Taxes & Freedom of Expression: We hear many complain about over taxation in the US, and the tweets of presidential candidates, business lobbyist and those with a particular special interest, slice and dice the tax code in an effort to reduce personal and business taxes, decrease government revenue, and at the very least, simplify it. While on a recent holiday on the Mediterranean island of Formentera off the coast of Spain, I decided to spend some leisure time, not a lot, researching what are the standard tax rates and categories of taxes the typical middle class Spaniard pays annually. I was a bit surprised to learn that their level of taxes makes the IRS look like a measly non‐ profit…Based on research from the accounting firm E&Y, Spanish taxes are extensive; a 21% value add tax on all goods and services provided and real estate purchased; a 3% real property tax based on “market” value; a 30% corporate tax on net income; a 20% capital gains tax upon sale. These poor guys don’t get a break; no deductions for interest, dependents, property/business asset depreciation and other legitimate “loops” favoring the US taxpayer. Whining has become the siren song of many Espanoles! And, they’re not alone. Just ask the Greeks, Italians and French. It’s no wonder many refer to this part of Europe as the wine states, for different reasons than just grape juice.


Time to Buff It Out!: Depending on where one is in the income ecosystem, the Fed top tax rate of 39.5% and the 13% California state tax rates, before deductions, believe it or not, are a lot less than our Spanish brethren. Many states don’t have any income tax. So what? If we applied Spanish tax rates to the DJM property portfolio, our monthly distributions would easily be cut by 50%. I get that we are not Spain, or the EU; Just offering a bit of perspective. Our tax code is complicated and benefits those who take risk and succeed; For example, our recent recapitalization of Bella Terra would have generated an eight figure tax in Spain; zero to our beloved IRS. On a slightly different note, I was also surprised to learn upon arrival, that the island is essentially “clothing optional”; the Spaniards have figured it out that the government can’t tax them for simply hanging out in their birthday suit! However beautiful the human body, thank the clothing gods for H&M, Tommy Bahamas and O’Neil…


“Those French Have a Different Word for Everything”: S’il vous plait; In one short flight, I went from laid back beach‐ chic to Champs Elysee, Musée d’Orsay and Plaza de le Concorde, to name a few monuments to past glory. We all remember Alexis de Tocqueville, best known for his portrayal of American spirit of adventure, political equality and economic freedom in the mid 1800’s. The French expression “Laissez‐faire” defined early American entrepreneurialism and an economic system free from government interference such as regulations, privileges, tariffs, and subsidies; sometimes referred to as “let it be economics.” A system that did not exist, nor exist in most of Europe today: C’est la vie‐‐ “That’s life”!! Steve Martin had it right, except for the expletives like “j’en ai ral le cul” (“I’m so…fed up!”)Frenchman use to describe their government bureaucracy and taxes.


Justice and Liberty for All!: Hooray for the Fourth of July and the spirit of the American entrepreneur, and a government that doesn’t muck it all up. We can thank the French, “merci beaucoup” for their impact on American history. Going back a few hundred years, widespread poverty in France, aggravated by social inequality and the high rate of taxes imposed by royalty and tithes imposed by the church, buried the working class, which represented 95% of the population at the time. Essentially, neither the Church nor Royals paid taxes to the state. It’s no wonder the countryside revolted and, today they celebrate their independence on Bastille Day with such energetic freedom of expression—maybe that’s why they all head to the beach? And, smoke!


Home on the Range: How is it that America fostered such independence of ideas and freedom? Is it the weather, the beaches, the wine or maybe the “Marlboro Man”? It’s probably not our monuments. Could it be that we are such a young country, brimming with confidence and fearless, that we don’t know what we don’t know? Indeed, taxes are as critical to our collective health as breathing; involuntary functions for sure, fortunately not enough to strangle risk‐taking, business innovation, technology and real estate finance and development. Fundamentally, we are a brave bunch, multicultural and extraordinarily free to pursue dreams. Another measurement of the resiliency and spirit of our culture is the rebound from a 10% unemployment in 2008 to 5.1% today.


One Investor’s Pain is Another’s Gain: Talk about free market. What happened to our stocks? It’s no wonder people are nervously asking themselves “… is it time to buy or sell?” After a nearly 25% drop in stocks over the past 60 days, the real question is “what’s safe and sane”. What happened to investment real estate? Nada…DJM’s universe of invested capital continues to thrive in each and every property we own and manage. Bricks and mortar are looking better all the time to investors seeking safe harbor, and a current return. Another surprise is the recent data from the International Council of Shopping Centers assessing the impact of e‐commerce on in‐stores sales. Many retailers have adapted to changing technologies and consumer tastes and preferences by creating omni channel strategies. This is accomplished by increasing the number of interactions and net sales with their customer. On‐ line sales, with direct delivery and return only, is about 77% of net sales, versus 107% net sale success with on‐line sales with in‐store pick and return. Retailers have simply harnessed the internet to drive more sales. On‐ line retail sales in 2014 represented about 6% of the market in the US. Improved job growth portends for strong upcoming holiday sales. The economy is growing, with room for more expansion. On the DJM front, we continue to generate 8.5% plus annual returns on the Net Lease Fund, while protecting principal and value in the balance of the portfolio. Spain and France have reason to complain, but for most of us‐we have no reason to whine! Please pass the sun screen.


Take care,

DJM Capital Partners, Inc.
Asset Manager

D John Miller, Founder and CEO of DJM Capital


D. John Miller, Founder & CEO