The Opportunity Zones Podcast is now on YouTube!
In this webinar, Blake Christian discusses his mission of providing affordable, sustainable housing through an OZ operating business.
- Blake’s background as a CPA for more than four decades, including a focus on tax incentives;
- Review of MIT’s assets and strategy, including an industrial building in Provo, Utah;
- MIT’s focus on environmentally friendly design and manufacturing;
- A unique structure that allows MIT to exit out of its manufacturing business after five years with tax free gains;
- Blake’s focus on a competitive fee structure in his OZ fund;
- Review of the multiple offerings available, including both debt and equity options;
- Overview of MIT’s facility in Provo, which sits on 2.5 acres;
- Images of MIT prototypes, including off-grid options;
- Discussion of target markets for MIT, including workforce housing and homeless housing;
- Live Q&A with webinar attendees.
Industry Spotlight: MIT Modular
MIT Modular is dedicated to providing affordable, sustainable housing, specializing in solar and wind powered solutions that can withstand 180 + mph winds, and pull 2.5 G in a seismic event while maintaining an elegant modern aesthetic. They believe that providing jobs that pay a living wage empowers and inspires systemic change in communities, and actively pursue opportunities to do well by doing good. The business model is built around fulfilling a deep need for affordable housing, and our Opportunity Zone Fund offers investors minimal risk, good returns, and great tax benefits.
Learn More About MIT Modular
- Visit MITModular.com
Jimmy: MIT modular QOF, located in Provo, Utah, Blake Christian joined us a few minutes earlier for our panel on the OZ reform legislation. Blake, I’m bringing you back on stage now as a panelist. Hey, there he is.
Blake: All right, should be live now. Good to see you again, Jim.
Jimmy: Look looking good, Blake. Good to see you again as well. Thanks for joining us today.
Blake: Oh, just in case some of the audience wasn’t on a little earlier, I’ve been a CPA for 42 years, focused on tax incentives for at least 25 of those years, various tax credits and things. So obviously I jumped into the OZ program when it came out. So I’ve been involved in the OZ program for four and a half years. My day job, I’m a tax CPA with a top 30 firm in the country. And I have set up 180-plus OZ funds throughout the country.
You’re going to hear today about MIT, which is a real estate and a container housing OZ and ESG is our backbone. And so you’re really investing in a diversified fund, industrial property as well as a manufacturing company. We convert shipping containers into housing. So it’s a couple of fairly hot markets, and the convenience of investing through an OZ fund, you get the compounding tax benefits.
We’re located in Provo, Utah. Purchased a 19,000-square-foot, heavy industrial building. And there’s a real shortage of heavy industrial in our region. It’s on two and a half acres and it’s strategically located in the Provo rail hub. So, from a logistic standpoint, it’s perfectly located and we can work 24 hours a day in that facility. And our neighbors don’t care how much noise we make, because we don’t have any residential there.
We’re very focused on the environmentally designed end manufacturing. My partner, Roi Maufas was one of the first builders of a container house in Salt Lake City. Extremely innovative guy, great to work with. All of our clients love working with him because he is super creative, but essentially we’ve been able to build a thermos out of these containers and keep them very warm in the winter and cool in the summer, getting R ratings in the mid-thirties.
So it’s really kind of a fun area to work in. And it’s a very hot segment right now. You all already know about all of the tax advantages. I’m going to put the disclaimer up here. You’ll have that in the package when you get it via email later. So, again, we are very… Great presentations today. We saw really interesting projects, but I have to say with all humility that I think we have the most interesting project because you get the real estate play plus the manufacturing and because I’ve been a tax CPA for 42 years, I’ll get into it when I show you the organization structure, but we are able to exit out of our manufacturing side in five years and provide everybody tax-free gains at the five-year mark, and then we can hold the building for 10 years.
Also because I’m a CPA and I have insight into hundreds of other OZ funds, I wanted to be below cost provider from a fund standpoint. So I’ve set our fee structure at 1.25. I don’t have any add-ons. I think we have a small fee if you transfer your OZ fund investment, but other than that we’re probably the lowest fee structure in the country. So we have really two offerings, and two under the equity, and then we have a debt option. So bite-size, $100,000, right now, because we’re not fully funded you’d get a 5.16 interest for investing 100,000. If you invested 250,000, you’d have an 11.76% interest.
Once we raise our full $4 million, you’d get diluted to 2% and 5% respectively. The debt option we do have, we’re refinancing our facility right now. We have a $1 million bridged loan on it. And, so we are talking to a few people about refinancing, but we figured we’d throw out to the group here too. So, we’re going to refi at $2 million, and you’d have a first trustee, we’d negotiate the interest rate, and we’d also be willing to throw in a kicker of a little equity interest for a compromise on the interest rate. So, those are the two offerings, and we can discuss those offline. So this is our somewhat unique structure. So we’re set up as a partnership up on top, pretty traditional, and then our real estate is held and firewalled in MIT facilities.
And the reason we did that is to allow MIT design and fabrication, our manufacturing side, to be allowed under Section 1202, and I can provide you with a bunch of information on that, we could sell this in five years and people could get up to $10 million per investor exclusion on that exit. There’s my partner, Roi. He’s a fun guy to work with and the smartest guy in the game when it comes to container housing. This facility, we have, it’s a 100-year-old building, and so we have two and a half acres on this. We also inherited three… You can barely see them there, but three tankers which were abandoned. And we’re going to be able to sell those for 25,000 each because nobody claimed them.
Then this is a layout of our warehouse, and then we have this 5,004 feet incubator space. So we are going to lease… The process of leasing this out to 10 or 12 individuals that are doing R&D light manufacturing, etc. And we’re trying to get people to be strategic, they may be doing some projects for us, sub-projects. Here’s a couple of our prototypes. We use 45-foot shipping containers, so it ends up yielding about 360 square feet. This one has a rooftop deck on it. And the far one has a full solar and it’s all off-grid. We have biodegradable toilets in there, so it can be completely off-grid. We have a five-ton gantry crane. Again, we’ve completely redone the floors, completely redone [inaudible 00:08:08], and the building. The land alone is worth probably a million and a half.
The latest valuation we got because of the improvements that we’ve done is 3.8 million. That was in March. Granted that’s probably a little lower now with the change in market. Our target markets, homeless housing, workforce housing, rentals. One of the surprises is we’ve been approached by a ton of mobile homeowners, and they want to add, kind of upscale features to their current developments. Again, there’s some of our… And then there’s videos, internal walkthroughs on our website. I’d encourage you go there.
We use sustainable woods and things. This is all bamboo products. And we also have … We may be starting a bamboo manufacturing and distribution division. It may not be within this OZ fund. It may be in another one. There’s some workforce housing projects, and we have been getting a ton of press just because the housing crisis is not going away. We have a great solution.
It’s a green solution, the portability. And if you buy these and rent them out, if they’re fastened to the ground properly, you can expense the under the bonus depreciation rules in the year that they’re placed in service. Again, please get our package. There’s lots of links of articles, etc., and there’s our contact information. Call either me or Roi. Go onto our website and I’ve hit 10 minutes perfectly, Jimmy. I turn it back to you.
Jimmy: You did it well, thank you. I appreciate that. You did hit 10 minutes perfectly. Yeah, please do reach out to Blake and his partner Roi. They’re both fantastic. I’ve heard Blake and Roi speak a couple of times previously. Always great to hear from you, Blake, and MITmodular.com, I posted that link in the Zoom chat as well. We’ll do questions for a couple more minutes before we get started with the happy hour. I’m going to post the link to the happy hour once we have officially concluded here. We had one question from an anonymous attendee, wanted you to elaborate on that five-year exit. I think you’re taking advantage of Section 1202C. Is that right? Or can you talk about that a little bit more?
Blake: Right. And so it’s qualified small business stock. And so as long as you’re in the proper industry, and we would be five years from the date we convert, and right now for full disclosure, we’re an LLC partnership, but as soon as we’re profitable we’ll convert to a C-corp, that’ll start the five-year clock ticking, and then you get the greater of $10 million exemption on sale, or 10 times your equity investment. So if you invested 2 million, you’d get a $20 million exemption. So it’s pretty powerful.
Jimmy: Yeah, for sure. Yeah, great little section in the internal revenue code there to take advantage of, and yeah, there aren’t a lot of qualified opportunity funds that are layering that in. So it’s good that you’re doing that, and that speaks to the expertise you have being a CPA for as long as you have. Blake, a question from Rick here. We’ll get to a couple more questions before I close things down here. Rick asks, “Do you build the container housing based on sales contracts or spec build sold after completion?”
Blake: Right now, we’re just doing custom orders. There is a part of our business plan will be for people to invest in groups of 10 to 12 containers that would be at the ready for emergencies. And, we feel that that’s a huge market, earthquake, fire, etc., that we can put these tractor-trailer rig and haul these out to an emergency. And, those things are usually going to sit there for six months at a massive premium rental. And so that’s part of it. So you also asked about rising costs and, again, because we’re a smaller space, our costs in raw dollar terms aren’t going to go up as much, but they do go up proportionally. But it’s like buying a car. It’s like, what features do you want on it? So there’s a pretty widespread … We can build stripped down models for 40 footers for 80 grand, but the more elaborate ones could be 150 grand and we can do multi-family with… We can do multi-family. We can do multiple containers on projects.
Jimmy: Fantastic. Yeah. Joseph was asking are there any multi-family projects using container construction?
Blake: There’s some in … Hollywood has done some of those.
Blake: Hollywood, California.
Jimmy: One more question from Joseph, and then we’ll officially close things down here. Joseph asks, “What is the expected useful life of a container home?” That’s a great question.
Blake: Yeah. From a tax standpoint, if it’s not fastened to the ground, it’s going to fall into [inaudible 00:13:52] under, and you’re going to be able to take bonus depreciation on that.
Jimmy: Very good.
Blake: They may have asked debt terms too. At the moment we’re just looking for a 24-month interest-only loan balloon payment, you’d have a first trustee.
Jimmy: Perfect. Well, Blake, I think that does it for all of the questions. Thank you so much for not only presenting right here right now your MIT Modular, but thanks for serving as a panelist on our OZ reform legislation earlier today. Really appreciate your time today. Thank you so much, Blake.
Blake: Thank you. Great program today.
Jimmy: Thank you.