The Opportunities in Opportunity Zones

More than $100 billion could be invested in 8,700 zones across the US thanks to the new tax law, but there are still many challenges, including a 10-year hold timeframe, say panelists at ICSC RECon 2019.

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More than $100 billion could be invested in 8,700 zones across the US thanks to the new tax law—a potential powerful tool for economic investment, said moderator Phillips Hinch, VP of tax policy of ICSC, based in Washington, DC.

But while it might incentivize the next project, investment or community, it isn’t without its own set of challenges, say panelists at ICSC RECon’s opportunity zones panel.

➤➤ Join the GlobeSt.com ADAPT: Opportunity Zones conference September 16-17 in Baltimore, MD The new national conference series is aimed at identifying Opportunity Zones across all property types and geographic regions. This first-of-its-kind event will educate, connect and celebrate the investors, developers and owners with the people behind the planning and decision-making, such as architects, consultants, academics and, most importantly, municipal officials. Also, be sure to take a look at our current adaptive reuse and opportunity zone nomination form and submit your project! Deadline is fast approaching June 7th. Click here to register and view the agenda.

Panelist Scott Maxfield, VP of Goldman Sachs, based in New York City, said that the company has been investing in opportunity zones for a while now. “To date the company has a significant pipeline of investments that it expects to close in the next one to two years.”

But Maxfield told attendees that one very important fact is that opportunity zone tax credits will not solve the problems for a project that doesn’t pencil or that is hardly making any return. “The opportunity zone benefit isn’t deep enough.”

Having said that, he explained that the opportunity zone investment is important to take a project that is close to meeting an investment return hurtle and might help take it over that threshold. “This legislation is allowing cities to organize around projects and discuss what kind of projects should be developed.”

What people forget, he said, is that the deal still needs a strong developer and has to have a real compelling plan for redevelopment and that is often overlooked. “All across the country, the legislation’s spirit is to invest in ways that is consistent with the local communities.”

For panelist Arturo Sneider, co-founder and CEO of Primestor Development Inc., one of the challenges is the length of the investment period. “When we look for a project, we are going to look into a 10-year vehicle, let’s say, we have to be focused and look at it closely…it is a fairly long-term commitment and these communities are evolving at a significant pace.”

Sneider said that the opportunity zone benefits don’t mean that you solve for social balance issues, infrastructure or employment issues in that area. “You don’t really know what an exit looks like in 10 years, so while it is an attractive program, and while I am very pleased with the last batch of clarifications, the timeline is tough and you cannot lose site of the program’s intent.”

Catherine O’Connor, president of the Alliance for Economic Development of Oklahoma City, said that they were one of the cities selected early on and tries hard to identify projects and match them with investors. “I don’t think we will have a local fund but we will work with other funds to match them with local projects.” She adds that Oklahoma City is also creating community engagement programs to help identify job creation opportunities there might be and are matching their policies with projects that create some sort of social benefits. “We are looking at developing workforce programs to help develop skills. You have to work towards that double bottom line.”

Above all, says Primestor’s Sneider, there are complexities with opportunities zones that many people don’t understand.

Check back with GlobeSt.com in the next week or so as we talk with Joseph Panepinto, SVP and CEO fo Panepinto Properties all about the legislation, how to get the full benefit of it, whether liquidity is a concern and more. Also, keep checking back for more in the next week for out full wall-to-wall coverage surrounding the Las Vegas ICSC RECon show wrap up and be sure to take a look below at stories you might have missed.

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