At least one observer thinks theOpportunity Zone program missed the mark in one area.

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"Opportunity Zones were notdesigned to be a real estate play," says Steve Sharkey, a partnerbased in Baltimore for DLA Piper. "The guys who put this stufftogether actually were thinking about operating businesses. And itreally has not grabbed hold in that area. It has kind ofunderperformed relative to being fuel for investment into startupbusinesses as opposed to real estate projects."

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Sharkey isn't alone in thatassessment. James C. Seiffert and Jameson M. Seiffert of Stites& Harbison wrote that the Opportunity Zone program "has yet totake a major step in connecting private capital with operatingbusinesses in these distressed communities." So far, OpportunityZone Funds have invested in real estate, but they have largelyavoided operating businesses and venture-stagedcompanies.

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Sharkey thinks the program missesits full potential by not being more welcoming to investments inoperating businesses. Though Sharkey designs arrangement structuresfor these investments, he doesn't see a lot of them being done thatway.

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"Even though I think it's clearthat it was designed to have a broader application and to pick upoperating businesses, I think they [Opportunity Zones] are notgreat for that application," Sharkey says. "I think it's a toolthat doesn't have a great fit."

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The length of the investment isone of the reasons for this 

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"One of the things that make realestate investments such a good match for Opportunity Zones is thatthey are long-term assets," Sharkey says. "Real estate projects aremuch more likely to have a box around them that you can steer outof."

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But a lot of things can happen toa startup over a decade. "For a startup business, ten years is along time," Sharkey says. 

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Mike Krueger, a partner atNewmeyer Dillion, does see a path for OZ investments into startups."I think that's one of the easier transactions to do is workingwith companies who are looking to raise capital," he says. "Startupcompanies are just as good of an Opportunity Zone deal as realestate. I think a lot of people forget that it doesn't have to be areal estate deal for an opportunity."

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In fact, Krueger thinksOpportunity Zone Fund investments in operating businesses will growin popularity. "It can be any type of business, and I think we'regoing to see that increase," he says. 

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Some of that money could comefrom funds earmarked for foreign investment. "I think people arenow reconsidering a lot of foreign investments—money that peoplewere taking out of the US economy to put into foreign investments,"he says. " I think [now] they invest that money domestically. We'regoing to see more money staying in the US and being put into localprojects."

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Leslie Shaver

Les Shaver has been covering commercial and residential real estate for almost 20 years. His work has appeared in Multifamily Executive, Builder, units, Arlington Magazine in addition to GlobeSt.com and Real Estate Forum.