Asset Classes For OZ Investing, With Kira Golden

Investing across different asset classes provides not only diversification benefits but alternative sources of growth and revenue. Opportunity zones can offer strong investment returns with an added social impact component in the United States and in Puerto Rico.

This week we chat with Kira Golden, CEO of Direct Source Wealth, as she shares her longer term perspective on asset classes for Opportunity Zone investing, with a specific focus on OZ projects in Puerto Rico. Direct Source Wealth is a real estate development company out of Denver that does direct deals and serves as a platform for new and experienced investors.

Click the play button above to listen to our conversation with Kira.

Episode Highlights

  • Types of asset classes for Opportunity Zone investing and what’s catching investors’ attention.
  • Why industrial centers attract Opportunity Zone investors and what’s unique about this particular property type.
  • Monetary benefits of long-term leases in opportunity zones.
  • Unique opportunity zones deals available to investors in Puerto Rico.
  • Subsidies or tax incentives available in Puerto Rico that are unavailable in the mainland.
  • Multifamily opportunities in Puerto Rico.
  • Advice on how to find an advisor in the OZ space and other types of alternative assets.

Featured On This Episode

Industry Spotlight: Direct Source Wealth

Direct Source Wealth is a wealth building opportunity for investors using commercial real estate and note-lending as their primary vehicles. The advantage is a passive turnkey model that generates cash flow, tax advantages, and equity growth.

Learn More About Direct Source Wealth

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.

Show Transcript

Jimmy: Welcome to The Opportunity Zones Podcast. I’m your host, Jimmy Atkinson. And today we’ll be discussing asset classes within Opportunity Zones. Joining me to discuss this and more today is Kira Golden, an alternative asset specialist, who recently participated on OZ Pitch Day. Kira joins us today from San Juan, Puerto Rico. Kira, welcome to the show. How you doing?

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Kira: I’m great, Jimmy. Thanks for having me.

Jimmy: Absolutely, Kira. Pleasure to have you here. It was great having you present one of your Opportunity Zone deals during OZ Pitch Day a few weeks back. Very excited to dive in today. So, I wanna talk about different asset classes that you like within Opportunity Zones. The deal that you presented was an industrial deal in Puerto Rico, so I kind of wanna start there. Why do you like industrial for Opportunity Zone investors?

Kira: Yeah. Thank you, by the way. It was great to get to connect with everybody on the conference. But industrial centers make sense to me for a number of reasons in general. When you have… Once you get a good credit quality tenant in there, you have a nice long-term lease, they’re fairly stable, they have cancellation provisions, and all kinds of great things that make managing that asset, in my opinion, a bit easier than managing the multifamily or single-family portfolios or other asset classes we also do. But the other big thing is these are long-term leases. So, it seems like a natural fit to an Opportunity Zone, where you’re going to wanna put a 10-year tenant or a 15-year tenant in your property, and have a lease term for the duration of your hold period. So, it just seems like a really natural fit, given the provisions required.

The other thing is that we have to do this thing where we buy a property for a certain amount, and then we double the basis by adding value. For example, the deal we’re doing recently, that we’ll be into this thing for about $22 million, bought it for $8 million. But the way these institutional leases work, by the time we’re all said and done, after stabilizing it, we should have a value of close to $40 million. So, they’re easy to double the expense into, and they go from being just worth the concrete at purchase, you know, so you can get them for a steal, and then, once you put a tenant in there, they have these massive jumps in value. So, that’s a nice thing to do when you’re looking at being able to take that capital gains tax-efficiently.

Jimmy: Right. And yeah, you referred to the substantial improvement requirement, which is part of the IRS regulations that allow you to qualify as a Qualified Opportunity Fund, you need to at least double the basis in the building, and industrial lends itself well to that, or at least in the case of your particular deal there. What other asset classes do you like for Opportunity Zones? Where else are you curating deals?

Kira: So, we’re doing a lot of Opportunity Zone deals right now in Puerto Rico. It’s my home base. And 98% or so of the island is an Opportunity Zone. And if you want, we can get into why I think that this is the best Opportunity Zone designation area. But we’re also focused on multifamily repositioning. Again, I believe we have a unique opportunity here because there really isn’t a ton of multifamily. If you drive around Puerto Rico, what looks like multifamily is either condos or government housing. The multifamily here is a lot smaller, two units, four units, six units. So, we’ve had an opportunity to go out and buy adjoining lots and adjoining properties, and assemble institutional-size multifamily projects. So, again, they very easily meet that investment requirement, but they also have the ability to double or triple the rent, post-renovation, from what they were at the purchase price. So, big swings and upside on value, but, in my opinion, minimized and controlled risk factors, because we’re by the beach, we’re on an island, there’s limited amount of inventory, a lot of beautiful upside with controlled risk on the downside.

Jimmy: That makes sense. So, you’re buying some adjacent lots and you’re replacing maybe some two or four, six-unit buildings with… What are your plans there? You’re building mid-rises or high-rises?

Kira: We’re not scraping, because a lot of these have wonderful historic character, and that’s just sort of part of our value, or the things we care about, is preserving that history and that character and that value and the local culture. So, we’re going in, we’re actually sort of renovating them as best as possible to fit the feel of the historical build, and then we adjoin them. So, we’re not actually knocking down and building something new in its place. We’re just connecting it all, whether that’s through corridors or garden paths or a connected roof, but bringing together something that was previously disjointed. And also, to your point about asset classes, I mean, those are two real estate examples, but companies can also be a Opportunity Zone. And this isn’t my project, but we’ve got a number of great vertical garden projects and business endeavors, green energy projects, and things that are Opportunity Zone companies here in Puerto Rico as well.

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Jimmy: Yeah, that’s a really good point, operating companies. And I know you’re not specializing in that part of things, as you just mentioned, but, yeah, I’d love to see more operating companies take advantage of the OZ benefits. I think it took a little bit too long to get the regs out for operating businesses, and that’s why we might see a lot more real estate deals, but hopefully that kind of evolves over time. So, we talked about industrial, we talked about multifamily a little bit. I wanna talk about the location now, Puerto Rico. Why Puerto Rico? Why do you think it’s a great location for Opportunity Zone investing?

Kira: Yeah. I’ve been in Puerto Rico eight years, going on nine years now. I did a deal when I first got down here, and it was super challenging, I’ll be honest, sort of soul-crushing. I’d never experienced that many hurdles and challenges. But I’ve pushed through, and actually, we’re about to really turn that project around. So, I was kind of short, or at least agnostic on the opportunity in Puerto Rico for a while, and just here enjoying, you know, the life and the family and the experience my kids and I were having. But in the last few years, and even actually prior to Opportunity Zones, but this really accelerated it, I started to see the opportunity here, and I learned how to work in the local culture and how to get things done politically, how to get permits done correctly. It was a whole new learning curve. So, even though it’s a U.S. territory, it’s largely Spanish-speaking, so there was a lot of barrier to entry, which created the opportunity, because not everyone was willing to push.

So, after pushing through that for years, and finally coming out the other side, it made a lot of sense to leverage that knowledge that myself and my team developed. Now, in the last few years, we’ve gotten very, very active here, and Opportunity Zones have made a huge difference in that, both bringing down capital, that maybe otherwise would have had some trepidation. Even just the other day, we got a custodied IRA investment approved, that the custodian originally didn’t approve, and said, you know, “Puerto Rico is a foreign country.” And I said, “It’s a U.S. territory.” But when I said “It’s an Opportunity Zone, a federally-identified Opportunity Zone,” the light bulb went off for them, and they were like, “Oh, it’s part of the U.S.” And so, in some ways, the Opportunity Zones just give that extra little bit of credibility, to help people in the states who don’t have a relatedness to Puerto Rico, to understand it is part of the United States, it’s not sending money overseas, you’re not using a SWIFT code, you’re participating in the U.S. economy, and the Opportunity Zone designation is actually really meaningful, and helping people understand that.

Jimmy: Yeah, very good. Well, you don’t need a passport to get there, and they use the U.S. dollar, so those are a couple more examples as well. What other subsidies or tax incentives may be available in Puerto Rico that are unavailable in the mainland? I think there’s some sort of programs there. We’ve spent some time on previous episodes of this podcast discussing those, but it’s been a little while. Refresh us.

Kira: Yeah, absolutely. What I’ll speak to is high level. There are definitely a lot of various incentives. For example, the project we’re working on in Aguadilla, we’re attempting at least to attract research and development tenants and run it as a research and development center, because there’s a ton of opportunity, and Puerto Rico has an interest in developing more research and development here, which is great. It’s great for Puerto Rico. It’s great for the United States. There’s incentives for tourism, there’s incentives for movie production, there’s incentives for real estate development, hospitality. There’s a whole lot that the Puerto Rican government is, I think, in my opinion, very smartly and very strategically doing to attract opportunity down here.

The other thing I wanna mention is that, just like you said with the Opportunity Zone designation, it took a while to sort of navigate how these incentives would work and who they would incentivize. And one of the things the Puerto Rican government has done lately is really also put an eye on how some of these incentives can help empower the local population. So, it’s great for people to come down, bring money, bring capital, bring opportunities, but one of the other things we really wanna make sure we’re doing is creating opportunities for the local Puerto Rican population to learn new skills, express their entrepreneurialism, and also, opportunities for Puerto Ricans who have left and gone to the States, to come back, because a lot of people who left left for lack of opportunity, and all of this economic development is enticing them to come back. And I see firsthand how good that’s been for the island.

Jimmy: Very good. Well, I wanna shift gears now and talk about advisory a little bit, because you have a wealth advisory firm you advise clients with. And as a question that I would pose to you is, how do clients who are looking for advice on how to navigate this market, how do they find an advisor who actually understands Opportunity Zones and other types of alternative assets? Because, frankly, when I look around, I oftentimes hear that, I talk to investors about Opportunity Zones, and they’ll tell me their advisor doesn’t really know very much about it. So, where do they turn?

Kira: Yeah. Thanks for bringing that up. Yes. I wanna clarify, I am not a financial advisor. I’m not licensed. But I do own a financial advisory firm with licensed advisors. And I created that because I saw a real, desperate need, because we were running into that when we would sponsor deals. Same thing, we’d put deals out, and people would say, “My financial advisor…” or the financial advisor would send a list of questions that were totally inappropriate and didn’t really relate to the investment, or, they were doing their best, but they didn’t know how to model out the income from a multifamily portfolio, they didn’t know how to plug that into their retirement calculator. So they didn’t have the right software or tools to really be comprehensive. And it created a problem. I mean, there’s a lot of people out there who are looking to do things right. They want a good team around them, a good legal advisor, tax advisor, and financial advisor, who can help them navigate both the traditional asset class, or what the crypto bros call the “legacy” asset class, and also help navigate some of these alts, these Opportunity Zones, or crypto, like I just mentioned, or whatever other things they might be thinking about doing. So, I founded the firm around that principle.

So, yeah, people are interested in having a single advisor who really has a strong sense of tax knowledge, and also alternative assets, but can understand and also fit that in with the traditional advisory model. That’s what we created. So, Direct Source Wealth Advisory was born out of that concept of direct deals, but still being able to work with people to build a comprehensive strategy and portfolio. And then, what I did was I partnered with…I brought in, if you’re familiar with The Duffy Method. You mentioned you’re going to the ADISA Conference. Will Duffy will be there. He’s brilliant. I brought in and partnered with Will Duffy. He’s part of our advisory program now. I went out and built, or purchased, a relationship with a 529 specialist, you know, a college planning specialist firm. I really wanted people to have a comprehensive place to address all of these growing markets. As more and more regular investors are getting access to these deals, which I think is great, I think they need to do so under the advice of an expert.

Jimmy: No, I think that makes perfect sense. And as you mentioned, this asset class, or if it is an asset class, if I can call it that, but alternatives in general, Opportunity Zones, privately-offered funds, crypto now, the whole thing’s just been democratized. There’s so much more access to these types of institutional-quality funds, or funds that have traditionally, in years or decades past, institutional-type investors are now available to accredited investors, smaller, high-net-worth-style accredited investors. But yeah, the advice there is still kind of lacking in some ways. So, yeah, I think you’re providing a valuable service there. And yeah, absolutely looking forward to the ADISA Conference, and talking with other like-minded folks about this very topic. Well, Kira, it’s been a pleasure speaking with you today. You mentioned Direct Source Wealth Advisory. Where can our listeners go to learn more about you and that firm?

Kira: Yeah. So, Direct Source Wealth Advisory has a website up. You can go to the website, although, I don’t know, I feel like websites are sort of the thing of the past. But you can also give us a call, 720-600-7070. So, 720-600-7070. And that’ll connect you with one of the advisors who specializes in The Duffy Method, which will be comprehensive, alternative assets, tax advisory, and Opportunity Zones are a wonderful blend of the two, right, tax and alternative assets. So, they’re definitely a great resource. And I’d love to find out that we connected with you through your podcast.

Jimmy: Terrific. Yeah. So, if you do reach out to Kira, tell them Jimmy sent you. For our listeners out there, if you wanna reference any of the resources that we discussed on today’s show, I will have show notes available on the Opportunity Zones Database website. You can find those show notes at opportunitydb.com/podcast. I don’t think websites are old-fashioned. So, you can head over there. Like I said, you’ll find links to all the resources that Kira and I discussed on today’s show, and I’ll be sure to link to directsourcewealth.com, and provide the phone number as well. Kira, thanks for joining me today. It’s been a pleasure.

Kira: Thank you.

Jimmy: That’s it for our show today. A huge thank-you to you, our listener. If you liked this episode, please rate and review us on iTunes. “The Opportunity Zones Podcast” is produced by the Opportunity Database. Visit opportunitydb.com to learn more about Opportunity Zones and Opportunity Zone Fund investing. You can learn how to subscribe to this podcast, and read more about today’s guest in the show notes, by visiting opportunitydb.com/podcast. And we’ll be back soon with another episode.