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Opportunity Zones begin to be put to work

June 20, 2019
By: Jason Rittenberg

After 18 months, some communities are starting to see Opportunity Zones (OZ) investments. LISC, a community development entity with a long track record of project finance, has published a new guide to help communities plan to capitalize on the investment. These activities remain heavily focused on real estate projects but may still be informative for groups looking to bolster their regional innovation economy.

Several sizeable OZ projects have been announced in the last few days. In Denver, a 10-story apartment building in an up-and-coming neighborhood is thought to be one of the first in the region. A $23 million apartment building in Cleveland is said to be “80 percent” financed with OZ investments.

Of course, many more projects could be occurring without public announcement. A new analysis tracks real estate investment in OZs, Census tracts that were not selected but were eligible as OZs (called “also ran” by Real Capital Analytics), and ineligible tracts. The data indicate that real estate sales in OZs were up substantially in 2018 versus 2017 and have continued to grow into 2019. Some of this activity, which includes substantial investments by the Kushner Companies, could already be related to OZ investments. Notably, sales in “also ran” tracts have been in decline over the last six months. Ineligible tracts have seen increased activity for the past nine months.

Pew Stateline reports on several efforts to translate the OZ incentive to business investment, which appears to be in the planning stage for most funds. A previous Weekly Digest article covered one foundation-backed strategy. Pew updates on this effort and cites LaunchPad and Community Reinvestment Fund as two other entities working toward a business investment strategy.

To help facilitate OZ investments, albeit largely into real estate projects, LISC has completed a “playbook” for communities. The goal of the strategy is to help advance projects that will have a positive impact in the neighborhoods seeing OZ investments. While the OZ incentive is new, the steps are developed from other community development finance programs, particularly New Markets Tax Credits.

LISC’s steps are:

  1. Hold a stakeholder meeting;
  2. Develop a plan;
  3. Leverage other programs and put parameters on acceptable projects;
  4. Build pipeline through collaboration and/or financial modeling;
  5. Create an investment prospectus; and,
  6. Define impact metrics and encourage transparency.

LISC anticipates developing additional guides for investors and developers.

opportunity zones