Generational Buying Opportunities, With Grubb Properties

In this webinar, Clark Spencer and James Holleman discuss OZ projects in the Grubb Properties portfolio.

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Webinar Highlights

  • An overview of Grubb Properties, a real estate developer and fund manager with a 50+ year history of “doing well by doing good.”
  • How Grubb’s vertically integrated structure reduces fees and allows for a nimble and opportunistic approach.
  • A review of essential housing, and how Grubb’s Link ApartmentsSM strategy is uniquely positioned to tackle the housing crisis is playing out in America.
  • Core components of Link ApartmentsSM , including efficiency and creativity in design and construction.
  • Examples of Grubb projects in Opportunity Zones across the country.
  • Why Grubb’s unique fund structure as a private REIT may appeal to high net worth investors.
  • Summary of fees, preferred returns, and target returns.
  • Grubb’s focus on “generational buying opportunities” in Gateway Markets (such as New York and Los Angeles) and status as a net seller in some High Grown Markets where prices have surged.
  • A review of a multifamily development near the Fitzsimmons Innovation Community in Aurora, Colorado that will include 405 units.
  • A review of the Queens Plaza development in New York City, including some massive tax subsidies that drive value for investors.
  • Q&A with webinar attendees.

Featured On This Webinar

Industry Spotlight: Grubb Properties

Founded in 1963, Grubb Properties is a vertically integrated real estate operating company and a leader in addressing the housing affordability crisis through its Link ApartmentsSM brand. Since 2018, they have raised over $200 million for Opportunity Zone investment.

Learn More About Grubb Properties

Webinar Transcript

Jimmy: And we are going to be hearing from Grubb Properties. First, we have James Holleman and Clark Spencer. I’m going to bring you, gentlemen, up here now. James, how are you doing?

James: Great, Jimmy. How are you?

Jimmy: Good. James, why don’t you go ahead and take it away.

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James: Thanks so much, Jimmy. And thanks to everyone on the line today. It’s a pleasure being with you here again. We’ve actually participated in an OZ Pitch Day before and loved our experience there. Jimmy provides an outstanding service for those attending this event and for the managers involved as well. So, thank you. It’s our pleasure. So, let me tell you a little bit about Grubb Properties. Today, you know, we’re a 57-year-old, vertically integrated real estate developer.

We’re also fund managers. And our current CEO, Clay Grubb, took this business and became CEO in 2002 from his father, Bob. Bob Grubb started the company in 1963 and really developed the foundation for our mission today. And I like to tell that story to start things off. You know, Bob started the company here in the South, in Lexington, North Carolina, as a single-family home developer. And he had some success, but he saw much opportunity with a certain market segment that was really being shut out of the system. And here in the South, at that time, the practice of redlining was very dominant. And that’s essentially where local municipalities got together with commercial banks and developed barriers to basically provide loans to individuals that were living within low census tract communities.

And most oftentimes, these were individuals that were persons of color, and Clay’s dad had a problem with this. And he also saw opportunity to do good while doing well with this. So, essentially, what he did was, he went to the banks, he borrowed on his own money, he started a not-for-profit finance arm to his development business, and he essentially provided no-cost loans to individuals within redline communities, to allow them the chance to homeownership to then turn around and develop a home with him, again, that do good while doing well model.

And although that’s not our strategy today, you know, we still carry that torch of impact forward, you feel it in our mission, you feel it with our CEO, and our CIO, and our other C-suite executives, as they sit in the trenches with us and develop and push the strategy into markets where it’s so desperately needed. So, let me tell you about the strategy and what we’re doing today. Before I go in, you know, just a couple of manager highlights. Again, we’re a vertically integrated real estate developer. We’re not an asset allocator, we’re not the financial institution developing funds, and then going and buying things from real estate developers, we are the real estate developers.

I like to say, we’re the purest way to access this investment class without doing it yourself. You eliminate fees while you’re addressing a vertically integrated manager, and you also get access to a nimble and opportunistic approach as we can turn on a dime and realize opportunity within current markets. Our manager highlights are robust. Since 2002, when Clay took realm, we’ve had 12 funds over 75 investments and deployed $1.5 billion of equity.

The track record for that deployment has been fantastic. Our realized investments, a weighted average internal rate of return on those has come in at 41.6%. And the weighted average equity multiple on those realized investments is actually 2.35x. I like to say, we bring alpha to the asset class. There’s so much value in that vertical integration, and this is part of it. So, how do we differentiate ourselves? What’s our strategy? You know, it’s really a demographic-driven strategy focused on essential housing. And I’ll go into what essential housing is later. But, you know, within our 57-year history, you know, what we really focus on is long-term real estate value and risk management.

I always hear the guys say, “Protect principal first, get gains later.” You know, in our history, in our 57-year history, we have never had a property level bankruptcy, foreclosure, or deed in lieu. And when you talk to our prior investors, they’re very satisfied. You know, in our rigorous investment process is really what drives that, our prudent use of leverage. When you look at this weighted average track record, one thing that is not mentioned is the average leverage ratio that sets just under 55%. We’re prudent, we’re very careful. The duration of that leverage is very extended as well.

You know, we’re not looking for short-term flips, we’re looking for long-term holds, where we can take our expertise and really drive value into these assets, right? And we do it with that vertically integrated real estate development team. And, again, we do it all, you know, we’ve got the in-house research teams, accounting, finance, fundraising, you name it. Even we’re general contractors, we don’t do that work very often, but we can. We can step into a situation and make sure that our general contractors that we hire are staying within their contingencies. I like to say that we’re not out there swinging hammers, but we’re watching them swing hammers, and we’re staying on-site, being on-site representatives, and having superintendence watch them and make sure that everything’s being done within our proforma.

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So, how are we doing this? And what is essential housing? Is really driven off of a housing affordability crisis that we see in the markets today. Over the past 10 to 15 years, most new multifamily product that you’ve seen built, about 80% of it, within tier 1 and tier 2 marketplaces, is catered towards those that represent top income-earning class, 140% area median income or above. And while we see these prices for rents continue to rise, we’re not really seeing supply keep up with that pace, right?

And on top of that, we’re seeing a population growth continue to put pressure on this market. In fact, as you can see in this chart, Pete & Burson [SP] United States happened in 2007. This essentially means that new workers are going to continue entering the workforce up until the early 2030s, and continue to flood certain markets with demand for multifamily housing. This comes at the same time where the median new home price in the U.S. exceeds $345,000. Most millennials, in fact, 80% of millennials earn less than $50,000 a year. They cannot even qualify for the average monthly rent, which is $474 for an apartment across the United States, much less afford to buy a new home.

So, we see opportunity in this problem, and we think that if we can develop a product that has a more moderate price, but it’s still Class A, it’s still fully amenitized in that live-work-play environment, we create an insatiable demand, and that is Link Apartments, that is essential housing. So, essential housing is really that segment that is not affordable housing, it’s not like tech, it’s not luxury double Class A, it’s right in the middle. I like to say, it’s the nurse, not the doctor, you know, and there are a lot more nurses that are potential tenants for us than there are doctors.

And the area median income class that we’re targeting are those that represent the 60% to 140% class, not the small class of 140% or above. So, our renter pool is greatly expanded when we can drive our prices per month down for our tenants and offer them a quality unit in a live-work-play environment that’s Class A but a little bit cheaper, right? So, what we’re looking to do with essential housing is basically deploy this asset in a urban infill, transit-oriented environment that’s close to major job centers and employers.

You know, and certain things that we really like to target are universities, hospitals, innovation quarters, medical centers, and state and federal government. And we find that those types of job centers present a defensive type of environment, and that’s been proven when you look at our track record. So, let’s talk about exactly what is Link Apartments and how we’re doing this. You know, it’s really around two things, efficiency and creativity.

And the efficiency comes with an intelligent design platform. When we look at the Link Apartments, we only have six-unit floor plans. Those six-unit floor plans are highly efficient for plans that we use like Lego blocks to essentially maximize the space of a potential development. And we stack those Lego blocks to eliminate wasted space to drive a lean type of methodology that allows us to squeeze as much as we can get per square foot out of our development sites, while in turn, charging a reduced rent per month for our tenants, right? And when you look at our units, those six-unit floor plans, they’re just studios, one bedrooms, and two bedrooms, right? Clark and I toured an asset in Aurora, Colorado that had 61-unit floor plans.

It’s completely impossible to be efficient with that type of model. But for us, we can replicate. We can drive these floor plans across the entire nation and make sure that we can drive a lower price point with them that can range from $150 to $500 a month cheaper than units sometimes being built right across the street from us. And while $150 to $500 a month may not seem much to some of those on the call today. You know, a nurse making 60 grand a year, that’s extremely meaningful.

You know, a cop making $45,000 a year, that’s extremely meaningful. The essential employee who our ideal tenant is, that can provide a lot of impact and relief to that individual, and in turn, provide an insatiable demand for us when we can reach that price point with a quality product. So, our strategy is not just about being efficient, you know, that’s really how we drive a reduced per monthly price point for our tenant, it’s about being creative. And that’s how we generate alpha for our investors. So, in being creative, we have a numerous amount of creative methods that we attempt to deploy into each development site that we approach. And these creative methods can do things, like lower upfront capital costs, reduce the cost basis on acquisition for land, creating non-tenant revenue streams, or reducing tenant operating expenses.

And, you know, we’ll do a numerous amount of creative things that would like to describe to add alpha, but one example that I really like to talk about is our ability to use other property types, with the intent of getting to a cheaper cost basis for multifamily development. And this goes right in line with lowering upfront capital cost. And this also kind of paints a picture for how a vertically integrated real estate developer can be opportunistic and really bring things to the table that other asset allocators can’t.

So, I’ll give an example, where Clark and I are sitting right now in Charlotte, North Carolina, and our corporate headquarters is a value-add office play. This office in Park Road, which is right in Charlotte, South Park area, set alongside another office that we acquired, both of them independently. And each of these offices set on 11 acres of surface parking lot. We made sure that these two independent office buildings were great in themselves, right?

We underwrote them to make sure that we could make a nice value-add acquisition, give them an uplift, and then flip them at a good price. But as we were going through that value-add uplift, we essentially negotiated with the local municipality to allow us the entitlement rights to rezone the property, to chop up this big asphalt parking lot that really presents a barrier to growth for the community, rise a parking deck, and then wrap that parking deck with Link Apartment units. And then we’ll share the parking between the office and the multifamily.

And we were able to execute on the strategy, we essentially get the land for free to build the multifamily on because we’re winning it through the entitlement process, make sure there are some frictional costs in that entitlement victory. But compared to buying raw land, a huge savings and immediately passing those that value on to our investors. That’s one of, you know, numerous amounts of creative methods. Tax incentives are other creative methods, grants, subsidies, shared parking elements, all of these things tied together are what makes us special.

And I’d love to give you some examples of what we’re doing in Opportunity Zones as well, because we found as soon as Opportunity Zone census tracts were identified, that we’ve been navigating in these zones with Link Apartments since 2012. In fact, our first Link Apartment development site that we ever approached sets in Richmond, Virginia today, it’s in an Opportunity Zone. So, we found that 40% of our prior portfolio sat in Opportunity Zones when these census tracts were identified. So, it really took no deviation of strategy for us to approach this asset class. For us, it was just a different way to raise capital. And we’ve become very successful in that approach. That’s one of the reasons that we’ve been so successful with our Opportunity Fund.

And Novogradac recently, you know, brought out some statistics that put us in the top 3% of the Qualified Opportunity Fund market in regards to our fundraising. No deviation of strategy, I think had a lot to do with that. Also, we have a very unique fund structure that is a private REIT, which represents really a turnkey solution for high-net-worth investors to access this asset class. You’re going to get immediate access to a commingled fund of assets spread across the nation that won’t generate a K-1 every year for you, it will only generate a 1099-DIV and [inaudible 00:14:40] that you have a taxable distribution.

It’s so easy to use, it’s still that private market OZ access that you want, but in a vehicle, that allows us to be more efficient, and which I’ll have Clark describe, but also allows our client a much easier use. So, across our Qualified Opportunity Fund program, we have great multifamily experience. We have 17 assets that are now in QOZs, totaling over $1.3 billion of value and over 3,000 units. And we’re putting these assets in very high-profile markets.

Clark, our fund manager, has said since the program began, and he saw these census tracts, not all Opportunity Zones are created equal. We absolutely prove that. And Clark will give you some examples later in the presentation. But I’ll say this, our assets in Opportunity Zones are trophy assets. We have a flagship, Fund VII, fund in market right now. Same strategy as our Qualified Opportunity Fund, but non-opportunity zone geographies. If our opportunity funds were to pass on the assets in the Opportunity Fund, I’m sure our flagship funds would eat them right up.

I mean, these are fantastic assets that we’ll describe to you in a moment. We also have some commercial assets in Opportunity Zones as well, historically. We have four assets totaling $110 million of value and over 550,000 square feet of space. So, with that, I’d like to turn it over to Clark Spencer. Clark is senior vice president within Grubb Properties. He leads our Qualified Opportunity Fund program and he’s our fund manager for the Qualified Opportunity Fund program. It’s my pleasure to introduce him to you and have him talk about our current market approach and some of the assets that we’re looking at in the fund currently.

Clark: Thanks, James, and thanks for the little introduction, inspiration, and great job talking about Grubb Properties, and what we like to do in Opportunity Zones, and really, in real estate markets across the nation. I want to talk about a few things today. You know, as James said, we have deep experience in Opportunity Zone. We do have a specific fund in market, you saw the name of it at the beginning of the presentation. That’s the 2021 growth Qualified Opportunity Fund. In this presentation, we’re not going to spend a whole bunch of time talking about the terms.

I think there are very sort of market standard terms. It’s a 8% preferred return or the 82/18 split of all profits. Eighteen percent carried interest to us as the manager with a 1.5% asset management fee. So, I think it’s a very standard market terms, I don’t want to get bogged down in that. You know, James mentioned the REIT structure that gives us a lot of flexibility.

There’s the tax efficiency that James mentioned, but also, a big portion of that is within a corporate structure, being able to do taxable sales, and actually recycle assets that become much harder to do in a Qualified Opportunity Fund that we think that a Qualified Opportunity Fund structured as a partnership, obviously, you can access the 1031 program. But there can be some interesting ways that interacts with the reinvestment requirements or new development requirements in 1031. So, we really liked that restructure for that reason as well.

In our 2021 Qualified Opportunity Fund, I’m going to talk about two assets, specifically, but we actually have eight identified assets. Those are located in Charlotte, North Carolina, Aurora, Colorado, Los Angeles, Oakland, New York City, Hempstead, Long Island. And that’s it. And we’re raising capital for that right now. We’ve raised about $81 million so far, and we’ll have a target. And we think we’re gonna raise close up here somewhere between $175 million and $200 million. So, I do want to talk about the markets that we’re in because I think that also goes to our fundamental philosophy.

As James was talking about earlier, you know, we have this massive housing demand, and it’s really because of our production shortfall. There’s currently about a $5-million and $5.24-million or 5.24-million housing unit gap in the market. That is a…we need five and a quarter million more housing units than we have. That’s actually gone up since 2019 on 1.4 million units.

I say these types of things to investors, and they say, “Clark, you’re crazy. There are people building apartments all over the place. I see multifamily going up in new cities all the time. How could we be underproducing?” And I think James showed some of the graphs earlier. We’re actually still well below the 50-year moving average for apartment and actually home deliveries in the United States. And it’s causing a problem and that’s why in a lot of these markets you see massive housing pressure.

I know here, personally, in Charlotte, you know, the single-family housing market is going bananas and the multifamily as well. So, what we’ve actually seen during the pandemic is an incredible opportunity in gateway markets. We’ve expanded into gateway markets as I mentioned before, particularly in the 2021 Fund Los Angeles, Oakland, the Bay Area, and New York City. In our 2019 Fund, we actually also have an asset in Washington D.C., and we have a couple of additional pipeline assets that we’re looking at in the D.C. area as well.

These markets actually operated really differently during the pandemic than they normally do. Traditionally, these types of gateway markets are massive, are really recession-resistant. That’s that resiliency that James was talking about earlier. Because of that resiliency, typically, they respond very well to recessions. And they don’t actually have a lot of opportunities to get into these markets, because they’re very high barrier entry.

Because of COVID, and some of the flight out of these cities, at really the professional class, you’ve seen capital flow into traditional southeastern markets, and really take a pause in these gateway markets. Actually…and I’m gonna talk about some of these graphs…earlier…in a minute, you’re seeing it go back up already. But those high-growth markets are also, you know, target market for us, as I mentioned, Charlotte, Denver, and other markets like that.

If you look at these graphs, what you’ll see is basically the effect of the pandemic. On the bottom row, you have San Francisco, Washington, and New York. San Francisco, the Bay Area is still a little bit under, where it was, obviously, before the start of the pandemic and had a very, very steep drop off. But if you look at Washington, D.C., and New York and you continue that trend line from pre-pandemic, what you’ll actually see is New York is essentially on pace of where it would have been pre-pandemic had nothing changed, so it’s already bounced back.

And Washington, D.C. has accelerated beyond it. So, we think that they’re in these markets generational buying opportunities, and that’s what we’re trying to take advantage of. You can see there in Atlanta and Charlotte, you basically didn’t even have a dip because of the pandemic. Again, that’s that hot housing market that we’re talking about. We’re currently a net seller in the southeastern markets with a prior portfolio of assets, it’s a different strategy, a different brand, that’s our Sterling brand. And we are selling those former value-add workforce housing assets because the pricing it’s just gotten so good.

So, that’s sort of our market strategy. I’m happy to talk about that more in the breakout session. But I do want to highlight two assets, and I know I have about five minutes left in my time. So, first I mentioned Aurora, Colorado, just right outside of Denver. James, you know, highlighted Aurora a little bit in his comments as well. We toured an asset down the street from this. This is anchored by Fitzsimons medical campus.

This is honestly one of the largest medical campuses I’ve ever seen. There are three full-service hospitals, one of the top five children’s hospitals in the nation, as well as a university medical center, and a massive amount of office and lab spaces, still being built out. Currently, there are 25,000 jobs on this campus. And the full build-out over the next decade is projected to be 50,000 jobs.

So, we are building a pure-play Link Apartments project here, 405 units. If you see the top right picture, Fitzsimons quarter, that’s a hard corner, directly catty-corner across the street from main entrance to this campus. This was the original site, we actually did an assemblage, that original site was about 250 units. We assembled three additional parcels to expand a really efficient 405-unit property.

I’m super excited about this, as James was talking about, you know, those nurses, those hospital workers and administrators are the people working in those offices and labs, who maybe aren’t at the highest of the income range will have a great option right across the street. We think that this is just an incredible asset location. The Denver market is honestly also one of the best, if not the best multifamily market in the country. So, we’re really excited about having our first foothold there with this asset. It’s also got pretty good transit access as well to the downtown Denver area.

And actually, if you’ve ever been to Denver, Aurora is one of the only places in the Denver area that’s actually convenient to get to the airport. So, we think we may even actually pull in some airport-based residents, whether they actually work at the airport, or if they are people who travel for business a lot, you know, sales jobs, things like that, having that easy access to the airport will be really good. We have broken ground on this asset, but that’s the advantage of our REIT structure and multi-asset fund structure. Even though we’ve broken ground, we’ve secured JV Capital into this asset. You are still coming in at the original cost basis, and pro rata, this is a project in our 2021 fund. So, this is an asset that you would have access to coming in.

The second asset, and James said trophy assets, I think this asset really is kind of the crown jewel of our QOZ portfolio. We acquired a site in Long Island City, it’s literally about 150, 200 feet from the base of the Queensboro Bridge, it sits on top of the Queensboro Plaza subway stop. When I say on top, I literally mean on top, we got a density bonus from the MTA because we are going to be replacing an entrance to that subway and making a handicap accessible. So, because of that, we got a density bonus of 416 units. This is just an incredible asset.

One of the big stories here, though, is a massive tax subsidy. As James was saying, these types of tax subsidies are one of the ways we drive value. There’s a program in New York called Affordable New York, where you get a 35-year partial property tax payment in exchange for making certain of your apartments affordable at different income ranges. For a lot of other developers, those income ranges are actually fairly punitive on their underwriting. Now, they do it anyway because the tax incentive is so valuable, I’ll tell you about the total of it in a moment. But they do it anyway because that tax incentive is so valuable.

But for us, the markdown owner underwritten rents is actually pretty small, because of that median income class that we’re targeting anyway, you know, we’re targeting people making 60% to 140%. And the cutoff points on these units, I think it’s about a 30% set aside is, you know, I think 60%, 90%, and 110% AMI graduated over the property. Because of that, we are giving actually this massive tax abatement. We have a discounted NPV, we give a value of that at $65 million, we acquired the land for $63 million.

That’s kind of apples to oranges, but “Fly RC [SP],” likes to sometimes call that free land in New York City. And that’s something that can be really, really powerful on the long-term for a project. There’s two assets, like I said, we’ve got eight dynamic assets, it would be too hard to go through each and every one of them, happy to talk about them on the breakout session. I do have about one minute left, I’m going to turn it back over to James really quick to talk about some of our ESG initiatives that we do broadly in our Opportunity Zones.

James: Thanks so much, Clark. Yeah, I started this conversation out by, you know, describing some of the impact that Bob Grubb kind of sowed into our business from the very beginning. But today, Clay and team still carry that torch forward. You know, and you can see, you know, just some highlights here around our environmental stewardship and community engagement, how we’re addressing what we consider to be a housing affordability crisis. And all of these things really just allow us to do good while doing well. And from ’20 to ’21, we actually raised our grades via assessment score by 19%. And our development score is actually ranked in 81 out of 100, by their team as well. So, you know, really, you know, driving a sustainable building environment, but also providing impact where it’s needed in that middle-market America.

Also, you know, just as a quick comment, our investor relations experience is fantastic. I’ve raised capital for a lot of fund managers, and this is one of the best that I’ve seen. We really give a great experience to all investors, each quarter, my favorite report, is issued to all investors that describes every fund that we’ve ever launched in every investment within those funds, complete transparency to all investors is what we believe in. And if you’d like more information about our program, I would always love to have a conversation with you.

I’m available any time, this is my cell phone, you’ve also got my email here, you can go to grubbproperties.com, and also, you know, just dig in a little deeper and find ways to connect with us. But please, you know, don’t hesitate. We want to make sure that you’re able to take advantage of the Qualified Opportunity Fund program this year, while there’s still that 10%, you know, to be had on your deferred capital gains. So, you know, please, reach out, let us know of any questions that you may have. And we thank you for your time. And thank you, Jimmy, for allowing us to be a part of this once again.

Jimmy: Thank you, James and Clark, for participating in the presentation today, a great presentation. You’re absolutely right to point out that fact that the 10% is going away forever unless there’s some sort of congressional action. And that goes away at the end of this year. So, I think it’s a great time to invest in Opportunity Zones. I mean, I always think that, right? And they’ll still be a great time to invest next year, but you’re missing out on the 10% at least. So, we do have quite a few questions here.

I’ll try to get to a few of them now, we might have to kind of spill over into the breakout session. I’m going to post a link to the breakout session in the chat, in the Zoom chat right now. Here it is. So, that link just got posted in the Zoom chat to everybody. So, please click over there in a couple of minutes when we wrap up here, but let’s get rolling on a few questions here. We had two people ask about… some concerns about the fact that your fund is structured as a REIT, do you still get the depreciation benefits? Or what are your thoughts on that?

Clark: Yeah. So, that’s a great question. Well, that’s something that we deal with all the time. So, no, REITs do not pass through depreciation, but we still take depreciation, depreciation doesn’t go away. We just utilize it differently. We [inaudible 00:30:36] internally, as you probably know, REITs required to put out 90% of their net income as a distribution. Depreciation is a non-cash expense.

So, what that means is we get the depreciation that we capture, we get to retain internally and be able to redeploy it into additional, you know, either existing properties, additional new properties, making accelerated debt payments, because, you know, like most opportunity funds, we want to have a large refinance event around the tax-deferred, coming due to help our investors pay those taxes. So, depreciation is still there, it’s not passed through. So, yes, that’s certainly a disadvantage against a partnership-based fund.

But because we have a state a minimum of a $500,000 dollars, but we generally take tax down to about $100,000, particularly for anyone who’s coming to us through Opportunity ZoneDb. If you’re a $100,000 investor, who’s maybe diversifying into real estate for the first time, maybe you’re a doctor who’s had a business sale or something like that, or maybe you’ve just had a good run in equities and you’re wanting to have some real estate diversification. The tax prep cost fund on our fund for five or six states, and a partnership they want every year is probably going to…our tax advisor said that if you would charge about $2,000 and $2,500 a year for that tax prep, well, if you’ve invested $100,000, and I’m telling you this is a 10-year fund, your CPA is taking 20% to 25% of your investment in tax prep costs. He’s not going to charge you any extra to process it in [inaudible 00:32:18].

James: And Clark, just a comment, you know, I like to say that this is part of this turnkey solution. Because look, you know, by us internalizing depreciation, what we’re seeking to do is limit taxable income, you know, before the 10th year to maximize the tax incentivized value of the fund. So, don’t do that yourself, you know, let us do that for you. We can internalize that and put it to good use.

Jimmy: Okay. We’ll get through, I think one or two more questions here. And then I know we’ve got a lot more questions I’m not going to be able to get to. Clark and James will be available in that breakout session. I’ll post the link in the chat again here shortly. Curtis [SP] says he thinks he missed the fund minimum, what is the minimum? I think you just said it’s 500k?

Clark: It’s a state of a minimum of $500, but we’re flexible on that. And for anyone who comes to us through OpportunityDb, we lower that to $100,000.

Jimmy: Fantastic. So, a $100,000 for anybody on this call today. Venice [SP] says great presentation. Do you have any plans to enter the Central Texas markets?

Clark: Oh, man. I would love to buy something in Austin. We’ve worked in Dallas as well, both in our traditional funds and in our Opportunity Zone funds.
Even San Antonio has some significant appeal. The problem and this is by nature with Link Apartment strategy, because we’re driving to this lower price point, and it’s all about efficiency and going in basis and things like that, we can’t overpay for land. And unfortunately, by and large, if you want to buy land in Austin, you’re paying top dollar for it. Because it’s a great market. I want to be there.

If I can find the correct opportunity, I would pull the trigger in a heartbeat. But I can’t overpay for land and achieve the rents that I’m trying to provide in the Link Apartments product. A lot of other developers can, and that’s great for them, but they do that generally…they pass that cost on to their tenants by charging higher rents, you know, by adding amenities, they can charge higher rents for that, it’s not the game we play, it’s an efficiency game for us. So while, yes, those are absolutely target markets for us, they are tough. But if Venice happens to have a good deal in the Austin market, I would love to talk to him about it.

Jimmy: So, maybe Venice could join you in the breakout session.

Clark: Absolutely.

Jimmy: I’m going to wrap it up there. I’m sorry, we didn’t get to answer all the questions right here right now, but James and Clark are making themselves available in the breakout session for an additional half hour. So, please do head over there right now. I’ll post the link in the chat one more time so you can’t miss it. Just click on that link and head on over there. So, James and Clark, you should head on over there now. And we’re going to get started with our next presentation here in the main session if you’d like to stick around. I’m going to be interviewing Shay Hawkins, we’re gonna be discussing the future of OZs but Clark and James, thank you so much.

James: Thanks, Jimmy.

Clark: Thank you. Thanks, Jimmy.