On Wednesday, June 17th, JTC Americas, Formerly NES Financial, hosted a free Opportunity Zones webinar with a panel of industry experts — including Urban Catalyst and Four Points Funding, 2 of the top 10 companies from the Forbes OZ 20 List — to discuss the state of the market, the role of Opportunity Zones going forward, and why OZ leaders are uniquely positioned to be agents of the economic recovery.
Prior to our webinar, we spoke with speakers Rachel Reilly of Economic Innovation Group, Chris Montgomery of Four Points Funding, and Erik Hayden of Urban Catalyst about an important Opportunity Zones question: With the targeted investor more than likely even more focused on sound compelling investments, how will this impact interest in Opportunity Zones, especially since most like the tax benefit, but want the real estate to make sense as a standalone investment?
Below are their responses.
“Aligning your Opportunity Zones strategy to address community needs will be more important than ever. Opportunity Funds should work alongside state and local partners; the shared interest and market intelligence gained through partnership can enhance certainty and mitigate risk.
While not a comprehensive strategy, here are three areas of focus:
Investors should focus on assets that meet basic consumer needs, such as affordably-priced housing, where it’s safe to assume that demand will remain strong in a down economy. There may be increased opportunities to creatively structure mixed-use projects where public and private uses are co-located, and risk can potentially be mitigated through partnership. Investors can also consider a place-based, multi-asset strategy such as, developing a new distribution center to address local supply chain concerns and then creating new workforce housing and retail adjacent to the center to serve employees.”
The Opportunity Zone incentive is a massive tax benefit, but we believe each investment should stand on its own merit. This should be about long term investing in projects where the fundamentals make sense. For us that means choosing investments that have clear long-term demand drivers and the expectation of stable cash flow. For instance, we are building multi-family housing in communities that have significant attainable housing shortages. Meeting a community need is the best way to de-risk the project for your investors.
Now and even before the pandemic, all of our projects at Urban Catalyst made sense as standalone investments. They have to be since we have to be able to attract senior debt financing to get construction loans. Without construction loans, we won’t be able to get returns (even with the tax benefits) that are attractive to investors. We structured our Fund this way from the very beginning. Opportunity Zone funds are designed to channel money into lower income areas to create positive social and economic benefits. To make this happen, the program was written so that investors get tax benefits, and developers and fund managers that set up Opportunity Zone Funds have an easier time raising money with these tax advantages. Then the money is put to work to benefit these communities.
Watch the JTC Americas webinar titled Navigating a New Era in Opportunity Zones today by clicking here!