A Guide to Becoming an Opportunity Zone Sponsor

Phil Jelsma

There is a frenzy of excitement about the prospect of opportunity zone investments, but a number of investors are also considering becoming sponsors of the new fund model. While organizing a fund may seem simple, especially for experienced real estate sponsors, the opportunity zone model is actually complex. We sat down with Phil Jelsma of CGS3 to understand the process and get a guide to the process. It all starts with forming a partnership or LLC, of course.

“The steps to organizing such a fund as a Qualified Opportunity Zone Fund Sponsor appear simple, but upon closer examination are quite complex, depending upon the structure,” Jelsma, a partner at CGS3, tells GlobeSt.com. “A Qualified Opportunity Zone Fund Sponsor would typically form a partnership, an LLC or corporation for the purposes of investing in Opportunity Zone property.” In addition, the entity must include its purpose for investing in an opportunity zone property and a description of the Opportunity Zone business. “Although the proposed regulations permit existing entities to file an election to be a QOF as of the beginning of any calendar month, generally most lenders and investors will require a newly formed entity without any history associated with it,” adds Jelsma. “After forming the QOF, the QOF would need to obtain an employer identification number from the IRS.”