Originate Report - November 2019

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/

INDUSTRY JOB WATCH

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Commercial Mortgage Credit Analyst – Newport Beach, CA Wilshire Finance Partners is a growing balance sheet lender and manager of several real estate debt funds. Our internal funding platform provides debt financing and equity capital secured by apartments/multifamily and commercial real estate throughout the United States.

We seek a motivated and detail oriented individual with 3 or more years of experience as a Commercial Mortgage Credit Analyst or Commercial Mortgage Junior Underwriter to join our Newport Beach team.

The Commercial Mortgage Credit Analyst will work closely with the underwriting and origination team and is responsible for processing, analyzing and facilitating loan requests secured by apartments/multifamily and commercial real estate. The Credit Analyst will obtain and review reports, documents and information; assist with processing and underwriting; assist loan closings; drive the management of post-funding loan covenants, draw requests and disbursements; assist with loan portfolio management; and assist with regulatory reporting.

For more information about the opportunity, please visit the Careers page at www.WilshireFP.com

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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G N I RTIS

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R F S H ONT

M 3 N WI

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ENTRY WITH PURCHASE

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

email

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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30 Originate Report | November 2019

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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36 Originate Report | November 2019

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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