Transcript

Paul:Well I suppose, uh, my lifelong passion has been investing in so that fits in nicely with the Qualified Opportunity Zone space. But my, my father's savings and loan went public in 1986. I was nine years old like some of these guys on Wall Street into my early earliest trade was at a young age, right? Single digits, not even yet, 10 years of age, but enjoyed it. Loved it. And um, from there things progressed. By the time I was 15, I had a little pager that I carry with me to middle school and I had real time stock quotes fed to me. Trading in derivatives. 
Announcer:Attorney Paul Wassgren was an investor in long before he ever started studying law. His background as a trader and an investor as well as his broad legal experience gives him insights into Opportunity Zone investing. The few people anywhere can match. Paul Wassgren of DLA Piper is our guest on this episode of the OZExpo Podcast. 
Announcer:Welcome to the OZExpo Podcast where we talk with the people who really know the Opportunity Zone market. From investors, fund managers and developers to tax experts, politicians, and attorneys. The most influential voices in the Opportunity Zone industry are here on the OZExpo Podcast. 
Jack:Welcome back everyone to the OZExpo Podcast. I'm your host, Jack Heald. And joining me today, my guest is Paul Wassgren, who's a partner at the law firm of DLA Piper. Paul, welcome to the OZExpo Podcast. 
Paul:Jack, good morning. Thank you very much for having me. 
Jack:I always start my interviews by finding out about who it is I am talking to. We like to know who you are and where you came from. So, this is the first set of questions. Who is Paul Wassgren? Where did you come from and how did you get here? 
Paul:Well, Jack, I hail from the American Midwest. That would be that large a fly over jurisdiction between California and New York, by the way, for those geographically challenged. I, I've lived in Los Angeles full time now for nearly seven years and having practiced, uh, uh, in Los Angeles, both, uh, during that time and, and, uh, prior, uh, I guess California is home for me. And it's certainly been the base for my legal practice the last many years, as I said. Uh, that said, like you, I have spent some time in the desert. I was a partner at a firm and in Nevada, uh, having lived on the wrong side of the cactus curtain. I know what you're talking about. When you talk about school days. 
Jack:The cactus curtain. 
Paul:Yes. Yeah. Not My phrase. That was, uh, something that I picked up from the general counsel of Raytheon many years ago, but, uh, that, that is a, that is my geographic story. Obviously I've lived elsewhere for educational reasons and career reasons, but Los Angeles is home and I, and I love living in the southwest, but I do travel both for work and for pleasure. And so I appreciate other climates as well. 
Jack:You've got a pretty diverse background in terms of your practice of law. Tell us a little bit about that kind of the general, the general stuff, and then we'll, we'll zoom in on the Opportunity Expo stuff. 
Paul:Yeah, happy to flesh that out. I'm really not a tax attorney. This, this is a rare exception to my practice. So the QOZ space obviously touches and concerns U.S. Federal tax a great deal. But most people would describe me as a corporate or transactional partner. And perhaps somewhat uniquely, uh, to my practice. I've always been at the intersection of three practice areas, real estate, corporate and securities. And so the real estate syndication space draws on each of those three practice areas. And that's really then the focus of my legal career for the last 15 years or so. And naturally, the QOZ space fits perfectly within that intersection. So there is an element of tax, but more my approach, um, is from the transactional perspective. And I'm supported of course by a huge battery of tax attorneys here at DLA as and when needed for my deals, 
Jack:Well, I'm just embarrassed I called you a tax attorney and you're much more interesting than that. 
Paul:Well, who knew the tax code could be so exciting? But everyone's very interested in this topic. I think, uh, it's given a new lease on life for those who are tax partners. 
Jack:You know, it's actually, I have shocked myself because I've interviewed a number of tax attorneys know, specializing in the QOZ and, and it really is fascinating stuff. I always thought that was literally the single most boring about profession in the history of the world. And as I talk to these people, I'm like, oh, I get it. I get it. There's, there's, there's a puzzle solving element to it. All right. So, um, you're excited about the Opportunity Zone. Um, you know, when we first, when we first spoke, before we started the podcast, it was obvious that you've got a good deal of enthusiasm about it. I'm just going to open the floor up here. Talk to us about, um, your, your, um, how you feel about what's happening with the QOZ program, where you've gotten involved. I've seen if, uh, the research that I've done is correct. You've already completed three or four projects, a QOZ projects. So, to tell us about that. 
Paul:Well, that's right. I have unbridled enthusiasm as many do for this space. I think it's very exciting. Uh, I know Scaramucci by the way, but I'd like to believe I can display a degree of enthusiasm for something like this. And I look forward to meeting him of course at the expo later this week. 
Jack:Yea. 
Paul:But in advance, let me say that yes, we, we've closed a number of transactions. I have several on my desk now. We're trying to close one in the next few days, not withstanding the expo, which stands in the way of me and closing. But let me talk a little bit about what we've seen and where the shift may take place in light of the recently proposed rules and regulations. So when we started this in mid 2018, uh, the act of course was six to seven months old and we were anxiously awaiting the Treasury's promulgation of the first rules and regulations, which didn't come out until mid October, as you'll recall. 
Jack:Right. 
Paul:So, we were doing some work for clients interested in the space in advance of that. Now that's a dangerous business for any lawyer, of course. 
Jack:Yea. 
Paul:So, we basically held our powder dry and the moment that the rules and regulations were released, and again these are just proposed, but we are allowed to rely on them for the most part. Um, we had clients say, okay, go ahead and push print. So we quickly wrapped up our first blind pool deal on November 1st this was for a long term client of mine that was very interested in this space for variety of reasons and they in fact closed on their first acquisition of real property on November 2nd the very next day. So they're off to the races. This is a Florida based group. Then we've done a series of deals in the QOZ space. Almost all of them are single asset deals. 
Jack:Okay. 
Paul:Meaning that though we describe it as a fund, the fund consists of basically one asset and real estate in this instance. 
What we're going to see if I can have it now in light of the recently released second proposed rules and regulations, I think we're gonna see more non real estate deals. So we have enough clarity now from the Treasury, uh, to go ahead and structure deals that are not real estate specific. And I think there's a lot of enthusiasm in Silicon Valley, um, some of that generated by, you know, our evangelization, you know, and I go up there or when I have correspondence with folks in positions of some influence up there, there is a degree of reception, uh, in fact very warm reception to this idea. People have made a lot of money in Silicon Valley and this is a great way for them not to pay a full amount on, on the tax.  
And furthermore, to create structures going forward where they may not be subject to tax, at least at the federal level. Obviously in California we're still challenged. We, we don't have parallel legislation just yet, uh, to avoid the state tax piece. But, um, in, in a nutshell, that's kind of where we've been over the last six months. And again, we've gotten deals stacking up I think, um, across a variety of, of real estate property types. Um, there's certainly a lot of enthusiasm, um, around students housing. Um, multifamily... 
Jack:Yeah, I'm seeing that. 
Paul:And I think people are being smart about this. They're not doing bad deals just to save on the tax bill. Um, what I've seen, at least with our clients, and this may or may not be a representative sample, uh, we're seeing very smart operators, smart sponsors and developers and smart investors putting their money in good places. And the, the tax piece, um, driven by the QOZ legislation and the rules and regulations promulgated there under is really just the icing on the cake. 
Jack:You talk like my favorite? Uh, I'm just, I'm fascinated by the precision of your speech right now. I, I'm sorry. I know this is completely out of left field. Um, I'm a huge fan of the old TV show, Boston Legal and I swear as you were talking, you reminded me of the, of the James Spader's character Alan Shore just, 
Paul:well, I am no Alan Shore and I am no Danny Crane either. I think he was the other character. 
Jack:Yes. 
Paul:But it was a good show many years ago. In fact, I lived in Boston at the time. 
Jack:Oh, did you? 
Paul:So, I appreciated the show? I didn't see it until after I left Boston. But I, I, uh, I share your enthusiasm for the program and wish it were still on the air. 
Jack:You are so articulate. And your speech, not just the words that you choose, but your pronunciation is so precise. Okay. So that, that leads me to this place that we're getting to sooner than I'd anticipated, but that probably just has to do with the bizarre way my own brain works. I see that you matriculated at Max. Good Lord, let's back up. Matriculated at Oxford. I'm normally better than this. 
Paul:Well your very articulate too. And by the way, that's my corn fed Midwestern upbringing, I'm sure. Right? But I did matriculate, uh, many years ago, half a lifetime ago, in fact, uh, at Oxford and a greatly enjoyed the experience. So for a corn fed mid Westerner like Paul Wassgren, and I think Oxford was an interesting place. I'd like to believe they beat some good manners into me over the course of my many years there. Uh, we won't say anything about the weather or the food or the dentistry, but a England is great place aside from those things. 
Jack:Well, we were there at roughly the same time. It looks like I wasn't at Oxford, I was in London, but yes, I'm in violent agreement about the food. Um, so what was it like for a, for a boy from the Midwest too, make that, that switch from, from cattle country to the pastoral fields of Oxford, England? 
Paul:Well, it was a bit intimidating, isn't it? Because you're sitting there being tutored by the world's expert in whichever subject it might be, contract property, law, et Cetera. So it's definitely an intimidating experience. And for the first time in my life, I was surrounded by kids who I thought were incredibly bright, far brighter than I. So, it was more of a challenge academically, but, but a good challenge and I survived, uh, for better or worse. And um, look back on it quite fondly. Made great friends. Again, nothing about the food or the weather, but the experience overall was, was a irreplaceable and many of those same friends are, uh, my best friends to this day. In fact, I'm having dinner tonight with a friend who's in town from New York. He is a reformed lawyer now working for a large hedge fund. And um, yeah, 
Jack:I'm not sure that's technically a reformation but carry on. 
Paul:Indeed, a more lucrative a pivot in his career. 
Jack:Oh yeah, there you go. 
Paul:Um, but, uh, David and I have been friends for, again, most of our lives now at this point. And um, we met back in the 1990s. 
Jack:Great. You were at Magdalen, is that right? If I recall correctly, that's where C.S. Lewis was a fellow. 
Paul:Uh, among many others. Yes. Magdalen is among the more famous, so the Oxford colleges and I was there for my entire time a great experience and I think that was a large part of the favorable review that I would give Oxford University. It's all very collegiate specific. If I had been elsewhere, my experience might not have been as robust, but the college, uh, drew my attention. It has a particularly strong track record in training or creating jurists. And so for a young lawyer or aspiring law student, that was I think the best choice. I remember interviewing with the tutors who grilled me for an hour over a case that they allowed me to read for a few minutes beforehand and they, uh, further intimidated me by saying, well, you realize Paul, two of the nine members of your U.S. Supreme Court are educated at this Oxford College as when your senator from your home state of Wisconsin, Russell find gold. So, uh, it was an intimidating experience, but I survived. If that wasn't enough, by the way, they, one more story. They, um, they had me room my third year with a member of the British royal family, 
Paul:[Inaudible] 
Jack:Oh. Lovely. 
Paul:Yeah. 
Jack:Wow. I know that the American law is based on English common law, but it's not the same. So, you started your, your legal education, um, in, in the British system. How does it differ from the American system? Uh, I don't have your bio in front of me, but it looks like you got your, you actually, um, your undergraduate was in, what was it? Jurisprudence? Is that the what the, the phrase that it used? 
Paul:Well, yes. So in, in England and Wales, uh, the, the phrasing is a little different. You know, hot is cold, left is right. All that good stuff. You lived in London, but in Oxford and in Cambridge they have a slightly different nomenclature. It hails back to Latin. And so the first degree in law is called a baccalaureus artibus [inaudible], a bachelor of arts in jurisprudence. And so that looks like an undergraduate degree, but it is up to, right. That's the functional equivalent of a juris doctor where JD United States the JD nomenclature in the United States at the ABA accredited law schools uses a little bit of a fiction. It's not a doctoral degree. It is a first degree in law. So all these jurisdictions used to use the same, same language, bachelor of laws, right. LLB. 
Jack:Uh huh, right. 
Paul:And so, a lot of the senior [inaudible] even in the United States, will have that credential. Not a JD, but the, the nomenclature has changed in the U.S. And again in England it was always LLB with the exception of Oxford and Cambridge, which is the older Latin based formula for their degree credentials. But um, to answer your broader question, Jack, yes, the, the former system of jurisprudence has the same root and so the laws of England and Wales, um, are certainly the basis of jurisprudence in the United States, um, with the exception of Louisiana, which is based more on the [inaudible].  
Okay. Um, but, um, it's, you know, it's, it's the same general scheme, right? So, it is derived from both statute and the principles of common law or starry decisis to mispronounce a lovely Latin phrase, I think. I think that, um, I was stood in good stead, if you will, by my training and had no trouble passing the bar exams both in Nevada and California when I came back. That's it. I did have to petition for functional equivalency with my English law degree. Uh, and the, uh, the state bar was only too pleased to allow me to write the exam. 
Jack:So additional I see you were at least at one point, one of the youngest licensed to stock and bond brokers in the country. 
Paul:Yes, that's true. And that was pre Oxford. 
Jack:Oh okay. 
Paul:That was 17 years old. I wrote the New York Stock Exchange General Securities Licensing Exam, or a Series Seven as it is called. And if memory serves, I wrote the Series 63, which is the state exam on my 18th birthday. 
Jack:How'd you get into that? 
Paul:Well, I suppose, uh, my lifelong passion has been investing and so that fits again nicely within the Qualified Opportunity Zone space. 
Jack:Certainly. 
Paul:But my, my father's savings and loan went public in 1986. I was nine years old. Wow. So, uh, like some of these guys on Wall Street into my early earliest trade was at a young age, right. Single digits. Not even yet, 10 years of age, but um, enjoyed it, loved it. And um, from there, things progressed. By the time I was 15, I had a little pager that I carried with me to middle school. And this was long before the iPhone of course, and, uh, had real time stock quotes fed to me. 
Jack:Oh, my Lord. 
Paul:And was trading in derivatives. So not something that I should have been doing at that age, but, um, you know, becomes, it becomes an interest. And so it also became a profession. And I was licensed... 
Jack:So, what kind of derivatives were you trading at 16? 
Paul:Just a basic derivative in equities. So I was buying puts and calls on equity securities. 
Jack:Yeah. Okay. 
Paul:And you know, that that has never gone away. So I still make a fair chunk of income every year from things beyond the practice of law, one of which is writing naked, put contracts against large big cap companies in the United States. 
Jack:Interesting. I've dabbled in that business myself for awhile until, uh, the Fed started dumping $80 billion a month into the market in March of 2009 and I had a big position in the wrong direction. 
Paul:Scary time. 
Jack:So yeah, that was a scary time. All right. So, um, we've gotten you through Oxford. Um, you moved back to the U.S Got on with the firm in Vegas and then on to, uh, Los Angeles. So, talk to us about the Opportunity Zone as it stands today in particular. Um, what types of transactions are, are the most interesting to you? Not necessarily from a money generating standpoint, but just from, uh, the, the sheer, it might be a complexity thing or a puzzle solving thing. What's, what stands out to you? 
Paul:Understood. So the, the most challenging deals we've seen so far, again, all of the deals that we've touched a concerned are real estate related. Nobody's been doing non real estate deals, at least on my desk, but we expect that to change and that that will become interesting in its own right. But to date, the more challenging deals have been those that are structured as joint ventures because you have multiple parties, multiple sets of lawyers, of course, everybody with their own opinion or interpretation of the rules and regulations.  
And so, it's created, um, certainly more fees, sadly for the client good for the law firm, but also, um, pretty robust debate on certain topics. Um, I've also been asked to speak at various conferences, including of course the one this week at which you and I hope to meet. But, uh, I've even had folks from the audience challenge, me on certain points. 
:And so, it's created in my mind a clear sense that yes, there is a diversity of opinion on the, the words that the Treasury has released under these rules and regulations. And perhaps the most contentious argument thus far has been related to depreciation recapture. I had someone from one of my audiences basically tell me, I didn't know what I was talking about and that I was dead wrong.  
Well, unfortunately the opposite was true. He was dead wrong, but had gotten some errant advice from his attorney. So, uh, it's, it's an interesting space. It's, it's uh, emerging obviously and emerging quickly, but no one can really hold themselves out as being an expert. Um, there are those of us now who may be, have a six month track record, but, but that's it. Nobody was doing deals before the first half of 2018. So, uh, for somebody in my position it's quite, quite interesting. You know, I can be one of the firms leading experts very quickly in a space like this, which is of great interest to so many of our clients across the country. 
Jack:Yeah, it is kind of fascinating that somebody who's been doing this for a year is absolutely ancient. Um, I get a huge kick out of it. So, I had something hit my inbox this morning. Um, Gerardo, Gerry Portella who's the, uh, chief investment officer, Puerto Rico was one of my guests a couple of weeks ago and, uh, he sent me a bill that, um, I think it, I think the Governor of Puerto Rico is now signed it around, um, Opportunity Zones and they, it looks like they're layering local taxes or local tax regulations on top of the federal regulations to sweeten the pot even more for investors in Puerto Rico. Are similar things happening in other locales around, um, at least within the, the realms that you practice in. 
Paul:Well, there is a lot of interest at the state level and even to a degree at the municipal level to enhance investment in some of these, these targeted areas. And I've had folks reach out to me, you know, mayors of small and midsize towns, what can we do Paul to, to further enhance investment in, in our Opportunity Zones. And of course there is nothing that prohibits the stacking of tax credits or other benefits. You can combine the qualified Opportunity Zone concepts and tax benefits with other options. Um, many people have talked about affordable housing for instance, is a very short time horizon for those sorts of credits. For instance, 10 years is a good figure for instance. Um, and yes, Puerto Rico I think is a particularly exciting jurisdiction. I have had some calls from folks there. We haven't closed any deals yet. I think there is a different risk profile attached to Puerto Rico, although it is technically part of the United States it, of course, has territorial status rather than state status. Um, but there are a lot of benefits to a, to investing in Puerto Rico and I think there is a great opportunity down there. I mean more than 90% of that island is a qualified Opportunity Zone. And so it's a lot easier to find a geographic target when, when that's that what you have in your sites. 
Jack:Yeah, absolutely. Um, just went completely blank as you were talking about Puerto Rico. Oh, I know what I was going to ask you. Um, uh, as I pondered this whole Puerto Rico thing, that's been one of my questions was what are the, what are the significant differences that an investor needs to be aware of between, uh, investing in a territory such as Puerto Rico and investing in a state? I have absolutely no idea where the, what the differences are, what the risks are. 
Paul:Well, I think for a week it was a great example because of the financial difficulties they faced. Just a few years ago and they've begun defaulting on some of their territorial, uh, debt, right? The Cofina Bonds, for instance, we're in the new ideal. These are trading at 30, 40 cents on the dollar. Uh, basically there was a proposal by the United States Congress, I think proposed by Senator Harris from California that they would basically wipe out the debt and anybody holding that indebtedness would, would recoup the losses from the U s Treasury. Except if you are a hedge fund capitalized it more than a few billion dollars, then you just tend to stomach your own losses. 
Jack:You just ate it. 
Paul:Yeah. For better or worse. So that was proposed and you know, on, on a number of those fronts, I'm not sure where we ended up, but Puerto Rico does have a different risk profile. I've traveled there. It's the only place in the world where a US citizen of course, um, can, can live and hold the US passport and not pay federal income tax under certain circumstances. So think there's a lot of enthusiasm. Um, there's also a lot of need for investment. Obviously the, the energy infrastructure there has been badly wounded by some of the tropical storms, um, that Elon Musk has been talking about doing something there. And some of our clients and prospective clients are interested in this space. So I think that there is a lot of opportunity. I think that it's important to get the right professionals involved if you're an investor looking at that space so that it can be properly vetted. I mean the diligence, uh, is well spent when, when it comes to a jurisdiction like that. 
Jack:Describe for me the professional structure. Let me clarify that. The, the organizational structure of professional advisors, professional experts, that the ideal opportunity, Opportunity Zone investment is going to put together. They've got someone like you, they've got a tax professional, they've got an accounting professional. I mean, put that, build that structure for me conceptually. 
Paul:I think that's right. So you definitely have to have a law firm that has substantial experience, right? And many firms are holding themselves out as having that experience. I'm very doubtful that they all do. I've heard some pretty bad inherent advice from some, but yes, a solid law firm. And that would include a team of both a transactional type attorneys such as, uh, the role I serve, plus the tax piece. Those are the two critical pieces in structuring deals. And then it's also important to have the right tax advisor on meaningless CPA or audit type firms. So depending upon the QOZ structure, right? So some Qualified Opportunity Funds are structured as corporations. Most, I think we're going to be structured as partnerships for federal tax purposes. And undoubtedly you're going to need a CPA to generate forms K1 and deal with some other formalities with the IRS. Um, investors obviously also need to have a CPA familiar with this space because they need to file an election. 
Um, if they're going to invest in a QOF, um, they need to make an affirmative election that they're deferring some of their capital gain right until December 31 of 2026. So I think those are the critical pieces. Now, if the QOF is going to leverage its investment with debt than obviously there's a lender that comes into this capital stack and any of their lawyers and advisors, and if it's structured as a joint venture, well then you've got another set of lawyers and accountants.  
So, it can, it can become a pretty crowded table very quickly. Um, but, but again, we found a lot of interest in joint ventures. Um, a number of folks who are very good at putting together funds are not necessarily good at swinging hammers or managing those who do and having gone through a rather bloody home remodel myself, I fully appreciate that. 
Jack:Yeah, 
Paul:I think this is a, a marriage made in heaven for, for those that have the funds and need to deploy and those who have the skills to deploy. So some of my clients are very good at, at both of these things, uh, and, and great for them. Um, but I think again, a lot of folks are very good at putting together funds. They're not necessarily great at managing a physical construction and for most Qualified Opportunity Funds, again to date the funds are invested in qualified Opportunity Zone Businesses, which in turn are the titled holder of Real Property, which needs to be substantially improved in order to qualify. So there's going to be an element of physical construction and you know, the easiest is when it's ground up then there's no real question about qualifying. But a number of these projects are going to be substantial rehab projects as well. 
So, either way you slice it, if it's a real estate project, there's going to be some, some physical construction and that's, that's a different space, right? Wall Street guys are not necessarily skilled in those arts, so a lot of joint ventures and, um, I think we'll see a lot more of that. Again, in the real estate space, we could see, again, a pivot into Qualified Opportunity Zone businesses that do not touch or concern real estate so much. And that'll be really the next frontier. I'm very excited to see and hear what's discussed this week at the, at the Expo in Las Vegas. 
Jack:Absolutely. From an emotional standpoint, I'm emotionally ready to get really enthusiastic about any kind of ongoing business that's, that's, um, gets planted or, or, or moved to Opportunity Zone. And that leads me to my next question, which is, um, what kinds of discussions and or actions are you seeing taken around, um, tracking the actual social benefit of the Opportunity Zone investment? I think it's pretty clear that at some point Treasury is going to mandate that there's, um, some accountability about the good that is done with this program. The social good in terms of jobs, affordable housing, um, economic growth, seeing anything formal happen. 
Paul:I have not seen a lot of formality around that. I think the Treasury's still more focused on putting into black and white their proposed rules and regulations. Obviously they're behind the curve on that. I think we will see that. Um, I think it's a little early maybe to be tracking, you know, we're just starting to see deals close and, and money move into these areas. Again, a lot of physical construction is taking place at these sites and so I think it's possible to quantify the economic benefit, the number of jobs or the number of paid hours of employment for construction and the resulting employment that takes place in these buildings once they're erected and so on and so forth. But we haven't, at least, I have not seen a lot of formality around that subject and long-term.  
Let's see what happened. I think, um, you know, the future government, uh, perhaps beyond Trump will, will take more of a focus on that. But I think it's a moment, the, the real focus is let's get the money deployed and, and uh, things, things moving. And I do think that the Qualified Opportunity Zone concept has helped extend our economic cycle. I think many people, many of my clients in this space had long predicted a slowdown or decline in real estate. And I think this concept alone has helped push that out a little bit further. 
Jack:You know, you're the first one who is actually articulated that thought. Um, first one I've heard articulate that thought, but I've, I've certainly had it. It seems like from, from our historical perspective, this market is overdue for a correction. Okay. And yet we've, we're also in a situation I think we've never been in precisely because of, of elements, um, like the Opportunity Zone. What's your perspective on that? 
Paul:Well, there's no doubt hailing back to my origins in the great American Midwest, a very wholesome place, but not a land of great economic prosperity. I mean there are pockets of it clearly, but the sort of coastal economy that we have on. I think it is a little misleading. So for those of us in California, you know, times have never been better real estate values have never been higher. Same could be said of New York and many other markets, um, for those fly-over states.  
And again, I don't mean that in a disparaging way. There are large pockets of economic depression and I'm not sure what impact the Qualified Opportunity Zone concept will have. My hometown for example, is largely a qualified Opportunity Zone concept. Um, and I'm not sure that's really going to drive any, any business there. I mean, I've thought about it, but you know, what would you do? 
So, my late grandfather being the stereotype of the Swedish American owned a cheese factory. Um, but you know, that's just not something anyone would do. I'm not going to go create a cheese factory in my hometown. That's that, that economic model passed during the Vietnam War. So I think that we'll see, you know, spotty application of this. But in places like California, in places like New York, I think this will again continue the bull market in many respects or at least push back, um, the looming bears. Um, and in terms of real estate values here in California, I think we've got a lot going for ourselves. A lot of money has been created, a lot of wealth has been created through Silicon Valley. A lot of that now is pouring into southern California.  
Now this is a very regional specific comment, but with uh, investments such as Netflix acquiring a million plus square feet in Hollywood, which is a qualified Opportunity Zone and other companies like Google and apple committing to um, you know, secondary campuses in Los Angeles. 
I just see a lot of wealth, a lot of high paying jobs coming into California, uh, the Olympics are eight years down the road. Um, some professional teams coming into the city. We've got a lot going on. And I think on top of all of that you have Qualified Opportunity Zone opportunities for investment. And so again, I just see the economic cycle being extended at least in places that are already doing well to my earlier point, a lot of my clients, a lot of the investors who put their money with my clients are making very informed and good decisions.  
What I've seen so far, they're not just putting money into bad deals to, to defer a capital gain tax bill. And so I don't see them putting money into, um, some of those fly over states even though there may be opportunity there. And I hope for the benefit of every state in this country that everyone will benefit. But again, just based on my non statistical sample, uh, I'm seeing much more prosperity in the coastal markets as a result of the QOZ space. 
Jack:I don't have an opinion on that one way or another. So, I'm going to defer to your, oh, your expertise there. Having lived in England for several years and being exposed to how, um, how government operates there and then coming back to the states, how has your perspective about, how the, how the government affects how we do business. How has that changed? Does that question make sense to you? 
Paul:Well, to a degree, I've become more familiar with the parliamentary form. Uh, I think it was Montesquieu who incorrectly translated that during the colonial years. You're an American. So our form of government in the United States, this is substantially different than what the British have used. Uh, but that said, there are again, commonalities between the two. I don't know that anyone's holding up, um, the British as an example of great governance at the moment, given what's going on with Brexit.  
However, that said, I think that the British have a long tradition about which they can be very proud, and our democratic origins are most directly related of course to a form of government in England at the time of the colonies. So I think it's very informative for me to have studied constitutional and administrative law in England. Um, I have never formally been a student of constitutional law in the United States. 
It's perhaps a weakness in my jurisprudential training, not critical perhaps to my role as a transactional partner, a large law firm. But, um, just as a matter of academic interest, you know, I do find, um, U.S. History to be very fascinating and a great part of that is the evolution of our constitution. And you know, what, what it reflected at the time, uh, just a small example of prohibition, you know, that involved two constitutional amendments. Imagine prohibiting the consumption of alcohol at the constitutional level, and then repealing it 12 or 13 years.  
So, government is an interesting thing and perhaps someday I'll be more directly involved in it. My firms certainly has a role in lobbying and we have a government relations practice and so on and so forth. Our chairman is a former U.S. Senator, so I find it fascinating that I'm, I'm no expert in that field. 
Jack:I was brought over to London to run a project because quote unquote, they wanted an American project manager. And that didn't make a lick of sense to me at the time. But, you know, look, it looked fun. I hadn't ever lived in England and I thought I'd like to do that. Um, and my experience taught me that, um, the, the fundamental driving, um, motivations of my English counterparts was completely different than the fundamental driving assumptions and motivations of those of us in America.  
And all, you know, admittedly, this was 18 years ago that I was there. Things could have changed, although I doubt it. Um, and I realized it took me awhile to figure out why I feel I, I kept, yeah. Not connecting with my British counterparts. And, um, I realized that that in America we have this fundamental, I think it is a cultural assumption that whatever we're doing, there's probably a way to do it better, faster and more efficiently and probably more profitably as well. 
And that was the, the intrinsic, unspoken motivation that I brought with me when I came to London. And I discovered that with that did not exist by and large in my, uh, in my English counterparts. Their primary driving motivation as best as I could tell, was preservation of place, preservation of status. MMM. And so where, where the American approach was fundamental fundamentally an aggressive and offensive approach. The English approach was fundamentally defensive, conservative and protective. That was my, that was my experience. Um, so literally everything I did had to be had to be interpreted inside that frame. Um, so with that as a jumping off point, does that, does that sound familiar? Did you observe similar kinds of things? And how has that changed how you practice, not just law but your life and your business? 
Paul:I think that observation is correct, at least in large part. Obviously there are exceptions to the rule and some of the greatest entrepreneurs in San Francisco are Ex Oxford folks who are British by birth. But, um, overall I think that's right. I mean the British had attained a status that a few other nations had in terms of global influence. So that thought of preservation as opposed to expansion might be right in America. We've long had a tradition of entrepreneurism and we really value that.  
I mean, if you think of the moguls in our society, those are largely first generation folks, you know, Bill Gates and some of these others, um, Larry Ellison and countless others who've made vast fortunes by being entrepreneurs and doing something that challenged the status quo. So definitely a different mindset, especially in California. I think there are more conservative parts of the United States where we don't see that tradition of entrepreneurs at least to the same degree. But again, my statistical observations may be an error. Um, so 
Jack:You really do have the mind of a lawyer, don't you? It's fun to hear you talk, carry on. 
Paul:Ah, you know, I, I practice law because I don't have any other opportunity to make living. Right? 
Jack:Okay. 
Paul:Nobody else will offer me a job. No, it's a, it is a great way to, uh, to train the mind. And, and you know, I've had the pleasure of working with entrepreneurs from the very earliest days of my career and that is inspiring. And so I have made some strategic investments in ventures outside of the practice of law, including in real estate. And I have been inspired by some of my clients. And so just as a small example, during the great economic recession to which you earlier alluded, I took every bit of capital I could muster and I bought single family homes when nobody would touch that asset class and I was getting cap rates of 30% right out of the gate and uh, ultimately, you know, tripled and quadrupled my money in many cases, even better returns were availed over the course of four or five or six years. So we are a society that rewards risk taking and obviously, uh, you know, you have to be smart about it and people lose plenty of money too. Um, but you're right there, there are vast differences in the mindsets of different nationalities and I think the English are a little more conservative in that regard on average, uh, then than here in the United States. 
Jack:I'm not sure that you actually answered my question, but it was, it was delightful to listen to it. It really was. 
Paul:of England and Oxford. Uh, there, there was a rule that the tutor shared going into final exams. They always said, be sure to answer the question because often are prepared to answer a different question and that is not a great way to demonstrate your knowledge. You do have to answer the question and you're exactly right. I didn't, I think in my own way I, I don't know how to answer the question you've posed because I never really thought about it. I mean my practice, is largely driven as a reaction to the needs of my clients. And so I become an expert in the areas. [Inaudible] And again, I've had the pleasure of working with entrepreneurs. Can I help solve for all of their issues? No, but on the legal side, we've, we've helped structure businesses and raise capital for businesses. And so this QOZ space is just the next, the next great puzzle for which we're solving for our clients. 
Jack:Well, this is one of my favorite questions. What accomplishment in your business life are you most proud of? And then we'll talk about what you're most proud of outside of business. 
Paul:Well, within the practice of law, I've had the pleasure of representing some very high-profile individuals. And all though their names cannot be shared because of confidentiality in my industry. They're names that any of your listeners would easily recognize. And so having had the pleasure of working with them in some cases, getting to know them pretty well, I think that to me is a great accomplishment. I keep thinking all right, and I'm sitting on this plane flying to wherever and I might have the opportunity to watch a movie and that movie happens to be about one of my clients. Um, you know, that's exciting to me and I think all right, for a cheese fed Midwesterner. Um, you know, that's not all bad. 
Jack:What about outside of your professional career? What accomplishments are you most proud of? 
Paul:Well, and not to be a flightful about it, but I have to say finishing this godawful home remodel in Los Angeles. Yeah. It nearly killed me. And somewhere along the lines I'm convinced I lost my sanity. 
Jack:Well, it's time for me to ask a couple of my favorite questions. Maybe just maybe just my one favorite question. Um, I have a suspicion that your answer is going to be brilliantly entertaining. Imagine if you will for a moment. And I realized there's a law. You're, you're generally not living in the realm of imagination, but you don't have to what your lawyer hat right now. Um, imagine for a moment that you are the king of the world for one day. Now you only get this role for one day and you can fix one problem. What's that one problem you're going to fix with your, um, with your power? 
Paul:Well, I think we have to address basic human need, right? And so I've traveled some, but perhaps not to the most remote parts of the world, but enough to know that there are folks in desperate need. And so I had the pleasure of working for a well known charitable organization many years ago, and I saw a good taste of that back in Boston. I think probably hunger and thirst are the basic needs, right? And then shelter beyond that. I think that's the, that that has to be item number one. Anybody's list. 
Jack:Any ideas how you could do something immediately to change that, to make it better? 
Paul:Well, the question is an economic one, right? Allocation of resources. And that that is a complex business. Um, you know, we have the ability to, to feed and clothe folks. That just doesn't happen because of some of the institutions we've created and governments around the world and rebellion. And, uh, you know, it's a very complex situations and I'm not sure that there is a single decree that could ever solve for that. Maybe in a single jurisdiction there would be a way to solve for it, but across to our very fractured form of human government while these different nation states, uh, that becomes a daunting task. Sure. The Romans might've had some clue about that. They had a large swath of the civilized world at a long period of time. And, um, they seem to feed all of their citizens and others in their realm. But, um, you know, as, as a, a world torn by various nationalities and forms of government and we don't seem to have that ability 
Jack:Spoken like a razor-sharp legal mind, you're going to be difficult to pin down. I can tell. Maybe if I get you a liquored up I can, I can get some answers out of ya. 
P:aul:I have been known him to drink a lemon drop or two that may work. 
Jack:The lemon drop. Oh. Okay. Well, um, Paul it has been an absolute pleasure. I love talking with people. You know, my business is words and I loved, I just love listening to people who speak well. Um, you're, the precision of your speech is music for, for these ears and I've really enjoyed talking with you. Any last words with it for us before we leave? 
Paul:Well, Jack, the pleasure was mine by the way, and thanks again for the invitation. Well, I think the, the final words of wisdom from anyone in this space that who purports to have some experience, you know, let's, let's keep our eyes and ears open because we're not done dealing with the government. We need our clarity on a number of issues. Um, just to take one example is the carried interest in a syndicated deal a QOZ fund for going to be taxable after 10 years. That's a question that we're all scratching our heads over in light of the rules and regulations that came out a few weeks ago. So we're working through this and again, there aren't a lot of right or wrong answers and we're able to fill in some of the gaps based on the rules and regulations that came out in April. But uh, this is a to be continued story. 
Jack:Absolutely. Well, Paul, thank you for the time. It has been a lot of fun talking with you today. I look forward to meeting you in Las Vegas for Paul Wassgren. I am Jack Heald for the OZExpo Podcast. Thanks for listening to us. Be sure to subscribe so you get updated whenever there's a new episode published and that's happening almost every day. And we will talk to you next time. 
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