Our Next Event: Alts Expo - Dec 13th
The world of private equity can be slow to change, but sometimes a big idea can create transformation faster than anyone might predict.
Rachel Vass and Kelly Winget, co-founders of the EPIC family of funds, join Andy Hagans to discuss the unique vision they’re creating (in an unlikely partnership).
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- An overview of Rachel and Kelly’s career backgrounds, and how they became involved in asset management.
- The story of how Rachel and Kelly met, and decided to partner in launching a new family of funds.
- Why Rachel and Kelly believe in “investing across the aisle,” and how this relates to alternative energy.
- How stacked tax incentives can lead to IRR projections of 20 percent or more with certain types of development projects.
- What’s coming up in the future for the EPIC funds (including an Opportunity Zone fund).
Rachel Vass, Syzygy Cities
Kelly Winget, Alternative Wealth Partners
EPIC Dev Fund
About The Alternative Investment Podcast
The Alternative Investment Podcast is a leading voice in the alternatives industry, covering private equity, venture capital, and real estate. Host Andy Hagans interviews asset managers, family offices, and industry thought leaders, as they discuss the most effective strategies to grow generational wealth.
Andy: Welcome to the show. I’m Andy Hagans. And today we’re talking about a partnership made in heaven, big ideas and big profits, big, bold visions. Honestly, this is the most fun part of my job, talking with talented entrepreneurs who have big, bold visions, and helping those visions come to reality. I love people who build stuff, right. So, Kelly, welcome back to the show. Obviously, we saw you at Alts Expo earlier this week. We’re gonna get back to Kelly Winget in a second, but a lot of our audience, already familiar with her. Rachel Voss, I wanna introduce you to our audience. And you and Kelly are building something amazing. But before we dive into what you’re building, could you give us a little bit of your background?
Rachel: Absolutely. And thank you so much for having us here today, Andy. So, my background is very diverse and very different than most folks because it encompasses almost every industry sector. But I started out at Morgan Stanley in private wealth management, helping build out their marketing and business development platform right after the financial crash of ’08, and sort of moving them towards a family office service offering. After that, sort of became really close with some of the folks there, like John Mack, who was the chairman at the time, and ended up going into one of his venture capital portfolios, where I discovered the sort of aspect of media intersecting with real estate, and how you can activate spaces that are being underutilized during off hours. And I fell in love with this.
And from there, I ended up going and joining one of these top experiential marketing agencies, just out of sheer passion, called Sparks. And they did things like Google IO, and Salesforce Dreamforce, and massive events. And it was in these rooms where I was listening to the chief marketing officers of these Fortune 500 companies, stroking their white chin hairs, going, “What economy should we save this year with our $300 million event?” And it dawned on me in that moment that there was a real intersection between real estate, economic development, and experiential, and I happened to sit at that intersection.
So, I got really passionate about this, and was super disappointed when I kept seeing these big companies continuously not choose places that needed that experiential foot traffic, which is like the attention economy, but in real life. And I was sad for Detroit, I was sad for Chicago, and all these places that really needed that economic support. So, I then ended up taking a job, probably my dream job at the time, which was global partnerships manager at TED Talks. And that’s where I learned there’s also a whole market around not just experiential, but impact narratives, and the idea of doing good and doing well.
And at TED, I got introduced to the people who are really pushing for change like that, and that’s when I started getting approached by real estate developers to help them come up with programs that helped upskill communities, and create economic development and foot traffic opportunities through experiential. And I, you know, it was eventually, when one person tried to get me to sign a 10-year non-compete in consideration of no money, and I said, “You know what? Maybe I should just compete.” And that’s when I founded my business. And I ended up going and reaching out to emerging developers, often women and minority developers, in these Opportunity Zone markets, and co-developing with them, going after RFPs, like the ones Chicago produced the INVEST South/West initiative. And we went on to win some of those properties, and are now developing in the corridor, about 2 out of the 12 city corridors that were part of the INVEST South/West initiative.
So, it’s been a really exciting time. And then I met Kelly, and we decided to super turbocharge that, and take this foot-traffic-driving economic development strategy on the road and start to scale it.
Andy: Well, I wanna talk about your partnership with Kelly in just a second, but I wanna follow up on one thing you mentioned, you know, tax incentives from local governments or state governments. I hear that, and it’s almost, like, unfathomable to me, unfathomable that anyone even does that. Like, I know it happens. I know companies and organizations get checks. But in my mind, I’m like, “Isn’t it, like, a 27-year process, with piles and piles of red tape?” You’re telling me you’ve figured it out, and you know how to navigate it and actually get the green light.
Rachel: Yeah. I mean, okay, you are right. It is a slug. It is definitely a slug. And I don’t know that if I had known now what I didn’t know back then that I would have been up for it. But I got through it. And the answer is that it’s one of the sleepy parts of finance that no one really realizes exists in this public-private partnership space. But I both…all of my buildings that I’m building are getting about 40% of their financing from just government tax incentives and grants. And part of that is because, I mean, think about it Andy. If you’re bringing, if I’m bringing experiential, I’m bringing about 120,000 extra feet to a street in a year.
And if you look at markets like Park City and Sundance, if you look at markets like Coachella in Palm Springs, if you look at South by, in Austin, they all have the same sort of equation. Every year, if you bring about 120,000 extra feet to the street, then that’s going to equal about $300 million added to the local economy, and about $30 million to $60 million added to the tax base. That’s a number that is a game-changer for local governments, and they’re willing to provide, you know, $20 million to $30 million in grant and incentives for one-time payment for the opportunity to get $30 million to $60 million added to their tax revenue. It’s a no-brainer.
Andy: I like those numbers, you know? Sometimes, yeah, you know, public-private partnership, I’m glad when other people figure it out. People like you, Rachel. Because it’s sounds so tough to me. But Kelly, I wanna shift to your background in a second. So, you two ended up being partners, but your background, you know, similar theme. You were in the family office world, but obviously a very different context, right?
Kelly: Oh, yeah. So, I mean, I’ve helped companies raise close to a billion dollars in private funds. And that’s either through high-net-worth, family offices, or institutional partners. And that’s because I grew up in the affluent, in an affluent home. So, you know, my experience being around wealth was comfortable, and so I would teach in, you know, companies looking for capital, how to communicate with investors, and then eventually rolling into teaching investors how to find companies looking for capital. You know, our whole mission is to make alternatives more accessible. It’s been kind of gate-kept from people.
And the reality is, is that it, today, especially, being a millionaire is kind of, like, at the bottom of what you need to do to get involved in alternatives. There’s over 25 million millionaires in the United States, a lot of people that can start investing in alternatives. The problem is is that the information isn’t available. So, when I started my firm in 2020, it was because I was in a room full of people who were managing billions of dollars, and I was the smartest person there, and that’s terrifying.
So, you know, I took the opportunity to start my own firm and give a more boutique experience to investors looking to get into these really unique deals, structured well, with tax incentives, and huge upside. You know, that was what I wanted to do. And so, through that experience, we’ve launched three or four different funds. We’ve, you know, close to $30 million under management today. We’ve done that in 18 months. And being a millennial, female, LGBTQ fund manager, it’s, you know, was said to be impossible, but here we are doing it. And…
Andy: And Kelly, wasn’t your first fund, didn’t you call it your “I Told You So Fund?” If I remember correctly?
Kelly: Yeah, it was my “I Told You So Fund.” Absolutely. My “I Told You So Fund.” And, you know, we’ll have some news coming out about that in about 30 days, so it’ll be a real “I told you so.”
Andy: That’s awesome. So, you know, come from different backgrounds, both, you know, working with affluent investors, big projects. Obviously, Rachel, you’re in New York. Kelly, you’re in Texas. And I think you described yourself to me as a gun-toting lesbian who drills for oil at one point, so…
Kelly: Oh, yeah.
Andy: You’re on to… I feel like, here’s the interesting thing. You both have very similar energy to me, which is, like, the creative, entrepreneurial energy that I love. Like, I just, I sincerely love it. I feel like that’s kind of my tribe, right? Like, my dad was an entrepreneur. It’s just sort of in my blood. And when I’m around creative people, I just sort of feed on that energy. So I love that energy, and I think you both share it, but at the same time, you come from these different worlds. So, Rachel, how did you meet Kelly originally?
Rachel: It’s probably, it’s one of my favorite stories. And I think it actually should be titled “I Told You So,” by Kelly, because Kelly and I met at Sally Krawcheck’s apartment. We were both investors in her Series B. And I just overheard this woman talking about how she was an investor in alternatives. And then I heard blah, blah, blah, oil and gas, blah, blah, blah, ammo, blah, blah, blah, Texas. And I just turned around and walked away. And then I heard her then say, “And we reinvest the dividends into renewables, and also coffee and cannabis, and blah, blah, blah.” And I turned back around and I said, “Let me hear more.”
And then at some point, the gun-toting lesbian comment did come out. And I said, “Stop it. You have to tell me more. Because, you know, if you are, you know, of the mindset of this sort of global progress in certain ways, help me understand how you’re investing in these other things?” And she said, “Rachel, if you wanna see a future that has sustainable energy, that is also profitable and happens more quickly, then we have to get the oil industry on board. We have to get our investors to invest in oil, get short-term dividends, and reinvest them into long-term renewables. And that’s gonna be the quickest way to your goal.”
And it reminded me of one of my family’s favorite quotes, of “Would you rather be right, or would you rather be successful?” And I said, “You know what? I’d rather be successful at this endeavor.” So, we ended up getting dinner. And it turns out, you know, we were really, really more aligned than I ever expected. And I suddenly realized that actually, we needed each other to achieve the goals that we both really shared, and just had different approaches to getting there.
Andy: So, Kelly, how about you? When you met Rachel, you know, for the first time, you know, obviously, you went out to dinner. So, you know, you both come from these different worlds. How is it that you kind of immediately realized that you had this shared vision? Or maybe you didn’t have a shared vision right away, but, like, what were the threads, I guess, that you realized, like, “Hey, we actually have a lot in common. Maybe we should talk about doing something together?”
Kelly: Well, you know, this has, like, been a year-long experience, coming together and figuring out, like, are we doing this separately? Are we doing this together? Are we doing this just parallel to each other? You know, a lot of conversations going back and forth of how this looks structure-wise. That’s what my forte is, is structure. How do you wrap this in the most tax-efficient way? And how do you structure it with the right partners that, you know, everybody benefits? Because, you know, all of my funds are focused on the fact that we get capital from other investors, right?
And that, I feel like, if you’re writing a check, you should absolutely get that upside. And the whole point of wrapping fund on top of fund on top of fund is that by the time the investor gets the return in these opportunities, it’s been dwindled down so much that it doesn’t really matter, when the reality is, is that it is a 40%, 50%, huge return, but it’s not structured well.
So, my background, being in structuring these deals correctly, with the deal flow that Rachel has, you know, has come together in kind of this perfect unison, that creates both tax incentive, tax benefit, and return for the investor, and us as fund managers.
Andy: So, it’s interesting, you mentioned, you know, kind of framing deals or wrapping deals, Kelly. This week on the panel, at our event, you know, I talked about the triple net returns framework, you know, which is ultimately, as an investor, I don’t care about gross returns, I don’t care about nominal returns. I wanna know what are my returns net of inflation, net of fees, net of taxes. I think maybe you’ve taken it past triple net, to quadruple net or quintuple net, but I, honestly, I love the idea of stacking tax incentives. And I almost think you need it, right? Because, I mean, I walk through this example of, if you’re in a bond fund that’s earning 7%, and it’s in a taxable account, and if there’s any management fee above zero, guess what, Jack, you’re negative. Or guess what, Jane, you’re negative, after inflation, fees, and taxes. You’re literally losing net worth.
So, I think, you know, obviously, the Opportunity Zone program, I love that program. But Rachel, what you do is so intriguing to me, because it’s saying, like, “Well, yeah, we’re locking in these tax benefits, what Kelly is doing with structuring things in, you know, a very tax-friendly wrapper.” I think in and of itself, Opportunity Zones are just a great way to grow wealth. But then when you start stacking other tax incentives on top of it, it almost seems like it’s not fair. But you make, I mean, you two make me feel like if I invest in this, that I’m a fantastic person, so maybe I shouldn’t feel bad about it.
Rachel: But you shouldn’t feel…like, I mean, the reality is, Andy, that it doesn’t compute to me that if you provide more value to more people that you shouldn’t get more return. Actually, the opposite should be true. So the fact that we are providing more value to more people is a wider market. Not all of them have the money to pay us for that value we’re creating, and so we had to get creative about figuring out who would pay us for that value. And ultimately, the answer was some sort of fusion, or my favorite word, syzygy, of government, and they, you know, who’s willing to pay for community economic growth? Government. You just have to.
Andy: Well, who has the money, right? I mean, if you’re raising money, it’s like, well, high-net-worth investors and family offices, they have money, has a lot of money. Well, the government has a lot of money. It’s, like, so simple it’s genius, I guess, you know.
Rachel: Exactly. Well, if not simple. It’s actually the thing that you alluded to earlier.
Andy: Simple but not easy. Simple but not easy.
Rachel: Very true. It’s hard. You have to sort of, to navigate this, you have to pull together, it’s like scrap metal. You have to pull together all these scraps of tax incentives, like… And you have to research them. They don’t make it easy. You have to really understand, you know…
Andy: So, what are they really paying for? I mean, what is it, like, with Chicago or any of these cities? Maybe you could give us an example or two of their offering X amount of money if you do Y. Like, how does that actually work, concretely?
Rachel: There’s so many. And there’s more that we’re still gonna tap into post-development. There’s neighborhood opportunity funds that give up to $5 million to retailers to, you know, rebuild their retail locations or expand to a second one. There’s new market tax credits. There’s 4% and 9% tax flips. There’s Opportunity Zone, you know, investments. There’s, every time you create new full-time employment, you get a $26,000 check. I mean, there’s a ton of different… New York, if I build a certain amount of affordable housing, I get 20% of my project financing in cash, up front, right away, not even…you know, free capital. It’s a grant from the city.
And people just don’t know. They’re lazy. They think about things in simple terms. And really, it just requires ingenuity and the ability to sort of piece the puzzle together of what benefits am I creating for what people, and who is incentivized to pay me for that, and how do I create invisible layers to my capital stack, that then actually give me more money for giving more people more value?
Andy: So, if I understand it correctly, you know, Kelly, you’re helping to structure this, not only one fund, family of funds, eventually, in a very tax-advantaged way. And then within the fund, within each fund, rather, there will be diversified projects. Each of the projects, they might be a real estate play, they might be energy, they might be all kinds of diversified, but operating businesses that also stand to get all sorts of tax incentives. So, it’s like we’re investing in operating businesses across the United States, in communities that need them, we’re stacking tax incentives within those operating businesses, and then the operating businesses are inside this other fund that has all sorts of tax advantages. Is that basically the?
Kelly: Yeah. So, if you think about it from the perspective of private equity, which is what I do, right? Rachel knows that… It’s funny, because I don’t like real estate. I think it’s gets boring, right? So, this is how.
Andy: How dare you? How dare you, Kelly?
Kelly: I know. I’m sorry, but this is how you make real estate interesting, is tax…
Rachel: For me.
Kelly: Yeah. Tax incentive and private equity. So, in private equity, your multiple’s 5X-7X, right? You’re coming in growth, equity, or you’re doing some buyout or something. But if we structure that inside of the tax vehicle of our funds, with the element of real estate, and combining that with venture private equity, then you’re taking a real estate investment return, which is 1.5X to 2X if you’re really good at it, right?
Kelly: The return of private equity 5X to 7X, combining them together with a tax incentive. So, you can take a real estate investment and turn it into a 3X to 5X return, tax-free in the funds that we have structured, because we do both the real estate development and the private equity development, inside of, all of it together. And the reason why this, I don’t know why it hasn’t been done before, but investing in general is very compartmentalized, right? You invest in this section, this asset class. But the reality is, is that we’re solving a huge global societal problem, right? Which has to be funded, and the solution built together, holistically. And that’s the whole point of why we have EPIC as part of our funding pool, because EPIC stands for Energy, Public-private partnerships, Infrastructure, and Community. So, EPIC. Because the solutions must be funded and built together, at the same time.
Andy: Understood. So, and you all are investing… So, are you…like, if you’re investing in infrastructure project, or a real estate project, or any kind of operating business, are you finding a manager, entrepreneur, like, an existing project? Because I’m thinking, well, you don’t wanna end up running 20 different businesses, right? Like, you two aren’t gonna scale. So, Rachel, how does that process work, by, you know, identifying projects that are worth including in the portfolio?
Rachel: That’s a great, great question. Well, I’d say, first of all, the one thing that I learned you cannot scale is community relationships. So, I opt usually to co-develop with local, emerging developers, often, you know, minority and female-led development companies. So, you know, we can have access to more benefits, but we also can create sort of capital opportunities for folks that didn’t previously have as much access. And so the idea is we go in, we co-develop and partner with local developers. They already have the sort of support of the community. They help bring community-led businesses that bring the charm to the asset to life, and then my job is sort of bringing national businesses and national capital to sort of subsidize and support.
And in some cases, that’s where we even get corporate social responsibility, you know, marketing budgets to support the local businesses there. And that helps add even more layers to the capital stack. And that’s how we’ve sort of scaled the revitalization aspect of this real estate. In terms of the industrial, I think, to Kelly’s point, we’re looking at both investing in the businesses as well as the real estate. So, we do a lot of research about what emerging businesses are best suited for zones that don’t necessarily need to have so much access today to, you know, public transportation and being in the center of a city and stuff like that. Something that can create jobs, create foot traffic, create an economy, that actually benefits from having sort of less-expensive, tax-incentivized real estate, where a government would really be willing to put a lot of incentive in there for us to be there and for the business to be there.
And in that way, we’re able to control all the levers that can affect a business’s growth and a development’s growth, because if the business succeeds, the development will succeed. And if they both succeed, then whatever power infrastructure we help support the build of, whether it’s battery storage, or energy from waste, they will be necessary and high in demand, because we will have succeeded increasing the population and economy, and the demand.
Andy: I love that idea. And, I mean, it’s interesting that you two are focusing on this. I don’t even know what verbiage to get it. You know, I might call it, like, a real estate-heavy operating business, but just the idea that you might be developing or purchasing real estate, also investing in the business, and then you’re kind of saying, “Well, I know I have a good tenant, or at least I have visibility into what’s going on with the tenant, because it’s an operating business that we own, you know, and vice versa.” Like, I have a good…
So there’s just an alignment of incentives. But what kind of operating businesses are we talking about, right? Because, I mean, when I think about real estate, I mean, Kelly, in a way, I agree with you. Can be kind of boring. You know, you might be looking at a 2X equity multiple. And you’re right. Yeah, I mean, you have to be really good, even to get that. Operating businesses, to me, are inherently more interesting. Gonna have a much higher failure rate. But then when you get a winner, sometimes it can be, like, a big, big winner, right? So, what kind of operating businesses are you attracted to, do you wanna invest in?
Kelly: So, there’s a shift happening from how real estate was being developed the last 10 years and what’s happening now, right? Money’s expensive. So you can’t just, like, plop an office building or a warehouse in the middle of nowhere, and, like, take time to, like, find a tenant, fill it up, and then refinance and move on to the next project. You just can’t do that anymore. You have to be, like, more purposeful in the real estate you’re developing. So, the projects we’re building are wanted, and needed, already. So, we’re not building a shell and hoping to fill it. Like, there are… The turtle’s there. We just have to fix it, to fix the turtle’s shell. And…
Andy: I like the turtle analogy.
Kelly: Yeah. Like, it’s just a naked turtle. Needs a shell.
Andy: So, I mean, but that’s kind of the Warren Buffett, is, “I look for the 1-foot fence that I can walk over, rather than the 3-foot fence that I have to jump over.” So, it’s almost, you’re looking for a business need, where a business requires the real estate, and then you’re saying, “Well, I have a built-in tenant from day one, if I develop this asset, or purchase this asset.”
Kelly: And an infrastructure. So, infrastructure is a huge part of what we’re doing. So, we have two funds going simultaneously, one focused on Opportunity Zone, and one focused more on this really big, EPIC, big-picture thing, and, which is gonna tackle more of that infrastructure, long-term impact stuff that’s attached to this trillion dollars that are being invested in infrastructure projects. My background in oil and gas, and then our cumulative network of energy people in our lives, you know, building energy-from-waste facilities, power sources, battery storage, the future of energy, through these projects. So, when we’re talking about building a piece of real estate in the infrastructure space, building a power plant, no matter what it is, is going to make an entirely new economy outside of the city, and everything that needs to go with it.
Rachel: And if you think about, like, a building that has…so all of our…like, the buildings I’m building in Chicago are either passive house and solar-powered and all that stuff. And if you think about, if you had a completely self-sustaining building, with solar and battery, I don’t have to pay for energy ever again. I’m self-sustaining. So, what does that mean? I can raise rent, because nobody in my building has to pay for energy or power. That’s a 30% cost savings. It’s huge. And so, it’s, like, you know, it’s really, really, really powerful, pun intended, to have sort of not just the ability to self-sustain your power grid, but also the ability to sell power back to the grid, as a revenue line item.
Andy: Yeah, I mean, it’s interesting. What I like about it is it’s not, you know, it seems like you both are very flexible and kind of open-minded right? Like, you’re talking about solar, talking about alternative energy, but you’re also flexible about energy investment, right? Like, our nation needs a variety of energy sources. Like, that’s just the reality, even geographically and regionally. There’s not a one-size-fits-all solution. So, Kelly, I honestly think you’re almost a thought leader in this. And, I mean, well, Rachel apparently agrees, just because you come from this, you know, Texas oil and gas world. And I think if I asked you, “Well, do you wanna invest in oil and gas or do you wanna invest in alternatives?” your answer is “yes.” Is that right?
Kelly: Absolutely. I mean, you have to. I mean, we use so much energy. And again, it goes back to the oil and gas does more than your electricity, right? Oil isn’t everything. And you can’t transition from that overnight. It’s impossible. Especially if you look at it from the global sense. Like, there’s 8 billion people on this planet. You think that we’re gonna go to electricity tomorrow? Yeah, right. There’s still people trying to figure out how to use coal more efficiently, you know? Like…
Andy: Yeah, well, and from even the social justice perspective, you know, poor, lower middle-class people, they need access to cheap energy, so I think you do kind of, regardless of political beliefs, you know, you have to balance those needs of lower-class, working-class people need access to energy, right, for any sort of sustainable lifestyle. So, it’s not happening overnight, right? And it’s pretty rare. You know, a lot of times, people will be in this one extreme camp or the other extreme camp, with renewables versus, you know, oil and gas.
Kelly: We’re incentivizing the good behavior. So, we’re incentivizing oil and gas investors, by showing them that their investment dollars, yes, we’re great in oil and gas, but can be better in renewables. And so, transitioning them into that. So now, “Oh, I can make money in renewables? I’m gonna start investing heavily in renewables.” Then you see the transition happen, and then you subsidize that for those that can’t invest in those power sources, by just giving it to them. And if you relieve them of that burden, they’re able to do more, because they have more money to spend into the economy, or they have time and less stress, right? Because everything’s tied to money. When you’re worried about money, you can’t do anything else. Then you’re creating more opportunity for people who would otherwise not have it because they can’t…they don’t know when and where they’re gonna be able to turn their power on.
Rachel: And the reality is that while it’s more expensive up front, sustainable energy infrastructures begins to be more cost-effective after 20 months.
Andy: Yeah, and, you know, these types of technologies, obviously, they become more efficient over time, right? So, it, you know, Kelly, that long-term mindset, I really like that, because it’s, like, first generation of this, any type of energy, it’s generally not gonna be very efficient, right? But one thing you both alluded to, I don’t know if you’ve used the phrase yet, but Rachel, maybe we did in our prep call, “investing across the aisle.” I think we’ve already kind of alluded to it here, which is a little bit more of a…how would I describe it? It seems like you two have, like, a big tent, which is, like, “Well, look. We’re trying to align incentives and show you how we can invest in multiple things, have these be profitable, in a way that’s win-win for communities, but it’s also gonna make you a lot of money as an investor.” That seems to be a very popular message, right? But, you know, do you find that you’re getting buy-in for your ideas from, you know, across the political aisle, across the, you know, geographically? Can you talk about that issue?
Rachel: Yeah. I mean, I think, first and foremost, we’ve been living in a world, all of us, where we feel that we’re incredibly divided and polarized in where we wanna go, but if you poll most of Americans, most want the world to be, you know, the country to feel safer for communities to grow and to develop economies. And everybody wants the same outcome. And so, I think what I’ve learned from my partnership with Kelly, that’s been really beautiful, is that if you understand what the goal in mind is, the tension between how to get there is probably the answer, not the obstacle.
And the fact is that, between, like, loose tax laws, and, you know, sort of more hands-off laws around businesses and what they can do, and tax incentives that help support and fund and aid the ability, and incentivize the ability for us to do those good things, are just double the amount of flexibility and funding for, at our disposal.
And if we actually get to the lowest common denominator of our goal, which is to have a healthy, happy, sustainable, future for this country, which is, I think, all of our goals, then the question isn’t,
“Do we disagree?” We don’t disagree. The question is, “How do we get there?”
And so, she and I have these amazing educational conversations that sort of braid together our thoughts. And it’s been a beautiful lesson to me that we’re actually not all that different, and we should come to the table together, to try to just agree on how we can use our different strategies to get twice as far twice as fast. Like, if you imagine two horses pulling a cart, if they’re pulling in different directions, the cart’s gonna get split in half. But if they’re going forward together in the same direction, they’re gonna go twice as far, twice as fast. And I think we really found that special sauce together.
Andy: Kelly, what do you think? I mean, you know, I might say, “Well, Texas is red, and New York, New Jersey are blue, but money is green,” right? So, forget purple. I think green is the universal color.
Kelly: I’m a, absolutely, green is a universal color. I say that all the time. It doesn’t matter. Like, money is green. And, of course, we’re not investing in New York, but…
Rachel: That’s true.
Kelly. At least not for now. Kind of, our strategy is to, again, with this public-private partnership, right, in Texas, focusing on the infrastructure and energy part of our investment thesis makes sense because we have less red tape. We have a lot of incentive from the state to build these types of projects. And, you know, because we’re women and minority-owned and managed, we have access to the funds that aren’t available to other people in our space investing in this space. It’s our competitive edge, fortunately.
It hasn’t been for many, many, many, many, many years. But in the last probably five years, like, being a woman at the leadership table is our advantage. And we get to profit from that. And then, obviously, investing in Chicago, which is where a lot of our first break-ground projects are, we have kind of a blend of that, kind of loose regulatory stuff, but also a lot of incentive to be there, and to develop our projects. So, you have to kind of put your ego down. I think investors are starting to invest that way now. I mean, I’ve been doing this for over a decade, and the shift in the investor mindset has been dramatic in the last three to five years. Impact is definitely at the forefront. Everyone hates ESG, but they want it in their portfolio. You know, what does it even mean? And we’ve kind of taken away these kind of ostracized terms that people don’t want to talk about, impact investing and ESG investing, and said, “You don’t have to put a label on it.”
Andy: Exactly. Exactly. Because if you call it ESG, then I’m already, like, my guard’s up, right? But just, when you talk about stacked tax incentives and diversified energy, I’m like, “Well, this sounds great.” So, I totally agree. The label, it’s more than likely just going to be a blocker for… It doesn’t help. It doesn’t help at all. I mean, and I think it’s, to me, these labels, a lot of times they serve an institutional purpose, right? But, you know, your capital base, at least as I understand it, at Alternative Wealth Partners, has historically been more high-net-worth individual investors, family offices and the like. So, you know, it’s like, if you don’t need that institutional baggage, just junk it, right?
Rachel: Right. And while we’re targeting probably more institutional as we grow, I mean, obviously, the EPIC Development Fund is a billion-dollar fund, so there’s going to have to be institutional checks involved. You know, but we just naturally check those boxes because of our strategy and who we have on our teams, that we don’t have to slap an ESG label on it. We just don’t have to. Just by doing what we’re doing, we qualify, on the institutional level, as an impact emerging fund or an ESG fund. And we just don’t have to advertise that way. Because we’re just doing what we’re doing.
Andy: Yeah, no, I love it, because it’s totally the very, you know, the forced marketing and the PR state… You know, that’s the stuff that annoys people. You know, when you’re you being you, that doesn’t annoy anybody. Like, people get energized by hearing about this in the story.
So, we’re gonna do a follow-up episode at WealthChannel on the fund itself, you know, or the family of funds, I should say. But could you, you know, I know we’re almost out of time, but could you tease us, give us a teaser, I suppose, on what’s happening next? You know, you’ve mentioned multiple funds. One of them is gonna be structured as an Opportunity Zone Fund. I know maybe there’s probably a quiet period for some of these things, but can you kind of walk us through, for the investors in our audience, the family offices in our audience, what can they look forward to hearing about?
Rachel: So, and I think, Kelly, you’ll probably add a lot more on the infrastructure side. But from the development side, I think what we’re really excited about doing is, typically, if you look at an Opportunity Zone fund, if you look up what the average return or levered IRR, it’s about 7%. We’re actually targeting an above-20% levered IRR with our Opportunity Zone Fund, because we’re not gonna use, you know, we’re not gonna go in, acquire land, take government funds, and sit on the asset for 20 years and wait for gentrification. We actually know that it’s much faster to build foot traffic right away. We build the entire building around a program. So, we pre-lease the building. Before we even acquire the land, we have already decided who the tenants are gonna be, and we build it with them, in partnership. So, it’s revenue.
Andy: But this is, like, forced appreciation, you know, essentially?
Rachel: Yes. And the idea is to have an outsized return much more quickly than people had expected. Because if you drive that foot traffic, those numbers I put up at the beginning, those numbers are real. And then, what I didn’t mention at the beginning is that the real estate market in all those markets I mentioned, between Austin, Palm Springs, and Park City, all have the same growth rate in the same amount of time, 200% in under 10 years. That’s a lot faster than most Opportunity Zones, a lot faster than gentrification.
And so, to Kelly’s point, you know, the turtle and the shell and all of that, the way I sort of look at it is, most people build pretty buildings and hope wealthy people move in. Well, that sounds really expensive, and really limited. Everyone’s already targeting that market. And it’s a lot of waiting. We instead prefer, instead of building pretty buildings and hoping wealthy people move in, we try to build wealth, and then hope they make our buildings appreciate.
Andy: Understood. Well, Kelly, talk about the structure a little bit, because when I hear 20% IRR, I mean, I imagine most of our listeners, everyone’s like, “I’m listening,” you know, but then I’m thinking about, okay, if that’s in an Opportunity Zone Fund, which is, like, a kind of like a super Roth IRA, I mean, when you start stacking that kind of return in a tax…any kind of tax-advantaged, and, you know, investment wrapper, gets really exciting, you know, really fast. So, how are you… You know, talk about the wrappers. You know, there’s gonna be multiple funds. Can you tell us anything about those funds right now?
Kelly: Sure. So, the first fund is the EPIC OZ Fund I, and that, it’s gonna be strictly an Opportunity Zone Fund, because one, we already have projects that we’re gonna be breaking ground on this year. So, it’s not like, “Oh, let’s go find the projects.” We absolutely already know where they are, and they’re ready to go. We’ve separated off this piece of the Opportunity Zone Fund from the EPIC Development Fund, which is the billion-dollar fund, kind of to incentivize the separation of the Opportunity Zone Fund from the business and the venture and infrastructure projects. One, because those, most likely, some of that won’t be in Opportunity Zones, so we wanna make sure that we’re getting the most benefit from being in Opportunity Zones through the Opportunity Zone Fund.
So, the EPIC OZ Fund, all OZ, and we’re offering investors a 40% discount into the development fund. So, it’s a huge incentive to get involved with us right now on the OZ fund, so that you can have that discount into the larger Opportunity Fund, that is a billion dollars, because we’re targeting $250 million, $300 million infrastructure projects that we already have earmarked for that. And we’re…
Andy: Why not do something big, Kelly? Why not do something big?
Kelly: I’m sorry, the $10 billion fund. No, we’re just taking our piece of the pie. And when we started putting together these projects, you know, I’ve always been a billion dollars from day one. And it’s been taking some warming up for Rachel to get there. So, our…
Rachel: Just go like Dr. Evil, you know? It didn’t sound…
Kelly: When you’re talking about infrastructure projects, I mean, an energy-from-waste facility is a $250 million investment, on a minimum, okay. But the return potential on the energy-from-waste facility is $100 million to $150 million a year in profit. So, net. So, we needed a bigger fund for that. And so from day one, I’ve been, “billion-dollar fund, billion-dollar fund, billion-dollar fund.” But, our compromise was, “Okay, we’ll also do $150 million OZ fund, just for you, Rachel.” So…
Rachel: This is how we reach across the aisles.
Kelly: Yes. So, there’s an incentive for investors to kind of come along this journey, because it’s gonna be a long one. I mean, we’re talking about a 10-year commitment here. But the way that we have this structured and the types of projects we’re targeting, we absolutely are anticipating cash flow from your Opportunity Zone Fund.
Andy: I love it, and, you know, I think I call the Opportunity Zones program the best program with the worst name, but my business partner, Jimmy, I think he calls it the greatest tax incentive in the history of the United States. And, you know…
Kelly: Besides oil and gas.
Rachel: I was actually gonna say…
Andy: Well, it’s up there. So, you know, I love it. We’re, you know, to our viewers and listeners, we’re gonna have a follow-up episode on WealthChannel where we dive more into the funds, and, you know, some more of those details. And I know that Kelly and Rachel, you and your team have some announcements coming up. So, I want everybody to stay tuned for that. Rachel, in the meantime, where can our viewers and listeners go to learn more about your company, as well as, you know, this project?
Rachel: Absolutely. So, this is gonna be my opportunity to teach your audience a new word, because I’m gonna have to spell it for you. You can go to www.syzygycities.com. And that is S-Y-Z-Y-G-Y, and then the word “cities,” C-I-T-I-E-S .com. And syzygy is an astrophysics term that means the perfect gravitational alignment between, usually, planets, three planets, or more. Usually the Sun, the Earth, and the Moon. But in my business’s case, it is the business, government, and community alignment, for maximum outsized returns. And that’s why, you know, we’ve named the company that. So, syzygycities.com, or you can feel free to follow us on LinkedIn, or Instagram, or any of the above, which would also be syzygycities as our handle.
Andy: I love it. And I love the brand name, for the record. And Kelly, as a reminder, where can our viewers find you and Alternative Wealth Partners?
Kelly: alternativewealthpartners.com. If you wanna know more about me personally, you can go to my personal website, kellyannwinget.com. I have a book on there now, so you can go find out even more.
Andy: And you also have a podcast, which I subscribe to, so…
Kelly: I do have a podcast. Yeah, “The Wealth Alpha.” So, if you wanna hear me rant about things going on in the financial world, please join us.
Andy: I love it. I love the energy. Thank you both ladies for joining the show today. Really, you know, your insights, but also just your positive energy, your creative energy, just, I personally just feed off of it. And again, for our viewers and listeners, we’re gonna have a follow-up episode after this one. But thanks again for joining the show today.
Kelly: Thanks, Andy.
Rachel: Thank you, Andy.