“Utilizing Opportunity Zone REITs” with Mike Kelley of Park View Investments

Jeffrey (1s):
Hello everybody. And welcome back to Radio Entrepreneurs is the show that’s constantly streaming stories of entrepreneurship and leadership and how people are dealing with this economy. Our next guest is Mike Kelley founder and managing principal of Park View investments. Welcome Mike.

Mike (17s):
Thanks Jeff. Thanks for having me.

Jeffrey (19s):
So tell us a little bit about, you know, park view investments, what you look at, what your history.

Mike (27s):
Yeah. Parkview investments is a family office. We have been involved in different areas of money management, and right now were very excited about park Voz re, which is our sort of flagship product, which we can, we can get into.

Jeffrey (48s):
Okay. I’m listening all

Mike (50s):
Yours. All right, fantastic. We’ll dive right into it. So the opportunity zone program was passed back in 2010, right? At the end of 2017, effectively allowed you, if you had a capital gain within 180 days to re-invest it in one of these qualified opportunity funds, which would then in turn, invest in low income communities. So the treasury is giving up tax revenue in order to economically kickstart these distressed areas. And I looked at the benefits that were offered and I was amazed.

Mike (1m 31s):
I thought the government was being overly generous. So we quickly ramped up in that space, made ourselves experts in it. And it honestly, hasn’t gone the way I expected the, the, the way these funds have been structured. The first wave of them, I thought was incredibly awkward and didn’t work very well for investors. It worked great for portfolio managers and it was what they were used to. But what we did was we decided to make these, these tax advantages available through shares of stock instead of partnerships. And the big difference there is that the investor can control their own holding period, which is critical for financial planning and to get the most out of these tax benefits.

Jeffrey (2m 24s):
Interesting. So can you give us a sense of some of the companies and types of companies you’ve invested?

Mike (2m 31s):
Well, this it’s a real estate investment trust in the opportunity zone tax benefits can go for either operating companies or for real estate. So you just have to be putting capital to work in these communities. And we chose to go with real estate because this is a geographic based tax incentive, and it gets tricky when you have an operating company, you’ve got salesman on the road and trucks out on the road, leaving the, the designated opportunity zone area. So real estate is something that works extremely well with such a geographically based program.

Mike (3m 11s):
So we’re, we’re just focused on real estate. We launched the fund in October, so we’re getting going, we’re going to be making our first investment in the first half of this year. And it’s going to be commercial real estate. We’re largely looking at the warm weather, low tax states. So it’s Florida and Texas and potentially Arizona where we can invest anywhere in nationally.

Jeffrey (3m 41s):
So I guess you’re a busy and a lot of things, cause you’re also a mentor, a board member and you work in the pitch competition. Can you tell us a little bit about those other activities?

Mike (3m 51s):
Yeah. So I got involved with teaching. I’ve always wanted to teach and just to get involved with MBA students and sort of pass along what I’ve sort of been through business wise and with different entrepreneurial ventures, it’s really fun and an, a great way to create new relationships with when young guys coming into the economy who are, are trying to get things done. I had a friend who prod over at Harvard business school. So I would go over there to his entrepreneurship class.

Mike (4m 31s):
And then I would also spend time up in Amaris with UMass is a, they had a summer program mentorship program, which I did for a couple of years, which is a lot of fun. Ironically, do it this year. Cause I was working on my own project trying to get this, this business up and off the ground and get it through the sec and do all the things you need to do.

Jeffrey (4m 55s):
And are you sitting on boards as well?

Mike (4m 60s):
Currently I’m on the board of Parkview. Ooz REIT, I’m the chairman of the board, but I’m off all the other boards currently. So I’m just focused on this business.

Jeffrey (5m 12s):
So what’s your background. You grew up yourself and family business.

Mike (5m 18s):
My dad was a stockbroker. I started off as a stockbroker and the firm I was with on an institutional brokerage firm. I didn’t know what an institutional broker was or dead, but I was sort of the on guy in the office. And they, they picked me to try to build this thing in the Boston area. And it turned out to be a tremendous educational experience and a big part of what we do is we interact with the analysts and the portfolio managers that fidelity Putnam, Wellington, all the big money managers, as well as some of the hedge funds. And you’d also set up meetings for companies, the CEO and CFO of a company would come through town.

Mike (6m 2s):
They would, we would set up meetings for them, with all of these investors. So I would prep the management on what they, they, the institution and the people they were meeting with were looking for. And then I’d get to sit through the meeting and hear the questions that were being asked and the way that the management would respond. And then I talked to both parties afterwards, I talked to the, the analysts of the PM’s at fidelity. What did you think of that? And I talked to the management and I’d sorta try to bring it all together and create a good communication system, but as a tremendous way to learn the investment business.

Jeffrey (6m 41s):
Oh, interesting. I we’ve been speaking with Mike Kelley founder and managing principal of park view investments. Do you work alone or are there other peoples involved with your business?

Mike (6m 53s):
Nope. There are, there are five of us involved in a few others on the periphery. And as I was saying, we launched in October and we’ve been raising capital and as we go, we’re adding, adding additional people.

Jeffrey (7m 11s):
That’s good. If someone were looking for you and wanted to connect with you and learn more about what you’re doing, maybe help you invest with you, how would they find you?

Mike (7m 20s):
Our website is park view oh Z reit.com. So it’s park view Hosey as an opportunity zone and then real estate investment trust REI t.com. And on there, you’ll see if you’re looking to learn more about opportunities, zones and opportunities on investing. I wrote a couple of articles in the CPA journal about art collectors and how opportunities on incentives can particularly help them. Also with irrevocable, grantor trusts. There’s some special benefits that you can get out of that. And I also wrote an article which came out in November that Thomson Reuters published.

Mike (8m 2s):
And I talk about our fund strategy and how we’re different because we’re not a partnership. We allow our investors to go in and out of the fund and controller on holding period and the huge difference that makes to your financial planning. So once w we haven’t specifically talked about the benefits and, and I want to keep it light here, but if you reach the 10 year hold period in one of these funds, the government will eliminate all capital gain liability. And you’ve accrued in owning that fund. And most opportunities zones liquidate shortly after year 10, they have a 10 year lockup and then they liquidate shortly thereafter.

Mike (8m 45s):
Whereas our fund allows you to capture all of the benefits. Let’s go out to 2047, which is tax-free compound growth. And you, if you exit your 10, you only capture about 15% of that potential benefit. So we looked at it, we think it’s a very straightforward way to structure a fund. It is much better for the investor, not so great for the fund manager, because it takes a lot longer. It’s a lot more expensive and less profitable than running a partnership. So that’s why I think you don’t see it done this way a lot, but it’s, it’s still a brand new tax incentive. And we’re trying to get the word out, talk to a lot of CPA groups and wealth managers.

Mike (9m 27s):
And thank you for helping us sort of spread the word of what we’re we’re trying to do.

Jeffrey (9m 33s):
I appreciate your being on Radio Entrepreneurs. Hope you come back again, as things evolve for you. Remind everybody again. This is Mark Kelly founder, managing principal of Parkview investments. I’m Jeffrey Davis, I’m founder of Radio Entrepreneurs, but also chairman and CEO of major LLC management consulting firm here in new England since 1985, working with families and private companies. We are going to take a break. We’ll be right back after this short break on Radio Entrepreneurs.