Peachtree CEO Talks CRE Turning to Private Credit

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In the latest episode of Peachtree's Point of View podcast, CEO Greg Friedman sits down with Michael Parise, attorney and Chief Compliance Officer of Copper Beech Financial Group, to discuss one of the most over looked tax-efficient investment strategies available to high-net-worth investors: Private Placement Life Insurance (PPLI).

As Michael aptly puts it, "It's not what you make, it's what you keep." This philosophy drives the conversation as they explore how PPLI can help investors significantly improve their net composite return—the actual return after fees, taxes, and inflation.

Private Placement Life Insurance offers a compelling tax-advantaged structure similar to a Roth IRA but with additional benefits specifically tailored for accredited investors and qualified purchasers. The structure allows investments to grow tax-free, with tax-free withdrawals and loans, plus income-tax-free death benefits to beneficiaries.

What makes PPLI particularly valuable for sophisticated investors is its flexibility with alternative investments. Unlike traditional life insurance products, PPLI allows investments in alternative asset classes such as private credit, private equity, hedge funds, venture capital, and real estate—all within a tax-efficient wrapper.

Key Takeaways:

• Tax-Efficient Growth: PPLI allows alternative investments to grow completely tax-free, with withdrawals available tax-free through basis withdrawals or low-interest loans
• Generational Wealth Planning: When structured properly with irrevocable trusts and younger family members as the insured, PPLI can create decades of tax-advantaged growth and transfer wealth outside your taxable estate
• Investment Focus: Unlike traditional life insurance that maximizes death benefits, PPLI is structured to purchase the minimum required death     benefit while maximizing tax-efficient investment growth
• Minimum Investment: The strategy typically makes sense starting at $2 million     in committed capital, which can be spread over several years
• Investment Considerations: Investors need to be aware of diversification requirements and investor control doctrine limitations, though these are typically manageable with proper planning

For investors currently allocating capital to tax-inefficient investments like private credit or hedge funds, PPLI deserves serious consideration. The simple math is compelling: if your tax savings exceed the roughly 1% annual cost to maintain the structure, you're capturing significant additional returns that would otherwise be lost to taxation.

As Greg Friedman notes in closing, "With all the impact of higher interest rates and inflation, tax efficiency should be a big part of everyone's investment strategy to really have that compounding effect."

Want to learn more about implementing this powerful tax strategy? Listen to the full episode of Peachtree's Point of View podcast on your favorite podcast platform and follow for more insightful investment strategies that can help maximize your portfolio returns.

To reach Michael Parise or Copper Beech Financial Group visit them online at Copper Beech Financial Group.

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^Disclaimer:

^{This material is being provided for informational or educational purposes only, and does not take into account the investment objectives or financial situation of any client or prospective client. The information is not intended as investment advice, and is not a recommendation to buy, sell, or invest in any particular investment or market segment.  Those seeking information regarding their particular investment needs should contact a financial professional.  Copper Beech Financial Group, our employees, or our clients, may or may not be invested in any individual securities or market segments discussed in this material.  The opinions expressed were current as of the date of posting but are subject to change without notice due to market, political, or economic conditions. All investments involve risk, including loss of principal.  Past performance is not a guarantee of future results.}

^{Securities and investment advisory services offered through Osaic Wealth, Inc. member FINRA/SIPC.  Additional advisory services offered through Copper Beech Financial Group,LLC, and SEC registered investment adviser.  Osaic Wealth is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Wealth.} 

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Peachtree Group CEO Greg Friedman joined Bloomberg TVs Abigail Doolittle to discuss the challenges in commercial real estate, market trends and why private credit.

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Click here to see the entire episode which begins around 43:48.

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Peachtree Group welcomed Mark Zandi, Chief Economist at Moody’s Analytics, for our most recent Market Update. Mark is responsible for directing economic research across macroeconomics, financial markets and public policy and offered his insights into the U.S. economy's performance and near-term prospects, highlighting reasons for optimism while focusing on the stabilizing benefits for commercial real estate and private credit investments amid moderating inflation.

Here are some key highlights from his presentation:

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Economic and Market Performance:

1. 2023 Real GDP Growth: Approximately 2.5%, surpassing expectations and indicating a strong year despite initial downturn concerns.
2. 2024 Real GDP Growth: Projected at around 1.5% for the first half, with an expectation of about 2% for the full year.
3. Unemployment: Currently just over 4%, a slight increase from previous years but still considered low.
4. Inflation: Continues to moderate, with current levels very close to the Federal Reserve's target of 2%.
5. Long-Term Rates: The 10-year Treasury yield is expected to stabilize around 4-4.5%, with mortgage rates potentially settling just below 6%.
6. Commercial Real Estate: The market is adjusting, particularly in the office sector, but overall price declines and transaction volumes are expected to stabilize over the next couple of years.

Positive Developments:

1. Supply-Side Improvements: Increased immigration, productivity, and a surge in U.S. oil production have helped ease inflationary pressures.
2. Consumer Spending: High-income households are in a strong financial position, driving the economy forward despite struggles among lower-income     households.

Potential Risks:

1. Federal Reserve Policy: Concerns that if the Fed does not cut rates soon, it could lead to financial instability.
2. Election Outcomes: Potential for social unrest and policy uncertainty depending on the results.
3. Long-Term Fiscal Issues: High debt-to-GDP ratios and the potential for future fiscal crises if long-term fiscal challenges are not addressed.

Investment Environment:

We, too, are optimistic about the economy and believe a soft landing is the most likely scenario, aligning well with how we are investing our capital. While certain commercial real estate investments will experience challenges as they're calibrate to a higher-for-longer interest rate environment, it still remains a favorable climate for Peachtree Group’s near- and long-term capital investments in credit, as well as opportunistic strategies, including development in the hotel sector for the coming years. Overall, many of the overarching themes Mark discussed echo what we have observed in the market, specifically:

1. Stabilizing Interest Rates: The highly dislocated lending environment, with $2 trillion in loans maturing in the next three years, becomes more manageable as 10-year Treasury yields and mortgage rates stabilize, creating a predictable environment for financing and refinancing commercial real estate projects. This could lead to increased investment activity.
2. Inflation Moderation: As inflation moderates, cost pressures on property operations and development ease, enhancing profitability and investment returns.
3. Consumer Spending: Strong consumer spending, especially from high-income households, supports demand for commercial spaces in retail and hospitality sectors, despite current challenges.
4. Private Credit Opportunities: The dislocation in traditional lending markets creates significant opportunities for private credit investments, offering attractive, equity-like returns with relatively lower risk due to substantial equity buffers in transactions.
5. Regulatory Environment: Regional banks facing pressures may retreat from commercial real estate lending, opening opportunities for alternative lenders. This benefits private credit investors and those with capital for loan purchases and recapitalizations, leveraging the firm's disciplined processes and strategic real estate ownership.

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Mark Zandi is chief economist of Moody’s, where he directs economic research. Moody’s is a leading provider of economic research, data and analytical tools. Zandi was a co-founder of Economy.com, which Moody’s purchased in 2005. He is on the board of directors of MGIC, the nation’s largest private mortgage insurance company; is the lead director of Policy Map, a data visualization company; and is on the board of the Coleridge Institute, a non-profit that facilitates the use of data across federal, state and local governments. An influential source of economic analysis for businesses, journalists and the public, Zandi frequently testifies before Congress. He is the author of Paying the Price: Ending the Great Recession and Beginning a New American Century, which assesses the monetary and fiscal policy response to the Great Recession. His other book, Financial Shock: A 360º Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis, has been described by the New York Times as the “clearest guide” to the financial crisis. Zandi earned his BS from the Wharton School at the University of Pennsylvania and his PhD from the University of Pennsylvania, both in economics.