Once again we illuminate our Investor Spotlight and share a Q&A with one of our investors. Today we turn our focus to Dave Kuo, whose capital gains came through stock sales. He learned about the Opportunity Zone Program through his tax advisor.
Check out Dave’s story of how he came to invest capital gains in Urban Catalyst’s Opportunity Zone Fund.
Q: How did you come about your capital gains?
A: My capital gains came mostly by liquidating stock options and RSUs from my employer, a biotech company, and from personal stock investments.
Q: Before investing in the Urban Catalyst Opportunity Zone Fund, did you simply take the tax hit on your capital gains?
A: Yeah, I donated a lot of money to the government to help them with whatever they’re doing, and that’s a pretty hefty price when you get to a certain income figure.
To hear what I could do with Urban Catalyst was pretty refreshing, and it’s a no-brainer.
Q: How did you hear about Opportunity Zones and, specifically, Urban Catalyst?
A: I first heard about Opportunity Zones from my tax advisor, because after she did my taxes she was like, “you’ve got a lot of capital gains. You have to think about how to best utilize that and be more tax efficient.”
At first I talked to another group that was raising funds for Opportunity Zones, and they’re involved in projects across all the U.S. But somehow in the process of doing that, I was doing some research and someone mentioned Urban Catalyst, and the fact that it’s local, it got me much more interested--the fact that we’re doing something about San Jose, which is the town that I live in.
So when I heard about it I was pretty excited and I wanted to make sure that (Urban Catalyst) was big enough (to make things happen). And by looking at their Fund I results, I knew that they raised pretty large amounts of capital. As I talked to Erik it really got me understanding that they’ve done this before, and for a long time.
Q: Why is investing in San Jose projects important to you?
A: I’ve lived in San Jose since I graduated from college. I always thought that San Jose’s downtown does not represent Silicon Valley’s image to the world.
So it got me thinking: If you live here, and you may get tax benefits, why not invest in the place where you live?--where I can see the building coming up, where I can see what we’re doing and see that you’re part of that development and really bringing up the image overall of San Jose?
When I see what Google is trying to build, and what Urban Catalyst is doing on top of this, it really got me excited. I want to be part of that.
Q: You seem to have a lot of confidence in San Jose’s future. Why?
A: Some people did tell me that hey, you don’t necessarily want to put all your money into San Jose. I did look at other cities where Opportunity Zones exist, and I don’t necessarily have the full confidence that those other sites within the U.S. have better opportunities than San Jose has. The reason I say that is that I know that San Jose is the central hub of innovation and technology and that isn’t going to go away in the next few years—not even decades, probably. It’s only going to build.
Q: Any final thoughts on investing in Urban Catalyst’s Fund II?
A: In a way, you are giving back to the community, based on the things that you have. And you’re using that to actually fund projects. What more can you say? You’re bettering the area that you live in, and that eventually will yield fruit.
Interested in learning more? Contact us today.
[1] Please note, this testimonial may not be representative of the experience of other customers; is no guarantee of future performance or success and does not represent a paid testimonial.
Important Disclosures
The contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the “PPM”) which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by an issuer, or any affiliate, or partner thereof ("Issuer").
All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM.
With respect to any performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. All investments carry the risk of loss of some or all of the principal invested. Assumptions are more fully outlined in the Offering Documents/ PPM for the respective offering. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment.
These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. All offerings are intended only for accredited investors unless otherwise specified.
Past performance are no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by Issuer, or one of its partner/issuers. Issuer does not warrant the accuracy or completeness of the information contained herein. Thank you for your cooperation.
Real Estate Risk Disclosure:
- There is no guarantee that any strategy will be successful or achieve investment objectives including, among other things, profits, distributions, tax benefits, exit strategy, etc.;
- Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
- Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
- Potential for foreclosure – All financed real estate investments have potential for foreclosure;
- Illiquidity – These assets are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.
- Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
- Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits
- Stated tax benefits – Any stated tax benefits are not guaranteed and are subject to changes in the tax code. Speak to your tax professional prior to investing.
Opportunity Zone Disclosures
- Investing in opportunity zones is speculative. Opportunity zones are newly formed entities with no operating history. There is no assurance of investment return, property appreciation, or profits. The ability to resell the fund’s underlying investment properties or businesses is not guaranteed. Investing in opportunity zone funds may involve a higher level of risk than investing in other established real estate offerings.
- Long-term investment. Opportunity zone funds have illiquid underlying investments that may not be easy to sell and the return of capital and realization of gains, if any, from an investment will generally occur only upon the partial or complete disposition or refinancing of such investments.
- Limited secondary market for redemption. Although secondary markets may provide a liquidity option in limited circumstances, the amount you will receive typically is discounted to current valuations.
- Difficult valuation assessment. The portfolio holdings in opportunity zone funds may be difficult to value because financial markets or exchanges do not usually quote or trade the holdings. As such, market prices for most of a fund’s holdings will not be readily available.
- Capital call default consequences. Meeting capital calls to provide managers with the pledged capital is a contractual obligation of each investor. Failure to meet this requirement in a timely manner could elicit significant adverse consequences, including, without limitation, the forfeiture of your interest in the fund.
- Opportunity zone funds may use leverage in connection with certain investments or participate in investments with highly leveraged capital structures. Leverage involves a high degree of financial risk and may increase the exposure of such investments to factors such as rising interest rates, downturns in the economy or deterioration in the condition of the assets underlying such investments.
- Unregistered investment. As with other unregistered investments, the regulatory protections of the Investment Company Act of 1940 are not available with unregistered securities.
- It is possible, due to tax, regulatory, or investment decisions, that a fund, or its investors, are unable realize any tax benefits. You should evaluate the merits of the underlying investment and not solely invest in an opportunity zone fund for any potential tax advantage.
