Opportunity zones (OZs) are underserved and economically distressed, communities that have been nominated by a state or US territory and certified by the Secretary of the US Treasury. The census tracts, which are designated low-income areas, were chosen by governors based on poverty rates and median family income. Can you explain how opportunity zones are beneficial to communities?
The tax benefits afforded to investors are meant to push the flow of capital into these under-served communities. The capital is used to purchase property or make equity investments in operating businesses. The communities will benefit from new housing, affordable housing, new businesses opening, an increase in jobs created and the chance to attract capital for their own ventures.
What are some of the areas in Tampa that qualify as an opportunity zone? How do these opportunities bring business to the area? Are there examples of other areas similar to Tampa that have shown success?
There are 101 census tracts in the Tampa Bay area including 16 in Pinellas, 19 in Polk and 32 in Hillsborough.
Having so many local OZ census tracts could be the difference-maker between a company choosing the Tampa Bay area over another metropolitan area. If a company knows they can benefit from the tax incentives by making an investment in the community, it could sway their decision. Companies also look for areas that are exhibiting growth, which many OZs already are. Additionally, companies want to make sure they have the available talent needed to run a successful business, that their employees have access to
housing (especially affordable housing) and that there is a vibrant community that will attract the best talent, each of which can be found in OZs here in Tampa Bay. Atlanta, GA is one of the best examples and most comparable areas. The city caught on to the incentive early and the City of Atlanta’s economic development authority created Invest Atlanta, an initiative to provide individuals, and businesses, every resource you could possibly imagine regarding information on OZs. There are resources for developers, businesses, homeowners, renters and guidance for grants, bonds and loans. The City of Tampa has developed a similar initiative by aggregating OZ resources at https://www.tampagov.net/economic-and- urban-development/opportunity-zone- program.
In what ways has the pandemic provided more opportunities for the OZ program? Would you say this is a safe investment when it comes to real estate?
The pandemic has really highlighted how impactful programs like this can be. While there are millions of Americans without jobs, and some on the brink of losing their homes, this program can spur the economic development needed to provide a lifeline to struggling communities. Historically, recessions have been caused by weaknesses in our financial systems or economy. The recession caused by this pandemic still has positive underlying attributes. In general, most industries (outside of hospitality and retail) are still moving full steam ahead. These industries can provide much-needed jobs for Americans. It may not be the same
job, or the same salary, but there are opportunities out there.
To say any of our investments are safe would be a full display of hubris. At the end of the day, the underlying real estate deal needs to stand on its own two feet before the incentive is even considered. The program can make a good deal great, but it can’t make a bad deal good. The decision to be made here is, do I send the government my money, in the form of taxes, or do I invest my money into quality investments and spur economic activity? That seems like a simple choice.
How is the upcoming election going to affect the OZ Program, if at all? Do you think this will impact the program and investment options? How?
Fortunately, the program had strong bipartisan support when it was enacted. However, I do think you’re going to see things like reporting requirements increase. If we see a regime change, I believe it could actually increase investments in OZs. For example, if the capital gains tax rate were to double in the future, investors could benefit greatly by making an OZ investment now that allows them the ability to exclude such tax liability on the ultimate sale of their OZ investment.
Jeanine Blake is Principal for Opp Zone Capital, a private equity firm using strategic diversification of assets utilizing Qualified Opportunity Zones to rebuild and reshape communities across the US. She is the former SVP of Global partnerships for Portable on Demand Storage (PODS), leading a new brand that disrupted the moving and storage industry through her development of the franchise system. jeanine@OppZone-Capital.com.
