Wednesday, June 12, 2019

Shaffer in the News - Biggest Benefit of Opportunity Zones

Tax Benefits Aren’t The Biggest Benefit of Opportunity Zones

ALM Media ALM MediaApril 25, 2019

Investors are lining up to buy projects in qualified opportunity zones and take advantage of the subsequent tax benefits, but the capital gains tax forgiveness is one of several benefits that come with opportunity zone investments. Access to capital is among one of the major benefits of these zones, starting with cheaper capital.

“Traditional equity capital is focused on the best sponsors, locations, and projects. But, much like EB5—which encourages non-U.S. citizens to invest in real estate in exchange in for a benefit of citizenship from the U.S. government—qualified opportunity zone investors will receive tax benefits for investing in qualified opportunity zones and qualified opportunity zone funds,” Bryan Shaffer, principal and managing director of George Smith Partners, tells “We believe the investor will receive 200 to 400 basis points in tax benefits, so a developer will be able to obtain cheaper capital for projects located within a qualified opportunity zones.”

In addition to cheaper capital, opportunity zones also present a new source of long-term equity, since opportunity zones require a 10-year hold to reap the benefits. “Unlike traditional equity capital, qualified opportunity zone investments require a 10-year hold time to receive the strongest tax benefits, so they will provide a unique source of equity into which investors can eventually tap,” says Shaffer.

The model also gives investors access to cash in certain cases, and in those instances, it may make more sense to pursue an opportunity zone investment rather than a 1031 exchange. “For example, if you are getting $10 million in cash from an investment, and your capital gain is $2 million, with a qualified opportunity zone investment you would defer the payment on the $2 million gain for seven years, and your new investment of that $2 million could end up being tax free—if you hold the investment for 10 years,” says Shaffer. “Plus, you receive access to the other $8 million today. On the other hand, with a 1031 exchange, you would defer all taxes, but the entire $10 million in capital gain must be reinvested. For the small amount you pay on the gain, you access a huge amount of capital vs. a 1031 exchange where you are required to reinvest everything.”

There is also a deadline on these investments—and a pretty short one. That could be seen as an additional benefit as well. “As the law is written today, to receive a 15% basis step-up on the original gain, the taxes on the original gain must be paid in 2026,” says Shaffer. “Therefore, in order to qualify for this tax treatment, the qualified opportunity zone investment must be made by December 31, 2019. The deadline is putting pressure on investors to make their investments in qualified opportunity zones this year, which is one reason why we’re hearing so much about it.”

Shaffer in the News - Globest Are opportunity zone benefits all they promise

There is a frenzy around opportunity zone investments and the capital gains tax benefits that come with them, but for commercial real estate investors and developers, 1031 exchanges will likely provide better tax benefits. That is because there are mitigating circumstances to receiving the tax benefit from the qualified opportunity zone. Bryan Shaffer, principal and managing director of George Smith Partners, has outlined five reasons why the tax benefits of opportunity zone investments might not be as advantageous as expected.
First, Shaffer says that the capital gain must be reinvested, and he calls this the most “misunderstood” aspect of the qualified opportunity zone feature. “The most misunderstood part of qualified opportunity zone investments is that you only receive the tax benefits if the investment comes from a capital gain that is reinvested. New money receives no tax benefits,” Shaffer tells
Second, the capital gains tax benefit works better for the large capital gains earned by corporate, stock, bond and casino investors. “Most corporate, stock, bond, and casino investors who make a large gain have to pay capital gains tax. Therefore, these are the most likely types of investors that are going to invest in QOFs,” he says. Real estate investors on the other hand receive better benefits through a 1031 exchange. “Because of the 180-day reinvestment rule for both QOFs and 1031 exchanges, managers of high-net-worth capital and investments banks are more likely to have clients with this type of gain, so they will most likely put together this type of investment fund,” adds Shaffer. “A standalone real estate investment fund would be more likely to attract co-investors who know people with large capital gains.”

Shaffer in the News - Koreatown Multifamily Financing - Bisnow

From Bisnow-
FINANCING George Smith Partners secured $33M in cash-out refinancing for a nine-property portfolio of rent-stabilized apartment buildings in West Hollywood and Koreatown on behalf of a local owner and developer. The financing was arranged by George Smith Partners principal Bryan Shaffer, along with his team, which included VP Jon Shapiro and assistant VP Max Lehrman. Bryan and his team secured two capital providers for loans at a five-year fixed rate of 3.15%. George Smith Partners secured the permanent financing at 75% of the portfolio’s appraised value and a 1.20 debt coverage ratio. ***

Read more at:

Shaffer in the News- Bloomberg

Bryan Shaffer Profile on Bloomberg

Mr. Bryan Shaffer serves as the Principal/Managing Director at George Smith Partners, Inc.. He served as the Principal, Director & Senior Vice President of Commercial Real Estate Loans & Capital - Debt & Equity at the firm. He focuses on delivering solutions to address his clients real estate capital requirements and arranges structured financing for multifamily and commercial properties, including acquisition, refinance, construction,,%20Inc.

Wednesday, July 26, 2017

Multifamily: Navigating changing landscape for multifamily financing 2017

Navigating the Changing Landscape for Multifamily Financing in 2017

While multifamily remains one of the most desirable asset classes to finance, a number of new factors have emerged that are making it more challenging to secure competitive financing.

 Full Article  Bryan Shaffer | May 02, 2017

Sunday, February 22, 2015

Shaffer structures $32,250,000 Bridge loan for Multifamily apartment portfolio

Transaction Description:
$32,250,000 High Leveraged Bridge Loan of Multi-State Apartment Portfolio Bryan Shaffer successfully placed the $32,250,000 senior bridge loan for the refinance of a two property 397 unit multifamily apartment portfolio for a family trust. The highly leveraged loan took debt coverage to 1.05 and allowed the family trust to pay off ballooning debt and secure over $1,000,000 in rehab dollars. The Sponsor also received a return of equity on his investment. Sized to 85% of current value, the non-recourse debt floats at 5.25% over LIBOR and is interest only for the two year term.

Challenge: As single stand-alone assets, neither property would qualify for additional debt; one property restricted by debt service coverage and the other having LTV restrictions.

Solution: GSP mapped out the future upside in the portfolio and developed a plan to structure the assets together as a portfolio, reducing the overall risk of the loan and providing better overall coverage and cash flow for the lender. Monthly cash flow after debt service increased with the lower interest-only payment and the ownership is provided the capital needed to complete the rehab plan and increase the rents on the projects. A self-imposed Borrower capital reserve was funded to absorb market changes until the assets are fully stabilized and will qualify for permanent debt.