Episode #156: Steve Glickman, Develop LLC, “I Think There’s A Lot Weighing On How Successful We Are At Achieving The Goals Of Opportunity Zones”
Guest: Steve Glickman is the Founder and Chief Executive Officer of Develop LLC, the first full service, independent advisory firm dedicated to building and supporting Opportunity Zone Funds, and he is one of the nation’s top Opportunity Zones experts who is a sought after speaker at industry gatherings around the country. Steve is also an Adjunct Professor at Georgetown University, where he teaches on economic diplomacy and international trade in the School of Foreign Service. He sits on Georgetown’s Board of Governors and the Board of The NewDEAL.
Date Recorded: 4/26/19
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Summary: In Episode 156 we welcome back our guest from episode #115, Steve Glickman. To get listeners up to speed, Steve starts with an overview of what Opportunity Zones are, some specifics about the design of the program, and some concepts behind how investors can actually put money to work in Opportunity Zones.
Meb asks about additional insights since updated rules have been announced. Steve discusses clarity on items such as investing timelines on capital gains, and the length of time funds have to invest capital.
When Meb asks about what kind of investments are available, Steve goes on to clarify that just about any asset class is available, but commercial real estate funds, energy, and infrastructure are areas he’s seeing utilized, among others.
The conversation then gets deeper into what needs to happen with investments to qualify to meet the regulations, and what happens if companies no longer qualify under the rules. For real estate specifically, Steve describes the need for projects to fall under one of two categories, either 1) purchased for original use, or 2) must undergo substantial improvement. He then describes some of the rules surrounding other businesses, such as startups and existing businesses. Meb follows up with questions on qualifications of some specific examples from public stocks to REITs.
On the back of details about investments, the pair get into the fund landscape, with Steve mentioning how he thinks much of the fund market will consist of professional money managers running funds in their respective industries.
Steve then covers what he’s seen so far from the very early days of the program. He discusses much of what he’s seeing is in commercial real estate, but he’s seeing creative models of asset classes many people haven’t thought of yet. He then shares some thoughts about how some of the early rules may be revisited going forward, and some of the potential issues that could come up with the program.
As the conversation winds down, Steve discusses his firm, and the things he’s working on.
All this and more in episode 156.
Links from the Episode:
- 0:50 – Welcome back Steve Glickman
- :56 – Episode #115: Steve Glickman, Opportunity Zones: “Ultimately, If You Hold for…10 Years or More…You Don’t Pay Any New Capital Gains – Ever”
- 1:40 – Overview on opportunity zones
- 3:13 – What it means for investors to put money into opportunity zones
- 6:00 – Describing the latest updates to these rules
- 10:41 – What is characterized as a suitable investment under these rules
- 13:35 – How real estate would qualify for opportunity zone benefits
- 16:36 – How does a company looking for investment qualify
- 19:00 – Investing in established businesses
- 20:42 – Restrictions to buying publicly traded companies
- 22:09 – Using a REIT to invest in opportunity zone properties
- 23:16 – What happens if a company leaves an opportunity zone or the business goes bankrupt
- 28:00 – What are the rules around LP funds investing over multiple years
- 30:02 – The breakdown of investing through funds vs. independently
- 32:50 – Conclusions from the first year of this program
- 35:44 – When the Opportunity Zones reviewed
- 39:48 – Disaster relief zones and opportunity zones, and the criticisms surrounding them
- 44:00 – Steve’s new advisory firm Develop
- 46:25 – Ways Steve would fix the opportunity zone program
- 47:51 – Other countries with a similar model
- 50:37 – Non-traditional business ideas for opportunity zones
- 55:14 – Favorite zone
- 56:03 – Learn more: Develop, Opportunity Zones Index
Transcript of Episode 156:
Welcome Message: Welcome to the “Meb Faber Show,” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Disclaimer: Meb Faber is the co-founder and Chief Investment Officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
Meb: Welcome, podcast listeners. It’s the end of April and we got a great show for you today. We’re bringing back our guests from episode 115 to give us an update on the new opportunity zones, legislation and rules. He’s the founder and CEO of Develop LLC, the first advisory firm dedicated to building and supporting opportunity zone funds. And he’s one of the nation’s top experts. He’s also is the co-founder and former CEO of Economic Innovation Group. Occasionally teaches at Georgetown University, was even a Senior Economic Advisor at the White House. Welcome back to the show, Steve Glickman.
Steve: Hey, thanks for having me on, Meb.
Meb: Yeah, man, your first episode got a lot of interest as this is an area that’s newly developing and the ground beneath us is shifting. So last time we talked… Let’s pretend that all of our listeners are new. I know our listeners listen to every episode, but let’s pretend they didn’t hear your episode. And for those that don’t have an understanding of what opportunity zones are, give us the 10,000-foot view, but also just refresh our memories. What’s this programme?
Steve: So this is the newest, largest community development incentive in the U.S. tax code that was created at the end of 2017 in that big tax reform package. And what it enables is investors to roll over capital gains into a special fund that can invest just about any asset class, as long as they hold their investment for a long term period of time, and make those investments in low-income communities that have been designated around the country as opportunity zones.
And to give you a sense of scale, there were about 8,760 opportunity zones around America, they’re in every state, and U.S. territory, including all of Puerto Rico. They make up about 12% of the country, cover the downtowns of many, many U.S. cities. And this programme is all designed around getting investors to think about a part of their portfolio to fit into this opportunity zone programme, essentially means they’re gonna be making long term private equity investment in real estate, infrastructure, operating companies that are headquartered, located in the opportunity zone communities.
Meb: All right, good 10,000-foot overview. I mean, I think the goal and the impetus behind it certainly seems noble. Let’s start to get into some of the more specifics. Why don’t you talk a little bit about kind of the concepts and clarifications for investors, what it means to actually put this to work? So, all right, I just sold my business, I got a million bucks, what’s next?
Steve: Yeah. So let me jump into the core incentive here. So let’s say you’ve got a million bucks and that’s all capital gains, there are really two big parts of how the incentive works. The first part relates to that existing capital gains and the tax obligation you owe on it. And so normally, if you had that million dollars you’ve realised it, let’s say in 2019, you would owe roughly $240,000 next year. Well, this programme allows you to defer that tax liability until 2027. So you get to defer that capital gains tax, which is the first part of the incentive.
And then if you held for a long enough period of time, at least 5 years, you get a 10% discount on that capital gains tax. And if you held for at least seven years, you get an additional 5% discount. So that’s the second part of the incentive, you don’t have to pay more than 85% of that tax, when you have to pay off that deferred capital gains in 2027. But the really big part of the incentive is on the back end. And that a million dollars, meanwhile, has been put to work. And the way you put it to work is you’ve invested in what’s called opportunity zone funds, which can be set up lots of different ways. But typically, they’re a partnership or they could also be a corporation.
But typically a partnership, that could be a single investor or multi-investor, it could be investing one asset or many assets. But let’s say in this case, it’s investing in a real estate development. And that a million dollars of gains that you put in as opportunity zone fund investment and development, and you’ve held your stake in that fund for 10 years, so that 10 years down the road, it’s now worth $3 million. So you’ve now made $2 million in new gains.
Well, as long as you held your interest in that fund for 10 years or more, that $2 million is completely tax-free. And you can hold your stake in that fund up to 2047. So you’ve got 30 years, you can let this thing grow tax-free, when you take it out it’s liquid for you again. And that makes it the only capital gains incentive that you get total tax forgiveness without having to die first, which is one of the big benefits of this programme, it makes it totally unique.
It’s also one of the only ways…maybe the only way you can take an investment you made in, let’s say, the equities market or through investing in a private company, and reinvest into another type of asset like real estate, and get a tax incentive for doing it. So it’s kind of akin to like a 1031 lifetime exchange in real estate, except you’re gonna make it liquid a lot sooner. And it’s much more flexible.
Meb: So a lot of the foundation was laid last year in the general rules. I think you’ve kind of described what we talked a little bit about in the last podcast. How has the clarification finally settled in? I think we’re now to the point where most of the rules have actually become pretty set. And you can correct me, I could be wrong there. But it seems like this recent round of updates really gave investors more clarity. Could you talk a little bit about any of the additional insights on how the investments are viewed and kind of just the nuts and bolts of how all this might work?
Steve: So this round of regs that came out, actually, last week, in mid-April is huge. It’s really the real starting gun for the marketplace. And there was a previous…this was the second round of regulations, and probably the last big one. The previous round was in October. But there was really a lot of grey area, even after that October round of regulations. And that kind of net result of that is that a lot of investor capital, I think, because of information investors were getting from their wealth managers, advisors, and accountants, SRAs, said, “Hey, wait, we have all the clarity here so we can properly evaluate how much flexibility you have as an investor and how funds work.” And this round of regs in April provided a lot of those answers.
So, for example, it told investors how long they had to roll over their capital gains. So the rule is, you’ve got 180 days from the day you realise your capital gain to mold into a fund. And that’s true if you’re invested in equities, like stock market or in a private company. But if your capital gains comes from real estate, you actually have 180 days from the end of your tax year, or the end of the calendar year, not the 180 days from the day you sell the asset.
So there’s gonna be a lot of people who thought their gain…their opportunity to use this programme expired sometimes last year, where they are gonna learn that they’ve not got to the end of June, to make investments from their 2018 capital gains. That’s also true if you get your gains from a partnership. So if you get your gains through a K1, you have 180 days. You can choose but you have the option to have 180 days from the end of the tax year as well.
Meb: Theoretically, that’s like a year and a half. So theoretically, you could have gains from 2018… So you could have sold a property on Jan 1, last year, and theoretically, you could have until this summer. Does that make sense?
Steve: That’s right, that’s totally right. So for people who were in a partnership, who sold an asset in January, who owned a piece of real estate in January, they’re really gonna have 18 months to make the decision. But they have to make it during this 180-day period. They can use all of 18 to figure out what funds they wanna invest in, or what projects they wanna do, or how to set up their own fund.
Meb: Wow. So they couldn’t put it to work in ’18, they would have to put it to work in the first 180 days of 2019?
Steve: Yeah, that’s right. But for most investors, that’s a big advantage, because it gives them a lot of predictability, about when they need to raise capital. And particularly in this first year where you didn’t have you know, all of the regs until after your taxes were due, this provides you an opportunity to extend that clock again, and you know, file amended returns, and to still utilise the programme. And so I think it’s really dramatically changed the timing of how people utilise this programme. And when funds are doing their capital raising. So expect this to be a happening every time between now and June 30th.
That was one big category of stuff. And there were also lots of clarity over how funds invest and how money actually goes into assets, that answered all sorts of questions. Like before, it was unclear how long funds had to invest capital. And they could have been put in situations where they had as little as a day or two, once they got an investment from an LP, to put that capital to work into a project. Now funds have at least six months up to an year to deploy that capital. And when they deploy that capital, there’s a way to put it into a safe harbor, they call it, sort of a sub that has an additional 31 months to deploy it.
So funds could have as long as three and a half years to ultimately deploy this capital. There’s lots of reasons you wouldn’t wanna wait that long, because it’s a huge drag in your return. But it provides a lot of flexibility if you need time when money goes into real estate development. Or if you have to deal with other unknowns, like getting government approvals before you can deploy capital, you can take in that money from investors who may not be about time when they have capital gains, and still have a lot of flexibility on how you spend it. And then it answered a lot of nuts and bolts questions on how you invest in real estate like how do you treat land? Or how do you handle depreciation or refinancing?
Meb: Let me interject here real quick. So let’s talk about what investments are suitable, what are not, what fits in this programme, and what are sort of the main use cases that you see developing? So I’ll give you the mike. What’s suitable? “All right, I’m Carl Icahn, I got a million bucks, just sold some stock in Tesla.” I think he sold it to Soros. So I got a million bucks, capital gain, I wanna put it to work, where can I put it?
Steve: The reality is you can put it in just about any asset class. But let me talk about what’s practically happening in the marketplace. So most of the marketplace now is made up of commercial real estate funds across a number of different asset classes. Multifamily, mixed-use, office, retail, senior, affordable housing. And that’s because the rules on real estate came out a lot sooner. And because, frankly, there’s a lot of muscle memory in the real estate space around how to use tax incentivising community development programmes. And when you think play [SP] face, something that’s geographically centered, a lot of people think real estate anyhow. So that’s a big chunk of the market.
But increasingly, I’m working with clients and seeing funds that are in energy, and infrastructure. And there’s a big fund I work with in that space, it’s doing stuff like solar panels, and telecommunications, infrastructure, like rural broadband in these zones and kind of other similar types of assets. I’ve got a client, that’s a big film, and TV, content, and production studio that’s using this for both its main content company, and also where it does its production in opportunity zones in the U.S. I’ve gotten calls from electric car manufacturers, I’ve spoken to folks that are doing stuff in the healthcare technology space, there’s a big movement around using this to fund charter schools.
So there’s quite a few already launched venture capital funds, that are opportunity zones specific. So you can do anything you can with private equity capital, you can do in this programme. I say there’s two things to think about. I think when you’re thinking about what type of investment classes makes sense. One, this is really for long-term patient capital. The big incentive here is for 10 years or more, and so you’re really looking for growth. So this is sort of like value investing based on place. What places do you think you’re gonna grow the most over the next 12 years, particularly if you’re doing real estate and what sort of businesses have the kind of growth potential?
And two, you have to put a lot of development or growth capital into those businesses, for many of these investments to qualify. You can’t just buy an investment and sit on it, for the most part, you’re looking to improve what you’re investing in. So those two concepts of having this long-term patient capital, and being in growth industries, are really what you’re looking for. But there’s tons of flexibility in what sort of things these investments can go into.
Meb: All right, well, I got a million follow-on questions so be prepared. So first, walk us through what needs to… The easiest, conceptually, I think for the listeners would be, “Okay, I buy an apartment building, it’s pretty obvious that it sits in an opportunity zone. What needs to happen with the real estate?” I remember the earlier iteration said something like you have to put equal amount of money in upgrading the property, yada, yada. As far as real estate goes, what needs to happen for it to qualify for the regs?
Steve: Yeah. So there’s really…any investment really has two categorisations. It’s either one, what’s called original use, which means it’s something new you’re building or investing in. And two is something that has to be substantially improved. In the case of real estate, essentially, if you’re doing a ground-up development, that will qualify from the beginning. From the moment you buy that raw land to the end point, when you build on top of it, that new building will count for the programme.
If you’ve got an existing building, you’re right. So the rule is, you got to improve that building by 100%. But now, because of these regs, you can take out, subtract the value of the land. So let me give you an example. If you’ve got a million dollar building that you acquired, and 30% of that value is land, and 70% of that is the building itself, then you’ve gotta put in $700,000 more within 30 months to qualify for that programme. So it’s really built for a substantial rehab of existing real estate if you’re not building it ground up.
Meb: And along kind of tangential to real estate, which I think is the most obvious use case. Does farmland qualify if you had a working farm in an opportunity zone?
Steve: Well, yes, we think so. But if you’ve got an existing business, and this gets into kind of the business investment, all opportunity zone investments, whether they’re operating businesses or they’re real estate, has to be part of an active business. So the regulations, say for example, you can’t just buy raw land and land bank. And they also say that if you’ve got an existing business on it, they’ve actually made the bar pretty high, you’ve gotta have essentially more new property than you do existing property for that business to qualify.
Now, if it’s a brand new business, just like a brand new piece of real estate, you can invest in it from day one, and it qualifies because all of its property is new. And if you relocate a business, from outside an opportunity zone to inside an opportunity zone because all that property is new to that zone, it also qualifies. But if it’s a business already in the zone, like for instance, a working farm, which would be categorised as a business, it’s actually the hardest category of investments to make work. Because you’ve gotta replace or supplement all of that existing property with new property you’re putting into it.
And the whole concept behind all of that is this programme that is meant to drive economic growth. So there’s a lot of push through the intent of the programme to ensure that your investments are adding new value to that community.
Meb: Yeah. And I could see how farmland…if I just bought a blueberry farm already in production, it doesn’t really change anything if I just take it over from someone else, you would see how that might not qualify. Okay, next question. So let’s say I see an opportunity zone, I got an amazing founder I met on AngelList or somewhere and I say, “I wanna give you a million bucks to start this new company, Uber for hair dryers or something, I don’t know, the next new great idea.” What does the company need to do? Originally, I feel like I read that 100% of the employees and the revenue had to come from the zone. But that seems to have changed. What kind of business qualifies if I invest in a totally new startup?
Steve: The reality is, there’s not a lot of flexibility. So let me give a little history and then talk about what’s changed. So when these first round of regulations came out in October, there’s a test put on businesses, that said 50% of your gross income, that’s actually 50% of your revenue, had to come from inside the zone, which many people interpreted it as meaning you had to sell…majority of your buyers had to be inside your zone. Which is a very strange construct, given that these are all depressed communities, and you wanna see businesses grow, that could sell all over the country, all over the world, that could export, etc., etc.
So in this last round of regs they changed that test after a lot of pressure from almost everybody who saw this and was close to the programme. And they said, “Really, what we’re trying to get at is that you’ve got a real business in the zone.” So the test of what it will mean to show that you’ve got 50% of the activity coming from the zone, is you’ve got at least 50% of your employees working in the zone, 50% of the value of the services you’re providing are in the zone, 50% of your management is in the zone. It created this complicated three-part test. But really, they provided so many options to meet this test that any real business operating inside the zone should be able to qualify and now can sell anywhere they want around the country, around the world and not have to worry about being disqualified from the programme.
So again, you have a lot of flexibility there across industry. There are certain limitations that were built into the statute that it’s useful to be aware of. And they’re very few of them, but they are totally not allowed in the programme. One, you can’t have a financial institution as a business. That’s not a qualified investment. And two you can’t have what are called sin businesses. So these are like your golf courses, and country clubs, and massage parlors, and hot tub facilities. And there’s a list of these in the code of what you can invest in. But otherwise, it really works for any other industry or asset class.
Meb: Next question. What about established businesses? So let’s say there’s a cool little business, I know, in an opportunity zone. Let’s say it’s a struggling newspaper, and I say, you know what, I wanna invest in that business, I think it has potential, turn it around, does that qualify? What’s the deal with companies that are already located there?
Steve: So like we talked about a little bit earlier, the companies that are already in zones are really the hardest types of investments to make in this programme. And the reason is, the definition of an investable business is one that has 70% of its property that’s qualified property. And what that means in the simplest terms is that property has to be located in the zone and has to be new property to that zone, or you have to substantially improve it like a piece of real estate.
So if you’re a… I mean, you know, it depends on the specific company. But maybe a newspaper company that’s already got facilities there, and infrastructure, and printing machinery, and a building, it might be very hard for that business to qualify because you’ll have to buy enough new property. So that ratio of old property is only 30% of the company’s property and 70% of it is brand new. And that just may not be feasible for that kind of investment. On the other hand, if you had like a tech company, already existing in a zone, which didn’t have very much property at all, let’s say it just had a few desks, and some computers, and some office space at least.
And a leased office space doesn’t count, by the way, it’s only property you own, then you know, you just have to buy some new computers and desks. And with the remainder of that money, you can spend that however, the business wanted. So it disadvantages most existing businesses that have a lot of existing infrastructure in the zone for better for worse. That’s how these regulations have worked out.
Meb: So I’m sitting here brainstorming, and I would assume that you couldn’t buy a public stock. Like, if someone went through and looked at all the 3,000 stocks trading in the U.S. buying a public security probably wouldn’t qualify?
Steve: Somehow, I knew you might ask that question, Meb, and I’m pretty sure we talked about it last time, Meb. No, I mean, it’s very unlikely. The reality is, this is a programme that’s not gonna be very useful to most large companies because there are so many rules that constrain your business activity. Most of them are built around geography, and the type of property you have, which theoretically, if you were coming, that could relocate all of your stuff to opportunity zones, it’s possible, you could use this programme. But then you know, those companies are less likely to need that type of capital infusions that would really motivate a company to wanna relocate for opportunity zone investment.
So I think there are so many mid-sized companies, they’re gonna use a relocation strategy if they’re seeking their next round of capital. And they know that there’s an opportunity zone marketplace of investors that are looking for them. And frankly, I think, overall, the private equity market in things like venture capital and operating business investment will ultimately grow to be bigger than real estate. Because real estate’s capped by land, and physical space, and new businesses, and relocating businesses are, you know, really infinite. But it’s not gonna work for a lot of your bigger companies, most of which are gonna be publicly listed.
Meb: How about…this sucks for me because we had some amazing opportunity zone tickers reserved when it first came out. How about…this isn’t my business but what if a writ, say one of these public writs, these gazillion public writs out there said, “You know what, we’re gonna do a writ that only invest in opportunity zone properties.” And then you bought shares that writ on the public marketplace, I wonder if that would qualify?
Steve: I think that’s a really good potential exception to my earlier prognostication, there won’t be a lot of equities investing. I think that could work. There’s already writs in the opportunity zone marketplace. The key is the incentive for your investors is all tied for how long you hold your stake in the fund. So you’d have to know that the fund that writ would not sell any of his assets until 10 years after its last investors come in. And that might be tricky to time for if you have a bunch of retail investors that are investing you. But theoretically, I think a writ can work and there’s already non-invested writs being structured as opportunity zones funds right now.
Meb: Interesting. I have to brainstorm some more of that on this weekend. It’s a little too deep for me on this call. Two more questions. What happens… So say, Carl Icahn, invest in this company… And there’s two parts of this so you can answer both. So the first part is a year later, they say, you know what, we’re tired of this terrible location, we’re moving the office to Malibu. So the first part of question is, what happens if it gets jumped out of an opportunity zone? And the B to that question is, what happens if the company gets bought, or liquidated, or goes bankrupt? So it doesn’t go 10 years, it only goes, say, 2 years. What’s the sort of answers to both those two-part question?
Steve: So the first part of that question of what happens if your company leaves or grows out of the zone, it’s a little tricky. This is a programme that’s gonna be harder for investors that essentially don’t have control over the companies they’re investing in or don’t have some kind of arrangement, or agreement, or skin in the game, from that company management, that they’re gonna be tied to geography. Now, there’s a middle ground here, you could grow out and move out of the zone and make your growth move into another opportunity zone, these are not out of the way places. These are again places right in the middle of downtown, most American cities, or at least in surrounding those cities.
Like there’s not a ton of opportunity zones up, downtown San Francisco, or in the middle of Manhattan. But there’s a ton in Brooklyn and Oakland and San Jose, those zones all over downtown LA, Seattle, Portland, and they make up most of the downtowns, that’s almost every other American city. So there’s lots of ways to continue to ensure your growth is in the opportunity zones. So it’s a risk factor, I think, for investors who don’t have control or say to that decision.
Meb: But to keep going there, what happens. So let’s say I invest in a company and they no longer qualify, so they just move out. And again, because I don’t control what happens to my investment?
Steve: It depends what you do with it, you’re able to sell your investment. There are new regulations that came out April that say you have essentially 12 months to reinvest that capital into something new. And you’re gonna keep that same tenure clock, it doesn’t restart your clock. But it depends on how your fund is set up. And most of these funds are set up as partnerships. And a sale at the partnership level, even though you can reinvest that capital gains into something else and not spoil that holding period, you’re still gonna trigger a capital gains tax for your partners in that fund.
And so it does come with a little bit of pain to keep that incentive going. Of course, you can always end the fund right then and there, and just distribute the assets and no longer take advantage of the tax incentive. Or that fund can just be treated as a market raise fund without the tax incentive. And there’s no penalty for that. It’s just your deferral and you’re probably not gonna make it to the full tax incentive on the back end. So it depends on how your investors are motivated.
I think the good headline about that to know is that unlike a lot of other programmes in this space, the penalties for not getting this right, or for having a company leave, or move out are really low. I mean, you’ve got, one, the ability to reinvest, two, if you don’t reinvest, and you’ve still got this bad asset on your books, the penalty rate is only the underpayment tax penalty rate. And you can cure it, which obviously you won’t wanna pay if you couldn’t cure it, but it’s still a very low penalty. And the worst case scenario is that you lose the tax incentive at that time, there’s no clawback for what you’ve already got, that you won’t be able to make that full 10-year hold tax forgiveness. So a lot of those outcomes are less than optimal, they’re not gonna be devastating to any investor, I don’t think.
Meb: All right, so part B, let’s say two years in company gets acquired, is it same sort of treatment where you can roll it over or decide to just pay taxes on it?
Steve: Yeah, that’s almost a clearer example, right, because it’s an exit event, you’re gonna have a distribution of capital to the partnership. And the partnership can either distribute it to its partners, let them pay the tax event, or it can reinvest it and keep that gain rolling. And they’ll have a phantom income event that your investors will have to pay taxes on. There are a couple other scenarios that it’s worth pointing out.
If it’s a certain type of business investment, you have the ability to use qualified small business tax incentive, that 1202 incentive. As long as you meet the requirements of that, if you’re a corporation, you’ve held for five years, etc., etc. So that gives you some tax shield. And if it’s a piece of real estate, you can still 1031 lifetime exchange, that capital you got from that sale into a new investment, and avoid having to pay a capital gains event at the partnership at all. So you’ve got at least that much flexibility.
So again, not a ton of downside, if it happens in the real estate world. And in the business transaction world, you have less options. And it makes it a little bit riskier. But of course, the returns on those kind of investments are usually a much higher multiple than what you’re talking about in real estate.
Meb: Okay, so let’s say I’m an individual, and I have a big liquidity event. Again, Carl’s got a million bucks, puts it into his own LP fund. That’s one scenario. There’s another scenario where if the capital gains you have them forecasted, say, every year for the next 10 years, would investor use one fund for the whole period and just have different entries? Or would they also just do a new fund every year? What’s the more reasonable approach?
Steve: Well, I’d say this, most funds are not gonna be open-ended funds. Because for most funds, particularly if you’re doing multiple asset, you’re gonna want a close-ended fund that has a pretty short investment period, a year, maybe two years. So that that lockup period of when the last money is in that you gotta hold from doesn’t stretch out to 18, 19, 20 years. So if you’ve got a 1-year, 2-year investment period, you’re talking about a fund that last 11 or 12 years before you get liquidity, which is still a really long term hold. And there’s a lot of funds that are now gonna wanna go later than that.
But those funds, and I think it depends on how successful the fund managers are, are gonna create different vintages of funds. And it depends on how many assets are looking at. I have clients that are looking at 200, 300 deals right now in opportunity zones and they’re just looking for the money to put to work in those deals. And so they’ll do like a 2019 to 2020 fund, and close it, and then a 2020, 2021 fun and close it. But as the investor, you have the flexibility to do, both, again, there’s probably about close to 300 funds already in the market. And that’s just in commercial real estate, as this business investment side of the market ramp up, I think you’re gonna see several hundred more.
So there’s gonna be a pretty sizable market. I mean, if you look at the scale of deals that are already to get done in opportunity zones before this programme, just in commercial real estate, you’re talking about $50 billion a year, that was the number at the end of 2017. So I think you’re talking about this being a $50 to $100 billion a year asset class. And I don’t think that many people realise how big of a deal it’s gonna be, they make it bigger than the whole venture capital industry.
Meb: I keep saying two more questions, because everything we talked about generates two more questions. Okay, first question is looking at the landscape… And I know it’s early, what percentage of funds are created, where it’s, say, I’m Carl Icahn, I start my own fund, and then kind of go allocate to what I wanna do. Versus Carl saying, “No, I’m gonna go invest in five existing opportunity zones funds by people who have already established, hey, they’re focusing on real estate in the northwest, or they’re focusing on new farms, or startups, whatever it is.” What’s the kind of percent breakdown between on their own versus established funds that people are allocating to?
Steve: So I think the vast majority of the market is gonna be doing it through third-party funds. But the best way to think about is very much like the market now. I mean, these are professional private equity funds, ranging in capital from a couple hundred million dollars to several billion dollars of capital. And they’re complicated to administer, we’re not just talking about the regulations of this programme, which are obviously new, and everyone’s getting their head around, dealing with mostly with the IRS, but you’re also talking about having to deal with SEC regulation for any meaningfully size fund with multiple investors. And that’s no joke, you wanna make sure you get that right.
And that’s just on the regulatory side, then you’ve got the challenges of doing development, real estate projects in second to third-tier markets or doing growth business investing. Whether it’s private equity, or venture capital investing, or doing energy infrastructure investing, all of which I think are fairly complicated. Now, I talk to lots of investors who say, “Well, I really crushed it in X industry.” And let’s call it venture capital. “And I’m gonna now start my real estate private equity fund.” And I tell them to be real careful because it’s a really competitive landscape, those two skill sets may or may not have crossover.
And when you couple the fact that there’s a bunch of rules around this programme, that could be the difference between your investors qualifying for the tax incentive or not. I’m skeptical of most people who wanna do their own funds who aren’t already in that industry.
I’d say there’s one big exception to all that. A big part of this market, at least right now, are large family offices, who are used to setting up their own structures. And I expect a lot of them will set up their own funds if anything else to just co-invest alongside other funds and have control over the capital. And that’s fine, I expect there will be a good amount of that. But I think for your average investor, even your average high net worth investor, which is basically this market, they’re gonna go to a third party fund manager who’s doing this for a living.
Meb: I can sympathise with a lot of what you just described, because we always joke that, by far, worst investors are the smartest doctors and engineers out there, their personality and brilliance does not necessarily translate. And I can joke about that I was an engineer once upon a time. So again, early days, but talk to us about what you’ve seen thus far. As far as any takeaways, “You’re like, you know what, man, this is 90% commercial real estate,” or, “Wow, you know, we’ve actually seen these new startup hubs that are literally building a sort of tech.” What’s the first year of this look like so far? Or is it even too early to draw any conclusions?
Steve: Well, it’s important for people to understand we’re really at the beginning the first inning of this programme. Just to walk back the calendar, the programme was really created, as of January of last year, the zones weren’t designated until June. You didn’t have any regulations around the programme at all until last October. And now you’ve got the regulations, you really need to operate a fund successfully in April. So the market is really starting today, although you now have a group of stakeholders, investors, and communities, and developers, and entrepreneurs and others who’ve been thinking about this and planning around it for over a year.
Most of the market to date is commercial real estate, for a lot of the reasons that we talked about. It’s just the most obvious asset class in this space. But I’m already seeing models that are amazingly complex and interesting that involves, I think, all sorts of asset classes people haven’t thought about. And reality is there’s a lot of mindshare, in this industry around real estate, that’s gonna increasingly grow out to allow these creative models to be successful.
I think the big highlights you’re gonna see this year will be the fulcrum point for capital going into the programme. I think they have capital, going into the OC marketplace will continue to increase into 2020 and 2021, where you start to face a little bit of a quip on that incentive, you lose that 15% capital gains rebate on that deferred taxes, and then we’ll kind of see where the market is. You may then start getting more of those institutional investors in, who’ve now seen the market work, and see funds that have stabilised product in it and a track record. And you may see even more capital into the market after that.
I would expect operating business investment to be as big or if not a bigger marketplace than real estate. Because again, it allows so much more flexibility and has so much more growth potential, higher returns, you can see from capital gains in these zones, which I think will be very attractive for investors.
So what’s exciting about the market is being involved right now means you’re a pioneer, an early pioneer in a really interesting space that I think will ultimately be some part of every high net worth investors portfolio. It’s not because of the great tax incentive, because it’s solving a problem that investors seem to care more and more about, which is economic and equality, I think is dawning on people as a.., it has such a big impact not just on our economy, but also on our politics and on what this country looks like. That folks want I think be a part of fighting that really big challenge.
Meb: When do these zones, get the magnifying glass re-looked at or characterised? This is something that it’s 10 years sort of period, and then the politicians will look at it again, how does it work?
Steve: Well, it’s funny, this is a part of the programme that’s somewhat controversial and frustrating the people. When the legislature was created, it was created with a basic set of reporting requirements for the funds. And because of reasons that aren’t worth going into was stripped out of the legislation for procedural reasons before it was passed. And so there are no requirements that provide very much data to even the government, which you think might be great because it prevents kind of a chilling effect on that market. But the reality is, we really should be collecting basic information about these funds.
Who’s investing in what funds, I’ll call it the who, what, when, where, why, and how, who’s investing in these funds? What are they investing in? When did they invest? Where did they invest? What was the intent behind the investment? Which is a big underlying current of the regulations, your intent has to be aligned with the spirit of this programme. And how much capital did they invest in these zones.
Basic stuff that every fund has at its fingertips and should be reported to the government, and will give us this pool of data to evaluate, let’s call it five, six years from now, of how successful this programme is at getting capital into communities, and what sort of industries and projects it’s going into. I don’t think there’s actually a lot of resistance from the marketplace. I don’t think people are thinking about it that much, they’re sort of expecting to have to report out data. But the IRS has been really conservative in its approach, and they believe they’re not empowered to create these requirements.
And the net of which is right now, we just aren’t collecting a lot of data on this programme at scale. And so a lot of the evidence about what’s happening is anecdotal, I think that might make much harder to demonstrate its impact to the political class down the road. But stepping back a layer from the data, there’s a tremendous amount and a surprising amount of bipartisan support still around this programme. The Trump administration has much more actively engaged around this, in part because of their role on the regs, but in part because they’ve used this as a way to talk about one of the accomplishments of the administration.
And even that hasn’t dissuaded a number of democratic political candidates from talking about their role in this programme. Beto O’Rourke, John Delaney, Seth Moulton, were all original co-sponsors, as was Cory Booker, Kamala Harris put this in for disaster relief legislation. And a number of mayors and governors around the country are organizing their next 10-year economic development strategy around how to take advantage of this new source of private capital that uniquely doesn’t force them to mortgage their local tax base.
In fact, it’s one of the few programmes that will build their tax base by creating these new developments and new businesses that will pay into property taxes and sales tax. And let them reinvest in education and infrastructure and other things. So aside from I’d say, some thinkers, particularly on the last of the spectrum, if you look at policymakers and community leaders, both at the federal, or state, or city level, there seems to be a lot of excitement about the potential here.
And listen, I travel all around the country, speaking to investor groups, and the amount of I’d say suppressed investor interest is enormous. They really were just waiting for these regulations, to get free to get out of the market. So there’s gonna be a lot of activity over the next couple months.
Meb: A rare bipartisan win. But so do these tracks ever get re-characterised or are they set in stone for 10 years?
Steve: So right now they’re set in stone till the end of 2028, at which point they’re supposed to be… If the programme is extended, you’d see a whole new round of these tracks being selected. Keep in mind, they always come out of the bottom. These are made up of low-income communities. So they always come out of the bottom 40% of tracks in the country, economically speaking, and there was always gonna be a bottom 40% of the country economically speaking. And so there’s always gonna be a reason to wanna incentivise investor capital to lift up those parts. Particularly at a time where federal, state, and local governments are increasingly broke, or in huge amounts of debt, I’m not sure where else the capital is gonna come from.
Meb: You mentioned something. There’s always haters of everything, believe me, I’m on Twitter. So you mentioned a comment that you hear the people in the media always wanna find a negative angle to something. At one point, you mentioned the disaster relief, I can’t remember if this ever went through or not. The disaster relief zones could be characterised as opportunities zones. I remember reading somewhere someone’s like, “Oh, great. So all of a sudden, Malibu now is a disaster relief zone, and everyone’s gonna be doing opportunities zone in Malibu.” And then someone else was complaining about Hudson Yards? Are those the biggest complaints? And then maybe tell us a little more color on disaster relief, I don’t know how that ever all shook out.
Steve: Well, on the disaster relief it hasn’t shaken out yet. There’s a new legislation that was introduced by Marco Rubio and Rick Scott, the two Senators from Florida, that also includes opportunity zones in their disaster relief bill, but none of its passed Congress yet. And very little it’s likely to get done in a time where you’ve got democratic control one house of Congress and Republican can control the other. So I’m not expecting a ton of that front. But it’s a good indicator people least like the programme and what it’s attempting to do. What was the second part of your question again?
Meb: What are the haters complaining about at this point? I mean, because someone was like, “Oh, Hudson Yards, that’s an opportunity zone? Come on.”
Steve: So I think there’s two things here and they’re related but really different. I share some of them, although I think they’re a bit overblown. So here are the two biggest concerns. One, there’s probably out of the 8760 tracks, 100 tracks, combined out of the ones selected by governors that probably didn’t deserve to be opportunity zones, and got through because of one reason or another. And they were adjacent to an opportunity zone, or the governor just wasn’t that zeroed in on. Well, the zones were they were actually picking don’t really this programme.
I don’t think it’s a huge deal that they’re including these opportunity zones, but I think the investment there, and projects, there can become anecdotes for the fact this programme isn’t really necessary. And that’s just not the case, they just happen to be some bad seeds in that bunch.
And then a related question, which I think is much more serious, but also limited, is the concern around gentrification, and why they’re fueling capital into low-income communities is really the right answer. And reasonable people make that argument, I just disagree with them. And the reason is, that if you look at opportunity zones…and there have been a few independent studies that have now shown this, 96% of opportunity zones are not at risk or have not been at risk for gentrification, but they’re not places that have had too much capital, but have really gotten too few.
And while those 96% still deal with displacement, it’s almost exclusively displacement because of lack of investment, not too much. Because those places are dying, the next generation doesn’t wanna stay there. People who have the resources, the connection, the skills to move to a place like San Francisco, and Seattle, or LA, New York, they do. And then in turn, what happens is that those cities become overcrowded and too expensive and stop building. And nobody wants to live there either. So it’s a bad outcome for both the struggling cities and the ones that are performing really well, economically.
But at the end of the day, I’m really focused on that 96%, because it’s not sustainable, in my view, to live in a country where economic growth really only benefits a handful of super performing cities ad people are forced with this terrible choice to leave their family and the quality of life, they want to go somewhere where there’s more economic opportunity. It’s basically the thesis that they’re entrepreneurs everywhere, that if you can get capital to them, and you could build their downtowns and create this new ecosystem of growth, we’d be far better off as a country. And I happen to believe that’s true.
And so my biggest concern is ensuring there’s a big enough market, that can really be transformative, you got enough capital to move the needle in places. I’m much less concerned about some of these other issues, in part, because local governments have a lot of ways to control capital and investment they don’t want through zoning, and permitting, and entitlements and all the other controls local governments have. So I think what it boils down to is, there are some, I think, observers of politics and economics in these sort of programmes that are skeptical of private investors in general, and believe that the only way you get good social outcomes is through direct investment. And I believe you can make progress through both.
Meb: Talk to me a little bit about your new advisory firm, Develop. Where do you guys fit in the equation? What’s the general concept? What are you spending all your time doing besides flying all over the place checking out these zones?
Steve: Yeah, well, my life is full of startups. I’ve got Develop, my startup advisory firm, I’ve got two kids now under two. So I got my startup family, and I’ve got this startup industry, I’m trying to help get off the ground. I’m trying not to screw up any of them too badly. The business is really built up of mostly kind of full-suite advisory services to a handful of very large opportunities, own funds that are raising 250 million to a billion dollars or more of equity, making a big commitment to the space, in both real estate and in business investment type funds and projects.
And I’ve helped them figure out what the marketplace is doing and the strategy for this new sector. And you know, real nuts and bolts stuff, how to structure their funds, how to start structure deals, as well as how to build their team. Lawyers, and accountants, and fund administrators, and how to connect with the media, and how to connect with mayors and governors. So there’s a lot of pieces of this everywhere from the regulatory and compliance side that deals with communities and finding investors and everything in between. Not a lot of people know a ton about this programme. So that’s gone pretty well.
And then I spend a much smaller chunk of my time travelling the country, speaking at conferences and events, and trying to get the right information out there. And thanks to you for being such a huge resource. I do a bit of press, and I hear probably most often from people out of the blue that, “I heard you on Meb show and tell me more about this programme.” So you’re speaking to the exact sort of stakeholders that are trying to be big, early movers in this programme. And if there’s not a lot of activity here, to me, the programme is not gonna be successful. So I only work with a pretty small group of clients this is a bigger market of hundreds of thousands of investors and hundreds of funds and thousands of communities.
Meb: It’d be interesting to see… And by the way, I can relate to the two-year-old comment, my son is just turning two. And there was a very panicked phone call last night from our babysitter who proceeded to tell me that his bathtub was now characterised as a disaster zone. Needless to say, it was not a submarine in the water. But couple more questions for you that are kind of fun ones. If you were in charge, let’s say you had the pen, and you could draft the legislation, anything that you would add or fix off the top of your head that you think would be particularly useful or would help augment the current programme, or for people to think about in 2.0?
Steve: Well, I’m actually pretty happy with the bucket of rules we have now I think I would ax off those 100 zones, which I think are becoming a distraction for the rest of the programme. And I make it much easier at least create a formula to invest in existing businesses. So that businesses within community can also take advantage from this without having to buy a bunch of property or desks, and chairs and computers they don’t need. I think those are two elements that are kind of have at least [inaudible 00:47:07] which have unintentionally not worked the way I hoped it did.
And I do think we need a little more clarity for investors around hopefully some safe harbors on what happens when you invest in that growth company that you helped succeed in a distressed area that grew which is a great outcome. And why should you have to then sell your interest in it, or block your fund, because you’ve had that level of success. So some of that stuff I’d like to see fixed. And I think there will be pressure on treasury to fix it. But overall, I’m really optimistic about what I see in the market and how investors are responding and how much excitement they seem to have.
Meb: I think it’s awesome. My problem, of course, is I never have any capital gains. But I think it’s a really cool, a rare across the aisle, political, economic incentive. Any other countries around the world that adopted anything similar that this is either based upon or that are taking a look and saying, “Oh, wow, maybe we should think about doing this too”?
Steve: So I don’t think so, and part of this is related to our tax code, and how we treat capital gains. And it’s very specific to our tax code being structured like it is in the U.S. I think it’s unprecedented from that perspective. It’s also fairly unique in U.S. history, in terms of how we structured tax incentives, it did sort of grew out of this also bipartisan legacy of place-based programmes in the U.S. like enterprise zones, and empowerment zones, and renewal communities that started with Jack Camp and then went through Bill Clinton, you know, and beyond.
But those programmes were never very successful. And they were never flexible enough or scalable enough, or you know, they didn’t incentivise the right stakeholders, which in this case, I think, is investors. And the result of which they’re kind of, either having the right intent but failing in their execution. And I think opportunity zones, for the uninitiated, suffers from a little bit of that comparison.
But this is much more weight in some ways crowdfund, economic development. It’s responding to this really specific need that we really didn’t have 50 years ago, when the government had tons of money to do big projects. Whether it was creating these big safety net projects, or the highway system, or these very robust forms of U.S. investment in the economic development. And because over the last 30 years, in my view, the tax code has changed so dramatically, we’ve taken so much revenue out of the government, we’ve given it so much of it back to investors. We tax capital at a very low rate for individual investors compared to income.
And we’ve got all this growing other obligations from entitlement programmes and debt and other things. That this was a unique moment, not just because of where we are physically, but look where we are politically. I mean, 2016 was a turning point for this country. And it’s a turning point, for frankly, the UK and much of Europe, where 70 years of sort of orthodoxy around what economic growth meant is being turned on its head for places that are growing, because of the fact that growth is so unevenly distributed. So I wouldn’t be surprised if places like the UK where I know ideas like this are in vogue, and Europe decided to adopt programmes like this, if this programme turns out to be successful.
So I think there’s a lot weighing on how successful we are at achieving the goals of opportunity zones. And if we can really move $100 billion a year in private capital, through a programme that costs the federal government very, very little money, one and a half billion dollars over 10 years to move, maybe a trillion dollars of capital, it might change the way we do economic development and big investments in this country for a while.
Meb: Yeah, I’m optimistic. You glossed over this at one point. So I’m not sure if it was an offhand comment, or you’re referring to something specific. You’d mentioned briefly that there were people developing ideas or applications for opportunity zones that you had maybe not thought of, or were kind of non-traditional. Is there anything that comes to mind specifically there that you think of?
Steve: There were a few of these I sort of fired off before. But for instance, there’s a lot of interest around how to use this to fund education and infrastructure, but particularly around charter schools. There’s some big foundations, the members of congress, increasingly groups that use this as a way to fill that need. Or other types of like social infrastructure needs, like this could be the way you build rural broadband across the country or the way you lead to the conversion to the renewable energy economy. Because now you’ve created that tax incentive coupled with other tax incentives that make that an actual viable asset class in places that weren’t before.
So some of that stuff I find super interesting. But a lot of the stuff I’m just seeing come out organically. The ability to grow the new National Film Studio, based in opportunity zones, I think, is fascinating, because it’s just not a use of the programme, I thought of when this thing got started. It’s also fueling… And this was a little bit more predictable, but I expect to see a lot of it. Accelerator incubator, co-working hubs around the country that will become a hybrid. Where you have real estate investors investing in real estate, and then you’ve got that operating business that’s operating it.
Think of it like a WeWork in like second-tier, third-tier markets. And then you’ve got companies that may be taking root in those incubators and accelerators that become the fodder for opportunity zone venture capital funds.
So I think the most important feature of this whole programme is, it’s gonna hopefully change the mindset of investors mostly sitting in places like New York, LA, San Francisco, and Boston who expect companies and good ideas to come to them. And they’re gonna start seeking out those sort of entrepreneurs in, you know, other cities like St. Louis and the south side, Chicago, and Atlanta, and Birmingham.
I’m sure you follow this a bit, but Steve Case, someone who I’ve worked with for a long time in his Rise of the Rest tour, his idea that you go to these cities that have been off the radar screen, and you find amazing entrepreneurs that don’t wanna leave to go to San Francisco to get that their next round of funding. This may actually change that dynamic, because now investors have a real incentive of being there. And think how many new and interesting models it’s gonna create around America.
Meb: And that’s his VC fund, or private equity fund focuses on sort of interior off the coast investments, am I right?
Steve: Yeah, he’s got a seed fund called Rise of the Rest. Now he’s also setting up an opportunity zone fund that will invest specifically within opportunity zones. So these two ideas, while not totally the same, are pretty related, particularly when you see the footprint of opportunity zones, when you get to the middle of the country, they tend to be the parts of those cities that you would wanna invest in anyhow. And that’s what makes it really interesting. You don’t really have to sacrifice so much on place in terms of picking places that could never be economically successful, you’re really just picking places that industries have ignored.
And the idea here is if you build this programme, they’ll come. And as soon as you’ve got this first round of capital in the market, then you’re gonna have a second round of places that weren’t investable today that are gonna be investable two or three years from now. Because now they’ve got brand new buildings, and cool office space. Now they’ve got some growth companies that look like you can get unicorns and more parts of the country that can then spin off and create local capital that can see that next stage.
That’s sort of what happened with ExactTarget in Indianapolis that got bought by Salesforce for $2 billion in seed with a bunch of local investors and development. It’s what you got from Shift, which is an Instacart competitor in Birmingham, Alabama, which got sold for, I think, $550 million. And again, started the revitalisation of its downtown. So it’s amazing that just like one really successful company can totally change the narrative of a whole city that may have been in decline for 30 or 40 years, because now you show what’s possible there.
There are many unicorns in Salt Lake City per capita as any city around the country. So we really have a pretty limited view, of where high growth, businesses can take root in America. And it’s crazy to think you just have entrepreneurs in 10 cities when you could be using the rest of the country as that campus.
Meb: Plus way better skiing, too.
Steve: Way better skiing, that’s right.
Meb: Gun to your head, put you in the hot seat. What’s your favourite zone? Is there one that you’re looking to that you think is particularly interesting?
Steve: I’d really buy into this value investing in the heartland themes. So not sure I’d pick one, that I love what’s going on the south side of Chicago, there’s some gateway projects there that I think are gonna transform a huge divide in that city. There’s 100 acres in the south side there that are gonna be developed into this really interesting mixed-use project that’s gonna create new life for a chunk of one of America’s major cities. St. Louis has got really interesting stuff going on in it. And we’re looking at great projects in Atlanta and Birmingham, with some of my clients.
So I love all those cities, the Sun Belt and the industrial Midwest, I think the growth potential there is enormous. And way more than I think you’re gonna find anywhere really expensive market already on the coast.
Meb: Cool. I love it. So where do people go to find more information, if they want to learn more about your company, they wanna learn more about the zones? What’s the right spot?
Steve: So I got a website for Develop called www.developadvisors.com. On that site, there’s actually an analytical project I did called the opportunity zones index which evaluates every opportunity zone in the country and ranks them against each other. And rolls it up to city, states, and counties, and maps it all out on this, I think really cool, interactive map. And you can get a feel for what opportunity zones look like economically compared to each other. So of course, you’re gonna see strong nexus of opportunities in places like San Jose, in places like Brooklyn. But you’re also gonna see these really interesting hubs of economic life in downtown Detroit, and downtown Indianapolis and Birmingham and St. Louis, that I don’t think people are expecting.
So it’s not just a theoretical exercise, there are zones in the downtown of all these cities performing as strong economically as anywhere on the coast, but you’ll be able to feel that for yourself. It’s all census data done in a partnership with Esri, which is one of the leading geospatial analytics firm. And I think it’s a really interesting and useful tool, and you can also find other information about the programme, the latest round of regulations, new steps and all that other stuff.
Meb: I love it. I am optimistic, I’m excited. This has been a lot of fun, super informative. Listeners, it’s a great motivation to go generate some big capital gains. You can invest in these zones too. Steve, it’s been a blast. Thanks so much for joining us today.
Steve: Thank you, Meb. I always enjoy talk with you about this stuff.
Meb: Listeners, we’ll post all these links to Develop, everything else on the shownotes mebfaber.com/podcast. Shoot us some emails, email@example.com, love to hear your reviews, feedback, criticisms, compliments, all that good stuff. Subscribe the show on iTunes, leave us a review, we love to read them. Thanks for listening, friends, and good investing.