NOVEMBER 2019
THE OFFICIAL MAGAZINE OF GERACI
INDUSTRY SPOTLIGHT:
Robert Jafek Boomerang Capital
TOTAL LENDER SOLUTIONS Randy Newman
INSIDE: CULTURE CORNER
RCN Capital
GENERATING LEADS WITH EMAIL MARKETING
Generosity Report SUMMARY OF CHANGES AFFECTING QUALIFIED OPPORTUNITY FUNDS www.originate.report 1
2 Originate Report | November 2019
CONTENTS NOVEMBER 2019
Features 20 Culture Corner: RCN - Behind The Scenes Of The
Private Lending Industry
Originate Report Staff
6
24 Charity Spotlight: Ripples Of Hope: Faith and
Finance Leaders Unite to Help Tanzanian Orphanage
Originate Report Staff
26 Generating Leads With Email Marketing
Ramona D’cruz, Geraci Media
32 Summary of Changes Affecting Qualified
Opportunity Funds
Kevin S. Kim, Esq., Geraci LLP
14
Who To Know 24 6
Randy Newman - Total Lender Solutions
Charles Peckman, Originate Report
14 Industry Spotlight
Robert Jafek, Boomerang Capital
In Every Issue
26
11 Industry Job Watch 28 Cities To Watch:
Indianapolis, Indiana
Originate Report Staff
38 Lender Directory
32 www.originate.report 3
Revenue diversification
Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial
Think of it as a new product offering which results in the diversification of your potential revenue. All of this is well within reach, and much easier than you may think.
TODAY’S MARKET OPPORTUNITY: •
•
•
100 billion dollar non owner-occupied investment space SFR ’s 1-4 Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial Diversify product offering and add new revenue opportunities you may be missing out on Legally compensate your most prized relationships (Realtors) for referrals
The NON-O/O investment space is a 100 billion dollar industry that has come full circle since the last market downturn. Over the last decade private lending has been growing, and the comeback of property investors is at an all-time high. Here’s what it takes to do these types of loans and a good private lender will handle these things for your Brokerage…
WHAT TO LOOK FOR IN A BROKER + CAPITAL PARTNER RELATIONSHIP: • • •
Concierge across product offering with underwriting, training, service and support Dedicated call center for loan origination support and fund control Marketing materials provided including product tear sheets, pitch decks and web banners
• • • • • • •
Traditional Realtors and Mortgage Brokers have the misconception they need an NMLS license to be a lender in this product space. The main point in dealing with a private lender is while they primarily fund SFR’s, these loans are governed under commercial guidelines.
In today’s market, refinancings have limited availability and there’s not much new housing inventory to lend against. For mortgage Brokers, this means the obvious; there are a lack of transactions in the market to profit from. For shops that are only doing refinance or traditional mortgages, opportunities only come around every 5-7 years. You’ve got to have a big client base to have volume. With financial products across SFR ’s 1-4 Fix N’ Flip, Bridge, Refinance, Ground Up & Small Balance Commercial, the sales cycle is faster, there is significantly higher recurring business, and a few lenders have teams dedicated to helping you succeed.
BROKERS, PARTNER TODAY
Review and process loan applications Document collection Facilitate Appraisal Coordinate Title & Escrow Complete underwriting Facilitate Funding Pay you
Thus we are not governed under RESPA, TRID or TIlLA. These loans are funded only into business entities allowing 7-10 business day closings and can pay anyone under a Brokerage license a referral fee or commission on the HUD at closing. There are two avenues a Brokerage launching this type of product to Real Estate professionals can expect to see. You can be a Correspondent Partner (the lender would fund in your name)
http://triumph.capital/brokers
4 Originate Report | November 2019
or an Origination Partner (the client would see the lender’s name on the HUD). Most deals are funded under a single set of product guidelines allowing training, underwriting and servicing to be easily understood. CORRESPONDENT PARTNER (CP): You look and feel like the lender, a complete white-label product. ORIGINATION PARTNER (OP): Traditional Broker + lender relationship, lender shows on HUD. A full concierge service for Broker partners handling everything from A-Z is an entirely new model for private lending and Mortgage Brokers / Real Estate professionals. Working with a direct lender enables Mortgage Brokers to keep the lion’s share of the profit and have the potential to earn from the yield spread as well, all while monetizing on much more frequent lending transactions, instead of the normal 5-7 year customer lifecycle. There many private lenders chasing this strategy and it’s safe to be wary of who to work with. While choosing a partner, look for someone who understands the business and has a strong reputation for closing transactions. You’ll also need support with marketing materials. Having the right documents and product tear sheets (one-pagers) for conversations, trade shows, etc. is helpful in positioning the opportunity with your existing book of referral business from Realtors.
For more information call
877-450-9741
ROB JENNINGS robert@triumph.capital
GEORGE O. FLINT goflint@triumph.capital
CEO Geraci LLP ANTHONY GERACI Anthony@Originate.Report Vice President Geraci Media RUBY KEYS Ruby@Originate.Report Editorial Director MAX BERGER Max@Originate.Report Art Director LYNDA HIGHT L.Hight@Geracillp.com
Letter
from the
Editor “Be thankful for what you have; you’ll end up having more. If you concentrate on what you don’t have, you will never, ever have enough.” -Oprah Winfrey Welcome to our November 2019 edition of Originate Report! Once again, the time to remember what we are thankful for
CONTRIBUTORS Max Berger Robert Jafek • Randy Newman Ramona D’cruz • Kevin S. Kim, Esq.
is upon us. Time to reflect on where we started, how far
FOUNDING UNDERWRITERS
In this edition, you’ll get a chance to learn more about
we’ve come, and the choices we’ve made that have brought us this far. Time to keep our loved ones close and remind them how much we care.
the foreclosure business from one of its most seasoned professionals, Randy Newman with Total Lender Solutions. You’ll also become acquainted with Robert Jafek of Boomerang Capital, a bastion of integrity and humility in
MARK HANF President, Pacific Private Money ORIGINATE WEBSITE www.originate.report GERACI LAW FIRM www.geracilawfirm.com MEDIA WEBSITE www.geracimediagroup.com CONFERENCE WEBSITE www.geracicon.com
our industry. Our team at Originate Report is grateful to our readers, our featured lenders, our content contributors, and our advertisers; without you, none of this would be possible. What are you grateful for?
Max Max Berger Originate Report Editorial Director www.originate.report 5
PROFILE
“The reality is that foreclosures are always going to be needed – whether we are talking about institutional lenders like banks or private lenders, what we call hard-money lenders, it’s always in need.”
RANDY NEWMAN
TOTAL LENDER SOLUTIONS
T
By Charles Peckman, Originate Report he
foreclosure
Solutions. But just as Originate Report learned when we sat down with Newman to discuss his growing company, the foreclosure business wasn’t always on his radar. Originate
Report
(OR):
What
originally caused you to become involved in foreclosures? It doesn’t seem like something that you just wake up and want to do one day…
industry
regulated facet of the real estate
often gets a bad rap. While
world serves as an intermediary
some outside the space
between borrowers and lenders. You
have formed a skewed perspective
will be hard-pressed to find someone
on foreclosure professionals (we’ve
who knows the ins-and-outs of the
visit and I fell in love with the San
all seen how they are routinely
industry better than Randy Newman,
Diego area. A year later I was on
portrayed in movies), this heavily-
the founder and CEO of Total Lender
a plane to California for good.
6 Originate Report | November 2019
Randy Newman (RN): I am from New York originally – I was a real estate attorney and still am to this day. But in 1999 I came out to California to
In
take advantage of what’s happened. The majority of what we do are commercial business foreclosures; this includes SBA loans and fix and flips – there are always ups and downs, but this segment of the real estate process will always be there. In most cases, in an economy that is strong, what we serve is more to light a fire under the borrower; when nothing is happening, it is often the case that the borrower doesn’t have an impetus to do anything. That is when we become involved – in California and Nevada, two of the states we operate in, it can be a three or four month process – we light that fire, and the borrower realizes that we are serious. That’s really the most predominant thing we do in an economy like this; years ago, however, everything went to sale when the economy took a turn for the worse. 2005, I was teaching some real estate
That was my first foreclosure-related
courses for those wanting to obtain
customer, and I haven’t looked back
their real estate license – one day,
since.
OR: You’ve discussed this a little bit, but how does the foreclosure process change
as
the
economy
grows
and weans? And does a negative
one of my students came up to me and asked if I knew anything about
OR:
foreclosures. I said “foreclosures?
Solution’s existence, there have been
I’m a real estate lawyer, of course!”
a number of ebbs and flows in the
He said his father-in-law was not
economy – how has this impacted
happy with his trustee, and asked
your business model, if at all?
Throughout
Total
Lender
I said to myself “what the hell is a
RN: The reality is that foreclosures
trustee?” as we use mortgages on
are always going to be needed
the East Coast (without a trustee). I
– whether we are talking about
searched online and found the United
institutional
Trustees Association– I enrolled in a
or private lenders (what we call
certification course that was being
hard-money lenders), it’s always in
held in two weeks and and told my
need. There are always going to be
student that I would gladly speak
people who are not able to afford
to his father-in-law in three weeks.
what they’ve done, or in some cases,
like
or nonconventional lender more difficult? RN: Right now, we’re seeing an uptick
if I could talk to him. At the time,
lenders
economy make the job of a trustee
banks
in
the
nonconventional
lending space as far as foreclosures go, and I think the reasoning behind that is people are starting to get nervous. We’ve had a relatively long uptick in houses selling within a few days, but those properties are sitting on the market longer now. The longer things stay on the Randy Newman : Continues on pg. 8
www.originate.report 7
Randy Newman : Continued from pg. 7
market, nonconventional borrowers lose money – the interest payments, at first, can be manageable but as time drags on and construction costs increase, this hurts both the borrower and the lender. Still, about 85 percent of properties on which we start the foreclosure process are being refinanced or sold. Borrowers have to come to a sense of reality
if they’re new to the area.
quarter of 2020. OR: Can you speak about TLS’ year? Between the acquisition of a new
OR: You brought up the role that
company and the beginning of your
technology has played in video
business in Texas, it seems like a
conferencing. How do you feel that
busy time in the foreclosure world.
technology has made it easier to operate in a number of different
“California is still the largest market for us, partially because of the sheer amount of property that is in the state.”
that they’re not going to be making as much money anymore.
we’re planning to do by the second
states? RN: Having so many tools at your fingertips is incredible. The ability to connect via email, scan documents,
RN: It was definitely a busy year
sign documents electronically – who
for us. A foreclosure company that
would have ever thought you would
existed for quite some time was
be able to do that? I have been in real
acquired a new owner in recent
estate law since 1982, and started as
years, and she was a student of
a legal assistant when I was in college
mine at the trustee’s association. We
– I remember when a desktop word
became friends and she was looking
processor was literally a machine
to retire and have someone take
that needed its own desk …and the
over the company. This is actually
printers
the second company I’ve acquired;
At that time, those two pieces of
the first was Western Regional
equipment cost about $20,000. I
Foreclosures in Arizona. A friend of
thought it was the greatest thing
market for us, partially because of
mine was the owner of the company,
at that point, because I was typing
the sheer amount of property that
and she and I had referred business
up college term papers on a word
is in the state. Our second-largest
to each other for a number of years.
processor and transferring it to
market is Texas for a similar reason,
In 2016, she turned 66 and wanted
floppy disks. The first PC I bought
it is a large state and there is so much
to retire, so I purchased the assets
had 20 megabytes of storage, and my
property there. There is expansion
of the company and employed her
second computer had 40 megabytes.
going on in Texas currently, and
one employee – without her, I don’t
I said to myself “how am I ever going
I happen to be there as we speak,
know if I could do it. She works so
to use this much space?” It just blows
but trying to compare the processes
hard, and she helps deeply with the
my mind.
of these states is insane ¬– the
continuity of the business. With the
process lasts around four months in
advent of video conferencing, we are
Now, when I travel to conferences
California but in Texas, the actual
able to conduct face-to-face meetings
I don’t need to put an ‘out of the
foreclosure process lasts less than a
several times a week.
office’ message up because I can
OR: Currently, Total Lender Solutions operates in four states. Can you discuss some of the differences in the way that foreclosures operate across the country? What has been your experience with acting as a trustee in California, for example, as opposed to Nevada? RN: California is still the largest
month. There’s a pre-notice sent to
weren’t
much
smaller!
access work material wherever I
the borrowers which gives them 20
Arizona’s processes are closer to
go, for example. It has been both a
days to pay, and if they don’t there
Texas than California and Nevada, so
benefit and a burden because now
are often sales in less than a month.
the Arizona office handles Texas and
there is no down time; I used to be
So there’s much more opportunity
the California office handles Nevada.
able to sit in an airport and relax
for a lender here – the borrowers
We’re looking to expand up into
but now I’m checking emails and
can get caught off guard, especially
Oregon and Washington State, which
talking to people. It just seems like
8 Originate Report | November 2019
I can’t shut off sometimes – but the upside is it allows for the growth of the business, and allows me to connect with people that I wouldn’t necessarily meet otherwise. OR: How has the changing nature of technology assisted Total Lender Solutions in its growth process? RN: You know, when we first started the functionality was more stifled. We’ve gone from using spreadsheets and
using
search
and
replace
functions to running software that allows us to perform calculations and other tasks. If there is an activity coming up in a week, we can easily take care of it; overall, it streamlines the process a lot more. In the last two years, because we’ve grown so much, I brought in a few consultants to help us nail down the internal processes and procedures that have made us so incredibly efficient. I am blown away because I thought I would have to bring on one or two more people this year, but due to the resultant efficiencies, I can essentially double
not overly-confident; those people
RN: Legislation. There are so many
can get thrown into a tizzy because
people who have good ideas and they
person.
there is some bad information that
want to do it right, but sometimes
For the sale and purchase of real
we use is LinkedIn because for
estate, social media has played a
our purposes, it is more business-
large role in that. Every broker I
oriented as opposed to Facebook or
my business in the next two years without bringing on an additional
know has a social media presence ¬– I’m getting inundated on LinkedIn, Facebook, and even email with information. From my perspective, there can be too much information at times and it’s not necessarily a
gets seeped in. The only social media
other platforms.
things don’t work out as planned. Even going back to 2010 when the Dodd-Frank Act was imposed, the CFPB created a requirement that consumer loans secured by a residential owner-occupied property a 120-day waiting period before a
OR: Apart from social media, what
foreclosure can be started. While
are some of the other changes
that doesn’t necessarily hurt Wells
you’ve noticed in the foreclosure
Fargo, it hurts the smaller lenders
bad thing, but there tends to be some
market throughout your time in the
overload. The problem is, every once
space, and throughout Total Lender
in a while you get someone who’s
Solutions’ existence?
who are held to the same standard, and there is no exception for them. If Randy Newman : Continues on pg. 10
www.originate.report 9
Randy Newman : Continued from pg. 9
you have someone who is dependent on that income, it can be hard to tell them that they have to wait – there comes a trickle-down effect when they can’t pay for their mortgage. The good intentions behind these things don’t always translate into a positive outcome in the end. Lobbying
also
plays
a
role.
Sometimes, there gets to be a media hysteria surrounding things. The ‘foreclosure
crisis,’
for
example,
wasn’t really a foreclosure crisis. There was a lot of greed on the origination side of things, in the large entities that had the ability to take advantage of people and people who tried to game the system. When the smoke cleared, so many people said “wow, none of these things are viable.” All of a sudden we had so many loans that shouldn’t have been applied for and deals that shouldn’t have been brokered in the first place. The media then comes in with mass hysteria saying how all the banks are evil. Of course they played a part in it, but there was also fault on the side of the borrowers as well. I don’t personally believe that everyone should be owning their own home – if you can’t afford it, then you can’t afford it – and there are different things you can do. OR: All of that change aside, can you describe what a typical ‘day in the life’ looks like for you? RN: For me, the good thing about my day is that I don’t get involved with the day-to-day processing of files.
10 Originate Report | November 2019
When I first started the company I
We get paid a percentage based on
industry. I strive to find people who
did everything, but now I have some
the work we do, and the amount on
are intelligent and hard-working.
great people on my team and I am
the loan when we start.
able to spend a considerable amount
Looking
forward,
we
want
to
of time reviewing issues that pop
OR: You mentioned the people that
expand our client base and move
up, anything out of the ordinary that
you have brought on board as the
into different states as well. Like I
happens, and strategizing how to
company has grown. Can you talk
said earlier, we’re looking to move
best run and expand the business. I
a little bit about the importance of
up the West Coast into Oregon and
also spend time talking to borrowers
creating a productive, hard-working
Washington State and at the same
explaining the process to them, and
team?
time, increase our client base. The
pointing them in the direction of
economy is going to turn – there
talking to their lender. No lender
RN: The people I’ve brought on board
are always ups and downs, that’s
that I have ever talked to wants to
had absolutely zero experience in the
just how it works – with that said,
foreclose. Oftentimes, it is just a
industry. What I looked for are people
I don’t think the next downturn is
lack of communication which causes
who have a good attitude, who are
going to be anywhere near what we
mistrust, and that moves the process
hard-working, who are willing to get
experienced in 2008-9. We just have
forward.
the job done. I hesitate to say I looked
to continue being in the right place
for people who wanted to have a
at the right time, and I think we’re
The question I get asked most often is
good time, because a lot of what we
on track to do that.
“what is it going to cost to foreclose?”
do with the foreclosure process has
That’s always the first question. We
serious consequences for people,
For more information about Total
are a very regulated industry; our
but it is important to enjoy the work
Lender
fees are set by statutes in most states.
that you do – and that goes for any
totallendersolutions.com/
Solutions,
visit
https://
CONTACT: https://totallendersolutions.com/
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www.originate.report 11
PRESS RELEASE
GERACI MEDIA ANNOUNCES 4TH ANNUAL
INN VATE 2 0 2 0
C O N F E R E N C E
Newport Beach, CA., October 2, 2019 – Geraci Media is launching their 4th annual Innovate conference, a two day event that will provide attendees with the latest trends and insights in the non-conventional or private lending space. At Innovate 2020, which takes place this February 20-21 at the Balboa Bay Resort in Newport Beach, CA, expect to receive first-hand knowledge from industry executives and professionals on how to stay ahead of the curve in the new year. The event will focus on education, the changes happening in the lending space, the new trends in business, and more. The two day event will begin on the 20th with a welcome reception, and continue the next day with a variety of educational panels, a hosted breakfast and lunch, and an espresso bar. Innovate will also facilitate face to face networking through a smart phone app, a speed networking activity, and various networking breaks as well; all of which will assist in fostering new connections and business partners for all attendees. Sang Yoon from Pacific Equity and Loan spoke highly of a Geraci conference he recently attended. “A huge thanks to the Geraci team for putting together an excellent conference. This conference was the most productive one we have been to. We were able to connect with exactly the people we needed to meet in a very efficient manner.” Geraci’s goal for the conference is to help you feel comfortable while networking with the private lending industry’s best and brightest, and attending top-tier panels and discussions. If you have any questions or would like to attend or sponsor, please reach out to us – we look forward to hearing from you. Super Early Bird tickets are now on sale, so visit https:// geracicon.com/conference/innovate-2020/ to learn more. Register before Dec. 14th to ensure that you receive the best savings. See you there! 90 Discovery, Irvine, CA 92618 Alicia Carter, Event Manager | 949.379.2600 | a.carter@geracillp.com 12 Originate Report | November 2019
INN VATE 2 0 2 0
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INNOVATE 2020 FEBRUARY 20-21 NEWPORT BEACH, CA
HOW TO WIN Purchase a Super Early Bird ticket for Innovate ($200 off normal ticket price) by Friday, December 13th to enter the raffle.
PRIZE 1 full-page ad in the Originate Report for the February, March, and April editions. Printed copies featuring your ad will be available at Innovate 2020. Winner will be announced on Wednesday, December 18th. www.originate.report 13
SPOTLIGHT SPOTLIGHT
INDUSTRY SPOTLIGHT Robert Jafek
Boomerang Capital
14 Originate Report | November 2019
Innovation and Entrepreneurship from HEC Paris. business
and
He also teaches finance
at
the
university level, with his current position being an adjunct professor at UC Berkeley Law. Q: What does your typical day look like and how do you make it productive? There are a lot of things about my days that are subject to change, including what town I’m in. But the similarities are that I’m a consistent early riser, work a pretty long day, and try to sneak in some exercise at some point. I don’t watch a lot of TV, but I enjoy reading. To make my days productive, I’m afraid my process is not too interesting – I use a to-do list, which I try to prioritize, and a calendar. The calendar is electronic, but my to-do list is mostly
hand-written,
frequently
with an old school fountain pen. Q: What has been one of the biggest challenges you’ve faced in your career? My biggest challenges have been with partners or key employees that were bad actors. Their actions Robert Jafek, Boomerang Capital
impacted employees and clients, and I had to clean it up. While clients never ended up with poor
R
investment results, some employees obert Jafek – Principal.
and Analyst at Tiger Management.
Rob has been involved in
He has founded and managed two
all phases of Boomerang’s
alternative
investment
firms:
development since its inception
Plumeria Advisors and Torrey Pines
and oversees it operations. He
Capital Management. He started his
previously held various principal
career as an investment banking
investing roles including Head of
Analyst at Morgan Stanley. He
International Trading for Nicholas
received a BA in Finance from The
Applegate
University of Utah and a Masters in
Capital
Management
lost jobs and bore the brunt of those short-sighted and selfish choices. Q: What do you work toward in your free time? Staying
connected
with
family.
They are the most important to me, but unfortunately get less attention Robert Jafek: Continues on pg. 14
www.originate.report 15
being bros’.
Robert Jafek: Continued from pg. 13
and care at times. I also try to get in some exercise, and particularly enjoy biking. I’m also working on my SCUBA divemaster, and I’d love to figure out a way to do a PhD.
organization that you admire. Why do you think they have made an important impact? I admire organizations less per se, and more just regular everyday people in their regular everyday environments that somehow find opportunities to make someone life
a
bit
better.
I
am
particularly inspired by people who reach outside their comfort zones and just do kind things. They remind me that it’s never really ‘convenient’ to be considerate or charitable, and that even small actions frequently make a difference.
com/r/HumansBeingBros/
they aren’t going to want the same houses as their parents, which is
Q: What advice would you give
going to be incredibly positive for
your younger self?
private lending, especially rehab-
Get some more balance in your life.
ing.
Q: Tell us about a person or
else’s
https://www.reddit.
A few weeks
ago, I was in a subway in a part of town that clearly wasn’t my home turf. I was wearing a suit in a crowd of hoodies. I was also pretty lost and must have looked it. A young man came up to me, and I thought to myself that this might end very badly. Instead, he asked me where I was going and went out of his way
Q: What is something that most
Q: What is your favorite quote?
people don’t know about you?
It’s a bit of a tie between two.
One thing that people might find
Either: “Plans are worthless, but
surprising is that I really like to laugh and have a good time. This doesn’t come as a surprise to my family, who think I’m a goof. They know I can be serious and get things done, but they end up rolling their eyes at me a lot. Q: How do you define success? Success, to me, really isn’t about me. I want to make a positive impact
planning is everything” by Dwight D. Eisenhower; or what my wife tells
our
kids
when
they
are
running out the door, which is “Be good and have fun, just remember which comes first.” Q: If you were stranded on a desert island with access to one book, one song, and one movie,
in the lives of others, whether they
what would they be?
are borrowers, investors, students,
For a book, I’ll go with The Razor’s
or just someone I run across in the
Edge by W. Somerset Maugham.
street.
The epigraph there I particularly like, which is apparently taken
Q: What is a recent trend in the private
lending
industry
that
excites you? Millennials. Millennials will make some interesting contributions to society, and they will leave their fingerprints all over it. But for some
from Hindu writings: “The sharp edge of a razor is difficult to pass over; thus the wise say the path to Salvation is hard.” For music, I’d go with just about anything
by
Bach,
or
maybe
Rise Against, whose Ghost Note
to take me to the right platform
reason everyone thinks they are
and get me on the train I needed. A
totally different from everyone else,
small thing, perhaps, for the young
almost like an entirely different
man, but it made an impact on me.
species. The truth is that they are
He had all the reason in the world
just younger, and the one thing that
to ignore me, but chose to spend
is for sure is that they will age. As
altogether and just look forward to
his time helping me get sorted out
they get older they will buy houses
watching the sun rise and set every
instead. On a related note, I also
and invest for the future, like all
day. The views from a desert island
frequent the subreddit ‘humans
the generations before them. But
would be pretty fantastic.
Symphonies album I particularly like. And for a movie, I’d skip that
CONTACT: Robert Jafek: rob@boomerangcapital.com | https://boomerangcapital.com/
16 Originate Report | November 2019
PRESS RELEASE
Geraci Media Now Offers Video Recording and Editing Services Irvine, CA., October 18, 2019 –Geraci Media is excited to announce the addition of video content creation as part of their growing suite of products and services. This offering encompasses the entire filming process from beginning to end, including creative consulting, scripting, recording, and editing. Video content marketing has become one of the most effective ways for brands to grow their audiences and increase prospect engagement. A growing number of companies have caught on to this trend, and are looking for ways to incorporate it into their own marketing strategies. The only problem is that many of them do not possess either the resources or the know-how to execute their visions; and that is where Geraci Media steps in. “We understand the importance of really getting to know the company you are working with, and we want to help lenders and those in the private lending industry tell their story,” said Ruby Keys, the Vice President of Geraci Media. “Videos get people excited and allow them to visualize and understand who you are as a team and as individuals.” Whether you are looking to create promotional videos, educational content, or more creative projects, Geraci Media is here to help. They guarantee state-of-the-art video and sound quality, lighting, production, editing, and the same high standard of professionalism and customer service that their clients have come to expect. If you’re ready to produce quality video content for your company or you have more questions about how the Media team can help you do it, please visit https://geracimediagroup.com/ or reach out to Ruby Keys.
90 Discovery, Irvine, CA 92618 Ruby Keys, Vice President of Geraci Media | 949.379.2600 | r.keys@geracillp.com www.originate.report 17
FEATURE FEATURE
NON-BANK REAL ESTATE LENDING
WHAT DOES THE FUTURE HOLD? By James Bowie, Alta Capital Group
D
ue to the large role that the
also acted as a petri dish for the
regulation. This stark contrast in
housing market played in
expansion of a bourgeoning field
regulation, however, has more to
the 2008 financial crisis,
– nonconventional (or non-bank)
do with the fact that banks have
it only seems natural that banks
lending.
shying
access to deposits that are insured
and traditional lending platforms
away
lending
by the FDIC (which is ultimately
shied away from this asset class
avenues, these non-bank lenders
backed
in the housing bubble’s aftermath.
saw a decade of continuous growth,
Nevertheless,
Both the U.S. government and
a period of growth that continues
capital
regulators
of
to this day. But what will the next
institutions (and correspondingly
dollars into these institutions to
ten years hold for the non-bank
substantial lobbying efforts) may
avoid the complete collapse of
real estate space?
result in a heightened level of
injected
billions
With
from
investors
traditional
by
taxpayer the
behind
dollars.) substantial
large
banking
regulation in the next decade. At
the financial system – banks and elected officials, understandably,
An “unlevel playing field” is a
the same time, however, as the very
pursued only safe and predictable
phrase often heard by politicians
vivid memories of the financial
loans following this period of
and
lobbied
crisis fade, banks may get relief
unprecedented turbulence.
by
traditional
from their own regulators, which
increasingly
would take attention away from
regulators banks
institutions
–
being
these are
anxieties
complaining about this disparity,
financial
stating that non-bank lenders face
sector during this time, this period
a much lower level of scrutiny and
Aside
from
experienced
the by
the
18 Originate Report | November 2019
non-bank real estate lending. The
global
bond
market
is
institutions,
loan
approval
can
institutions
such
as
Charles
drag on for long periods of time.
Schwab and Fidelity – although
One thing that makes non-bank
these physical locations may add
lenders
cost to a lender’s business model,
is
valuable
their
ability
bureaucracy,
to
borrowers
to
avoid
cutting
this
through
red tape and making decisions with less information. Although this may seem counterintuitive, lenders at non-bank institutions can quickly discuss a loan with other members of an investment committee, and make decisions
a larger presence in any given market may require more visibility with the business community and general population in that area. Just as Schwab, Fidelity, and other large-scale
financial
operations
give “a face to a name” with these physical
locations,
non-banks
earlier on in the process.
lenders may continue to establish
estimated to be worth $100 trillion
Varying population growth rates
could play the dual role of serving
– the U.S. speaks for a large
around the world impact interest
investors and lenders in the non-
rates
bank lending space.
portion of this, at an estimated
–
Korea
and
similar locations, locations that
Japan,
for
$38 trillion (according to the Bank
example, have lower interest rates
for
Settlements.)
due to slower population growth.
Although it can be difficult to
interest
rate
If a given return on investment is
ascertain the future state of non-
investors
10.0 percent for a transaction, for
bank lending, it is fairly easy to
understand the risks of holding
example, this deal may seem more
state the continued growth of the
bonds; although this may be the
attractive
located
space – some economic analysts
case, investing in loans backed by
outside the country. Additionally,
say the U.S. in on the verge of
the relatively stable worldwide
another recession (although the
view of the U.S. economy and its
lengths to which this claim has
democratic government ease the
been substantiated have yet to
concerns of investors skeptical
be determined.) Even if this is
about
the case, the aftermath of the
International
Given
the
rising
environment,
many
real estate – which investors can touch and see – is an attractive alternative. Even if a small fraction of this bond market capital finds its way into the non-bank real estate lending sector, this could contribute to a substantial growth of
this
banks’
market.
only
Additionally,
advantage
in
real
estate lending is their offered rate. Although banks can offer these lower rates, many investors and developers prefer to have fewer people devoted to dealing with their lending (even if this means paying a marginally higher rate.) Borrowers often,
value
when
bureaucracy
expediency
dealing of
large
with
– the
banking
to
investors
completing
deals
with
autocratic regimes such as China
last
and Russia.
strengthened
financial
crisis the
in
2008
presence
of
the non-bank lending sphere – in Walk down the street of practically
short, it seems as though the non-
any busy city, and you will be able
bank lending space is here to stay
to find a retail location for financial
for quite some time.
About the Author: As President of Alta Capital Group, James oversees operations and business development for the company. Anticipating an emerging opportunity in distressed real estate investment, James founded Alta in 2009 to capitalize on the shifting market conditions. Prior to founding Alta, James spent seven years as a commercial real estate broker with Lee & Associates, The Staubach Company and Grubb & Ellis. Throughout his time in commercial brokerage, he specialized in the acquisition, disposition and leasing of investment property. Contact: james@altacg.com
www.originate.report 19
CULTURE CORNER
2017 Year End Company Celebration RCN Team
RCN Capital
Behind the Scenes of the Private Lending Industry
“T
By Originate Report Staff here’s really no such
it comes to underwriting. As a
all in a fraction of the time of
thing
internal
direct private lender, RCN Capital
the
anymore.
approves all transactions in-house
innovative RCN Advantage, they
Your culture is always public,
to provide prompt responses to
offer their clientele a wide array of
and
time-sensitive loans.
competitive loan programs, state-of-
it’s
as
culture
your
most
powerful,
competition.
Utilizing
their
the-art technology via Bridge Loan
public-facing asset or liability.”– David Mattin, Head of Trends &
RCN Capital realizes that no two
Insights, TrendWatching.
investors are alike. As a brand,
Network, and unparalleled service.
RCN focuses on professionalizing
Creating
In an industry not particularly
hard money while simultaneously
organizational culture is no longer
known
delivering a personalized, customer
optional in today’s ultra-transparent
practices, RCN Capital aims to be an
centric
specifically
society. Corporate values are the
outlier when it comes to conducting
tailored to the individual client. They
foundation upon which successful
its day-to-day business operations
offer superior short-term fix and
business are built. Today’s employees
in a transparent, principled manner.
flip financing and long-term rental
value a strong corporate culture just
Founded in 2010 amidst the turmoil
financing for real estate investors
as much as they do their salaries
of the latest recession, they seek to
to fund the purchase and refinance
and other traditional perks—as they
inject the market with a refreshing
of non-owner occupied residential
should. Satisfied workers translate
common-sense
and
into satisfied customers, and RCN
for
its
ethical
approach
business
when
20 Originate Report | November 2019
experience
commercial
properties.—
a
scalable,
enduring
Capital goes the extra mile to ensure their team members are valued for what they are: their most vital commodity. The following are just a few examples of the workerfocused
initiatives
they
have
implemented in order to foster an optimal team environment: Dynamic Teambuilding Exercises: Successful
teams
aren’t
overnight.
Building
made
dependable,
lasting relationships is a deliberate process that RCN Capital takes seriously. They operate on a work hard/play
hard
mentality
and
believe in the importance of hosting regular team building activities to strengthen workplace relationships. Social Events To create new connections and strengthen existing relationships. Complimentary Food: Including
breakfast,
lunch
and
dinner options. “The Farm”: Yes, they have an actual on-site farm at their company headquarters complete
with
pigs,
chickens,
llamas, goats, geese and ducks. A nonconventional approach from a nonconventional
company.
While
this may seem like an odd feature, it is a collaborative venture amongst the employees who get to learn about and enjoy a variety of crops and animals. It’s a unique and effective way to relieve stress during breaks. Game/Recreation Room: Friendly competition breeds success
2019 Mid-Year Company Meeting Jeffrey Tesch, CEO
and helps alleviate stress. www.originate.report 21
“The thing I like most is the opportunity to work with so many innovative people.” – Thomas Smith, Counsel
Onsite Gym:
cross off items on their personal
to instill a close-knit, progressive
Healthy employees perform better.
to-do lists so they can remain
and modern work environment that
There’s nothing like a lunchtime
focused on their work.
is hard to come by in the financial
sweat session to get you over the dreaded afternoon slump.
industry. All employees, regardless
Electric Car Chargers: Environmentally friendly transportation
Onsite Laundry:
is the future. RCN applauds their
RCN Capital is all about convenience,
employees for taking the next step to
and not just when it comes to
address air pollution and hope this
providing their clients with solutions
innovative
to their financing needs. They make
their support.
convenience
expresses
are committed to sustaining an extremely
open
and
welcoming
office culture. Everyone is ready and willing to assist one another in order to achieve more and deliver a better end-product to their customers.
life easy for their team by providing them the resources they need to
of title, experience or background
RCN Capital has made it a priority
2018 RCN Holiday Dinner From left to right (back row) – Jeffrey Tesch, CEO; Stephen Ballard, Senior Business Development Coordinator; Erica Sikoski, Marketing Coordinator; Erica LaCentra, Director of Marketing; Natasha Nikulina, Business Development Coordinator; Rob Kavaler, Graphic Designer. From left to right (front row) – Laura Sweeney, Loan Servicing Specialist; Matthew Gunter Esq., Assistant General Counsel
22 Originate Report | November 2019
“One of the great things about RCN is you have the opportunity to go beyond the bounds of your typical job duties and grow professionally as well as personally.” 2018 Year End Company Celebration From left to right – Matt Ferrigno, Senior Loan Officer; Thomas Smith, General Counsel; Steven Gonzalez, Loan Processor; Alex Crivelli, Loan Officer; Tom Bjunes, Senior Processor; Joe Bordonaro, Lead Processor
– Natasha Nikulina, Business Development Coordinator
“RCN has a very open and cool atmosphere that lends itself to the creative process. It especially helps our marketing department thrive.” – Rob Kavaler, Graphic Designer
2018 Ugly Sweater Holiday Happy Hour From left to right – Chris Dorin, Senior Loan Officer/LO Trainer; Natasha Nikulina, Business Development Coordinator; Rob Kavaler, Graphic Designer
www.originate.report 23
1.2 million children in Tanzania
GENEROSITY REPORT
have lost a parent due to AIDS and a significant percentage of those children also have tested positive for the disease. The Shalom Orphanage is located in Karatu, a bustling village in East Africa. The indigenous population face
significant
especially
the
struggles—
children.
Nearly
68% of the Tanzanian population lives
below
the
international
poverty rate, subsisting on less than $1.25 per day. Alcohol, drugs and unplanned children result in a large number of children being abandoned at a young age. Mama
RIPPLES OF HOPE:
Warra,
with
her
now
deceased husband Bishop Nnko,
Faith and Finance Leaders Unite to Help Tanzanian Orphanage
established
Shalom
in
2004
to help alleviate the suffering of
these
children.
Originally
housed in a single tiny room, Mama Warra initially took in three
children.
That
number
quickly multiplied, and in 2007,
By Originate Report Staff
W
along
with
the
assistance
of
like-
minded volunteers, Mama Warra hat does a Mortgage
orphaned and abandoned children.
Pool Fund Management
The orphanage currently supports
company, a faith-based
over 80 children, ranging in age
Real Estate Mastermind group and
from 1 to 18 years old—with most
an eastern North Carolina country
of those children being double
church have in common? These
orphans, having lost both parents.
groups share the common goal of
Many of the children under Shalom
improving the lives of 85 orphaned
Orphanage’s
children in Tanzania through the
from serious medication conditions
Shalom Orphanage.
including
care
are
HIV/AIDS,
suffering
mental
or
physical limitations and trauma-
was able to construct the existing orphanage that 80 children now call home. In 2018, Darin Brockelbank, the founder of Kings City Mastermind in
Charlotte,
North
Carolina,
traveled to Tanzania as part of a
Samaritans
event
and
Orphanage.
Feet
charitable
discovered He
was
Shalom
introduced
to Mama Warra, who informed
The Shalom Orphanage is a non-
induced
The
him of the orphanage’s mission,
profit entity established by Mama
orphanage aims to provide love,
where he met representatives from
Warra Nnko in 2004, with the
comprehensive healing and day-to-
Goldsboro
goal of improving the futures of
day care for these children. Over
located in North Carolina—who
24 Originate Report | November 2019
complications.
Worship
Center—also
were building a hostel for Shalom.
that is hard to believe exists.”
The group discussed the existing revenue streams that supported
Mama Warra’s ultimate goal is to
the orphanage—including the small
expand the Shalom Orphanage’s
hostel that had been started by the
capacity to 120 children. As part of
Goldsboro Worship Center, whose
this aim, each child would be able
profits went directly to providing
to attend a local boarding school
for the care of the Shalom orphans.
that will provide food, books, and uniforms during the school year to
Upon returning to the U.S., Darin
help offset the operational costs
collaborated with his colleagues at
of the orphanage. The affiliated
King City Mastermind to organize
private
a group of real estate professionals
a discounted annual rate to the
willing to assist the Goldsboro
orphanage
Worship Center in completing the
Carolina Capital Management and
Shalom Orphanage hostel project.
other businesses associated with
As a key member of this team,
King City Mastermind are assisting
Carolina
Management
in the expansion efforts and hope
helped raise over $40,000 and put
to reach the goal in the next
together a 12-person team to travel
three years. The group is seeking
to Tanzania in July 2019. This group
other likeminded businesses and
was able to complete six of the
individuals to join the effort by
12 rooms in addition to 28 luxury
either participating in the bi-yearly
campsites. The hostel is scheduled
trips to Tanzania or submitting
to open for its inaugural guests in
donations. “We believe that revival
December 2019, with the remaining
throughout the world will come
rooms set to be completed soon
through
thereafter. “The most important
come alongside those dedicated to
thing
building the Kingdom, one child at
Capital
that
took
place
while
there were the relationships and lifelong
friendships
that
were
developed between the 12 travelers and 85 precious children,” says Wendy Sweet of Carolina Capital Management. “We witnessed a love so strong between children who have nothing but each other and will do whatever it takes to care for each other. They possess no jealousy or coveting, only joy and gratefulness for what little they do have. They especially love with all
boarding of
school
$640
businesses
per
offers child.
who
will
a time, “says Wendy Sweet. If you, your business or organization are interested in providing financial assistance, donations can be made in order to fund the completion of the hostel project, sponsoring a
child’s
educational
costs
or
sponsoring a volunteer travelling to Tanzania by visiting https:// w w w. g o l d b o r o w o r s h i p c e n t e r. com/giving. If you feel led to join them on a trip with your family, coworkers, or individually,
of their hearts, Mama Warra. Every
please contact Wendy Sweet at
day there, we witnessed miracle
wendy@carolinahardmoney.com or
after miracle and a depth of love
704-400-9481. www.originate.report 25
FEATURE
GENERATING LEADS WITH EMAIL MARKETING By Ramona D’cruz, Geraci Media
W
hether you started your
3,800% ROI, making it incredibly
Follow the inverted pyramid style
career
effective. (HubSpot)
of writing that journalists use.
in
marketing
before the email boom
Give readers the most important
or in the internet era, you are sure
In this post, we’ll discuss how Geraci
information first, and then follow
to remember a time when emails
Media can help you get a slice of the
up with supporting details. Most
were the top marketing platform. It’s
pie and craft email campaigns that
people read email while they’re
no secret that consumers’ inboxed
help you meet your business goals.
commuting or at work, so give
are proliferated with the latest and
them content that is easy to digest.
greatest offers. As email campaigns
Write for results
grew, laws were passed to limit them
Think deeply about how your
Write with a purpose, and keep
and give customers more control
customer
every
content concise. Each email should
component of your email. A good
have a goal, whether it’s to drive web
subject
news
traffic, educate, or generate leads.
headline – it grabs your attention
Reveal your purpose upfront, direct
and makes you want to read more.
copy towards the call-to-action and
Stick to a simple design. A crisp,
make your emails easy for busy
uncluttered email lets subscribers
readers to scan. Choose large fonts
know how professional you are.
that are easy to read at any size,.
Most email campaign platforms
Make sure your readers have the
offer well-designed templates to
experience your content in the same
help you get started.
way, regardless of whether it is on
over what lands in their inboxes. his shift is great news for marketers, who now have added assurance that their email audience is interested in their content – or at least interested enough to not hit the unsubscribe button. Email marketing is a proven method for generating leads. In fact, email generates $38 for every $1 spent, which is a staggering
26 Originate Report | November 2019
will line
perceive is
like
a
Often times, including a sales offer or coupon can help give the lead a little push to a sale. Test, analyze, and try again Don’t underestimate the power of A/B split testing. By testing your email campaigns, you can lower bounce rates, learn more about your customers,
increase
conversions,
and reduce cost. The average email open rate is around 21%, while the average click rate hovers around 2.48% (MailChimp). While
it’s
great
to
have
these
benchmarks, adjust your expectations based on your industry’s standard and your previous emails’ performance – don’t expect to see staggering results right away. Building an effective Move leads through the sales funnel
Nurture your warm leads as much
time, combining proven methods
Customize your Campaigns
as your cold ones. Develop a special
You probably get leads from an
with new ideas. Geraci Media can
email to share when you’re moving
array of sources, including, blogs,
work with you to figure out what
emails from the cold to the warm
combination works best for you for
list. Include a thoughtful touch like
maximum results.
their phones or on a desktop.
events, salespeople, and referrals. Categorize your leads and build custom campaigns based on what they’re looking for. Many platforms allow you to build automated email chains that help move contacts through the sales funnel. Use blogs to generate leads A great blog positions you as an
industry
leader
in
your
prospects’ eyes. Send your leads relevant articles to guide the conversation forward and prep them for sales calls.
marketing
strategy
takes
a testimonial to establish credibility. Follow the warm email up with a
Book a call with us to discover how
second email asking if they’re still
we can help your company thrive!
interested in what you have to offer. ABOUT THE AUTHOR: Ramona D’cruz is the Media Assistant at Geraci Media. She joined the company in 2018, and in that time she has become an indispensable member of the Media team through her passion, creativity, and attention to detail. She serves as the project manager for many of Geraci Media’s clients, plays an active role in conference planning and execution, and goes above and beyond to support her team members and help the organization achieve its goals. Ramona graduated from CSULB with a degree in Sociology and decided to pursue higher education by enrolling in an MBA program, with a concentration in Marketing. Working at Geraci and being a part of such a tight-knit team of individuals is exactly the environment in which Ramona thrives and she looks forward to her continued professional growth alongside Geraci. CONTACT: r.dcruz@geracillp.com
www.originate.report 27
CITIES TO WATCH
CITIES TO WATCH:
INDIANAPOLIS, INDIANA By Originate Report Staff
S
ituated smack-dab in the
Treaty of St. Mary’s. At the onset
four
middle of this Midwestern
of
transportation
each time of year certainly has its
state,
Indianapolis,
boom, Indianapolis proved itself
virtues, it is perhaps summer that
Indiana may not be the largest
indispensable in manufacturing
holds a special place in the hearts of
city
its
and transportation, acting as an
this city’s residents, as this season
Midwestern charm and world-
important business hub for the
is home to one of the largest racing
renowned
latter part of the century.
events of the year, the Indianapolis
we’ve
featured, attractions
but
certainly
America’s
distinct
seasons.
Although
500; every year, tens of thousands
make ‘Indy’ a must-visit stop on any bucket list. The area has been
Although the Midwest isn’t known
flock to the city to cheer on their
home to indigenous people for
for having the kindest seasons in the
favorite drivers. For all of you
thousands
was
country, Indy’s beautiful fall foliage
(myself included) who seemingly
relinquished to settlers in the
and serene, snowy winters are a
lack the ubiquitous sports-loving
early 19th century as part of the
perfect embodiment of the city’s
gene, there is plenty else to do in
of
years,
but
28 Originate Report | November 2019
INDIANAPOLIS, IN Economy:
• Median home price: $148,200 • Home price change: 10.8 percent increase (one-year change)
• Major industries: Advanced
• Homeownership: 68.5 percent
manufacturing, life sciences, information technology, and the
• Median rent price: $1,073/month
auto industry
(for a two-bedroom apartment)
• Minimum wage: $7.25/hour
Job Market:
• Cost of living: 12.1 percent lower
• Forbes List: #58
than the national average
• Unemployment: 3.0 percent
Housing:
• Job growth: 2.1 one-year increase
• Median household income:
• Loan originator average salary:
$59,566
$75,049
romantic way to spend an evening,
nights and vaudeville-style variety
look no further than Old World
shows. Dedicated to creating an
Must-see Locations
Gondoliers,
authentic
A short drive from Indy’s downtown
gondola ride service. Take in the
this hotspot certainly lives up
district, the Indianapolis Museum
sights and sounds of the city while
to its peculiar name. Although
of Art at Newfields is one of
floating down the river, arm-in-
Oktoberfest has already passed, the
the country’s oldest general art
arm with that special someone.
late-night ambiance and German
by timeless masters and up-and-
Nightlife
timeless German cuisine (think
comers alike, the museum is also
Willkommen, bienvenue, welcome
home to one of the largest and
to Cabaret! Welcome, that is, to the
most comprehensive collections of
White Rabbit Cabaret Club, where
Asian art. If you are looking for a
you can take part in wacky bingo
Indiana’s capital city.
Indianapolis’
own
museums. Home to 50,000 works
cabaret
experience,
flair of The Rathskeller offers schnitzel,
sauerbraten,
and
of
course, copious amounts of beer.) If you are looking for the perfect Cities to Watch: Continues on pg. 28
www.originate.report 29
Cities to Watch: Continued from pg. 27
spot to host an intimate gathering or
large
party,
Howl
at
the
Moon offers a fully-customizable experience, from the music, food, and entertainment. Dining You will be hard-pressed to find a restaurant in the Indianapolis area with better reviews than St. Elmo’s Steak House, which has 3,000 TripAdvisor reviews complimenting everything
from
the
ambiance
to mouth-watering cuts of meat. American fare is certainly popular in this Midwest city, with a breadth
and other American classics, there
and screaming with delight at the
is also a wide variety of unique
sight of priceless rocks and minerals
cuisine as well. This selection, of course, would be incomplete without Bosphorus Istanbul Café,
(I was a weird kid.) Perhaps the most visually enthralling part of the
which serves a wide variety of
museum is Dale Chihuly’s massive
Turkish cuisine.
‘Fireworks of Glass,’ a 43-foot high
Attractions For your children (or let’s be honest, the child inside all of us), never
glass sculpture. The city’s official website says “you won’t find a better place to learn, play, and grow as a
fear – after all, Indianapolis boasts
family,” and judging by the various
the largest children’s museum in
offerings present in Indy, I would
the world. The Children’s Museum of Indianapolis is a force to be
tend to agree with that statement.
reckoned with as far as museums
For the non-childbearing among
are concerned, housing dozens of
us, there is still plenty to do. White
exhibits on art, science, history,
River State Park, for example,
of American cuisine that rivals
and culture. I remember being
larger metropolitan areas – but
awe-struck when I first visited as a
where there is an ample supply of
child, peering at massive dinosaurs
cup of coffee or take your dogs for
reasonably-priced burgers, steaks,
“climbing” the side of the building,
a walk.
offers a tranquil setting to enjoy a
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www.originate.report 31
FEATURE
Summary of Changes Affecting Qualified Opportunity Funds By Kevin S. Kim, Esq., Geraci LLP
I
n IRS
October
published
regulations
the
business within a QOZ and how
has to invest under the deferment
proposed
to properly structure a Qualified
option. Moreover, capital gains
the
Opportunity Fund.
are determinable as of the last
2018, to
Tax
day of the taxable year for the
Cuts and Jobs Act program known as Qualified Opportunity Zones.
Here, we take a closer look at some
taxpayer.
So,
While the proposed regulations
of the more critical clarifications
taxpayers
with
identified
of
that came from those meetings and
generated during 2019, the 180-
contention, it opened up some
summarize what fund managers
day rollover investment period
questions and concerns that left
need to consider when structuring
begins December 31, 2019, and
stakeholders seeking clarification.
a QOF.
ends on June 28, 2020.
In April of 2019, the IRS issued a
Timeframe
second set of proposed regulations
invested
the last day to qualify for the 15%
which addressed many questions
Section 1231 gains (capital gain
deferment basis for investments
and added some clarity, and since
rates) are required to be netted
into Qualified Opportunity Funds
then, has conducted two public
with
the
will be December 31, 2019. After
hearings
amount of capital gains a taxpayer
that, investors will only be eligible
some
on
how
issues
to
conduct
32 Originate Report | November 2019
losses
for
to
assets
to
determine
be
for
individual
capital
gains
It is also important to note that
“The new proposed regulations will allow, under certain circumstances, for an investor who transfers his or her interest in the QOF to another partnership (Parent Partnership), it will not be deemed an “inclusion event” and would qualify for tax deferral as long the QOF remains alive.” to receive the basis step-up of
period
2. The lessee cannot make any
10%.
If an investor dies during the
prepayments to the lessor that
investment period, the investment
exceeds 12 months.
“Substantially all” clarification
will be passed on to his or her
3. For purposes of the 90% asset
The proposed regulations define
heirs. The heirs of the investor
test, the value of the leasehold
the substantially all requirement
will
improvements
threshold as follows:
from the original QOF investment,
now
receive
the
benefits
including any tax carryover basis
would
be
based
on either the applicable financial statements or present value of each payment under the negotiated
• “Substantially all” threshold is
of such investment. In the event an
90% when used to measure a QO
investor dies during the investment
Fund’s holding period of tangible
period, the holding period does not
property as qualified OZ business
restart for the fund investment
property,
period.
type of arrangement.
Related-Party Leases
gains related to the leasehold
QOZ
partnership,
or
corporation. • “Substantially all” threshold is
This addresses when a fund enters
70% of the property’s use must
into a lease agreement with a
be in a QOZ, and 70% or more of
landowner to develop the land and
the property owned or leased by a
operate the rental activities after
QO Zone Business must meet the
the build. This type of arrangement
definition of a QO Zone Business.
comes with several restrictions.
Clarification about the death of
1. Lease payments must be based
an investor during the investment
on “market lease rates.”
lease. 4. The “substantial improvement” requirement does not apply to this 5. Only the portion of capital improvement is eligible for the 10year permanent deferral. Real Property Straddling a QOZ If a taxpayer owns property near a QOZ and wants to expand by acquiring adjacent land located within
an
OZ,
the
following
Summary of Changes: Continues on pg. 32
www.originate.report 33
Summary of Changes: Continued from pg. 31
conditions may apply: 1. The QOF could purchase the adjoining property as part of the development project. 2. The adjacent property counts towards a QOZ investment if its square footage is greater than the property located outside the QOZ. 3. Once acquired, the property outside of the QOZ is contiguous as part of the entire development project, and the whole project would be deemed to be a QOZ Business Property.
reinvestment window to sell assets
Purchase of a QOF Partnership
and reinvest the proceeds into
Interest
another eligible opportunity zone
An investor can defer its capital
investment.
gains
by
purchasing
a
QOF
partnership interest from a direct Vacant Property
owner of the QOF. The investor
It a vacant building or structure
could choose to defer gains in the
has not been used within the past
amount equal to the price of the
five years prior to purchase by a
QOF partnership interest.
QOF, it will satisfy the original use Treatment of Carried Interest Gain
requirement of the regulations.
If a person receives an interest Triple Net Leases Prohibited
in a QOF in exchange for services
Leases structured as triple net
rendered to the QOF, the portion
leases, whereas a tenant is required
of such person’s interest received
to pay a portion or all of the taxes,
is not treated as a qualifying
insurance, and maintenance costs
investment.
Therefore,
under
for the property, are ineligible
such circumstances, the profits of
Treatment of Operating Businesses
investments for a QOF due to the
carried interest in a QOF are not
in a QOZ
passivity it provides the landlord.
eligible for QOZ benefits, as well
Outside of real estate development, operating
businesses
can
also
qualify as long as they meet one of the following three safe harbors: 1. At least 50% of the hours the employees or contractors work in performing services for the QOZ Business occur within the QOZ. 2. A minimum 50% of all payments the QOZ Business takes in for services are performed within the QOZ by employees, contractors, and employees of contractors. 3. Facts and circumstances test in which:
as any other capital interest in Ability to Roll Up All QOF Interest into a Single Parent Partnership The new proposed regulations will allow, under certain circumstances, for an investor who transfers his or her interest in the QOF to another partnership (Parent Partnership), it will not be deemed an “inclusion event” and would qualify for tax deferral as long the QOF remains alive. The Parent Partnership will
exchange for such services. In Conclusion The previous two hearings in April and July are most likely the last that will be held on the proposed regulations.
The
Treasury
Department is set to issue final Qualified Opportunity Zone rules sometime
over
the
next
two
months.
own the interest in the QOF, and it
If you have any questions about
will step into the investor’s shoes
Qualified
for
reach out to Geraci Law Firm at
purposes
deferred gain.
• The tangible property of the business is located within a QOZ and, • The management or operational functions performed in the QOZ are necessary for the generation of at least 50% of gross income. QO Funds will have a 12-month
34 Originate Report | November 2019
of
reporting
the
Opportunity
Funds,
(949) 379-2600. ABOUT THE AUTHOR: Kevin Kim is an experienced corporate and securities attorney with Geraci Law Firm, dedicated to providing reliable and innovative legal solutions. Kevin focuses his practice on private placements and other alternative investments for private lenders, real estate developers, and other real estate entrepreneurs. Kevin has advised and prepared hundreds of securities offerings including mortgage funds, structured debt offerings, real estate syndications, crowdfunding offerings, EB-5 projects, and Qualified Opportunity Funds. CONTACT: k.kim@geracillp.com
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THE IMPORTANCE OF
results. This global reach creates networking opportunities for building relationships and partnerships. Your audi ence has invested time in registering and listening to the information you plan to share. They’re expecting valuable takeaways from the webinar, even some thing they can put into place at their own company. This positions you and your brand as an industry lead er, or expert. Webinars can give your audience the chance to ask questions and provide feedback. This how well it performed. These metrics include the is valuable because you can address concerns, reser number of attendees, number of those registered, vations, or any lingering questions they may have and total views. The webinar can and should be recorded about your training or product in real-time. You can Webinars have grown in popularity in recent years for you, the audience, and affiliates to share with customize your presentation to your audience based on and have become an important marketing tool. others, growing the results even more. Each time a their questions and feedback to keep them engaged. These live web-based seminars can connect you with person completes your webinar’s registration form Ask them to take an action, such as completing a task leads from all over the world. They encourage interacti they should be considered a new potential lead, or answering a question. This will increase audience by allowing the audience to ask questions orJust how whether it be for a sale or a potential partnership. participation and interest. Include guest speakers, beneficial can a webinar be to your business? Here Webinars adds a personal interaction that videos and such as industry leaders or affiliates, to speak during are 7 reasons why webinars are a fantastic marketing commercials don’t. Webinars put a face and name your webinar. These individuals should be familiar strategy. Webinars are a cost-effective way to extend with your product making you approachable, human, with your industry and value of your product. They your reach globally. Rather than pay for flights and and someone they can trust. Educating them on how will be able to educate the audience on the benefits hotels to meet with individual leads, you can engage your product can benefit their company is the first or impact, validating information you have or will with a larger group over their computer screens. step in opening the door to future discussions and be sharing. By inviting a guest speaker, you can also People from all over the world can attend, providing partnerships. It is essential to show both new and increase the webinar’s attendance by including your your brand or product with the potential to see huge established leads how your product or service can guest’s audience and following. This can grow the results. This global reach creates networking opporimprove or enhance their workplace. Depending on number of leads you may gain substantially. Results tunities for building relationships and partnerships. the prospect, the sales process can be slow. Businesscan be seen quickly from webinars. After hosting a our audience has invested time in registering and lises want to convert a lead into a cusWhile it’s cerwebinar you’ll have metrics to measure how well it tening to the information you plan to share. They’re tainly important to provide useful information and performed. These metrics include the number of at expecting valuable takeaways from the webinar, tips to your audience, it’s equally important to share tendees, number of those registered, and total views. even something they can put into place at their own how your brand or business can help them achieve The webinar can and should be recorded for you, the company. This positions you and your brand as an this. How can your product be a solution to their audience, and affiliates to share with others, grow industry leader, or expert. problems? Your webinar should show the audience ing the results even more. Each time a person com the value of your brand. Garnering interest in the pletes your webinar’s registration form they should Webinars can give your audience the chance to ask product and its potential impact is the first step in be considered a new potential lead, whether it be for questions and provide feedback. This is valuable becompleting a sale. a sale or a potential partnership. Webinars adds a cause you can address concerns, reservations, or any personal interaction that videos and commercials lingering questions they may have about your trainThere are numerous benefits to hosting a webinar. don’t. Webinars put a face and name with your prod ing or product in real-time. Though this article only touches on a handful of uct making you approachable, human, and someone them, it should be clear that webinars are an effecthey can trust. Educating them on how your product You can customize your presentation to your auditive tool for engagement and growth. As you take can benefit their company is the first step in opening ence based on their questions and feedback to keep these benefits into account, you should begin to the door to future discussions and partnerships. It them engaged. Ask them to take an action, such as think how you can use a webinar for lead generation is essential to show both new and established leads completing a task or answering a question. This will and to increase traffic, which will yield great results how your product or service can improve or enhance increase audience participation and interest. for your business. Webinars have grown in populartheir workplace.Depending on the prospect, the ity in recent years and have become an important sales formation and tips to your audience, it’s equalInclude guest speakers, such as industry leaders or marketing tool. These live web-based seminars can ly important to share how your brand or business affiliates, to speak during your webinar. These inconnect you with leads from all over the world. They can help them achieve this. How can your product be dividuals should be familiar with your industry and encourage interaction by allowing the audience to a solution to their problems? Your webinar should value of your product. They will be able to educate ask questions or provide feedback in real-time. show the audience the value of your brand. Garnerthe audience on the benefits or impact, validating inJust how beneficial can a webinar be to your busiing interest in the product and its potential impact is formation you have or will be sharing. ness? Here are 7 reasons why webinars are a fantasthe first step in completing a sale.There are numertic marketing strategy. ous benefits to hosting a webinar. Though this article By inviting a guest speaker, you can also increase the only touches on a handful of them, •it Upcoming should be clear Business Development • Fintech/Newest Loan Programs • Automation in Today’s Evolving Society webinar’s attendance by including your guest’s auWebinars are a cost-effective way to extend your that webinars are an effective tool for engagement dience and & following. This can grow the number of reach globally. Rather than pay for ights and hotels Trends Changes • Marketing & Outreach • Essential Tools & flTechnologies •and New Legal Issues and Regulations growth. As you take these benefi ts into account, leads you may gain substantially. to meet with individual leads, you can engage with a you should begin to think how you can use a webilarger group over their computer screens. nar for lead generation and to increase traffic, which 5. Results: will yield great results for your business. WebiResults can be seen quickly from webinars. After People from all over the world can attend, providnars have grown in popularity in recent years and hosting a webinar you’ll have metrics to measure ing your brand or product with the potential to see huge have become an important marketing tool. These
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Direct Lender
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Fidelity Mortgage Lenders, Inc. www.fidelityca.com psteigleder@fidelityca.com Peter Steigleder (818) 422-8879
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50K
LENDER
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TYPES OF PROPERTIES
70/30
L O A N
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TYPES OF LOANS
MI NI MU M LO MA AN XIM $ UM Co LO mm AN er $ Co ns cial um Br e r idg Co e rp o A c rat i o qu ns i /T No sitio ru s ns te s a n ts/ L Pu eg dD rc h a ev e l o l Ent Re ased itie pm ha s en b ts Bla / Re mo nk S e e t Lo d e l e co d/ nd ans Re Jo no int Mor va tg V te d a en Fo ge t re i g n u re s s Ot h e N at i r on als MA XL OA NCh TO ur -VA ch LU es La E( /T nd % em (B )/M Au ar p AX les to m e / /S TE Co o RM Re mm yn t ag t a i i ve (YR e og l( rc i S) S En ue al/ s te r h o p L s o t ai / t ) Ga S nm tri sS en pM all Le t at i o t isu s) ns re Ho (G sp olf i Co Mi t alit ur y( xe se d H R e - u s e o te s / M ls) sid ar Pr ina In e o n p Ra d ) n c t i a l I e r t i e u st r he nv s ial sa Se es tm lfnd s en Fa R e to ra tP ge rms st a ro pe rti O f u ra n fic es t s e
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