What are you buying today?

[KJP]

Nickel 28 Capital Corp.

Swedish Match

Hill International

Leatt Corp.

 

[TwoCitiesCapital]

Trimming Whitecap Resources and Altius Resources.

 

Buying Sberbank and Resolute Forest Products.

[aws]

Yikes, I was way too early on OZ. Down almost 30% now. I sure hope this is just a big liquidation and not some actual news I am missing.

[fareastwarriors]

More SWMAY

[Red Lion]

APO and more KKR. 

[JAK]

SWMA

[fareastwarriors]

55 minutes ago, aws said:

Yikes, I was way too early on OZ. Down almost 30% now. I sure hope this is just a big liquidation and not some actual news I am missing.

 

Just checked out their site briefly. 

Nothing to add but seems like an interesting company.

[aws]

17 minutes ago, fareastwarriors said:

 

Just checked out their site briefly. 

Nothing to add but seems like an interesting company.

Yeah, as far as I know it's the only publicly traded Opportunity Zone fund, which in and of itself as an interesting opportunity. You actually get a tax writeoff dollar for dollar when you invest so long as you have capital gains to offset. And it's retroactive for 180 days so you can buy today and avoid paying tax on a gain from September of last year. 

 

Separately from the company itself, the stock has moved in very inefficient ways over the past year. They have an ongoing offering where they will basically sell unlimited shares at $100 per share, and for quite a while it didn't fluctuate more than a few pennies from that price. Then last summer the stock (when it was still trading OTC as BELP) floated to up to $180 at the high during a period when the offering was suspended, and now it's going the other way and traded as low as $65 today. I'd think if nothing weird is going on, then it probably drifts back up to the $100 NAV range as more and more people either buy in for the discount alone or new money rolls in at the last minutes to save on 2021 capital gains. 

[fareastwarriors]

4 minutes ago, aws said:

Yeah, as far as I know it's the only publicly traded Opportunity Zone fund, which in and of itself as an interesting opportunity. You actually get a tax writeoff dollar for dollar when you invest so long as you have capital gains to offset. And it's retroactive for 180 days so you can buy today and avoid paying tax on a gain from September of last year. 

 

Separately from the company itself, the stock has moved in very inefficient ways over the past year. They have an ongoing offering where they will basically sell unlimited shares at $100 per share, and for quite a while it didn't fluctuate more than a few pennies from that price. Then last summer the stock (when it was still trading OTC as BELP) floated to up to $180 at the high during a period when the offering was suspended, and now it's going the other way and traded as low as $65 today. I'd think if nothing weird is going on, then it probably drifts back up to the $100 NAV range as more and more people either buy in for the discount alone or new money rolls in at the last minutes to save on 2021 capital gains. 

 

We need our real estate experts on this ASAP 

 

@thepupil @Gregmal @BG2008
@realassetsvalue

 

Sorry for any omissions! 

[Gregmal]

Have to look at it. Been extremely lazy last few months since I was going on vacation and figured the market was gonna struggle to start '22. Then my biggest position got bought out. So my fucks to give arent quite there and due diligence efforts have been lacking. That said, I did just grab a handful more PCYO. 

[aws]

There's not a whole lot of fundamentals to look at yet. They have done a couple of small projects when they were managing funds in the <$100mm range, but they are trying to raise closer to $1b which will mean future development will dwarf anything then have done so far.

 

They do have to follow OZ rules which basically mean they can only own property in certain census tracts. And they have to deal in buildings that either are brand new and have never been placed in service before, or ones where they spend as least as much renovating as the original building cost. So the pool of assets they can invest in is much smaller than most REITs, but you also get amazing tax benefits as an owner so you could choose a lower yielding asset and still come out way ahead. In addition to the write off on purchase, if you hold for ten years you don't pay any taxes when you sell the stock either. And that goes for both capital gains taxes as well as depreciation deductions they pass through to you on a k-1.

 

I'm not sure yet if I'm sold on sticking it out with them for ten years, but the tax benefits from buying were too good for me to ignore, so I already had a pretty good size position, and that was before thinking about a 25-35% discount to NAV like we have now.

 

[Gregmal]

My understanding is that with the OZ stuff(probably more so citing things Ive heard about non traded product) is that the fees are something to watch out for and also the development risks. In other words these are almost always in bad areas that collapse if the wheels fall off the economy. So you have tax efficiency but you also bear risk and carry less than stellar properties while being charged high fees. Is that valid here?

[lnofeisone]

VET. Like CVE, they are deleveraging (with capital return plans once debt targets are achieved) and their financials are getting better, as long as oil stays high. VET just upped its European gas production by 50% (upping their share of Corrib gas field). For the foreseeable future, they are printing $ on their European exposure. 

[aws]

Their selling point includes fees that are 0.75% AUM/5% carried interest, where most OZ funds are 2/20 type fee structures. For the quality of the buildings/areas that mostly remains to be seen as to how they deploy the funds from the recent offerings. You can see what they have done so far on their website: https://belpointeoz.com/wp-content/uploads/2022/02/Belpointe-PREP-LLC-OZ-Asset-Deck-January-2022.pdf

 

I will note that the census tract designations for OZ funds are probably about as conflict of interest free as when the electoral maps are redrawn, meaning some tracts get the designation that probably don't need it at all. The most expensive area of my city, the downtown waterfront area, was designated an OZ. So there are definitely quality assets out there.

[Gregmal]

Appreciate the lead and input/head start on DD. Cheers

 

[Fundmanagerthrwawy]

Kelly Partners Groups.

[kab60]

Some FB. There are risks, but I think valuation takes care of a lot of those.

[hasilp89]

1 hour ago, aws said:

You actually get a tax writeoff dollar for dollar when you invest so long as you have capital gains to offset.

Is this legit? With private OZ deals the holding period is what lets you step up basis, defer and potentially eliminate cap gains. How long to you have to hold this for to get the 180 day look back benefit?

 

1 hour ago, aws said:

They have an ongoing offering where they will basically sell unlimited shares at $100 per share,

So they’re funding tax write off by raising money - what if there aren’t enough good opportunities - they give the money back or do crappy deals (both of which negate the initial tax benefit)
 

I wanna make easy money as much as the next guy but am skeptical on this. 

[Gregmal]

1 minute ago, hasilp89 said:

Is this legit? With private OZ deals the holding period is what lets you step up basis, defer and potentially eliminate cap gains. How long to you have to hold this for to get the 180 day look back benefit?

 

So they’re funding tax write off by raising money - what if there aren’t enough good opportunities - they give the money back or do crappy deals (both of which negate the initial tax benefit)
 

I wanna make easy money as much as the next guy but am skeptical on this. 

Yea thats what I need to get to the bottom of. I actually dig the locations for the most part. But its the hair that I want to make sure I feel like dealing with. Complexities with tax/ownership/incentives/etc are like the worst things in the world to deal with if you dont fully understand, at least IMO. When all those become a problem its probably easier top just day trade pump and dumps LOL. But again, I dont know how this all fits in here. Its a very interesting situation for sure. 

[aws]

Just now, hasilp89 said:

Is this legit? With private OZ deals the holding period is what lets you step up basis, defer and potentially eliminate cap gains. How long to you have to hold this for to get the 180 day look back benefit?

 

So they’re funding tax write off by raising money - what if there aren’t enough good opportunities - they give the money back or do crappy deals (both of which negate the initial tax benefit)
 

I wanna make easy money as much as the next guy but am skeptical on this. 

 

The purchase effectively rolls an old gain into the OZ investment, so it becomes tax deferred, much like contributing to a traditional IRA/401k. It's actually better than 1031 exchanges popular in real estate transactions, because here you only roll the gain over instead of needing to rollover the principal as well. There's no prescribed holding period to get that aspect of the tax benefit. As far as I know you could buy the stock, claim the deduction and sell the stock the next day. Once you sell you lose the deferral so it would be taxed in 2022 instead of 2021. Although of course if you were so blatant about that I'm sure you would lose the deduction if audited by the IRS.

 

There used to be additional benefits for 5 and 7 year holding periods, but those expired 12/31/21. Effectively there you got a discount on your deferred tax and paid only 85% or 90% of the original tax. But unless that gets extended retroactively you don't get that anymore. Instead when the deferral period ends you will pay the regular tax that you deferred when you bought it. I guess that's something I didn't previously make clear: the OZ investment is a deferral of your tax until 12/31/26, not a complete elimination of the tax. That would be way too good to be true.

 

So in summary:

 

Buy today, get a tax deduction

 

Sell anytime between tomorrow and 12/31/26 and you pay back the tax when you sell

 

If you still hold on 12/31/26 then the tax will be due on the original gain even if you still own the stock

 

If you hold until 2032 then all you gains since date of purchase, including tax writeoffs from depreciation pass-throughs, are tax free.

[fareastwarriors]

picked up some more AIV

[Red Lion]

More KKR and APO. 

Edited February 23, 2022 by RedLion

[DooDiligence]

More BBH & INTC for a long term hold.

[fareastwarriors]

Added to PCYO

[lnofeisone]

STNE, FB, SHOP, ATUS - half positions.