JTC Americas, formerly NES Financial now provides its purpose-built Opportunity Zone Fund Administration to more than 40 OZ funds, with projects ranging from theater productions to large-scale residential developments. In addition, we’re in discussion with approximately 200 other OZ funds — some just getting started, some already well established. Because of this expertise and experience, JTC Americas is uniquely positioned to offer information about Opportunity Zones, which we are calling “OZ Data Insights.” The first of the series will be discussing data on Opportunity Zones investors.

Direct engagement with such a large portion of the Opportunity Zones market, as well as polling information from our quarterly webinars, has enabled us to collect a substantial set of market data and to develop unique insights into this rapidly growing industry. 

In this “OZ Data Insights” blog series, we’ll look at some of the data we’ve gathered, and we’ll discuss the trends that we see emerging.

What’s motivating Opportunity Zone investors?

Opportunity Zone Investors Motivation Graph

Investor motivation is of key interest to OZ fund managers and legislators alike. For fund managers, appealing to investors’ priorities is crucial to raising funds. And for government and economic impact groups, investors’ stated motivations will help determine whether the program’s incentive structures are working as intended.

During our various Opportunity Zones webinars (beginning in Q3 2018), we polled those attendees who identified themselves as OZ investors, asking them to identify their primary motivation.

The results themselves aren’t surprising — the most common driver for OZ investment is the program’s tax incentives, as could be expected. A slightly smaller group said ROI was their primary motivation. And fewer respondents said they were, first and foremost, motivated by the potential social impact of their investment.

However, though these relative weights have remained in our recent webinars, it’s interesting to note that the largest respondent group (tax incentives) is shrinking, while the other two groups (social impact and ROI) are growing.

We have a few thoughts as to why this may be: First, though the tax incentives associated with Opportunity Zone investments are attractive, investors are increasingly realizing that the underlying project must be sound in order for an investment to make sense. (As one OZ fund manager recently put it, “The Opportunity Zones program has the ability to make a good deal great, but it won’t make a bad deal good.”)

Second, we believe that the proposed tax regulations, as well as a growing industry push for social impact transparency, are encouraging those investors who do care most about social impact to finally open their wallets — it’s likely that, until recently, a large portion of socially conscious investors were hanging back, waiting to make sure that their investment would do its intended good (as well as for projects to emerge that aligned with the causes they care about).

It will be interesting to see how these percentages develop over the next six months, as the market continues to mature and more (as well as more diverse) OZ funds open for business.

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