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  • Writer's pictureHoward Kline


Daryl Carter, CEO of Avanath Capital Managment, a workforce and affordable housing developer and management company with, approximately 2 Billion Dollars under management discusses his secret sauce for successful affordable housing investments. In particular, during this conversation, Daryl and I focus on Avanath’s growing interest in investing in Opportunity Zones. Included in this post is the audio-only podcast and an edited transcript, with time-stamps of the interview.

Among other things that we discussed, I really liked Avanath’s approach to:

  • Tailoring building upgrades to what the tenant’s can afford;

  • Holistic management which focuses on providing community assets, training, education and other amenities focusing more on the residents physical and financial health and wellness.


Howard F. Kline [00:00:00] Welcome to CRT Radio and TV, I’m your host, Howard Kline. Today, we’re going to be talking about workforce and affordable housing prospects in opportunity zones. And our special guest today is Darryl Carter. Darryl is the CEO and founder, as well as chairman of Avanath. They have been investing in workforce and affordable housing for quite some time.

Howard F. Kline [00:05:00] Why don’t we start out, Darrell, with distinguishing workforce housing from affordable housing.


Daryl Carter [00:05:14] Well, you know, those words are very often used interchangeably. We own affordable and generally workforce housing is considered something that doesn’t specifically have a rent subsidy or or rent restrictions. But I like to think that all of our residents, including those that live in affordable communities, work very, very hard. So all of our communities are workforce communities because even our residents that get Section 8 vouchers, ninety six percent of them work and they work very hard and very often their two income families. So generally affordable is considered either tax credit properties or those that have some type of subsidy, whether that be low income housing tax credits or some other state initiative or property tax abatement or project-based Section 8. Generally, they serve residents that are at 60 at no more than 60 percent of area median income. You know, when you talk about workforce housing, you’re generally considered something that is not subsidized, but often serves people making 50 to 80 percent of BMI and even up to 100 percent of area median income.

Daryl Carter [00:06:58] The average renter in the United States makes about thirty-eight thousand dollars a year. When you look at people building apartments that necessitates three thousand dollars to four thousand dollars a month, that’s more than the average renter makes a year. And that’s the challenge that we have with affordability and that in the United States.


Howard F. Kline [00:07:28] How did you first get involved in workforce and affordable housing projects?

Daryl Carter [00:07:45] Well, we started in building my company, Capri Capital. We did a lot of affordable housing. We were primarily focused in that business in urban communities that had been, very often, underserved by institutional capital.

Daryl Carter [00:08:02] We had established one of the early partnerships with CalPers in the mid to late 90s. This was post Los Angeles riots where there were there became a focus. We were one of the proponents of this investing in urban markets that had been underserved by institutional capital, not because there was a social benefit, but the fact that we the case we made to institutional investors was that you can make money doing this. Many of these communities did not have quality housing and that we could acquire and renovate or develop in those markets. And there was a very there was a considerable amount of demand in those markets. That started in the early 90s and it has continued on. In my current company, we wanted to target the market that owned the incomes from 30 to 60 thousand dollars a year because that’s the toughest part to house an American. Very often institutional investors, they overlook that area because of many perceptions. When you look at affordable housing, many of the models are very negative in a historic sense. You think about Cabrini Green and Pruittigo and other models of public housing. When institutional investors think affordable housing, they often recall these models that were just very, very poorly executed.

Howard F. Kline [00:09:52] I understood that you identified this and made the argument that money could be made in this. But why didn’t you at the time choose, a different model? When you started getting into this, this wasn’t that popular, affordable. Now, of course, you’re hearing more about it. There is more effort on some parts to get into it. So people are beginning to see perhaps what you saw. What has changed over the years for the time that you got involved?

Daryl Carter [00:10:33] Well, let me tell you, you know, a good friend of mine is former Congressman Rick Lazio. He ran in the New York Senate race against Hillary Clinton and lost. But Rick, who is a housing and was a housing attorney before Congress. And he’s still very engaged in the housing business and is also one of our investors. But Rick asked me the question and it was a good quiz. The last president that mentioned affordable housing in their State of the Union address. Let’s see if you can guess that.

Howard F. Kline [00:11:13] John Kennedy.

Daryl Carter [00:11:16] You’re close. Most people say, well, President Obama or even George W. Bush. But the last president that mentioned it was Jimmy Carter.

Howard F. Kline [00:11:26] That shouldn’t be a surprise to me because he’s always thought in those terms.

Daryl Carter [00:11:31] We have had a period of time where there’s just been very little focus, very little funding on a housing affordability. But I can tell you today, you know, when I was chairman of National Multifamily Housing Council and still very involved in that organization, I spent a lot of time on Capitol Hill talking to members of Congress and members of the Senate. And every time I walk in someone’s office, the first question they ask when they find out that I’m in the apartment business, they say and let’s by way of backdrop, most of our members of Congress and the Senate, you have some wealthy ones like Perdue and a few others. But many of them came up, middle class. They serve on a school board or something and then city council and they work their way up. Most of them are solidly middle class, upper middle class. But many of the members of Congress and I am talking from far left to far right. They ask the same question, why are rents so high? I have a child, grandchild, aging parent, someone in their family that has a housing affordability issue. And so it’s an issue that affects everybody, members of, I don’t care how far right or how far left it touches everybody. You will now see that of the presidential candidates, many of them have come out with these housing policies, which is also a reflection if you look across the country at rent control and things like that, that is now raising its head again, which did probably 30 or 40 years ago. The fact that we have this affordability crisis is playing out in local, state and even national politics. So the fact is that we’ve reached a tipping point as it relates to affordable housing.


Howard F. Kline [00:13:47] Why are you and your company involved in opportunities zone projects.

Daryl Carter [00:14:20] I have to first give credit to the person who’s who strongly suggested that I look into it. And that was about almost two years ago, shortly thereafter after the legislation that passed. One of the architects of the legislation, Senator Tim Scott. Senator Scott was on a book tour that he had written a book with Trey Gowdy following the aftermath of that horrible church shooting in South Carolina. Through a mutual friend said, hey, you know, would you like to meet Senators Scott and Representative Gowdy? So I ended up having dinner as a very small group of about six or seven people. I sat next to Senator Scott and he said, are you looking at Opportunity Zones? And this was shortly after the legislation passed. I said, well, I’m not sure. I don’t know. It wasn’t as if he was insulted, but he strongly suggested that I needed to come up to speed. Tim, certainly, encouraged my rapid education by inviting me to his office to sit down with his team who had helped draft the legislation, and he brought people from the Treasury and other places.

Daryl Carter [00:15:36] I brought my team and we decided that this probably made sense. The first thing we did after that, you know, we own about 75 apartment communities we looked at. How many are in opportunity zones? And we were surprised to find out that we actually owned 15 properties that were in opportunity zones. That got us thinking. We looked at each one of the properties relative to either redevelopment or adding more apartments or something, in terms of redevelopment. We had five of those that we either had some adjacent land that we could acquire and add units, we had some that were under density where we could add units there or we could tear down a few buildings and add greater density. But we had five that were prime redevelopment opportunities. We had looked at some of these prior to the opportunity zone legislation, but the numbers didn’t quite pencil out. However, with the benefits associated with opportunity zones, which we believe adds 3 to 4 percent in return benefits, then all of a sudden, they make sense. Then we started down the road of launching a fund using these assets as a cornerstone of identified assets.


Howard F. Kline [00:17:10] Let’s talk a little bit about what the Opportunities Zone program is and what the benefits are.

Daryl Carter [00:17:23] Well, I will do the abridged version because the tax consequences are very complicated, but the short answer is they provide an ability to invest capital. Specifically, any capital gains that may have been realized on other investments can be redeployed in an opportunity zone, which then makes that payment of the capital gain tax deferred for seven years, minimum, providing the asset is held that long and it also provides a 15 percent reduction in that capital gain tax. So for an investor who is looking at a 20 percent bill for maybe they sold a company or they sold stock or, you know, they Google became public and you have founding members with capital gains, they could invest that in an opportunity zone project and then realize these tax benefits. The other thing is that taxes on their investment would be also tax exempt on the new investment.

Daryl Carter [00:18:39] The key thing from an operator or the actual property or it could also be a business, is that whatever the cost basis of the asset is, 100 percent of that has to be invested. If it is a piece of land, obviously more than 100 percent would be invested in it. It’s easy to do a ground up development. On rehab, it’s a little bit trickier because you have to subtract the land out. If it was a 15 million-dollar property and then you’d have to take five million dollars out for land, you’d have to then invest 10 more million dollars in that investment. With our properties where there is an existing property and I could think of one that is probably the furthest along of the five, it’s one hundred and forty-four unit apartment community in Ontario, California, that we believe we can add another 80 apartments on an adjacent parcel that currently has an office building on it that we have a deal with the seller potentially to buy and then add more apartment units.

Daryl Carter [00:20:00] We believe with our five existing apartment communities we can add probably a thousand to twelve hundred more apartments. These are five communities that are all affordable apartment communities today that are very successful, all leased and operating. This now gives us the ability to add more apartments to those communities.

Daryl Carter [00:20:32] I think it’s a real win-win in many ways. One is that all those communities where this is located, they want to see more affordable housing. And this gives us a great way to add more affordable units. It’s already an affordable community, so the community, opposition, we believe, will be very limited because we’re just taking something that has a current use and we’re adding more density and certainly more density is an issue. But, you know, in all the cases of our five properties, there is a strong municipal support for what we’re doing. That’s been our strategy.

Daryl Carter [00:21:21] Now people have a variety of different strategies. There are pools that are being capital raised on a blind basis where they’re trying to find investments. I mean, the great thing about our situation is that we have a identified pool of investments to actually take the market today.


Howard F. Kline [00:21:46] I was looking at a very long, long list of these blind pools. Some of them may be blind, but they’re raising five hundred million dollars, 100 million dollars. The idea is that if you have capital gains and you need to move the money into something you’re not interested in doing a 1031, you can put your money into these pools. These pools have three years to put that money to use. That gives you a much longer runway than you would if it was a 1031 exchange. On the other hand, from what I’ve been seeing and there’s a lack of data, at least from my perspective, these funds are out there really looking hard for decent investments. I would assume that most of them really care about whether the investments that they get involved in are going to have good returns. But I’m a little bit concerned that as time wears on and while every opportunity zone is not the same, these funds are going to have to move their money and perhaps they’re going to be making good decisions, which means said, in your case, as you said, you already have some of the properties, but you’re looking at other properties to are you’re not?


Daryl Carter [00:23:39] We are looking at new investments as well. And one of the properties that we are putting in our Opportunity Zone initiative is a ground up development deal that we’re doing in the city of Detroit. You know, it is interesting. Every municipality that we’re in have, you know, most of them have a very good strategy of what they want to see in their Opportunities Zones. And I think it’s fascinating if you look from state to state. The states were given the ability to select where the opportunity zones would be in their state. Now, each state took, to me some slightly different strategies. If you look at California, for instance, there’s a lot in the Central Valley. A disproportionate amount compared to L.A. and very little in Orange County, very little in San Diego County. There are in big parts of the Central Valley, in places like Bakersfield and certainly there’s in south central Los Angeles that that’s a big Opportunity Zone. It’s quite interesting how one block was selected and not another.

Daryl Carter [00:25:23] I do think in the city of Detroit, which is my hometown, they made some great choices in some neighborhoods that, you know, just needed a little bit more help to get development in. We’re in one of those markets just north of downtown Detroit that we think, where there is city land that they’re trying to dispose of, where there were formerly houses that were abandoned. So they really are looking at revitalizing parts of the city that really need it. Every state took a different approach. By and large, I look at many of the locations that we’re at and we think that they’re the right locations for that designation because, you know, there is more capital needed in those neighborhoods.

Howard F. Kline [00:26:34] Opportunity Zones were chosen by the state governors and then approved by the Treasury Department. One of the things that I discovered, was that not all of the opportunity zones were in blighted neighborhoods. That’s number one. Part of the reason for that is that while politics could have come into play in some instances, perhaps many, I don’t really know. These opportunity zones were based upon census tracts that were considered low income based upon the 2010 census and in some instances the communities have already been changing.

Howard F. Kline [00:27:28] What are the cities, counties or other the municipalities are doing to help facilitate investment in these opportunity zones?

Daryl Carter [00:27:56] In most of the cities that we’re in and I probably can single out three of them. One is Long Beach, California, where we already own close to a thousand apartments. We have been investing in Long Beach since about 2014 and have a great relationship with the mayor and various other city officials. North Long Beach, where we own about a thousand apartments, is one of the areas that’s in an opportunity zone. And we have a property called Seaport that we are looking at repositioning and adding more apartments. I would say that in Long Beach, probably the most proactive of the cities, we were invited in by the redevelopment director and they sat down and they said, here’s everything in an opportunity zone. What would you know, these are things that we’d love for you to take a look at. They were very proactive in knowing exactly everything that was in their city and an opportunity zone and first focusing on people who were already investing in that community. We have been investing in that community when it wasn’t so popular. And before an opportunity zone. We have made well over one hundred and fifty million-dollar investment in that community, so they were very welcoming to us to try to look at other things there. And we are. And I say the same thing for the city of Oakland. They have been incredibly proactive. I had a meeting with the planning director who also happened to be a classmate of mine at MIT. And again, very, very open and wanting, very welcoming as to what we were trying to do. And I would say that same thing happens in the city of Detroit. They have been and I think they’ve been very strategic in taking land that the city ended up owning through either tax delinquency and making you know that and providing some incentives along with that for us to develop the property that we’re looking to develop there.


Daryl Carter [00:30:15] I look at those three because they stand out as being very proactive and welcoming and also, I think sensitive to the potential for gentrification. Each of those communities, they’re very sensitive to the fact that the way we have developed and invested in their community has been trying to keep people in terms of residents in those communities. Those three that I cite are primarily African-American and Latino communities. And so many of those communities across the country have been subjects of gentrification. And I believe that those three locations, those three cities, Long Beach, Oakland and Detroit, have been very proactive in trying to promote development that doesn’t do that, that no one keeps people in those neighborhoods. But number two, makes them attractive enough to people with higher incomes to move in.

Daryl Carter [00:31:35] I think when people talk about gentrification, you know, one part of it is bad, which is displacement. But if you can keep people in those neighborhoods and then the second part, adding people with higher incomes is a good thing. And we very much believe that the strongest communities we invest in are those that have mixed income because they become very aspirational. And it drives a variety of housing types.


Howard F. Kline [00:33:57] What do you do to keep people in the in the community?


Daryl Carter [00:34:05] Number one, we which first try to understand what the community wants and what they need. When we acquire a community and we and we talk to anybody, everybody from public officials to gang members to people in the faith-based side, anybody that will talk to us, we let them talk and we listen and we find out things. We find out, for instance, you know, at the properties we bought in North Long Beach, that the biggest challenge was that we have lots of kids there and very little recreational amenities. So part of when we did our redevelopment of the first community we bought, which was called North Point, we put in a state of the art basketball court that’s lit. We have organized activities there every night. We do after school programs. We’ve created programs for kids that any and of course, we are a for profit developer investor. It made sense financially for us to do that and creating a safe place for kids. Part of what we do is to be very inclusive and listen to all ideas, listen to what people want, what people need, and try to accommodate that. Institutional investors, when considering affordable housing, do consider crime in the area. The reality is that there are a variety of ways of making communities safe, one of which is to get rid of the bad people. I mean, it’s addition by subtraction.


Daryl Carter [00:36:02] The second thing is, if you create stability in that community. Consistent occupancy is very, very important.  Our turnover across our portfolio nationally, runs about 15 percent. So that means 85 percent continue to stay there. When people know their neighbors, they know whose kids are and things like that. It becomes cohesive. That’s the easiest way to make a community as safe is to make sure that there is a stability in that residency where people know each other and people develop a sense of neighborhood. That’s the one thing that we do that is a fairly it brings people together.

Daryl Carter [00:36:51] People start taking pride in that community when you care. We know, it’s important that we make the appropriate investments to make sure that it’s safe, that it’s nice, that it’s clean, and that things work in the community and that we’re responsive to people and we treat people with respect. We’re vertically integrated. We do property management as well.


Daryl Carter [00:37:24] We talk to our onsite people about respect and making sure, that even if they are a Section 8 resident we treat them like they are at the Ritz Carlton and that’s what we train our people to do. And those little things you may not think are meaningful, but they are. And so, you know, that is one of the ways we try to keep people in place and then we try to make it nice. So then ultimately other people move in.


Daryl Carter [00:37:53] Many of the communities are underserved by things like retail. So one of the things we’ve created a partnership with Amazon where we have a number of our communities, these Amazon lockers, where people can access things on a retail and we’re starting to put in cold storage locker so they can get fresh groceries. But these are all things that, again, our approach is not just brick and mortar. We look kind of holistically of investing in that community.

Daryl Carter [00:38:30] In many of the communities we invest in, and I’d say 70 percent of the communities we invest in, our communities of color, they’re under banked from the standpoint of financial services. A lot of times people don’t understand. I’ve had residents who say, well, you know what, I had a criminal record I can’t open up a bank account. Well, no, you can. The only thing a bank cares about is if they can identify you. Doesn’t matter. Banks only care that they can accurately identify you. Unfortunately, many in those communities use high cost check cashing where the transaction costs are 8 percent per transaction. If you convert someone who is using check cashing to the conventional banking system, then you’ve given them an 8 percent increase in their income. It makes them a better credit. So that’s one example of what we try to do in terms of getting people in the mainstream of banking.

Daryl Carter [00:40:44] We operate about 20 affordable seniors-communities. The key thing there is and they’re all independent living situation is to keep our residents healthier, longer. And we have a program called Avanath Activate, which is a wellness program that we have a couple of partners that we partner with. We’ve started this on the East Coast and our first partner we consummated it was University of Maryland Medical Center. There are a lot of medical entities like that that have community health outreach programs. We put a state-of-the-art examination room in three of our seniors communities in Maryland. They send doctors on a regular basis to that community. We have a dance line dance Zumba. We have nutritious cooking classes and things. The average age of our residents in our Senior Communities is probably 70. We focus on keeping them independent for a longer period of time before they need assisted living or skilled nursing and to keep them healthier through activities. While these activities are for the benefit of our senior residents, iit keeps them there longer and helps us.

Howard F. Kline [00:42:18] I do have some concerns about gentrification. Tell us a little bit about your project in Detroit.


Daryl Carter [00:42:53] Well, that was actually from Senator Scott. He was a guest speaker at National Multifamily Housing Council. Specifically in Detroit, where we are developing a property in a neighborhood, I remember riding my bike to my aunt’s house in that neighborhood where there buildings in the same condition that they were left in after the 1967 riots where they were burned and they were never rebuilt. That condition exists a lot in a city like that where you had a population of almost a million, seven in 1960 and today it’s approximately seven hundred and fifty thousand people, so a million people left that city. There has been a constant decline of 40, 50 years of a lack of investment in that city because people were leaving and people were leaving for one reason, because the auto industry was moving out to places in the south and also Mexico, Ireland, all these other places. So that was sort of the demise of Detroit.

Daryl Carter [00:44:16] One of the interesting things today, what I’ve learned and I was just there a couple of weeks ago, Ford Motor Company has taken a building that’s been abandoned for about 40 years, which is an iconic building, the old train station, and they’re totally renovating it. It’s going to become their driverless car center. One of the things I’ve learned is, of course, there’s been all this focus on the West Coast, on driverless cars and Google and some of the other tech companies. But many of them now realize that these kind of old auto manufacturers that add and as these new tech companies are realizing, well, you know, you actually got to get the Federal Highway Administration, the transportation authority, all these regulatory hurdles, you just can’t put it out there and all that knowledge and understanding of how that works resides in Detroit. There has been, believe it or not, people from Google that have moved to Detroit to be involved in the driverless car industry. It’s attracting, again, workers in the auto industry. But they’re they are now, engineers. They’re very highly paid professionals that are helping, build the whole driverless car thing.




Howard F. Kline [00:45:54] And you don’t need to go into a lot of detail because that is your secret sauce. But you had indicated to me that you take a C building and turn it into maybe a B building vs. B minus versus what other people are talking about, going in to opportunity zones and trying to turn a C building into an A building. What is it that you generally do to and the significance of it in turning a C building into a B minus and then we’ll go talk about the over-investment concept that some people are getting into.

Daryl Carter [00:46:46] Well, the one of our challenges with affordability is my is frankly the apartment industry. And part of it is that we look at this kind of what I call amenities arms race. Well, let’s do marble countertops. Let’s do this. Let’s do that. When we do a renovation, we can do an incredible job for under $20,000 a unit, sometimes 15, sometimes even $12,000 a unit. Now, we will have in particular a couple of our investors that will look up at the ceiling and they’ll say, my God can you get rid of the old popcorn ceiling? One of the fundamentals of our renovations is we look at everything we do in the context of how much rent will our resident have to pay to remove the popcorn ceiling. That’s going to be 40 dollars in rent. And what I always tell our investors, look, everybody today can afford a three-hundred-dollar big screen TV. They’re looking at their TV. They’re not looking at the ceiling. Let it go. People would rather pay 40 dollars less. And that’s the same thing. You know, we’re very often we rather than remove and put new cabinets, we resurface them and put new hardware on it, new cabinets, probably ten dollars and read our fix is probably two dollars in rent.

Daryl Carter [00:48:12] You go across the renovation spectrum, we can make it very, very nice. New appliances, washers and dryers. A nice wood-like synthetic floor. I mean, we can do things that make it nice, make it safe, all those things that have them be enhancements. But we’re not going to put the marble countertops. We’re going to put LED lighting to lower the electric bill for our residents. We’re going to put in more energy efficient plumbing and things like that. Part of what we’re doing as an industry where and the kind of renovations I’m talking about, we don’t have to push the rents more than 10 or 15 percent if that. Now, some of the renovations where people are put spending 40 and 50 thousand a unit, you know, they’re trying to double the rents. And that’s where I think we run into this challenge.

Daryl Carter [00:49:11] The other thing is that by keeping the rents lower, there’s a wider band of residents. And so, again, we try to optimize occupancy and demand. Of our 70 communities, probably half of them have waiting lists because they’re nice, but they’re also affordable. And we just don’t have enough of those in the industry. Part of the affordability challenge is developers that try to take C apartments and make them A apartments.

Daryl Carter [00:49:47] There was an industry forum where it was asked, how much will people pay for a yoga studio and their apartment or a cappuccino maker. I challenged this panel and said the question is not how much will people pay, but how much less would they rather pay if you take it all away? People can find their coffee, their Dunkin Donuts at Starbucks everywhere. And if they want to do yoga, they will find that. As apartment owners, we have to get back to basics and provide quality housing without the frill.


Howard F. Kline [00:50:25] You had indicated that you’ve got, I think, 15 current properties or properties that you had acquired prior to January 1st, January 1st, 2018 that are going to be part of your new opportunity zone fund, correct?

Daryl Carter [00:50:43] Well, we have we have five that we have identified that makes sense to do that. We’re still evaluating on the other 10. Now, some are fully-improved and we can’t, you know, add more. We can’t put 100 percent in. You know, there are various reasons why others may not work, but we had five that definitely do work and probably another three that we’re still evaluating.

Howard F. Kline [00:51:11] There’s an issue we have. If someone who already owned property, you are an asset within an opportunity zone prior to the effective date of January 1st, 2018. Then the question is how does that owner participate in the benefits of the opportunity zone program? So why didn’t you tell us a little bit of how you’re dealing with that with regard to your existing properties?

Daryl Carter [00:51:43] Well, one are our properties are owned in partnerships with institutional investors and we have an ownership slice of that. And the threshold of that law is 20 percent. If we own more than 25 percent, then we couldn’t participate. But if we own less than that, we can be on essentially both sides of the transaction.

Howard F. Kline [00:52:24] So that means that if someone already owns property or if they own property in an opportunity zone, say, for 10 years and they owned 100 percent, they can still participate in the project if they divest themselves of anything more than 20 percent.

Daryl Carter [00:52:46] I am not a CPA and lots of people that know the rules about better, but I know ours work because we own less than 20 right of the assets we’re contributing and will own less than 20 in the new fund that we’re creating.

Daryl Carter [00:53:28] Our existing investor base is about 50 percent tax exempt and 50 percent taxable. There are pension funds like New York City retirement as an investor, New York Common Fund. And then we have some foundations, Smithsonian, Ford Foundation. So those would not be likely investors and opportunity zones because the maximum benefits they can’t use. We believe that opportunity zone investors will look different than many of our existing investors. Now we have some that may be able to participate, but by and large, our existing investor base are both tax exempt and taxable investors, whereas the opportunity zone investors will be those that have sole companies or companies that have capital gains that redeploy.

Howard F. Kline [00:54:49] Well, I think part of the point that you had previously explained to me is that on some of the properties you can deliver the promised returns in which case you can exit that property and then the Opportunity Zone Fund can get involved and there’ll be different investors in the Opportunity Zone project. So there are going to be numerous and different ways that people will be able to exit existing properties. When I say existing properties or assets acquired prior to the effective date and then take advantage of the opportunity zone projects.

Daryl Carter [00:55:32] Well, and the other thing I think it’s important to remember that, while a lot of the focus has been on real estate. There are certainly opportunities zone investment can be made and operating businesses and the like. And in fact, as we look at creating our opportunity zone vehicle, we may actually house it in an Opportunity Zone. So that’s one of the other things that we’re currently evaluating right now.

Howard F. Kline [00:56:00] Absolutely. That’s one of the things that I think that investing in businesses located and satisfying the requirements of a business in an opportunity zone that’s the hidden pot of gold, I think ultimately, I think that’s going to be the greatest advantage of this program is moving businesses into the opportunities zones.

Howard F. Kline [00:56:30] I had a discussion yesterday and suggested that they could suggest to an owner of a office building that exists and an opportunity zone is saying, listen, there may be advantages of businesses moving into office space in this building that do not exist outside of the opportunity zone. It seems to me that that’s a great way to fill up your existing space and building. I don’t hear that a lot from people, but I know that if I was representing an owner of a building and an opportunity zone, if it would be an office building, a retail building, an industrial building, flex space, whatever, and I was looking to fill up that space I’ve got to tell people how to do it and how they can make this pay off for the future tenant and how the future tenant would even raise money to help their business.

Daryl Carter [00:57:44] Absolutely. Yeah. It’s a key part of it. And again, we tend, because we’re in a real estate world, to be focused on it. But there’s a whole world of other companies that should look at it, particularly, you know, tech companies and things, you know, because all of a sudden not having to pay taxes on that business for a period of time is a very important thing.

Howard F. Kline [00:58:09] The city of Stockton has partnered with a company in the city of San Francisco where that where they are going to be putting in some infrastructure into the opportunity zone in the city of Stockton. And that’s a way to finance the infrastructure project and make it make sense for them. And I’m going. Yeah, people are thinking, I love to see it.

Daryl Carter [00:58:43] And that’s a great thought. Certainly, Stockton has had many challenges. And I think they are now trying to be creative to bring commerce there. Sacramento is a place where we’ve made a lot of investments and there is an emerging market there of really people exiting the San Francisco Bay area and moving to places like Sacramento and specifically and also looking at Stockton in Modesto, because it’s just simply too expensive to operate in the Bay Area.

Daryl Carter [00:59:26] I think the opportunity zone could be transformative. My biggest concern is that there are very large companies who are jumping into this. I haven’t seen those companies in places that we’ve historically invested. Many of those companies don’t reflect diversity that is reflected in our employee base which looks like our resident base. We’re highly diverse. I think it’s important that that diversity is one of the reasons why we’re successful in the communities that we invest in. That’s part of our holistic approach. I think that if people come into some of the places we’re investing in and take a different approach, what concerns me is if they aren’t successful, people will say, we shouldn’t have invested in that area. And that was probably my biggest concern. But I do think the opportunity zones reflect a great idea that I think we as Americans should be very excited about, because I think we do have an opportunity to transform places like Detroit and Stockton and others in a positive way. And so I tend to be an optimist and I’m very bullish on it. But that’s the one concern that I have that you see some very, very large companies who I never come across in North Long Beach or West Oakland or other places that we invest them.

Howard F. Kline [01:01:22] I think it’s going to be a bit like playing golf. You really don’t worry so much about the other guy as you need to worry about what you’re doing yourself.

Daryl Carter [01:01:32] Absolutely and that’s what we do. Believe me, if we were watching other people, we wouldn’t do what we are doing now because people thought we would still think that we’re a little crazy and what we do. I think that’s a good perspective. But I do think that having the focus on some of these areas is a good thing.

[01:01:50] Absolutely. How do people get a hold of you?

[01:01:53] They can. We’re based in Irvine, California. Our website is www.avanath. And Avanath is named after my children, Eva and Nathan. Eva likes to say my whole name is in the company name and Nathan always likes to say, well, I have more letters.


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