Bayview Facility Located in an Opportunity Zone/Updated Valuation
It was recently brought to our attention that our Bayview facility is located in a very small area of San Francisco that was designated as an Opportunity Zone. Because Opportunity Zones and Opportunity Zone Funds are a very new program (established in April of 2018) I'd like to take a minute to explain what this means and how it is impacting our future fundraising and growth strategy.
What is an Opportunity Zone
An Opportunity Zone is a program that was created by the government to incentivize investors to put money into developing economically-distressed communities. As an incentive for the investor putting money into an Opportunity Zone Fund (OZF), i.e. a fund created to deploy capital into businesses located within an Opportunity Zone, investors are given a very large if not complete capital gains tax break on their investment.
I.e. if the investment is held for longer than 5 years there is a 10% exclusion of deferred capital gains, if held for 7 years there is a 15% exclusion, and for the real kicker, if it's held for over 10 years there is a 100% exclusion of capital gains taxes. (The funds can be deployed to any business but simply would need to stay in the OZF for 10 years)
What this Means for Seven Stills
Unfortunately this does not have any impact on the current offering or valuation of the company. Because the funds need to be deployed towards very specific uses, i.e. they are primarily used for the purchase of and development of commercial real estate in the opportunity zone, if we are to accept funds from an Opportunity Zone Fund we need to close our current round of financing and open up a new round.
Fortunately for us, we have a very strong relationship with an individual who is currently developing an Opportunity Zone Fund and they have agreed to help us create an arm of the fund for Seven Stills meant to deploy capital into our business over the next 31 months.
We do plan to continue accepting new investors until our close date of March 19th, at which time we will be closing both our WeFunder campaign, and our convertible note round for investors of $25k+.
Thank you all so much for your continued support and we look forward to sharing more updates with you all as we get closer to closing and issuing the new fund!