20 Jul ICONIC Detroit: The New Land of OZ
Perhaps it was the news of the twisters in Oklahoma earlier this week, or the abundance of large scale projects coming to life in Detroit… But, the city is feeling an awful lot like the Emerald City in the merry old land of OZ. The latest projects include:
- The New Gordie Howe Bridge, which will connect an already ultra-busy international border to our city
- The massive undertaking by Ford to restore Michigan Central Station, allowing for steady progress in New Center and other areas
- The immanent opening of the Shinola Hotel
However, this may be a lot less of a coincidence than you might think.
Investment in OZ
In this week’s ICONIC newsletter (subscribe if you haven’t already), there is a Forbes article framed around the famed billionaire Sean Parker. You may remember him from Napster or Facebook fame. Over the last several years he has embarked on a mission to change the way our country thinks about investment in low income areas, known as Opportunity Zones. So, what is an Opportunity Zone (“OZ”)? According to the IRS website it’s described as the following.
“An Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as Opportunity Zones if they have been nominated for that designation by the state and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation authority to the Internal Revenue Service.”
The ICONIC team is working diligently to better understand these OZ investment vehicles. This is because Detroit is very well positioned to benefit from investments in qualifying areas. Additionally, it makes the time-tested tax deferral tool of the 1920s obsolete, the 1031 like kind exchange. The OZ is broader in what type of gains qualify. In fact, it goes so far as to include stock sale investment gains.
Imagine, you invested in some cryptocurrency earlier this year. You got in early, got out at a peak and are sitting on a major windfall. Now it’s exposed to major capital gains, and you can invest that money back into real estate and other businesses in Detroit (and other qualifying OZs). All of this results in dramatically reducing your capital gain. This is a BIG concept.
My fellow managing partner, Jacob and I are meeting with a small group of peers from various professional pedigrees soon to learn more. The group will include a tax accountant from UHY, a commodities trader, a Fidelity Advisor real estate fund principal and several entrepreneurs. During this time we plan to ruminate on the impact all this can have on our city, clients and businesses. I look forward to learning more about the new land of OZ and making Detroit the ICONIC Emerald City.
If you’re interested in learning more, please reach out.