with them about like, “When do you get your capital gains?” But the fact the matter i nobody really has to do anything until the end of the year. I could see a huge amount of equity or a commitment towards the end of the year as the economy improves. And that’s probably a little too because there are transactions occurring. I watch the Novogradic reporting, there are transactions occurring, they seem to be a lot of large funds, which have big marketing arms. But on the small groups, it may be that nobody’s really sure until they have to, when they have to make a decision, and they look around then they’ll pull the trigger.

Jimmy: Yeah, I’ve been saying the same thing, Garth. You know, I think in some ways, it’s a double-edged sword, right? It’s good to give investors more time. It’s good to provide more relief in the current economic environment that we’re finding ourselves in. But the other side of that sword is it kind of puts people who are raising capital behind the eight ball a little bit. Now, kind of, the urgency for investors to write checks is gone, or if not gone, it’s at least pushed back until the end of the year. So I agree with you, Garth, I do think that we should, in theory, see a surge of investment activity in the fourth quarter of this year, in particular, the last couple of months possibly. I wanted shift to some more issues that are unique to small developers now, Garth. The opportunity zone format itself, do you feel that it plays more to the strengths of large developers? And why might you think that?

Garth: I believe, well, I think a small developer in the right market, if you’re a small developer in Seattle, or in an OZ zone in Seattle, and I’m always talking about the Northwest because that’s where my expertise applies. You know, location is still really, really important in real estate. And I don’t think you’ll ever get beyond that. The OZ kind of pushes it by giving your tax benefits to maybe less prosperous zip codes. But if you’re a smaller developer with a niche property in a major metropolitan area, you’ll probably be fine. But if you’re a smaller developer in an outlying area, let’s face it, outlying areas don’t get as much as an investment, period, whether it’s OZ investors or regular real estate investors, as some urban areas do.

And the point of the OZ or what I believe at some point was to incentivize development in these smaller areas. The problem becomes, that I see is I’m not sure how many larger developers…or let me put it another way. There’s a lot of communities that cannot really make a case for a large OZ investment. Like Fairview is a town of 10,000. It happens to be the Portland metro area, surrounded by other towns so it’s part of the bigger picture. But if you go further up the gorge, like to the Dalles or bigger, I don’t know if they’re OZ zones. But if they have an OZ zone, the people might go, “Well, if I have a choice to invest in a metro area or in one of these communities that needsthe investment, there’s still a safety issue, you know, a perceived safety issue, even though they’re investing for returns and capital gain benefits.”

So I think what happens is, it would be very hard, I think, for a larger fund to go into a truly small community where the smaller developers can exist because they have the local contacts and they already own the property or already have some local investors. I mean, in smaller towns, most investment is done by local investors. So I always wonder about this process, major metropolitan areas are more favorable to the bank. And you do need banks and OZ funds that are in the metropolitan areas that kind of work around the outskirts, they’ll do fine.

I always wonder how OZ funds will work in the 10,000-person communities outside of the major metropolitan areas, I call it the I-5 corridor around here. You know, are they gonna be getting into Eastern Washington, Eastern Oregon? How easy is that for these large funds to do because they have a carrying cost and the large funds have to generate a certain amount of revenue just to pay for themselves. And so they have an edge at market, they have an edge on the some of the reporting they can do, they’re very attractive in materials that are hard for a smaller developer to duplicate. I just kind of wonder how this is gonna shake out in terms of how much money will truly get into, say, communities of 20,000 people.

It’d be very fascinating to look at OZ money going into communities below a certain size versus above that size. But I’m sure at some point in time, they’ll be subtracting and they’ll tell us how that works. Because I think there doesn’t appear to be any incentive for banks to do funding with OZ money in the smaller communities. And that would be one way you could trigger perhaps more that is if banks had to do more community lending around OZ in certain communities, that might be one way to overcome that. And again, that’s just my sense of it. In terms of looking at some of the OZ funds out there- and whether or not they’ve been able to raise money for some of these smaller projects.

Jimmy: Yeah, it’s an interesting idea. And it’s a concept that’s come up a couple times on this podcast in the past is how a lot of the money may end up flowing to primary markets where banks are more comfortable lending or where investors are more comfortable investing. It will be interesting to see some data on reporting on where the money is flowing. And I do expect that we’re gonna see at least some level of geographic reporting from the Treasury Department as early as next summer for I believe that would be 2018 tax year data. Their data, unfortunately, lags behind a few years. But I think the first wave of that data will start coming out in about a year, a little bit less than a year, and then we’ll have a chance to take a good look, there.

So, Garth, speaking of some burdens on smaller developers and reporting requirements, you know, there’s been some thoughts on Capitol Hill about legislating additional reporting requirements. And I think it would be great to get some additional reporting. It’s a largely bipartisan effort to try to put some more reporting requirements around this new type of investment, these opportunity zone investments, but would doing so put a bigger burden on smaller developers such as yourself?

Garth: Well, I think the reporting is important if the premise of this is a social contract where we’re gonna give these tax benefits in exchange for developing in areas that really need development and are not normally attractive to development. The issue is just the cost of it, there’s an awful lot of costs in the OZ. I was kind of surprised, all the costs that I faced getting the OZ fund up, and then the complaints cost and how that just eats away at the return. And so there’s a situation is that every time government imposes another regulation, if it’s adding more reporting, somebody has to generate that report and then somebody has to be prepared to stand behind that report and defend that report if there’s any questions that occur.

And you certainly don’t want to put the investors at risk in terms of the tax benefits they’re seeking by this investment. So, if they did it, I really hope they consider the impact on additional work on small development because ours is a $3.5 million raise. And I started looking at some of the fees on $3.5 million. The fees, they’re not based on the size, they’re just based…it’s a basic fee to do work. Whether you’re reporting on a $10 million OZ or $3.5 million OZ, there’s always a fixed cost and a variable cost, and every time you raise the fixed cost, it just makes it less attractive for the smaller fund because it’s carrying a heavier burden.

I would be intrigued if there were two levels reporting. In a certain sense, it doesn’t make sense to require a $3 million, or $4 million, or $5 million OZ fund to necessarily do the same amount of reporting as a $20 million or $30 million fund for 2 reasons. One, the smaller funds may be in smaller communities, which is really one of the primary focuses on this. So it’s already hard enough to get investors into smaller communities. Investing in a downtown Portland or downtown Seattle is obviously more attractive to investors. But if you’re trying to incentivize investment in smaller towns, say towns under 10,000, not as many investors are intrigued. So the way you cover that is you offer higher returns. But every time you increase reporting requirements, that’s a cost that’s gonna be borne by the investors. And so every additional costs you obligate a fund to meet, you start reducing the attractiveness of funds. And let’s face it, some of these communities are not necessarily as attracted to invest in others. So if through additional reporting requirements you make them less attractive, who are you helping?

So to me, if you could do it by specific zip code…because some of these opportunity funds were mapped in areas that I think were surprising to pretty much everybody in terms of…Downtown Portland actually did not need OZ mapping. Let’s be frank. And I’ve heard some other similar stories from around the country. And I think that’s what raised a lot of fear with the OZ funds when they saw some of the places in development investor and groups and some of the funding that occurred, it was kind of like piling on in terms of whatever. So if you had one tier for smaller funds or smaller communities and another tier for larger firms or more dominant economies, the whole point of this was to get people to invest in areas that are not as attractive and have been, in a sense, left behind. So I would be intrigued if they would look at reporting requirements based on size of fund or, you know, exactly where the fund is operating.

Jimmy: Yes, you have some interesting ideas there. That might open up a whole nother can of worms. But I guess I think my hope is that they add enough reporting requirements so that they’re useful to draw conclusions from the program, but not be so burdensome that they would cause the funds’ costs to rise too unnecessarily, and especially those smaller funds that can ill afford to have any more costs associated with them. That I think if they can find that sweet spot, that would be great.

Garth: And the other thing about that, Jimmy, is that if they could find that sweet spot and stay there and not come back two years later and go, “Well, let’s add this next burden on top of it.” I mean, and really identify with support, that’d be great because that would take out any uncertainty.

Jimmy: Yep. No, I agree with you 100%, Garth, I agree. So Garth, there are obviously a lot of benefits to being invested in a larger fund investing primarily in primary markets where investors are comfortable and lenders are more comfortable. What are some of the benefits to investing in a smaller project with a smaller developer outside of a primary market in a fund such as the Ceeley fund that you operate? What are some of the benefits that investors may have from investing with a smaller fund like yourself?

Garth: A smaller…I think it’s attractive for a number of reasons, primarily is that the smaller developer is engaged in the community. These are smaller communities, smaller developers are on the street. They are typically invested in the project with the investors. And that’s a major investment for the developer. My investment in this project is very important to me. And it’s very important to me not just getting it underway and getting it completed. But it’s important to me all the way through. And I’m not downplaying that sentiment that large investors wouldn’t be. But if you’re managing 10 projects, you may not be able to give the day-to-day scrutiny that a developer has this very intimate with each project he does, or the one project he’s doing in an OZ fund.

And OZ developers, let’s face it, we work in smaller communities. I mean, it would be very difficult or very odd for large developers to come into a small community…because they need to do projects of a certain scale. I mean, larger developers, they start small, they’ll do 30, units, 40 units, 50-unit kind of projects, but at some point in time, they graduate to the institutional-grade, the 100-unit projects. And you might get to do a 100-unit project in a town of like Corvallis, or a town like Longview, or those in the Northwest. But those communities can’t support a lot of those, but they can support a lot more of the small developments that respond to market year by year as opposed to somebody coming in doing a big project and then nothing happening for the next five or six years because there’s just no room left. So I’m obviously biased toward small developer, we’ve been a niche developer everywhere we go. And we’re very nimble and very focused on every project we do. In this case, I’m actually building the project myself in addition to the new developers so I’m very much motivated by how successful the project is.

Jimmy: No, yeah, that makes sense, Garth, more intimate connection with the fund manager and the developer when you go into some of these smaller projects with a fund, such as yourself as the Ceeley fund, or another smaller type developer like you. And as you mentioned, it’s probably one of the better ways to access some of these smaller, more overlooked communities if that’s your goal as an investor as well, I don’t disagree.

Garth: I’ve seen a lot of this. A lot of podcast information and a lot of stuff about social investing as being people really paying much more attention and I was like, “Well, I drive through a lot of small communities in Oregon and Washington, and they have been overlooked in the last 10 years. And if you want this thing to work, really do it, then you invest in small communities.” And, again, nothing against large developers, I think they do great work, they are obviously successful. But can they go…are they in a small community already where they can bring the right product at the right time? And I’m not sure if that’s true. Because they’re good at one thing, and I think small developers may be good at other things. But if you really, kind of, wanna focus on putting some money into a deal and getting your tax benefits and getting some good returns, the small communities are hungry for this kind of investment, and the cities, quite frankly, are very, very friendly to this, which is a major issue.

Jimmy: Yep. Some very interesting points to consider for investors there, Garth, I don’t disagree at all. Garth, we’re in an election year and actually, we’re just a little more than two months away from the presidential election now. What do you think will happen with the opportunity zone marketplace after the election and in the run-up to that year-end deadline that we were discussing earlier?

Garth: I think the year-end deadline will require people to act. I mean, the bottom line is unless the government somehow decides to extend it again, they will have to act. So if there are people sitting on the fence because of COVID, because of the economy, or because of the election, once the election is over and as we get closer and closer to that December 31st deadline, people will not be able to sit on the fence much longer. So I expect to see quite a bit activity.

Jimmy: Yeah, I do too for a couple of reasons. One, we will have more clarity one way or another, depending on…well, I guess regardless of who wins the presidency and the Senate and the House. At least we’ll know, we’ll have the market…we’ll have some clarity there. And as you mentioned, obviously, yeah, we’ll be closer to that year-end deadline. I think there will be a huge incentive for investors to move their capital before the end of the year due to that year-end deadline. Garth, any other issues unique to small developers or particularly burdensome for small developers with respect to the opportunity zones incentives that we haven’t covered yet. Anything else you wanna convey to our listeners today?

Garth: One of the things that we found difficult was once we started down the path of the fund, we were contacted by lots of consultant groups. And it was really interesting to me because I have yet to meet a consultant group that just provides a clear map in terms of, “These are the basic 10 things to be done. Our company does items one through five.” So it took me a fair amount of time. Also, in all fairness, there was also a lot of uncertainty about this program until December of 2019 because the rules were changed. I think there were two different sets of rules that came up or amendments that came out, one in 2018, early 2019, and then one at the end of 2019. And it’s all based on feedback. It’s all good.

But again, there are a lot of people promoting helping you set these funds up and what you need to do but that kind of kept shifting because it wasn’t until the end of 2019, I think, that people actually really knew. And so there were law firms, accounting firms, assets firms, all these different groups out there, pitching a fee-based service to do ABC. But there was really no roadmap, “Oh, these are the 10 things you need to actually have a fund that’s up and running and compliant and all those things.” It was just mainly about getting into the business, creating a business opportunity without the client necessarily knowing what other pieces it needed to go get from other people.

So that was difficult for me. And that just may be me, but there’s a lot of conflicting information out there that you kind of weed through into and do a lot of interviewing to kind of put together the pieces on paper in your own mind so you understood what you needed to do and what additional things you needed to pay for to get the project where it meets what the industry expected to meet in terms of an offer. So that was unique.

Jimmy: Yeah, definitely. I mean, being an early adopter or a trailblazer such as yourself, Garth, that incurs some higher costs than some people who may follow behind you. The roadmap and best practices for doing all this still being ironed out by the industry. And we’ve come a long way, I think, in the past couple years, and certainly, in the past several months since the final regulations have been issued. But yeah, some of us still trying to figure out a lot of the best practices and still a lot on the table for different consultants and accounting firms and law firms to sort out. Garth, I wanna get back to your deal and the Ceeley Opportunity Fund here in the last few minutes before we go today. Can you tell our listeners a little bit more about what your project in Fairview and what you have going on there? Maybe you can give us a little sense of how big it is, what type of project it is, and some of the demographics of the area.

Garth: Yes, Ceeley is located at the main intersects of Ceeley Apartments. The business entity is the Ceeley Apartment LLC. That’s what the fund will invest in. It’s a four-story, mixed-use building at the main intersection of Fairview Village, which is the 91-acre village project. We primarily finished that project in 2008, 2009. But we kept some pieces back because, in the case of this particular piece, I owned it, and the five acres across the intersection was owned by province hospital, they have not made their plans known, but I kept it back when we finished the rest of the village with the expectation to develop it when that hospital did something. But then the opportunity zone came along and made it attractive to do it now.

Four-story, mixed-use, three levels of apartments above ground floor office. It’s planed for four office spaces of varying sizes. There’s a strong history of office development or need in that area. I’ve built most of the…I think it’s the 29 row houses surrounding this location around this block, and of those, I think 16 or 18 of those were converted or built directly as mixed-use. A lot of them were converted because there was a demand for office space, and that’s a market where these are small business operators who have actually had to buy buildings instead of being able to rent. I own one building, Marketplace Apartments, one block away, and it has two office spaces and they’ve been rented from day one.

So, the office space, I’m very keen on because this is not a retail location. This is an office location. And we have the library and City Hall across the street in one direction, and we have a beautiful new VA clinic,, and the post office across another street, Target’s down about 100 feet or 100 yards or 200 yards away down one street, there’s a credit union, so it’s kind of a little business core. So I’m encouraged about that. In apartments, we’ve been under 5% vacancy for a long time in East County because a lot of people are investing in downtown Portland. We are not located in Portland, we are in our own jurisdiction. So we don’t have some of the zoning constraints because the City of Portland is based on apartment developers, which has severely impacted development in the last year or two.

But these counties got a lot of national employers around there. It’s a strong blue-collar, white-collar area. Amazon just opened up a facility with 2000 jobs. FedEx has a huge facility nearby. We have two chip companies that face Fairview Village. So we have a lot of good national employers, a lot of good regional employers, and the Port of Portland is very strong. They’ve overseen a lot of development between Portland Airport, which is a long Columbia River just west of us out to along the Columbia East or to the gorge and that has brought a lot. I mean, literally from our site, you’ve got a 10-minute drive probably to at least 100 employers.

So it’s a very nice place. And I think that’s why we have low vacancies, there’s a lot of people who have been displaced out of Portland because the rent is much higher in Portland, and we’re able to offer a more suburban kind of format, which you don’t have to drive to Portland to get a job or to work. So that’s the long and short of the village. It’s a beautiful facility. The website’s I lived in the village for 12 years. I’ve been fortunate to be part of the development team from day one and built a lot of what got built. I’ve been fortunate enough to be around long enough to see second-generation people living there, which is kind of cool. And it’s a nice place to live.

Jimmy:, fantastic. Garth, thanks for joining us today. Is there anywhere else our listeners can go to learn more about you and the Ceeley Opportunity Fund before we go?

Garth: Your website is great. We have a listing there, we’ve been getting traffic off of it, and that’s where we update all our information. Once people inquire about a project then we contact them directly and send them more detailed information as they seek. But that’s a good clearignhouse.

Jimmy: Fantastic, thank you for that, Garth. I’ll be sure to link to that in the show notes for toady’s episode. For our listeners out there, you can find the show notes for today’s episode on the Opportunity Zones Database website at And there, you’ll find links to all the resources that Garth and I discussed on today’s show. Garth, thanks a lot for joining me today, I appreciate it.

Garth: Thanks very much. I appreciate your time, Jimmy.


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