Arizona Opportunity Zone Fund, LLC
The goal of the Arizona Opportunity Zone Fund (hereafter AZ-OZ)
The AZ-OZ Fund is being established as a regional opportunity zone fund to fund new or established businesses and companies that have great
potential for growth and to improve Arizona and its Opportunity Zone communities. Additionally, by building or acquiring multi-family housing to
improve those communities needing additional or improved multi-family rental housing.
Robert Ferguson (50 + years) and Deborah Breslin (35+ years) in forming AZ Opportunity Zone Fund, LLC are bringing over 90 years of combined business experience to the fund.
Robert Ferguson is a tax accountant with15 years experience and former multi-million dollar business owner. He holds a Bachelors degree In Electrical Engineering (Arizona State University) with 30 years experience in that field and an International Master of Business Administration in Finance and Taxation (University of Leicester – Leicester England).
He realized the value of opportunity zone funds early on after their creation in late 2017 by the Tax Cuts Jobs Act signed into law by President Trump. However, it was not until after Arizona charted its opportunity zones in 2019 that the real opportunities evolved.
At a meeting done by the Arizona Commerce Authority in 2020 and another shortly after at the Arizona Real Estate Investors Association (AZREIA) that Mr. Ferguson attended did he realize that he could establish an opportunity zone fund.
Mr. Ferguson invited Deborah Breslin, a real estate broker and owner of South Arizona Homes LLC that he has known for many years to join with him in establishing the fund. Ms. Breslin agreed and so the forms were submitted to create the Arizona Opportunity Zone Fund, LLC here in Arizona and they requested the IRS to tax the LLC as a Sub S Corporation who agreed.
Ms. Breslin has holds a Bachelor of Science in Business degree with over 25 years as a real estate professional as agent/broker and over 10 years as the owner of her firm that she shared with her husband until his untimely passing in an accident while bicycling (he was an avid cyclist) caused by a distracted driver who was texting. She has a unique understanding of Arizona’s growing communities, particularly of Pinal and Pima Counties.
There full resumes are included later on.
Overview of the Business – Where to focus, Why, and How.
Where to focus.
The metro Phoenix area during 2021 saw unprecedented growth with incoming businesses moving in. Many firms needing warehousing are leaving California due to its changing business climate. ( See the accompanying Articles from the Phoenix Business Journal)
Internationally, Taiwan Semiconductor Manufacturing Co. (TSMC) is moving into Phoenix after several years of visits by Arizona’s politicians and visits here by TSMC staff. Their commitment to building their multi-billion-dollar plant here brings in their suppliers as well to Phoenix. It is a great win for Arizona and is due in part to political strife with mainland China. The claim by China that Taiwan is part of mainland China brings about an uncertain future for Taiwan. TSMC’s need for additional production capability, as the world’s leading producer of semiconductor chips, is also part of the reason for the new plant here.
Intel also is adding two new huge fabrication plants in Chandler AZ to increase production capabilities here in the US of their products.
Casa Grande in Pinal County is south along Interstate-10 and is the first city encountered going south from the metro Phoenix area. It is about a 30 to 35 minute drive from the south edge of metro Phoenix and Chandler.
Casa Grande in Pinal County is where we plan to focus our efforts for now as it is both an opportunity zone and growing along with the Phoenix metro area..
Several new industrial plants have been built or are in the process of being built in Casa Grande along with several regional distribution centers and suppliers to TSMC and Intel.
Lucid Motors, manufacturer of the Lucid Air EV, Motortrend’s 2022 car of the year, has built their Phase 1 plant in Casa Grande and are producing the Air (EV) there. They are now constructing their 1 million square foot Phase 2 plant adjoining it (see the appendix story). They are concerned about where their employees will live as the plant expands as they hire up to 700 employees. They currently have 150. (See the Appendix article)
There are other plants being built there as well. Kohler has purchased the land to build a plant and is another one along with suppliers to TSMC (see the Appendix stories) are building there or committing to be there. Wal*Mart has a huge regional distribution center there. Tractor Supply has a distribution center there, Daisy dairy products have a plant there, and many more.
It is our belief that the best possible outcome for our investors is grow their investment for new gains as well as providing them the tax offset that investing in an opportunity zone provides. We will do this by selecting businesses to invest in that have great potential, and by investing in new or refurbishing existing multi-family housing that is needed to sustain the growth of the city. The real estate involved is where we plan to invest most of the funds to protect and grow the value of the funds invested.
By keeping the AZ-OZ an LLC, it allows the real estate owned properties of the AZ-OZ to share the depreciation with the investors of the fund each year on a percentage basis of their investment. The depreciation (loss) that can be shared with investors at the end of each year for tax purposes is another great benefit to them, and provides an additional incentive for investors to join the fund.
Projects visualized for the Fund
Our First AZ-OZ project
Cornerstone Masonry Systems LLC
Cornerstone Masonry Systems LLC has been an accounting client of Sonoran Consulting & Finance, LLC (Robert Ferguson’s other firm) since 2014. Recently Jim Longworth, its Owner/Manager, joined with two PhD graduates from Arizona State University that have developed three new exciting products for the construction industry. Two of the products have great insulating capabilities and one is an ultra strong concrete. The ultra strong concrete ranges from 10 to 20 times stronger than the current strongest concrete. The second is stucco that has insulation capabilities with an R factor of 12. Normal stucco has an R factor of about 2 at best. The third is paint with great insulation properties.
The two PhDs are joining with and licensing Cornerstone for production and use of the ultra strong concrete, the manufacture of the R12 stucco. The insulating paint may be produced by Cornerstone in the future. The ultra strong concrete when bagged for sale, and bagged stucco (as will the paint) will require a factory long term.
The initial plan is to have the paint and stucco made outside for a time while the plant is built and setup for production. A site in Casa Grande AZ has been located next to the Southern Pacific main line rail tracks with a siding next to the property for easy receiving and shipping of large quantities throughout the US by rail. Casa Grande also adjoins I – 10 and I – 8 for fast truck shipping and receiving.
The AZ-OZ plans to purchase the land, build, the plant needed, own it, and lease it to Cornerstone.
Cornerstone has a forth product which is a light weight concrete that has been licensed from its developer in Germany. It has many unique uses, but doesn’t have the strength of normal concrete. Cornerstone is also a licensed masonry contractor building wall systems. They are currently doing contracting work building block walls and other masonry block work. The ultra strong concrete will be used in projects as soon as it is practical to do so.
In the long term a separate location is needed to form and dry ultra strong concrete wall sections and for the light weight concrete wall sections. The AZ-OZ plans to purchase the land and setup the equipment needed for that operation as well, leasing it to Cornerstone. In the short term a leased location will be found it necessary.
Cornerstone was started August 1, 2013. By Jim Longworth and Ryan Dale, Ryan Dale holds the masonry contractor’s license and a General Contractor’s license for both residential and commercial work. Jim Longworth is a former broker in the New York twin towers whose position was lost when the World Trade Center was destroyed. He was there that day.
Cornerstone has applied for a $200,000 EIDL SBA loan to get started again. The pandemic has had a very negative effect on the company overall. The AZ-OZ may fund them earlier to get going if the funds become available.
On January 7, 2022, Jim Longworth is meeting with the PhD developers of the ultra strong concrete and insulating stucco and paint to discuss the timeline to formalize their agreements and licensing for the products to be produced and begin production of the three items, the ultra strong concrete being first.
Jim Longworth will be applying to the Arizona Corporation Commission to setup Cornerstone as a Corporation in 2022. Once CSC is incorporated, all of the assets of Cornerstone Masonry and Arizona Lightweight LLC with its assets, will be added to Cornerstone. The estimated value of the combined assets should be between $200K and $300K. Previous estimates were based on assets that were lost through the bankruptcy of the Asarco mine in Casa Grande when the assets were abandoned by the previous owner when he could not retrieve them from the locked mine.
When CSC is incorporated, shares will be available privately for the AZ–OZ. AZ-OZ wants to purchase enough shares and work with them to get CSC started with production of the ultra strong concrete. CSC will eventually be set up under Regulation A of the SEC allowing sales of stock to any investor, accredited or not, though they do not plan on going public, keeping ownership private. Crowd Funding likely may be used.
A temporary location in an opportunity zone that is also an industrial area is being sought currently. It will house the manufacturing of the ultra concrete panels for walls of all sorts, unique items ordered, and for formed lightweight concrete walls for its many uses. The stucco product will be delayed until a decent price for one of the key component ingredients can be arranged based on volume. That same ingredient is used in the insulating paint developed by the PhDs as well.
AZ – OZ will become a less than 20% member of the LLC in order to share in its growth and capitalization as they move forward in becoming CSC. Currently, Cornerstone, and AZ Lightweight, have a combined approximate worth of $250,000 dollars in equipment assets.
I have also asked for a current business plan as the one I have currently is quite old (2017), has products that will not be offered, and needs updating.
The new plan will be for all products Cornerstone will be offering showing the time frame each will be marketed. They are: Ultra strong concrete (walls, panels and unique shapes), Lightweight concrete (panels and unique shapes), Aerated Lightweight Concrete (ALC), and unique concrete with tremendous thermal, fire, acoustical, values that are far superior over conventional building products, the manufacturing of bagged R12 stucco, and bagged ultra strong concrete premix for retail sale.
The desired site found in Casa Grande has an asking price $765,000. Deborah Breslin, an AZ-OZ Director, hopes to begin negotiations for the property in January 2022.
Robert Ferguson is meeting with the architect the week of January 10, 2022 to discuss the desired plan and timeline needed to build the plant.
Some of the equipment from the mine location will be used at a leased location for the time being. It is needed to get operations going for the ultra strong concrete wall sections, and the light weight concrete. Cornerstone has the equipment to produce the lightweight concrete stored currently. However, they need to acquire some specialized mixers for the ultra strong concrete and to use the silos from the mine site for storage and mixing..
The Arizona Opportunity Zone Fund would participate with Cornerstone in two ways. First the AZ-OZ would invest in Cornerstone directly as a less than 20% early investor (later to be CSC) allowing the fund to have equity and growth in CSC. Second, it would purchase the land and either erect the steel building from the mine property, or build a new building that Cornerstone would lease from the AZ-OZ in Casa Grande (an opportunity zone area). This would provide additional capital gains for the AZ-OZ and the investors along with depreciation for both.
Cornerstone Masonry Systems currently has limited funds to move forward due to the pandemic. During 2019 they were beginning to have substantial revenue from ongoing work.
When the pandemic began in 2020 it reduced their work to next to nothing and they did not recover in 2021.
The advent of Cornerstone joining with the PhD developers with their three products has opened up great possibilities for all of them. The lack of funds is the biggest stranglehold they currently face, one that can be overcome.
They currently need a location to begin producing their several products into commercial ready items. Being in an Opportunity Zone is their goal for obvious reasons. The following are the first items of business needed for their production.
- A location where the ultra strong concrete can be made. A leased location in an opportunity zone in an industrial area is best for investment purposes and necessary for the AZ-OZ to invest in the company. Estimated cost to start is $10,000 with an additional $90,000 for operations for up to 12 months above earnings – $100,000.
They require from 5,000 indoor with another 10,000 sq. ft. of outdoor spaace for their first six months to a year while a production plant of their own for the concrete products is located and set up in Casa Grande AZ. A location for that operation is yet to be found.
- The ultra-high strength concrete requires a special type of mixer to blend the various materials used to make it. They cost is approximately $70,000 each. Two are required – $140,000.
- Two of the products developed by the PhD graduates that will be bagged and sold , the stucco mix with an R factor of 12 for high insulation and reduced energy consumption and the ultra high strength concrete for retail sale, require the plant for production in high volume and to reduce cost, for warehousing volumes, and for economical rail shipping.
The third product developed, paint with a high R factor, should also be produced at the plant in large volumes to be profitable. Both the paint and stucco use a proprietary ingredient which has a high cost in smaller quantities but has a much lower cost in volume.
Patients are applied for both the paint and the stucco and both can be produced by outside sources under non-disclosure on a temporary basis. However, the plant in Casa Grande would provide the necessary ability for large production of all items once built.
The production plant location has been foound in Casa Grande AZ. It is next to the main rail line going through Casa Grande with a siding next to the property. This location will be used to build the permanent production facility for the R12 stucco, bagged – ultra high strength concrete, and the high R factor paint. The land needs to be purchased quickly before another buyer determines its location and value for them.
An immediate need in order to begin work on the ultra high strength concrete is $240,000.
It is for when Cornerstone concludes a contract for a wall that is 1000 feet long it is negotiating at the present time. This can be either a loan to Cornerstone, or an investment into AZ-OZ for and investment with Cornerstone.
The immediate need to begin negotiation for the land in Casa Grande AZ is $50,000 for a down payment and a commitment for the balance in 30 to 60 days of $800,000 for the land plus closing costs. A total of $850,000 – $50,000 as an investment into the AZ-OZ and loan of $800,000 to the AZ-OZ with a 25 year amortization with a balloon at the end of 10 years or later.
Followed by additional loan of funds if at least $3 million with pay stones as needed for the construction of the plant. This would be best done as a bridge loan for the construction period.
Much of this can be a loan secured by the property and plant.
Once completed, the plant will need production equipment which can be either financed or an investment made either through the AZ-OZ or directly to Cornerstone.
Long term to fully develop the several products they have, $4 million during the first two years (excluding the plant costs) for marketing and operations, and an additional $5 to $10 million to move beyond the first two years for the operation, expansion, and marketing may be needed. These can be loans to Cornerstone, investment made to the AZ-OZ for investment in Cornerstone, or investment directly into Cornerstone.
I am working with them to develop a timeline of product development and marketing to get their products to market.
AZ-OZ Project Two – Multi-family Housing
The idea of constructing a multi-family housing project in Casa Grande AZ is in its formation stage. I plan on meeting with the Architect the week of January 9, 2022 to discuss my ideas for the complex.
Currently, in Coolidge AZ, a neighboring city to Casa Grande in Pinal County, has a multi-family project is under construction where they are constructing three story 42 units per building with 1- and 2-bedroom apartments. Coolidge does not have the new major influx of manufacturing plants that Casa Grande has and is about 22 miles from Casa Grande. Another three to five miles would be added to get to any of the plants in south Casa Grande.
My goal is to construct a multi-family complex of between 200 to 400 apartments with 1, 2, and a few 3 bedroom apartments. I want to build the complex in phases with several buildings and perhaps go to four stories with elevators. Each building would have between 40 to 60 apartments.
Additionally, there would be a club house with exercise equipment, rooms for meeting, dancing, a swimming pool area designed for families with a kiddy wading pool, slides and a regular swimming pool, tennis courts, and basket ball courts. Similar club areas have been built here in AZ for communities and could be used as examples.
Total cost of the complex would be between $40 million at 200 apartments and $80 to $100 million with 400+ apartments.
To start the AZ-OZ needs $50,000 for the plans and study. A site that may work has been discovered but no cost has been established.
Deborah Breslin, one of our directors and real estate broker, is tasked with establishing if the site would be a good one and the cost.
We should have more information about the multi-family complex in early February 2022. I plan on speaking the Casa Grande Chamber planner early next week to see what and where they would like multi-family housing, and how soon. With the growth of Lucid Motors there and the other new plants moving in (Kohler), I am sure they have plans that they would like to see implemented for multi-family housing.