10 themes with Opportunity Zone Funds


Tuesday, June 4, 2019 | By Sam Krause

10 themes with Opportunity Zone Funds

The Opportunity Zone Fund conversation has remained a consistent topic throughout 2019 and we are still in the first Inning of the program.  There have been a number of events, seminars, conferences, webinars and discussions regarding Opportunity Zone Funds and how to participate in the benefits.  I have noticed the same dialogue and themes – below is an excerpt of some of the most consistent topics for investors and assets managers.

  1. The waiting game
    There has been lots of talk but little action so far on the deal side and fundraising.  Many managers were waiting for the next round of guidance from the Treasury before finalizing a structure. See our recent blog on the status of legislation. Momentum may begin to pick up.

  2. Invest in profitable projects
    This may seem like a no-brainer, but bears being repeated.  No investment should be done solely for tax benefits.

  3. The tax benefits are an ADDED bonus
    Invest in deals that have a compelling IRR regardless of their QOZ status.  A manager pitching the anticipated IRR + QOZ benefit with IRR on top should be met with skepticism.

  4. Keep doing deals
    If they are good deals regardless of the tax benefits – do them!

  5. Pass on loophole manipulators
    Make sure your investments can pass the sniff test and follow the intention of the QOZ program.  If it seems like the manager is trying to take advantage of a loophole and outsmart the program – save yourself the headache and pass on the opportunity.

  6. Patience is a virtue
    Wait to invest in a good deal and the right one for you.  Rushing to invest because you are eager to meet the 180-day deadline could cost you in the long run.

  7. Don’t look at the expiration date
    The basis step-up benefits are slowly eroding, but the big money to be made is on the tax-free sale of the asset.  You have until 2028 to invest in a grand slam.

  8. More deals are expected to come down the pipeline
    Real Estate deals are the lowest hanging fruit, but as more clarifications come out, it is anticipated that traditional manufacturing, private equity, venture capital, etc. deals will be ripe for the picking. 

  9. Ask LOTS of questions
    • Has the manager managed money before?
    • Has the manager managed an asset in the asset class they are pitching i.e. real estate, solar, wind, manufacturing, etc.?
    • Who else is investing?
    • What tools are in place to make sure the fund is in compliance and passing all tests along the way?
    • Who are the service providers and who are their QOZ clients?

  10. How will the impact of the QOZ program be measured?
    No one knows right now.  It is one of the missing pieces of the legislation – there’s no reporting mechanism to measure the impact of the program.  Don’t lose sleep over it today, but expect the Treasury to come asking in a few years.


Alternative Investments, Fund Administration, Real Estate & Property Management


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