Cole Shephard joins us from Columbia to speak to international investments and DonnaMarie Baldwin discusses the ever changing opportunities in real estate investmenting

Episode Transcript

Intro:

Welcome to the Practical Tax podcast, with tax attorney Steve Moskowitz. The Practical Tax podcast is brought to you by Moskowitz, LLP, a tax law firm.

Disclaimer:

The information contained in this podcast is based upon information available as of date of recording and will not be updated for changes in law regulation. Any information is not to be considered tax advice or legal advice and does not form an attorney/client relationship. Further, this podcast may be construed as attorney advertising. You should see professional consultation for your individual tax and legal situation.

Chip Franklin:

Hi, welcome to Practical Tax with tax attorney, Steve Moskowitz. I'm Chip Franklin. Today, our first guest is Cole Shephard from the Legacy Group. Cole, thanks for being here. You represent a group of investors, international investors, essentially. Right?

Cole Shepard:

That's right. Typically, we invest in early stage companies, or we found early stage companies here in Columbia. We focus on impact-focused investments, impact-focused companies. Our biggest company that anyone would've heard of is called the Green Coffee Company, which is a company that we founded about five years ago. Which, in the past two weeks, has become the largest coffee producer in the country.

Chip Franklin:

Wow.

Steve Moskowitz:

Very nice. And as Cole, I'm sure knows, there's all kinds of special benefits, economic, financial, and tax, by investing outside of the country. That makes this extra interesting.

Chip Franklin:

Is that right? Do most people know what you just told me?

Steve Moskowitz:

No, they don't. What's a sad and a shame, I had been a professor for 10 years and I'm always trying to help people, and I've dedicated my life to this. So I want to say, "Hey, let me tell you some things." Most people are walking through an orchard full of wonderful tax fruit, but they never look up into the tree. They're too busy looking at the ground for something that may have dropped on there. And there's so much available.

Chip, no, most people don't know. When I tell them about it, usually their first question, "Is that new?" And I say, "No, it's been around for years." "Well, how come my last guy didn't tell me?" I say, "Well, that's why you're here."

Chip Franklin:

Let's talk about agricultural investing. Cole, what does that encompass?

Cole Shepard:

Sure. So biggest project, like I said, was Green Coffee Company. What you're seeing is a lot of especially high net worth individuals in the US worried about inflation, worried about what's happening with US government just printing capital in Washington, and they're looking to get their money diversified out of the US dollar into other countries.

So what we've seen is a huge uptick in high net worth individuals going after farmland. Right? Certain high net worth guys will go out and buy five, 10 million of farmland, and then they'll hire an operator to run it. And it'll be similar to what you'd see in a multi-family deal or something in commercial real estate. What we do a bit differently is we structure in a corporate structure.

So we're actually buying ... when you invest with us, you're investing in a whole enterprise, or a company, an international conglomerate. And then we structured basically to do one of two things for investors upon an exit. One is a private company sellout, which a logical acquire for someone like us will be someone like JAB Holdings, Nestle, Starbucks. Or we put it on a dual track to be able to IPO on a US market.

Steve Moskowitz:

And, Chip, something else. Especially now in the time of inflation, you have a situation where the dollar today may not be worth what it is tomorrow. But a company, physically, the physical asset, the company is worth it regardless of what happens to the currency. That's also another attraction.

Chip Franklin:

So, Steve, when you invest internationally, how much does a currency consideration play into that?

Steve Moskowitz:

And, also, another thing that some companies do is ... what they'll do is they'll do hedging, where if you're doing a contract with a company in a currency other than US dollars and you say, "Well, I don't know which way the currency's going to move. I could make money or lose money. And I'm in the business, not of finance, I'm in the business of the product." You go to the bank and, basically, you buy a future. And then what happens is, with the future, if the currency moves the bank takes the risk. And that's something that you buy from them. So that's something else you can do. So if you're worried about that, there's an easy way around it.

Chip Franklin:

All right. So this next question is for both of you guys. Does the value of the currency always reflect the value of the investment?

Cole Shepard:

I'll take that one first, Steve. If you don't mind?

Steve Moskowitz:

Great.

Cole Shepard:

I would say it always depends on the currency that you're trying to ... if you're going into a hedge position, or you're going into a position that says, "Look, I just want to take a long position on this currency." So certain of our investors will look at a COP rate that is historically just getting crushed versus the US dollar.

Our high net worth investors are primarily all US investors, so they want to diversify out of a currency. And some of it is just, I feel comfortable with the collateralized asset. And I feel comfortable that the Peso is undervalued, and they just want to ride that [inaudible 00:04:39] uptick. And then that would be the whole business thesis for them, or the profit thesis, and they'll be comfortable with that.

Chip Franklin:

Is that a quarter to quarter thing?

Cole Shepard:

I would say it's not a short term position. Usually when you have guys investing in alternative assets, especially private equity, they're taking the longer term view. They wouldn't invest in a company like ours if they don't have a four to nine year time horizon, which would be consistent with any GP/LP private equity fund that you'll see.

Short term positions, that's more currency trading. And that's something, if you're not in the business of currency trading, it can go the wrong way real quick with your capital if you don't know what you're doing. I would always recommend taking a long term position if you feel strongly about one currency or another. Unless, of course, you run a trading desk at Citibank.

Chip Franklin:

Steve, we've talked a lot about accredited investors. Can you define it for us?

Steve Moskowitz:

An accredited investor is someone that the Congress and their infinite wisdom basically says should know better. This is not grandma putting her life's savings into some [inaudible 00:05:49] or some risky stock. This is, basically, a sophisticated person that either knows what they're doing or should know what they're doing and they understand the risk.

Basically, on the one hand, the Congress is trying to protect the unsophisticated investor from losing their money, but not hampering somebody that says, "Look, they're sophisticated. They know what they're doing, and they're willing to take the risk because there could be a tremendous return." Essentially, that's how I would explain it in English.

Chip Franklin:

I love the sarcasm of the infinite wisdom of Congress. Here's a question for you guys. When a person goes to invest, is it true that you have to know more than just their portfolio? You also have to know and understand their risk tolerance?

Steve Moskowitz:

Chip, that is super important. The banks call it, "Know your customer." And, as attorneys, the example that I give is I could have twin siblings in my office that are identical in all respects financially, that have very, very different wishes. One person could be very conservative. One person could be a risk taker. One person is concerned with their kids and their grandkids. Somebody else said, hey, they don't even have any kids so much less. They're not planning for them.

So I always ask clients, "Tell me what you personally want. We'll figure out the taxes and the dollars later. Tell me what it is you want to do." And then my job is to achieve their goals in the best possible financial tax way.

Chip Franklin:

Cole, what do you guys have for accredited investors? Is it international only? Or is it also domestic?

Cole Shepard:

Most of the assets, let's take Green Coffee Company for instance, it's a Delaware holding company with all the subs held by that holding company. It's a typical international corporate structure, headquartered out of the United States, with substantial assets outside. For our investors who are all high net worth US, all accredited, just like Steve said, all of our offerings are 506(c) Reg D's. So we only accept accredited investors. We can't take, as much as you'd like, if grandma comes to you and she only has 5,000 dollars to invest, we're not allowed to take that cap. But, really, most people use the net worth accreditation. Most of our investors are worth minimum five million, upwards of north of a hundred million dollars.

Chip Franklin:

Wow. Cole, what is impact investing and why is it so important?

Cole Shepard:

So I think you're going to get differing opinions on who you talk to, if you talk to the Larry Fink at Blackstone, or some of these other guys. To me, it's about investing in companies. One, that you're proud of. And then, two, that are changing some kind of business in the world for the better. So the three that I would always say are probably the most important that you're going to see are environmentally focused. I think you'll see a lot in, especially with coffee and what we do,