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Do record stock market levels, the high inflation environment, and the new economy pose an opportunity for Opportunity Zone investors? Are there silver linings in rising prices?
Greg Genovese is CEO of USG Realty Capital and Investors Choice OZ Fund, a new Qualified Opportunity Fund offered by USG/OZI.
Click the play button above to listen to my conversation with Greg.
- The potential impact of social impact reporting and additional data collection for Opportunity Zones under the Biden administration.
- The development of a “new economy” driven by policy initiatives, the release of pent-up consumer demand, and lifestyle changes following the pandemic.
- Why inflation is increasing now and how inflationary pressures will impact consumer behavior and investment opportunities.
- Reasons to be bullish on the long term outlook for the U.S. economy and Opportunity Zone investments.
- Key factors to consider with making investing in OZ projects and funds, including the recession resilience of the underlying asset classes.
- Why now may be an opportune time to roll capital gains into tax-advantaged investment vehicles.
Featured on This Episode
- Greg Genovese on LinkedIn
- Investors Choice OZ Fund by USG/OZI
- Greg on the Opportunity Zones Podcast: Episode #5 | Episode #66 | Episode #132
- Ritz Carlton Hotel in Portland Opportunity Zone
- U.S. Bureau of Labor Statistics Consumer Price Index
- OZ Pitch Day Summer 2021
- USG Realty Capital
- OZI LLC
Industry Spotlight: USG/OZI
USG/OZI is a joint venture between USG Realty Capital and Opportunity Zone Investors Group. Headquartered in Silverdale, WA, USG/OZI launched earlier this year with the Investors Choice OZ Fund, a first-of-its-kind, investor-directed, multi-asset Opportunity Zone investment platform.
Learn More About Investors Choice OZ Fund by USG/OZI:
About the Opportunity Zones Podcast
Hosted by OpportunityDb.com founder Jimmy Atkinson, the Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in opportunity zones.
Jimmy: Welcome to the “Opportunity Zones” podcast. I’m your host, Jimmy Atkinson, and today a discussion of the new administration, which we’ve touched upon a few times in the last six months, but also now the new economy and new opportunities for Opportunity Zone investors. Here to discuss these topics with me and more is no stranger to the podcast. It’s my old friend, Greg Genovese, who is founder and CEO of USG OZ, the sponsor of a multi-asset qualified opportunity fund called Investors Choice OZ Fund. Greg, welcome back to the show.
Greg: Thank you Jimmy. Nice to talk to you again.
Jimmy: You can be in the “Opportunity Zones Podcast” Hall of Fame one of these days, Greg. You’ve been one of my more frequent guests on the program. We’re pleased to have you back on again. So President Joe Biden, he’s been in office now for roughly six months, and I’ve discussed this with several of my guests over the last six months or so on what changes his new administration may bring, in particular what tax policy changes may come to bear and what impact that may have on Opportunity Zones. But for those listening, who may not have been listening as regularly to the half dozen or so episodes of this show, I want you to give them your unique take, Greg, on what you expect of the new administration and changes that they may bring about, in particular, tax policy changes that may impact Opportunity Zones.
Greg: Great. Firstly yes, thank you very much for inviting me to be on the podcast. I didn’t know I had been on that many times, but I sincerely appreciate the invitation. So always happy to do it. Number two, you mentioned the new administration and I do listen to your podcast. So this has been covered so I’ll just touch on it. And it’s very much in line with some of your other guests that have talked about that, but there really is a new economy that’s come out with the new administration. And by the way, I’m very agnostic when it comes to doing investment evaluation. So it’s not a partisan on either side of the fence. There’s really a lot of good from both sides. And what you’re seeing now, when President Trump put in the Opportunity Zone initiative in the 2017 Tax Act, and there really was only one significant change in the initiative from when the Obama administration actually wanted to put that through in 2012, but it just didn’t go through.
And that was simply…if your listeners know, it was simply giving the power to the states to decide where those Opportunity Zones would be. So really truly was something that was bipartisan. I’ll just say the Democrat side, not the Biden side because he was not elected at the time, the Democratic side of the aisle, their biggest issues with Opportunity Zones during the Trump administration really had to do with reporting how creative are each one of these zones and these projects being to what I like to call honoring the spirit and intent of the initiative as far as really helping the communities. There were some Opportunity Zones out there that were, like, for instance, building Ritz Carlton. So that’s really where the Democrat side was pushing back. And there was that term being turned around, it’s a tax break for the rich, which I didn’t agree with.
It’s a tax break for anybody with gains. What we’ve seen with the Biden administration coming in, it has not been something where, oh, gosh, they’re going to dismantle it. It really is along the lines of how can each one of these funds have better oversight, more economic qualifying, more reporting. Something we’ve been an advocate of is doing social impact reporting on all the projects we’ve been involved in so that’s right in line, what the Biden administration wants. No real big changes other than, you know, what I like to put it under this umbrella, putting in policies and regulations to “better honor” the spirit and intent of the initiative. And frankly, I’m absolutely all for that.
Jimmy: Yeah. There literally was a Ritz Carlton project. That was an Opportunity Zone project a couple years ago. I’m not sure what happened to that one, but I’ll try to find out and provide some links to it in the show notes for today’s episode. So let’s talk about the new economy then, Greg. What do you mean when you say the new economy? Can you discuss that for us, please?
Greg: Yeah. This is a term that’s being used quite a bit in the last year. I mean, it’s being used more and more, and so it means different things depending on what industry you’re in. But for our purposes, let’s just look at, as far as the project development world, the real estate world and stock market world, Opportunity Zone world, what you’re really talking about is what was this, for lack of a better term, we’ll call it the Trump economy and now the Biden economy. So the Biden economy would be the economy that’s being facilitated by the new administration. But to me, the new economy is a combination of the direction the new administration might be pushing the economy through laws, rules and regulations and policy. But also through the paradigm of desires for business and lifestyle, which really don’t have much to do with the Biden administration.
So firstly, the Trump economy, and I don’t want to go too deep into it because, at least that particular part’s in our rearview mirror, but it was pro-business curtailing imports through tariffs, focusing revenues into the United States. So the economy was going gangbusters, plus we printed a ton of cash. We had low interest rates, we had an all time high in the stock market. So we were really off and running. And then you look at a long-term stock market hit historic highs over almost a decade, not from the Trump administration but carrying it on through the Trump administration. And then you have the pandemic that hit. So from an economic standpoint, business was good, lifestyle was good, lots of opportunity for folks, income was going up, taxes were mitig [SP] for the most part, depending on you who you are and where you live. And then you have a transition into the Biden administration where now you have…and by the way you can’t skip over the pandemic, of course, but during the pandemic, we had a massive amount of shutdowns.
So you’ve had a lot of pent up demand in the economy, but you’ve also had a lot of businesses that have gone out of business and a huge amount of stimulus. But what’s also come out of the pandemic, Jimmy, is the lifestyle changes. I can tell you that for many years, I’ll just use this as one example. I’ve always liked to do online webinars and maybe podcasts like you do, etc., but it never truly caught on with the business environment. And so people always needed one-on-one meetings, etc. The pandemic has really pushed us into a lifestyle change over doing podcasts, doing what we call Zoom meetings or online meetings, and people actually making decisions based on not really meeting somebody. So there’s been some paradigm shifts. Now you add into that, that the newer generation, the younger kids getting out of school, maybe half a generation above them, the whole live-work environment, which has been very conducive, not to everybody, but to a lot of people.
So, the pandemic actually unlocked a lot of pent up demand for lifestyle changes as well. So in the end, what I believe is the new economy is something that’s a combination of the lifestyle changes that have had pent up demand and has given me populace, the opportunity to venture into that side, more online negotiations and business, etc., etc., doing things… I’m in Santa Barbara, California. So I’m doing this podcast from my office and I have three Zoom meetings after this podcast instead of flying to Austin, Texas or Chicago. So that’s number one. Number two is the policy changes, that have been policies that have been implemented, have fostered the direction that as far as what the new economy is, I think, is really a combination of two things. It’s the Biden administration’s implementation of new policy and promotion of a lot of the pent up demands that really became facilitated through the pandemic as far as working from home and helping facilitate that, and really promoting more online business activities, etc., work home facilities, etc., etc. So the new economy, from our perspective, is really a combination of what the populace generally has been wanting to do and the new administration’s implementation of the policies.
Jimmy: Okay, Greg. Yeah. Read you loud and clear there. One of the silver linings of the pandemic and our response to it has been the rapid adoption of some new technologies that you brought up, the webinars. I’m able to host, for instance, an all day OZ Pitch Day event entirely on Zoom. And that probably wouldn’t have been feasible a year and a half ago, but now it’s regular business, basically, as you mentioned. But let’s zoom in now on the policy changes that you mentioned, Greg. What do those mean in terms of Opportunity Zones? What do they have to do with Opportunity Zones?
Greg: As far as policy changes, we haven’t seen much as far as an actual policy change, except we’ve seen a lot of indications, which frankly some of us in the Opportunity Zone world were already there and we’ve been promoting that people should get there. And that really has to do with really implementing a investment methodology into Opportunity Zones, that truly, as I think I mentioned earlier in the podcast, honors the spirit intent of the initiative, meaning the Biden administration wants to see more in the range of public-private partnership with the local community, making sure that the community itself is on board and supportive of the particular Opportunity Zone project. They’re not demanding social impact studies at this point, but that’s been suggested, but companies like my…our company, in what we’ve done, we do, because we want to show the community, as well as our investors, how those projects are being a creative to create a positive social impact in the local community.
So the Biden administration really is pushing more towards more oversight as far as a reporting of data, so that they can have a better hold on just how well is this particular project helping out the local community. So, as far as policy, there’s not a ton to talk about there, except for the direction that it’s heading. And I think that a good Opportunity Zone company should, regardless of whether it’s a Biden administration or Trump administration or Republican or Democrat, should be heading in those directions. And so far as what does it mean for Opportunity Zones, frankly, Jimmy, I don’t look at it from that perspective, like, “Oh, hey, it’s the Trump administration. We need to do this in Opportunity Zones. Oh, it’s the Biden administration, we need to do this in Opportunity Zones.” I think the way an investor, a wealth advisor, an institution, or private equity company investing Opportunity Zones should look at this purely from the economics, what’s going on in the economy, what’s happening with the indices, what’s happening with interest rates.
How is that affecting the projects? To me, you need to evaluate Opportunity Zones, on one hand, no different than any other project or any other investment somebody would make. But number two, because these are in technically low income areas, if we go into a period, let’s say, where we have another recession, which, frankly, we believe we will at some point and I don’t know when or how long, but how would that particular area hold up? What is its recession resiliency over a long period of time? So the only wild card that I think an Opportunity Zone investment throws into the mix here is the mandate for the 10-year hold for those returns. So you have to, absolutely have to look at these projects that people are going into from the standpoint of long-term resiliency. So I think it’s more important to have a conversation about the economic indicators, in my opinion.
Jimmy: Well, let’s talk about some of the economic indicators. What’s happening right now, Greg, in the stock market, with interest rates and inflation? I think inflation has been a big topic on most people’s minds, while the price of a hotdog may have gone down a few cents, I think most people look around and see that the prices of most goods and services have gone up considerably over the last 6 to 12 months or so. Give us your take on inflation and what you think may lie ahead.
And I’m glad you brought up inflation first, that’s really interesting. I have a 26-year-old daughter and a 23-year-old son, and they know the word inflation and they know what it is, but I actually graduated college in 1986, and we came out with high double digit inflation and high double digit credit card interest rates. So it was…inflation was something anybody that lived through the ’70s and ’80s, early 90s knew about and actually felt on a regular basis, but there’s a complete generation of people that it hasn’t really touched people too much. But I’ll bet my bottom dollar that within the near future, that’s going to be the biggest issue and it’s not because of necessarily because, oh, gosh, there’s this new administration or anything like that. It’s really a natural course of events when you have differing fiscal policies and monetary policies and even tax policies.
And it just depends on how that’s being facilitated over a 10, 15, 20-year period of time. So if you look at, and I don’t know if you want to be to get too technical, but generally speaking, if we want to look at our life from the great recession, the average inflation rate generally has been bouncing around between 1.4% and 2%, kind of averaging about 2% since the great recession hit in 2008. Our low watermark since that time as far as inflation was in 2015, and inflation was a grand total of only 0.7%, which is, in my opinion, basically zero. But 2016 to 2019, you’re looking at around 2%. But interestingly, 2020, we had the inflation rate was at 1.4. By the way, everything I’m stating too is from this morning from the U.S. Labor Department, so these are accurate figures.
Jimmy: And I’ll link to these figures, I’ll link to this source in the show notes, that page for today’s episode.
Greg: Sure, and I’d be happy to send it to you. So, as I mentioned before, Jimmy, if we look at our life from the great recession, 2008, till today, the low watermark for inflation was actually in 2015 at an inflation rate of 0.7%, but generally averaging between 1.4% and 2% ever since then. If you want to look at the last year, last year we had an inflation rate in the United States of 1.4%. But since January, our inflation has gone up from 1.4% to 1.7% in February, to 2.6% in March, but look at April and May, Jimmy, 4.2% in April, 5% in May.
Jimmy: Yeah. Greg, those are really big numbers, obviously. And just to clarify for the audience, these are unadjusted 12-month figures as of the end of May, it’s for the previous 12 months, we’re now at 5% inflation. So why is that, though, Greg? Why are these numbers so big? Why is inflation increasing so much over the last few months?
Greg: And thanks for asking that, Jimmy, because frankly the why is by far the most important question. I’m a big believer in the more things change, the more they stay the same, but I really do believe in this situation we have a new paradigm in our economy. We haven’t seen these types of variables and this type of data, really, since the polio pandemic. So it’s not helpful to overlay all the rotes of academics that we’ve seen over the last 25, 30 years onto today’s economy. And there is a new paradigm here. And what I mean by that is I boiled the down to what I believe are three main reasons why we’re seeing inflation as we do now. One is, we did have a year plus shutdown in the economy, period. We haven’t changed all that much, there’s pent up demand. Two, the U.S. government injecting money into the economy of historic levels has had its effect. And, three, new policies that have come into play since the Biden administration in the sense of industry rules, regulations, and the like.
So, those really are the three main reasons why we’re seeing inflation, you know, jumping like they are today. As far as the first one is concerned, the economy shutdown, there’s been a huge amount of pent up demand in the economy. So when the economy did start up, you saw a jump in prices, mostly of essential goods. And that wasn’t because of Biden policies. You look at used cars all of a sudden started…cars in general started selling like crazy, but used car sales were up…prices were up 30%, appliances were up almost 30%, around 27%. So you saw a huge amount of demand that was picking up. And a lot of people were making not so much money. And so the opportunity to increase prices really has caused inflation to jump. Number two, the U.S. government stimulus, the historic injection economic aid that we’ve had go to not only the populace, but to companies as well, which, by the way, your investors probably know, also buoied the stock market.
So, the historic injection of money to keep people afloat, this money to keep the companies afloat, low interest rates on those loans, and nothing due back really on the populace of stimulus. And then you add that on top of the 6 trillion of stimulus that came in behind that over the last few years, really, is ripe for, basically as we like to say in economics school, the overproduction of money itself. And then number three, new policies, not only is the government continuing to print money at historic levels, but we also have new tighter, in the industry, regs and policies, which really have jumped the pricing of essential goods. So these particular pricings really have to do with new policies. Your investors, if they don’t know the number, they’ve felt it at the gas pump. The gas is up over 56%, energy commodities in general.
What we’re paying for energy is up over 50%, I think it’s over 54% right now. I shouldn’t say I think, I know it is, and fuel oil is up 50.8%. So we’re seeing just this huge jump in essential goods. However, one of the silver linings is food. Food has actually thankfully stayed relatively low, but frankly it’s up another 2.2% in May and services are up 2.9% in May. So even though food has stayed relatively flat with just a minor amount of inflation, if you like to go out to dinner, you’re looking at…I’ll bet you your checks right now, your bills are at least 5%, if not 6% or 7% greater than they have been in the past.
Jimmy: Well, it’s been harder for the restaurants to staff also. And I think that leads to those costs being passed along to the customer in many cases. But, well, I think what you’re trying to paint the picture of, Greg, has really, I think we’ve seen a perfect storm of events transpire over the last 12 or 18 months. These policy changes, just this built-in momentum in the economy, all of this economic disruption and economic dislocation as a result of the pandemic and the ensuing shutdowns of large swath of our economy. And then the printing of trillions of dollars of cash. It’s all led to this point where, holy smokes, inflation, is it a real problem? Is it starting to spiral out of control here in a certain extent. And in some sectors of the economy quite possibly so, yes. So, Greg, I want to ask you now that you’ve answered the why question for us, I want to ask you, is there a silver lining in this inflation? Is there any good news for us?
Greg: Yeah, exactly. And I’m glad you asked that. So I didn’t want to sound too doom and gloom, I just wanted to give an honest and forthright diagnosis, but as far as the prognosis is concerned, there is some real good news here. The good news is, quite frankly, as in almost every situation, our economy tends to always grow, whether it’s at a slow rate or at a pace rate. When I first got involved in the financial services industry and the real estate industry was in the ’80s. The Dow was at 8,000 points, it’s now over 34,000. So looking at it long term, there’s always going to be some good news. And frankly, this is one of the benefits of the long-term investment strategy of Opportunity Zones over the next 10 years. So that’s number one. Number two is, for the most part, a lot of what I talked about is really temporary.
I mean, we’ve already seen that in the Opportunity Zone world where take point number one, the pent up demand. Yes, used cars and trucks went up 30%, appliances went up 27%. I mean, there’s a whole category of things underneath that that are well over 20%, but that’s the pent up demand. And that’s really for the folks that could afford to pay that. But you look at, in the Opportunity Zone world, you’re talking material costs. I mean, we all like to talk about lumber being up 1400% and all these different things, but we’re now seeing in the Opportunity Zone world that those high prices have jumped, but are now starting to come back down. I don’t mean to say that they’re not high, but they aren’t at the inflationary high that you’ve seen in the last few months. And for most of your investors, they know what a GMP is, a guaranteed maximum price on construction.
Those are now being held off on signing, which is a good thing, in fact, in our projects. That’s usually a good thing in the sense of, hey, you have this guaranteed max price from the developer or from the general contractor, rather. But right now it’s not the best time to sign those, because we’re starting to see that the prices are starting to come down. And it’s really a daily conversation with the general contractor between us and the developer and the general contractor to lock in the very best and lowest guaranteed maximum price or GMP, as we like to say, for our investors. So that’s actually a good thing. So we’re seeing that come back down. So the temporary nature is very significant. The second piece of good news is, for the most part, the treasury, U.S. treasuries have stayed relatively low. The two-year treasury is still hovering around 0%.
It’s up a little bit, but it’s still hovering what I would call around 0%. The 10-year treasury is starting to head up a little bit. So you’re seeing people that are getting mortgages now climbing into the 4s and the 5s, but the 10-year treasury is heading towards 4%, but you’re not seeing huge jumps in the interest rates right now, they’re trying to hold them down. And that’s actually a big benefit to Opportunity Zone investing because from the institutional side, companies like ourselves are able to get the very best pricing. So, one, I think it’s temporary, two, you’re still seeing interest rates in the range that is conducive to helping Opportunity Zone projects, and, three, we are seeing construction costs starting to come down. I don’t mean down from where it started, but down from the high that we’ve seen over the past two or three months.
Jimmy: Right. So the temporary nature of this combined with interest rates remaining pretty low, combined with construction costs returning to somewhat normal levels because they have been sky high the last few months. Let’s shift gears now, Greg. I wanna talk about…and just to preface this with a disclaimer first, we don’t want to be giving investment advice during this podcast. So don’t treat this as investment advice. But, Greg, why do you think there may be an opportunity given how much the major markets have run up over the last several years? Is there an opportunity right now to take some capital gains off the table for investors and defer them into or roll them over into Opportunity Zones? Why might this be one of the best times to invest in an Opportunity Zone fund if you’re an investor with massive capital gains?
Greg: So, it’s interesting that you use the word why. Because you hear that a lot, why Opportunity Zones, or why this, or why that. When it comes to Opportunity Zones, the word that I like to use is what. And what I mean by that is, it’s not to say everything’s rosy. I painted a mixed picture there, but as we like to say, at some point the doctor has to come in and diagnose the problem and treat it to find the solution. And we are really in that situation right now, all over the country, whether it be Opportunity Zones or any other type of investment, we’ve had a real 10-year run up on the stock market, and the financial economy has done extremely well. But if you’re gonna hold an investment in Opportunity Zones for 10 years, as I like to tell our investors, we want to make sure that you’re the owners of the investment after 10 years, not just the owners at the beginning because you want to make sure that the zone itself and the asset class is as recession-resilient as possible.
It’s one thing to put up the money, it’s another thing to hold onto the money, and so that’s very important. So when you say why, I always say what. Meaning in today’s world, it’s what Opportunity Zone are you going into based on all the factors that we talked…I’ve talked about before? Where is this Opportunity Zone? What are the demographics around it? What is the corporate stability of that area over the next 10 to 20 years? What’s the population growth? How is the next 10 years’ risks going to be mitigated just from the Opportunity Zone perspective alone for the area? And then number two is, what’s the asset? What are you guys building? What’s the demand for that particular building? You know, if it’s multi-family or if it’s storage or if it’s a hotel, what’s that long-term demand? So looking at the recession-resiliency of the asset class that’s being built, one, and two, what’s the demand going to be from a very conservative standpoint?
And I also put on that same line, what is the corporate fundamentals? What’s the corporate stability of that area over the long-term? And then number three is, just how risky are you performing this investment for the investor? You want to make sure that you’re putting in very conservative assumptions because, first and foremost, so the Opportunity Zone benefits for investors, and making sure that they’re getting the very best tax advantaged investment. And they’re going to be qualified as an Opportunity Zone twice a year for the next 10 years, and they’re going to get their capital back in a solid return. And that return is going to be tax-free at the end. Those are the first and foremost criteria in evaluating the projects before people get turned on by, you’ve got this big return percentage, pro forma, into the investment itself. So, again, what Opportunity Zone? Where is the Opportunity Zone?
What is its recession-resiliency from a demographic and asset class standpoint? And, three, who’s the sponsor? Who’s the developer? How conservative in nature is the pro forma, the investment pro forma they’re putting out there and their historic ability to hit those numbers? To me, those are by far the biggest questions to ask. But you had said Opportunity Zone. And quite frankly, I think we’re in a period of time that we need to be looking at what is our best tax advantaged investment, not just Opportunity Zone, but we’re in a period of time where, quite frankly, you didn’t ask me this question, but you know, the stock market is…it’s like, where do these games come from that we need to invest for capital gains? And for the most part it’s in the stock market, people are selling businesses. So I guess the next part of it is, besides Opportunity Zones being a really good place to go, there’s also 1031 exchange in other tax advantaged areas. So to me, the big question at the end is, is it a good time to actually do it? I think that’s, to me, after all those factors, it may may make sense, it’s, should we do it?
Jimmy: Yeah. So my question was why and you answered what and why. And now my question is, why now? Is now the time? And again, we’re not giving investment advice, this is just general information, but why now, Greg?
Greg: Yeah, we don’t do that on these podcasts either. And I have…I’m 30…I think I’m 34 years now in the real estate and the real estate securities industry. And I’ve come to know, not even believe, but know that there’s always a time to be invested. It’s where you’re invested and how you’re invested. So I’m not anti-stock market. I have a lot of money in the stock market as well. So I want the stock market to do well, however, you have to look at what’s going on with the new economy, what’s going on with the new administration, which is what we’ve been talking about, and what kind of risk am I taking with my capital right now, and is now a good time to potentially take some of those capital gains off the table and invest it into a tax advantaged vehicle? So, number one, we all know that this is the last year for the 10% discount on the capital gains tax.
So as far as is this year a good time to invest in Opportunity Zones, I don’t think it’s giving investment advice to say yes, absolutely, because this is the last year. However, as we always counsel people, so you don’t invest in an Opportunity Zone because this being the last year of the 10% discount. But it is there and it is part of it, and you want to make sure that that is something that’s being evaluated by the investor. So is it a good time? Well, yes, in one respect, because this is the last year for that, but is it a good time because of where we are with the gains side and what’s the risk there? And again, I can’t give advice, but you can look at the data and the stock market right now is up another 13% so far this year.
So we continue to hit historic highs in the stock market, but what’s really interesting, and this is something I look at. I’m not sure if your investors do, but something I look at is what’s the confidence that we’re seeing from large institutions versus investors when it comes to the confidence they have in the stock market. And what’s interesting is, if you go to…and I can send this to you, but if you look at the Yale International Financial Center and look at the confidence index, you’ll see that last year, the individual and large pension institutions, pensions, mutual funds looked at the confidence that they have in the stock market about equally, they were both around 80% confident, and that was as far back as July of last year. But what you started to see since July of 2020 is that the relative confidence that the individual has in the stock market and the institutions are starting to pull away from each other, where the institutions are starting to be a little bit more volatile in their confidence.
And so we’ve actually seen a 20% decrease in the institutions’ confidence in the stock market from July to today. So now it’s hovering in the low 60% range. So it’s almost close to a 50/50 shot as far as the mutual funds and pension programs. So as far as is, is the stock market is going to continue to go up? Do we want to harvest the gains now? Do we want to hang in there longer term and continue to try to squeeze out that last 10, 15, 20%? But that’s an individual decision, but the risk involved in it, I don’t think anybody would argue, is continuing to go up. So I think you put all that in a pot and stir it up, but I think generally people are going to believe that it’s very…there’s a very good reason to consider taking your gains off the table during 2021.
Jimmy: Sure. Well, I’m a big believer in the theory that the stock market, over a long enough period of time, is always gonna go up. But I guess it depends on your investor profile. What’s your risk profile and what’s your investment horizon, consider those. And if you have some unrecognized or unrealized gains baked into the market, yeah. Maybe there is an opportunity. And all I’m saying is, yeah, maybe there is an opportunity. Maybe that’s something for you to consider. And what better way to benefit or mitigate some of the taxes than to roll over into an Opportunity Zone fund. So, Greg, a lot of great insights that you’ve shared with us today. Before we go, though, I wanted to spend a couple minutes learning more about your investment offering. For those listeners who haven’t heard our first few conversations together, who may have missed your pitch on OZ Pitch Day back in November or March, can you give us the quick overview of the Investors Choice OZ Fund and what makes it different?
Greg: Sure. Happy to do that. And I just wanted to dovetail before I do that on what you just mentioned regarding Opportunity Zone investing. I think at the end of the day, if anybody has listened to this whole podcast, I think what comes out, I hope comes out of the podcast is really just three things. One is, what’s the environment look like? Two, is this a good time to take our gains off the table and invest it, let’s say, in an Opportunity Zone fund? And, three, where we invest it, is it a safe place…is it as safe as we can have it invested? Because harvesting gains to not get anything out of it probably isn’t the best thing for an investor. So you want to make sure that there’s two sides of the coin. One is harvesting the gains and the second is making sure you’re putting it in the right place.
So, I just wanted to make sure we covered that. And then as far as our fund is concerned, yes, thanks, we do…we have a fund that’s called Investors Choice Fund, and we’ve been out for quite some time now and raising money nationally for projects. And in demographics that meet the criteria of everything we basically just talked about as far as what we believe is recession-resilient demographics and asset classes, mostly revolving around the food groups of multifamily with barriers to entry, senior living facilities, storage facilities, and then warehouse and distribution centers. So that’s what we focus on, but we go into different demographics that, in our opinion, really match up or analogize with each other across the country. So it’s not in one area, but it’s in multiple areas that meet the recession resiliency criteria that we talked about earlier. And then the other thing that sets us apart is we’re the only fund out there that, after it goes through that filter, we actually allow the investor to pick and choose the projects that they go into.
And so they can pick as much…as many of the projects or some of the projects or one of the projects. And they can also decide on how much money or investment they want to go into each. So we give that variability and flexibility to the investors. And then lastly is who we’re partnering with on the developer side, the projects we get involved with are at the local community level. And so these aren’t big projects needing $30, $40, $50 million. These are the projects that need $5 to $8 to $10, up to, let’s say, $15 million per project. So these are the strong regional developers that have good connections in the local community and great, great relationships with the local economic development alliances and local communities. And so they’re really passionate about what they’re building and, quite frankly, the return profiles are really good in that arena. So we were able to develop an umbrella fund to be able to penetrate that marketplace, and we’re really happy with what we’ve developed, and we’re selling throughout the country right now.
Jimmy: Fantastic. And for our listeners out there today, you can learn more about Greg’s fund. He’ll be presenting it at OZ Pitch Day, next week, on Tuesday, July 27th, you can go ahead and register for the event right now. It’s free to register at ozpitchday.com. Greg, thanks for joining me today. Before we go, can you tell our listeners where they can go to learn more about you and USG OZ and the Investors Choice Fund?
Greg: Certainly, happy to do that. If you’d like to take a look at our company, you can go to investorschoiceoz.com, and you’ll find all the information there. And you can actually get ahold of me directly through that website as well.
Jimmy: Perfect. That’s investorschoiceoz.com. And for listeners out there today, I will, as always, produce show notes on today’s episode, those will be available on the Opportunity Zones Database website. You can find those show notes at opportunitydb.com/podcast, and there you’ll find links to all of the resources that Greg and I discussed on today’s show. I’ll be sure to link to that recent inflation report, as well as investorschoiceoz.com. And we’ll have a little bit of information on my upcoming OZ Pitch Day event, where Greg will be presenting his fund in much more detail. Greg, awesome catching up with you once again. Thanks for joining me today.
Greg: Yes, sir. Thank you so much, Jimmy.