Evergreen Capital

The Celtics are up for sale and you might own a sliver of the team someday. This likely $4B+ sale is big news. Elite teams don't sell often. The Yankees, Cowboys, Knicks and Lakers haven't changed ownership in 25+ years. But championship rosters in tier-one cities are crazy expensive. Guys that win, look to get paid after the parade. It's typically worth it, but most owners can't float a billion in salary obligations in order to earn the high returns of sports ownership. Which is why so few teams have a real shot at winning each year. This is why the major sports leagues are letting private equity into the ownership box. I suspect the winning Celtics bid will have a sizable private equity firm on the cap table. Which means, you might be able to co-own the Celtics as a limited partner (LP) in a Pro Sports Fund. This isn't speculation, it's happening in every major league excluding the NFL. Keep an eye on this emerging alternative asset class for high net worth investors. If you're looking for uncorrelated returns, I suspect this would be a bit more fun to own than municipal bonds.

The 1031 exchange could go away, but until then there's an easier way to sell your property and defer taxes. An UPREIT Exchange. There are two flavors: 1. 721 Exchange (Direct UPREIT) 2. DST Exchange (Backdoor UPREIT) Sounds complicated, but it's basically the same thing. DSTs just have an extra step. Option 1: Direct UPREIT Preferred path if you can pull it off. However, direct UPREIT transactions are typically reserved for large $30M+ deals (but there are exceptions). Buyer gets your property, you get shares (OP Units) in their REIT or Fund. You can convert OP Units to common shares and pay the taxes over time. Option 2: DST Exchange If you have a smaller deal you'll likely need to buy into a DST (Delaware Statutory Trust) first. The DST is a sub portfolio of the larger REIT. It's like being in the minor leagues before getting called up to the majors. You typically have to stay in the DST for 2+ years until the REIT exercises it's option to convert your interests into the larger portfolio. This staged transaction is designed to comply with IRS like-kind exchange rules. Unfortunately, most DSTs are garbage. Many seem to be created to fleece retirees who are tired of managing real estate and are looking to 1031 into a passive investment. They have: - huge markups - subpar real estate - high fees / big commissions - small teams with no real track record The goal is not to trade into subpar deals to defer taxes. That's a great way to "save" ~23% in cap gains (temporarily) then lose 100% of your investment if the deal goes south. Instead, evaluate the real estate on its own merits and think of the tax deferral as a bonus. Thankfully, the DST market is improving. There are a couple DST / UPREIT options that own Class A real estate run by world-class asset managers. I expect more will surface over the next few years assuming the government doesn't explore the elimination of 1031 exchanges. Benefits of a DST / UPREIT: - Defer taxes from sale of real estate - Increase diversification via a large high-quality portfolio - Receive consistent distribution payments without dealing with tenants - Additional upside appreciation potential - Access off-market deals managed by $100B+ private equity firms. Estate planning benefits of UPREITs: 1. can split shares among heirs so they can make individual buy / sell decisions 2. liquidity on your schedule (can sell UPREIT shares over time) 3. eventually transfer OP units to heirs on a “stepped up” basis DST / 721 Exchange Structure:

"Economic expansions don't die of old age, they are murdered." I talk to a lot of people hesitant to invest in private deals today. They are gun shy and are either: 1. Waiting for an "All Clear" sign from the Fed on rates 2. Waiting to see if the economy sputters out of gas Unfortunately, markets and the economy don't work that way. They die from black swans: - Tech Crash - Oil Spikes - Inflation - COVID - Wars - GFC - 911 We can't predict these things. And if you wait for everything to be 100% rosy, you'll likely be buying at peak pricing. So if you need things to be both obvious AND cheap.... You'll be waiting a long time. Therefore, you either have to: - Buy when there is blood in the streets and you're scared sh*tless - Buy quality that can grown + outperform even if you pay full pricing I don't remember who said this, but I constantly need to remind myself: The hardest time to invest is always...right now. Credit: Jim Bianco for this economic framework

Brad Johnson of Evergreen Capital is back again with more video content on GP Stakes. This time on "GP Stakes: Hedge Fund vs. Private Equity" #GPStakesNews #GPStakes https://lnkd.in/ed-Z89tF

This might be Bill Ackman’s most impressive trade ever and he once turned $60M into $1.6 billion on a bankrupt penny stock... Ackman sold a piece (GP Stake) of his hedge fund for $1.05 billion this week. This counters a common objection we get on GP Stakes Investing: "Isn't it a bad sign if an investment firm wants to sell 10% of their money printer???" But Ackman is arguably the most ambitious investor on earth. Here is his take: "I'm selling 10% of Pershing Square to help accelerate our growth in assets under management in existing and new strategies.” Even the most successful investment firms view minority GP capital as a strategic weapon for growth. However, short of one of the Pod Shops (think Ken Griffin's Citadel) that make money in every market, I wouldn't recommend investing in hedge fund ownership. Hedge funds were how the GP Stake business got started and the returns were in a word...meh. Too much reliance on one man: - Who can have a bad day and blow up the firm - Who could wake up one day and decide to be a Buddhist monk - Who could piss off his investors and have massive redemptions in 90 days Now, I wouldn't bet against Ackman, he's already an investing legend. But we'll stick to investing in private equity firms with giant teams, multiple strategies and 7-10 year management fee contracts on long-term capital commitments. And at a fraction of the earnings multiple than this reported deal, which was valued at staggering ~64% of its ~$16 billion under management. In other words, this is an UNREAL deal for Bill. He'll still likely supercharge AUM growth and make these Stake investors money. But we'll stick to private equity GP investing, which is a more conservative way to earn high income and stellar returns in our view.