Insights
While Up&Up's genesis was a "fair deal among friends," its has designed a product that relies on avoiding brokerage fees (by selling to users), and then renders users unable to purchase by utilizing user’s equity as cheap leverage to amplify its own (to perhaps 4-5x user’s). Up&Up has built a negative feedback loop.
Read MoreKey is a Canadian PropTech firm focused on smoothing the path to homeownership. It provides residents with the central attributes of homeownership paired with the most attractive aspects of renting and dollar cost averaging functionality that reduces basis risk. Key offers its investors multiple shots on goal. Its co-ownership product is superior to those of its US-based rent to own peers. Its property management tech could secure adoption in the SFR or middle-market multifamily spaces.
Read MoreThis week we discuss Unison Homes, a home ownership model created by a group of Wall Street veterans that fits roughly within the down payment assistance segment. Unison makes bold claims of social impact and herein we evaluate it across value created for the user, investors, and society.
Read MoreA host of venture-backed companies seeking to address housing affordability have emerged, some offering novel solutions. This series aims to provide a look beneath the corporate veneer to discern which firms create value for users, investors, and society.
Read MoreFriday’s IRS release of 80 pages of guidance is a step toward clarity and reduced compliance risk if not the final word on topics covered. While the IRS presumably crafted its proposed changes to optimize on its key program objectives subject to the input of the myriad of market participants who have lobbied, market participants have 60 days to provide additional feedback. That said, the IRS states that the proposed rules may be relied upon if the taxpayer applies them “…in their entirety and in a consistent manner.”
Several of the topics covered in these documents have come up in conversations I’ve had with family office clients and below, I attempt to distill the voluminous official documents down to key points and implications.
Read MoreDiscerning where one should invest, even with geographically-focused OZ capital, requires a multi-layered analysis that begins with understanding pre-OZ capital flows, how OZ capital is incentivized to behave, how conventional capital sources may respond and ultimately where the market might find equilibrium. In this post and the next we will discuss the directional impacts of OZ capital flows and where related alpha may persist when markets return to equilibrium.
Read MoreHaving described program strictures related to direct investing in Qualified Opportunity Zone Business Property (“QOZBP”), in this post we describe the constraints to indirect, or joint venture investing in real estate, which describes investment positions across a continuum of investor control, ranging from passive stakes in a commingled fund, to separate accounts (e.g. family office or corporation allows investment manager to invest its capital into a QOZB alongside a developer subject to control over key decisions). In either case, the investment manager is placing joint venture equity into a QOZ business entity that is formed to invest in QOZBP. We begin with a line-by-line exploration of the relevant constraints before shifting to a more holistic discussion of investment strategy implications.
Read MoreIn this posting we address investment constraints that derive from the definition of Qualified Opportunity Zone Business Property (“QOZBP”), building on the list of conditions developed in the last posting on the interwoven topic of vehicle structure. Note that to date we have only covered the implications of direct investing (from a QOF directly into real estate). After this post we will have set the stage for a discussion of the implications of indirect investing through a Qualified Opportunity Zone Business. Collectively, these three postings will serve as a basis for our review of investment geographies and ultimately the development of a coherent investment strategy.
Read MoreBefore discussing investment strategy, we will first discuss its vital inputs, program constraints and the manner in which we might expect the Qualified Opportunity Fund (“QOF”) after-tax return premium to map unevenly to identical deals executed across geographies. As the primary lens through which we will evaluate geographies and investment strategies, we begin with a two-part discussion of the constraints that the tax code imposes upon investment selection, starting with those that derive from fund structure in the context of direct QOF investments.
Read MoreThe evolving Qualified Opportunity Zone (QOZ) program, legislated into existence by way of the 2017 Tax Cuts and Jobs Act, provides powerful tax incentives aimed at drawing capital gains into investment positions in low income (and low income adjacent) census tracts. Today we discuss the structure of the incentives and what it means for investors.
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