0:00

I know that we've made a difference

0:02

in some of the communities we've been invested

0:05

in so far. And , that's

0:07

just, you know, at the end of the day, that's a really good

0:09

feeling and obviously when it lines up with

0:11

economics working out, but that's even

0:13

better. So that's

0:16

really an exciting part of it you want me.

0:19

Welcome to the OZExpo Podcast where

0:22

we talk with the people who really know the Opportunity

0:25

Zone market from investors,

0:27

fund managers and developers to

0:29

tax experts, politicians and

0:31

attorneys. The most influential voices

0:34

in the Opportunity Zone industry are here

0:37

on the OZExpo Podcast.

0:40

Welcome back everyone to the

0:42

OZExpo Podcast. I'm your host Jack

0:45

Heald and I am joined today by Sam

0:48

Hales , who is the CEO of Saratoga

0:50

group out of Roseville, California.

0:53

Sam, welcome to the OZExpo

0:55

Podcast.

0:57

Hi Jack, it's a pleasure to be here. Thanks so much.

1:00

We were just talking about the, the fact

1:02

that you sound so good. Normally

1:04

my podcast guests don't typically

1:06

sound good. Their

1:09

sound quality is bad.

1:13

Fair enough. Well, I'm gonna make sure my wife listens

1:15

to this so that she knows how good I sound.

1:17

How's that?

1:18

Okay , that's awesome. I want to

1:20

see if we can pick up some extra sponsors for this

1:22

show. So tell us what the brand

1:24

of the headset that you're using.

1:28

Boy, I'd have to look.

1:30

Ah ,

1:30

yeah, yeah, yeah. We'll have to put that

1:32

in the notes, Jack. I'm not really sure.

1:34

Excellent. Put that in the show notes. Okay.

1:36

So Saratoga Group. Of course

1:39

this show is all about the Opportunity Zone.

1:42

So tell us what, where Saratoga

1:44

group fits in the o

1:46

pportunities on ecosystem.

1:49

Yeah. Perfect. If you don't mind Jack

1:51

, I'll just maybe give a little brief history

1:53

of Saratoga group. We

1:56

started about 10 years ago , initially

1:59

launched with , we, we

2:01

raised money from China , focused on

2:04

single family home investment. And actually,

2:08

the genesis of the name Saratoga Group comes

2:10

from the battle of Saratoga, which was

2:12

the turning point in the revolutionary war.

2:14

And we felt that's what

2:16

we were trying to do. We were, you know,

2:18

helping people get back in home ownership that

2:21

lost home through bankruptcy or foreclosure.

2:23

A lot of the issues that happened

2:25

during the meltdown there. And so that's

2:28

kind of where Saratoga group started. We've

2:31

d one a number of things in the real estate space. So

2:33

we started with single family homes. We've done the infill development,

2:35

we've done quite a

2:37

bit of land entitlement, dabbled in a little bit

2:39

of office in a couple other things. Started

2:44

doing mobile home communities about

2:47

three years ago. And, and

2:51

I guess we'll get to this in the rest

2:54

of the podcast, but really found when

2:56

we heard about the Opportunity Zones that mobile home

3:00

community investment i n Opportunity

3:03

Zones, there was a lot of corollary there that

3:05

really made sense from an

3:07

investment perspective. And so that, that was

3:10

kind of what p eaked our interest there. And we, we've

3:12

actually already invested

3:15

into some OZones and

3:18

continued to look for more opportunities.

3:21

Okay. So , before we get into

3:23

what's happening right now with

3:25

, with Saratoga group and the mobile home

3:28

investment stuff, which, which is fascinating. I haven't

3:31

run into anybody doing that. Let's

3:33

back up. So 2008,

3:35

2009, the world is melting down

3:38

and I

3:40

don't remember the numbers. Millions

3:42

of Americans lost

3:44

their homes. And that's where you got

3:46

started.

3:48

That's where we got

3:50

to start . In fact , I

3:53

was in business school during

3:55

the meltdown. And the

3:58

fun thing about business school is, I mean

4:00

a learn a lot in the classes, but the best part

4:02

is on Friday nights

4:05

and whatever i s y ou're hanging out with your classmates

4:07

and just kind of talking shop and

4:09

bouncing ideas. It's just an exciting, exciting

4:12

time. And that

4:14

was really, you know, s ome, a lot of the discussion

4:16

was kind of a core group of us t hat was interested in real

4:18

estate and we talked

4:20

about what was happening and recognize

4:24

that there was opportunity here. We didn't

4:26

know w hat was going to happen with home prices. Obviously they've

4:28

escalated quite a bit.

4:30

But what we recognize

4:32

is that, hey, if you bought a home

4:34

now a nd a t t he e nd it's i n Oakland and

4:36

it costs you $200,000 and you

4:39

can get $1,800 a month in rent, forget

4:41

everything else. Just the yield itself. It

4:44

made sense as an investment.

4:46

Yeah. He wanted to say he was a wall

4:50

street trader back in the twenties. You've

4:52

advocated by when there's blood in the streets

4:54

I think is what he said. That's

4:56

a lot of a lot of courage to do. That

4:59

takes tremendous fortitude to

5:01

be able to pull that off. Okay.

5:03

So you get into

5:05

investing in real estate , start

5:08

with money from China and I

5:11

guess now you're also picking

5:13

up domestic investors as well.

5:17

Yeah. That, that's correct. So, so actually

5:19

mostly , the fundraising we've

5:21

done over the last few years is

5:24

lessons institutional and

5:26

more a high net worth family

5:28

office type of fundraising.

5:30

Okay. So let's

5:33

explore this whole mobile home communities

5:35

thing. When I was, and when we were

5:37

talking earlier about getting you on the

5:39

show and you said you do mobile home

5:41

investing. I gotta

5:44

tell you that one. I never saw that one coming. So let's

5:49

dive deep mobile home communities.

5:52

It makes sense that many of them would be

5:54

in an Opportunity Zone, but why

5:56

is investing in a mobile home community

5:58

yet a good fit?

6:02

Yeah. Maybe where I'll start

6:04

is just giving the

6:06

background of why SL mobile home

6:08

park investment is a good idea in general.

6:10

And then one of them kind of talk about how it fits into

6:13

the ozones . So we

6:17

started looking into this three and

6:20

a half years ago as we recognize

6:22

that, you know , a lot of commercial

6:25

real estate become somewhat frothy and

6:27

expensive and recognize

6:30

that it seemed

6:33

the one area that there would continue

6:35

to be growing demand was

6:38

for affordable housing. And

6:41

so, you know, it's

6:43

interesting to a mobile home park

6:45

investment. There's actually two publicly

6:47

traded reads that

6:51

specialize just in mobile home communities. It's equity

6:54

lifestyle. ELS is our

6:56

ticker at the Sam Zell Company . The other

6:59

one is sun communities. And

7:02

I had heard kind of this r

7:05

umor that the two companies since

7:07

t hey've been listed on the exchanges, it's been about 20 years

7:10

on the public exchanges that they've

7:12

reported, same store

7:14

NOI growth, a positive

7:16

same store NOI growth every

7:18

single quarter for the last 20 years. You think about what's

7:21

happened , I mean, you know, the great recession and the dot com

7:24

Boston and everything else. And

7:27

I was able to track down those numbers and c

7:29

onfirm that that's actually true. So

7:31

again, what I

7:34

take away from that is what I like when

7:37

things go the other way. When we cycled

7:39

down affordable housing

7:42

i n, in this case, specifically mobile home communities

7:45

s eem to do very well in a down cycle.

7:48

But then the second part of your question i

7:50

s, w ell, you know, how does that fit with

7:52

Opportunity Zones? I

7:54

think my, my first response to that is,

7:57

is just the political intent, right. When

7:59

this law was

8:01

passed, the idea was to

8:03

help people in

8:06

these communities. The ones

8:08

that live there, right. That reside there

8:10

now. And what's

8:12

nice about the mobile home parks is

8:15

that's what we're doing, right. I mean, so we

8:18

picked , mobile home communities

8:20

that are in Opportunity Zones. Obviously,

8:23

you know, people are there, but a lot of times, the

8:25

communities have

8:29

a lot of deferred maintenance that , you know, maybe

8:32

some of the plumbing doesn't work very well.

8:35

Really old homes are not well kept in

8:38

terms of the park itself. And

8:40

so we get to go in and really,

8:42

you know, invest into that community, redo

8:45

the roads, fix all the sewer lines,

8:48

put new electrical pedestals. Bring in some

8:50

new homes and

8:52

all these things. And at the

8:54

end of the day, people that are there already are

8:56

the same people that w e're helping to stay there.

8:59

And also a lot of times there's quite

9:01

a bit of vacancy a nd y ou k now, b ringing new

9:03

people in for a nice community

9:05

and it's affordable. So,

9:08

so really, I think

9:10

when we look at it from the perspective

9:12

of political intent. It really

9:15

meets what was, you

9:17

know, w hat the politicians w ere trying to accomplish.

9:21

Clearly. Now, I'm

9:25

thinking about, you know, I live

9:27

here in Phoenix and so we've got a lot of

9:29

snowbirds w ho come here during the winter and they range

9:34

the Econ, in terms of economic status.

9:36

They range all the way from folks whose fourth

9:39

or fifth home is up

9:41

in carefree or Paradise

9:44

Valley all the way down to folks who are pulling up

9:46

a trailer behind them and parking it in

9:49

a really, really temporary

9:52

mobile home park. However,

9:55

there is this one class of

9:57

snowbirds, which is retirees

10:00

who have either a first or a second home

10:02

in it's technically

10:04

a retirement community, but it's also,

10:07

but the structures are mobile homes

10:10

and those, to me, those seem

10:12

incredibly stable sources

10:16

of revenue. My mom actually lives in one

10:18

of those communities. It's extremely well,

10:21

I can imagine, owning one of

10:23

those w ho'd be, I

10:25

can imagine it would be very nice to...

10:27

A dream, right? Yeah, yeah , absolutely .

10:29

Yeah. But I'm guessing

10:31

that there's more to it. Then

10:34

that talk about , you

10:38

mentioned there might be additional tax advantages

10:40

with mobile home parks, that

10:43

are inside operatings qualified Opportunity

10:47

Zones.

10:48

Yeah. You know, it's

10:51

interesting. So, so part

10:53

of the 2017 tax

10:56

cut and jobs act, in addition

10:59

to introducing Opportunity Zones , was

11:02

that it introduced

11:04

an accelerated depreciation. Yeah

11:07

. And what this means is that for any,

11:09

any real estate , and

11:11

the portion of the real estate that has a 15 year

11:13

or less depreciation schedule,

11:16

you can actually write off the entire

11:18

depreciation in the first year. And

11:21

if you think about a mobile home park, you've got

11:24

asphalt roads, you've got sewer lines,

11:26

you've got fences, you've got electrical,

11:29

pedestals and lines. Basically

11:32

everything in a mobile home community is on

11:35

a 15 year or less

11:38

depreciation schedule. So

11:40

over the last three years as we've been

11:42

doing mobile home communities , and

11:45

our investors, you know, let's say they put in $100,000,

11:48

they get a k one for the

11:51

first year that shows, hey, you know, you invested

11:53

$100,000 and you lost

11:56

on paper $100,000. So they

11:58

get 1 00% r ight off

12:01

of their investment. So

12:04

basically you take, you take, exactly

12:06

right. S o you take that, y eah.

12:09

Okay.

12:09

Yes . I'm sorry, go ahead.

12:11

No, go ahead.

12:12

Yeah, I was just going to say that . So the numbers there, so

12:15

you know , if we talk about $100,000, so if

12:17

you take the the right off, let's say, you know, if

12:19

you're in the harshest highest , federal

12:22

marginal tax bracket plus

12:25

the capital gains that you would pay. I mean basically

12:28

we kind of did the math but you're really

12:30

looking at maybe 35 cents on

12:32

the dollar basis for

12:34

an investment into a mobile

12:37

home community that's in an Opportunity

12:39

Zone.

12:40

So, It's not necessarily a

12:43

mobile home community tax advantage.

12:45

It's just that the nature of the mobile

12:47

home community falls

12:50

on into this, this 15 year depreciation

12:52

schedule.

12:53

That's correct. It wasn't intended

12:55

to just be for mobile homes. So

12:58

the same thing if you, you know, if it's an

13:00

apartment complex and it's

13:02

underground sewer lines in there on a less

13:04

than 15 year schedule. I mean, don't you know, all this stuff has a

13:06

schedule from the IRS. Then the same

13:08

thing applies to the apartments. It's just for

13:11

a mobile home community. Everything

13:13

is on a 15 year or less schedule,

13:15

you know, unless you have like a clubhouse or something

13:17

like that, then that would not be the case.

13:20

But for us, I mean

13:22

we're, we're buying workforce housing communities

13:25

a lot of times we don't have a lot of amenities so

13:28

it really ends up, basically

13:30

100% of the park is

13:32

on that schedule.

13:33

Okay. I'm going to push back a little bit because

13:36

there, and I think

13:38

anybody who's, who's investing is going to have

13:40

the same thought. Um, we've

13:43

got this substantial improvement test,

13:46

which anybody who's paid any

13:48

attention to this legislation over the

13:50

last year understands. You got gotta , you've got it . Whatever.

13:53

You've got to put dollar for dollar improvement into your investments

13:59

but these are mobile home parks. The

14:04

question that springs to mind is how

14:07

do you avoid over improving?

14:10

Right. No, that, that's a very

14:13

fair question. And you certainly don't

14:15

want to over improve, right? I mean, if you're

14:17

adding amenities simply to meet the

14:19

tax requirements. It's

14:23

not something that going to bring any value to the community. Obviously,

14:26

not an economically a good idea. But

14:29

anyway, there's two things with regards to

14:32

mobile home communities that help

14:34

us meet that substantial improvement. I

14:36

mentioned first of all that, you know, most of these communities

14:39

that w ere buying t hem, there is a lot of deferred maintenance.

14:42

So by the time you r epave roads, you

14:45

put a new sewer lines, water lines,

14:47

you know, whatever else is required, lighting,

14:50

signage. I

14:53

mean you end up putting, you know, quite a bit

14:55

of of investment capital into it but

14:58

part of it what y ou g ot t o think about is this

15:00

is substantial improvement only

15:02

applies to the

15:04

improvements. And so

15:09

the land is taken out of that, so

15:12

what we do is we'll have a third party appraiser

15:15

appraise the underlying land and that

15:17

gets netted out of the approved

15:20

that net portion.

15:21

I bet the land in a mobile

15:23

home park is the bulk of the

15:27

Yeah. It's a significant

15:29

portion. I mean so what we're finding so

15:31

far with the appraisals that are coming back

15:33

and obviously we want something that's defensible,

15:36

so that's why we get that third party appraisal. But it's

15:40

coming in at 50% and sometimes more

15:43

of the acquisition price.

15:44

Yeah. Wow.

15:46

Right. So, so right there. Yeah. You're taking

15:48

quite a bit off the table.

15:52

My Mom,

15:54

this park that my mom lives in, I mean it's,

15:56

it is beautiful. It is gorgeous. It's

15:58

just exceptionally well taken care of.

16:02

Um, she actually owns

16:04

the box she lives in, but

16:06

she doesn't own the dirt . So yeah, obviously, if

16:11

he came in and bought something like that, the,

16:15

the land easily be 50%

16:17

of the investment. Wow!

16:19

Right. And actually,

16:24

what you're referring to is actually kind of the second

16:26

part of whatever we

16:29

want to call the secret sauce. But , you

16:33

know, let it in most of the communities

16:35

that we're buying like that, what we

16:37

just talked about and the improvements that we're going

16:39

to need to do to really get it up to standard

16:41

and make it a nice place to live. We're

16:44

going to already meet that , that substantial improvement

16:46

test. Sometimes we

16:49

won't though. And the other thing that happens

16:51

is , we

16:53

work with the very reputable

16:56

accounting firm that has

16:58

kind of guided us on this and has a lot

17:00

of experience. I've been doing mobile home communities for

17:02

something like 20 years and worked

17:05

with a lot of different practitioners. It's there professional

17:08

opinion and we've checked with others as well that

17:10

if you bring in brand new mobile homes,

17:13

set them up and then lease

17:15

them out, that they will

17:17

be considered

17:19

real property and that counts towards

17:21

your substantial improvement. And

17:25

that right there, it

17:27

costs us around $40,000 in

17:29

most markets to buy a brand new

17:31

mobile single wide mobile home.

17:34

Get it set up, skirting on

17:36

porch, stairs, all that sort of stuff. And

17:40

you can see you don't have to have too many of

17:42

those brand new homes to significantly changing

17:46

the amount of capital you're putting into the park.

17:47

Huh. Wow.

17:50

Okay. You know, it's funny that this

17:53

is the least sexy

17:56

sounding thing I've run

17:59

into .

17:59

Of course. That's why I like it.

18:04

Oh my gosh. Okay. So do

18:09

you follow a typical standard when you're

18:11

doing your underwriting on these things or is

18:13

this standard for your model

18:15

for investing in

18:17

mobile home parks a little bit different than

18:20

folks would normally be aware

18:22

of?

18:22

Yeah, that's a good

18:24

question. You know,

18:27

I think this relates a little bit to what we were talking

18:29

about with the political intent. Something that

18:33

gets me

18:36

excited as well is if

18:38

you look at most of the Qualified Opportunity

18:42

funds that are out there, they're

18:44

focused on markets, well, like Phoenix

18:46

where you are, or you know, downtown Portland

18:48

or LA or Oakland, yo u k

18:51

n ow, New York City. And

18:55

I would guess that at the

18:58

end of the day, a vast majority of the

19:01

Jo sie m oney that gets invested goes into those

19:03

urban market, right? I mean that's where

19:06

the job creations happening for them. Yeah.

19:09

And, and I, you know, I just read an article, the

19:11

New York Times kind of talking about this, which

19:13

is that divide that's continuing

19:16

to occur between the urban and the rural

19:18

areas in the United

19:21

States an d t his divide, it's somewhat

19:25

troubling.

19:27

Yeah .

19:28

and what would

19:30

I like about what we're able to do

19:32

is, first of all, there aren't any

19:35

mobile home parks in downtown LA, right? I

19:37

mean, I say that maybe a little tongue in cheek.

19:39

There's a couple, right? We're not

19:41

buying them. They're there . They're going to get,

19:44

I mean, if somebody buys them in there , they're

19:47

getting traded because of the land value and they're going to get

19:49

redeveloped and those residents are going to get

19:51

kicked out. So

19:53

instead, we're looking at markets and

19:55

we criteria like population

19:58

size and job growth and all those

20:00

things are important to us, b

20:02

ut t here t hey're not these real urban

20:04

areas right there. I mean, in our

20:06

newest fund, we've got parks

20:08

we re b uying outside of Austin,

20:10

Texas, you know, kind of on the outskirts and Daytona

20:14

Beach, Florida and Greenville, North

20:16

Carolina, and markets

20:18

like that where there's,

20:21

there's good things happening. There is economy.

20:25

But it 's, it's not, it's not

20:28

kind of these major me tros t hat I

20:31

think they're going to end up getting the book of the

20:33

investment capital for the

20:36

QOZs.

20:37

Yeah. Wow.

20:40

Okay.I'm sold.

20:42

I'm in here. I think

20:48

you've made your case.

20:52

So let's take the conversation in a

20:54

slightly different direction. You

20:56

were in a business

20:58

school? Was it, Wh arton t hat you went to?

21:01

Yup. Yup . Well , I went to Wharton Business

21:03

School.

21:04

Okay. And I, you know, I was looking at your bio

21:07

and there was a long

21:09

period there between the time you got your undergraduate

21:12

and the time you went to business school. So

21:14

I'm guessing you were probably in your thirties. Unless

21:18

you went to college at eight.

21:21

I didn't ask.

21:24

That's a fair assumption. I did not

21:26

go to college when I was eight. I was no Doogie

21:29

Howser. Yeah. Um , yeah. That's

21:32

right. You know, in fact, I'd always kind

21:34

of had this in the back of my mind

21:36

that I wanted to do business school, but life

21:38

started to happen then the kids and the family.

21:42

And I was like, well, that's

21:44

okay if it doesn't happen. But

21:47

actually I was working for a tech company

21:50

in the bay area and

21:52

actually my boss came to me one day and said, hey,

21:55

we'd like you to get an MBA and we'll

21:57

pay for it. And that it was

21:59

hard to say no. So , I was

22:03

fortunate enough to go to business school and

22:06

really changed the trajectory of, like

22:08

I said, I was in the tech industry and enjoyed

22:11

that. But always

22:13

had a desire to kind of do more

22:15

with real estate. I'd done a number of things on

22:17

the side and was excited

22:20

to try it, you know, make that a full

22:22

time career. It's been a lot of fun.

22:25

Okay. Now I'm going to ask you the

22:27

couple of things that probably don't have anything

22:29

to do with the Opportunity Zone, but I'm

22:32

interested in these kinds of things.

22:34

You got a chemical engineering degree?

22:38

Yes.

22:39

Oh, okay. So I

22:43

will confess that I'm a little bit of a fan

22:45

boy of just that whole

22:47

mindset. I discovered

22:51

late in life that chemistry is absolutely

22:54

fascinating. So,

22:58

but if you graduate with a chemical

23:00

engineering degree, w hat kind

23:02

of work were you doing? I

23:06

see t hat you went to national instruments,

23:08

but were you actually working in

23:10

chemistry?What were you doing?

23:11

Well, okay. So

23:13

here's what they don't tell you in school, Jack. If you're

23:17

going to get a chemical engineering degree,

23:19

you kind of have three choices of

23:22

a career. I'm in general, right. So

23:25

you're either going to work in a n actual chemical

23:28

factory, yo u k n ow, li ke D ow chemical and

23:30

the different chemicals th at a r e m aking. A lot of people

23:32

end up in oil industry, right. At a

23:35

refinery and that sort of thing. Or

23:37

you're probably go ing t o e nd up in a semiconductor lab wearing

23:39

a bunny suit every

23:41

day.

23:42

Right.

23:42

None of them . Right. So I'm getting

23:45

into my senior year and all of a sudden it's like

23:47

this revelation to me. Ah , these are

23:49

my job options. I was like, oh my gosh.

23:51

Like I enjoyed my classes and

23:54

I found that fascinating, but I didn't want to live

23:56

in these places. I'd have to wait and I didn't want to do

23:59

with what they were asking me to do. So

24:02

basically, I went into the kind

24:05

of business development. It really

24:08

went kind of on the electrical engineering side.

24:10

I mean, the nice thing about engineering is when

24:12

you've learn to kind

24:14

of think critically, like you need to do

24:17

an engineering degree. It's transportable

24:19

and you can take that to kind of different disciplines.

24:21

I ended up in the photonix industry

24:24

, and you know,

24:26

very interesting, very fascinating. But like

24:29

I said, I always had this desire

24:31

to do real estate.

24:34

Okay. Well, you know, I know that if you,

24:36

especially chemical engineering , um,

24:39

if you've got the kind of mind that can

24:41

do that, then that's an

24:43

analytic... that's tends

24:45

to be an analytical mind to a very

24:48

orderly mind. That's

24:50

also very focused

24:52

on detail, attention

24:55

to detail. I've talked to a lot

24:57

of guys, an awful lot

24:59

of developers and fund managers

25:04

who strangely enough, have an engineering

25:06

background or a science background

25:08

in some way, shape or form. And I think

25:10

it makes a different, yeah.

25:12

Yeah, I think so. Yeah. Thanks,

25:14

Jack.

25:16

Well, I, yeah, and, and

25:19

chemistry is just bloody interesting anyway. Another thing

25:23

that literally has nothing to do with anything, anybody,

25:25

but you and I are interested in, you were in a

25:27

men's chorus. Do you still

25:29

sing?

25:31

Yeah. You know,

25:33

I do , I

25:36

was with the good, this was at Brigham

25:38

Young University where I did my undergrad. Actually

25:42

if you've heard of the Mormon Tabernacle Choir,

25:45

my choral director, my

25:48

choral director is now, now directs

25:50

the Mormon Tabernacle Choir. And

25:54

I'm an amazing musician and it was a

25:56

pleasure to have you part of that group, but yes, music's

26:00

very important

26:02

to me and my wife

26:04

as well. And so we , with our kids,

26:06

we've introduced a lot of music and they play

26:09

instruments and we sing together. It's

26:12

fun.

26:12

Yeah , that is gorgeous.

26:15

I'm actually in an adult

26:18

chorus as well.

26:18

Oh, fun.

26:20

I was a music major

26:23

in school. So, I allegedly

26:26

am educated, but that, you know, I ended up in the

26:28

tech industry.

26:31

Yes.

26:32

All right , well this has been

26:36

frankly quite enlightening and

26:38

I'm going to be driving around the valley here,

26:40

seeing these mobile home parks, all,

26:44

you know, all kinds of different socioeconomic

26:47

situations in these mobile home parks.

26:50

I'm going to be looking at them with a completely

26:52

different set of eyes. I'm

26:54

kind of gobsmacked

26:57

to tell you the truth. This is bloody

27:01

like ,

27:02

It sounds like you, you might've caught the bug. I

27:04

definitely caught it three years ago and it's

27:08

a fascinating space.

27:09

Hey, you know what? I want to

27:12

circle back around real quick and ask about this.

27:14

So you actually got into mobile home

27:16

parks prior to the Opportunity Zone Program

27:19

kicking in. I'm

27:22

guessing that you had investments already

27:24

at that point. Did you wake up one morning and

27:26

find out that you had investments in the Opportunity

27:29

Zone?

27:31

Yeah. Right. That was an

27:33

interesting , kind of self-discovery

27:35

. They'd say, Oh, okay,

27:37

this program. Yeah, maybe we do. Ah

27:40

, it turned out in terms of mobile home communities,

27:42

we had one, we bought one

27:44

in downtown Atlanta. We

27:47

actually bought it after, you know , after the cutoff.

27:49

But we didn't

27:51

know anything about OZones time and so

27:53

we didn't raise money based on that.

27:56

You know, our investors haven't seen any advantages

27:59

because of that. Didn't put capital gains money and

28:01

, and so forth. Um , so, so yeah,

28:04

one out of the first 12 communities

28:06

that we bought wasn't an Opportunity Zone

28:09

and then we've since purchased two more

28:12

, that are in Opportunity Zones,

28:14

you know , specifically raised money around

28:17

that with

28:19

capital gains money. And then,

28:22

you know, looking to buy before the end of the year, probably

28:24

by another, we're looking

28:26

at maybe 10 to 12, we've got five

28:28

i n escrow, and, looking

28:31

to buy another 10 to 12 before the

28:33

end of the year.

28:34

These are all Opportunity Zone Investments?

28:36

All in Opportunity Zones. That's correct.

28:39

Okay. I'm going to tell you that

28:42

is quite the record in terms of proportion.

28:45

There's a whole lot of money chasing

28:48

fewer deals, at least from where I

28:50

sit. That's what it looks like. So the

28:52

fact that you're actually closing deals, ah

28:54

, says something.

28:56

Yeah, no . And that's an

28:58

important, if you don't

29:00

mind, I mean that's part of, you could

29:05

say my pitch or are , is as far

29:08

as what I'm seeing in the market,

29:10

you know, we kind of talked about this where there's

29:12

a focus on a lot

29:14

of these urban areas. And

29:18

they're kind of getting the preponderance of the money

29:19

and probably the investment

29:22

at the end of the day. But

29:24

what happens is, you know, once

29:27

it was recognized, hey, this part

29:29

of downtown Portland is an Opportunity

29:32

Zone. You think about

29:34

most of those sellers either have bare

29:36

land or maybe you know, the

29:38

building that's either going to get totally

29:41

redeveloped or torn down and built into something

29:43

else. Those are relatively sophisticated

29:46

sellers and they are

29:49

going to understand the Opportunity Zones. And

29:51

so what happens is, you know, prices escalated.

29:54

I mean, it was like a step function. They escalated

29:56

pretty dramatically once the

29:59

legislation went through and ended there and there

30:01

was awareness of it. On

30:03

the other hand , mobile home communities,

30:06

something like 90% of mobile home

30:08

communities are still owned by what I

30:11

refer to as like a mom and pop operator. You k

30:13

now, basically non-institutional, somebody

30:16

that either maybe b uilt the community or maybe

30:18

their parents built the community a nd t hey're running it

30:20

now. And so

30:23

for them, they

30:26

don't even know they're in an Opportunity Zone

30:28

and, you know, sometimes the broker does

30:30

and if there's a broker involved an

30:32

d, and even then they're not really sure

30:34

how people capitalize on it.

30:36

So, so what's nice, at least

30:38

what we've found so far is that because

30:41

there's not a general awareness of

30:44

mobile home parks sellers

30:46

in terms of the Opportunity Zones, we

30:49

haven't seen the same price

30:51

increase. Which is

30:53

important, right? I mean, we're looking at yield, we're looking

30:56

at potential yield and all that sort of stuff

30:59

and you know, all of a sudden

31:01

price simply escalates because they're in OZones. That can have a dramatic

31:04

effect on

31:09

the income and yield that we're buying

31:11

and can inhibit our ability

31:13

to start, you know, paying

31:15

out dividends to our investors right

31:18

away. So anyway,

31:20

that's really

31:23

kind of an advantage on the

31:26

purchasing side for, for buying mobile

31:28

home parks, is that, no , they're in all these desperate

31:30

markets, kind of all over the US. We're a

31:33

bit geographically agnostic. We do like

31:35

t he Southeast United States, but at the

31:38

end of the day, if it's an Opportunity Zone and

31:40

it's a place again where there's job

31:42

creation and there's sufficient household income

31:45

and median home prices, those sorts of things, then

31:48

we're interested, right. And we're in

31:51

six different states right now and with

31:54

these new acquisitions, w e'll be i n at least two

31:57

or three more.

31:58

Okay. Well,we've got

32:00

to now get to contact information. If folks

32:03

are interested in the Saratoga Model

32:06

and want to talk to you, find out more. How

32:09

do they get a hold of you? What's the best way to do that?

32:12

I'd say the best way to just simply

32:14

be my email address,

32:17

which is sam@saratoga, which

32:21

is S-A-R-A-T-O-G-A and then

32:25

group and it's sam@saratagogroup.net.

32:26

Alright, very

32:30

good. And I will remind our listeners

32:32

that that information is also available on

32:35

our podcast website. In fact, all the

32:37

contact information for Sam will be available

32:39

there. Well, Sam, I appreciate

32:41

the time. I particularly appreciate

32:44

you coming on and talking about this.

32:46

This almost sounds like a

32:49

peek under the covers at some proprietary information

32:52

that I'm not sure I'd ever share with anybody else,

32:54

but hey , thanks

32:58

for doing it. That is great.

33:01

Any last words for us before I let you go?

33:05

Well, Jack. Yeah, I really appreciate you

33:07

having me on. I think

33:10

a , I just maybe reiterate,

33:14

what we talked about at the beginning, which is, you

33:17

know , and I've listened to a lot of the podcasts that you've

33:19

had with others and

33:22

I fear that there's, there's some danger

33:23

in potentially, you know , this

33:26

legislation sunsetting and there not

33:28

being a lot of political support for it. If

33:31

we don't have some good examples of

33:35

money going into areas and

33:37

number one, helping the people that

33:39

are there and number two, helping in

33:41

areas that otherwise

33:44

aren't part of the focus. You

33:46

know they're not these downtown areas.

33:48

And so that's something

33:51

that I get excited about.

33:53

I know that we've

33:55

made a difference in some of the communities

33:58

we've been invested in so far. And

34:02

at the end of the day, that's a really good feeling. And

34:04

obviously when it lines up with economics

34:06

working out that's even better. That's really

34:10

an exciting part of it for me.

34:10

Well s

34:14

aid, Sam, I think we all agree. Well,

34:17

thank you for stopping by listeners.

34:19

I appreciate you taking the time out of your day

34:21

to enjoy these conversations.

34:23

There are always a lot of fun for me. On

34:25

behalf of S am Hales of Saratoga

34:28

Group, I'm Jack Heald for the OZExpo Podcast. Thanks

34:31

for listening. Be sure to subscribe so you're

34:33

always updated when new new podcasts

34:35

are released, and we will talk to

34:37

you next time.