Janet Souk, senior vice president, Clarion Partners
It’s probably a little early to say whether opportunity zones are living up to expectations. Has the program worked out perfectly bringing capital to the most underserved areas? Probably not. Has it brought capital to areas that otherwise would not have seen as much investment? I think so. Has it created jobs and affordable housing that otherwise would not exist? Yes. The intent of the program is good, but there are ways it can be improved. One obvious way is to better track the social and economic benefits of opportunity zone investments. The only way to tell if the program is effective is by measuring and evaluating the long-term impact. This requires an additional effort from as many groups in the industry as possible and an important step we should all consider.
Kevin Shields, chairman and CEO, Griffin Capital
Though there may arguably be certain designated opportunity zones that may not have required tax legislation to stimulate economic activity, the inclusion of Subchapter Z into the Internal Revenue Code has fostered a profoundly positive impact in several communities in need of capital investment. We will invest over $2.2 billion into 21 multifamily community developments in areas that are woefully underserved from a housing perspective. We would not have sponsored those funds, raised the requisite equity and invested in these communities had it not been for the qualified opportunity zone legislation. I think that says it all.
Erik Hayden, founder and CEO, Urban Catalyst
It wasn’t until December 2019 that the final round of clarifications were released. We’ve now had a finalized program for just over two years, and investment into the program has started to meet capital raise expectations thought to be met in 2018. The program, as currently structured, is set up for success. However, if the government wants the benefits from this program to continue there are significant changes that need to occur. If the program isn’t renewed, and extended past 2026, all of the benefits to the potential low-income communities will stop.
Paula Miterko, founder and president, Miterko & Associates
There are different ways to address this question depending on audience and perspective. For cities and towns, this is a golden opportunity to encourage development in areas that need it most, with the added benefit of generating additional property taxes. For broker/dealers, it is an opportunity to generate sales. For wealthier individuals, it is an opportunity to defer or reduce taxes. This can have the overall indirect impact of pushing tax burdens more onto the shoulders of the middle class. But for the financially poorest areas in the country, the jury is still out. The program is still relatively new. Many investment proposals have not yet materialized, as they are still in the planning stage or in development or lease-up. The full impact — positive or negative — will become clear only in years to come.
Jonathan Miller, president and CEO, Parsonex Capital Partners
It depends largely on the expectations of investors and the quality of advice they received from their financial advisers. Given the long-term nature of the investment, with virtually all the tax benefit coming after a 10-year hold and disposition of the assets, patience is necessary. Since we are a diversified fund and pursue smaller, shovel-ready projects, our first project was completed within 14 months of initial funding and fully leased. This is somewhat bizarre in the broader market, as most projects take years to complete, lease up and cash flow. Ultimately, time will tell and good communication and applying best practices will help customers on the long journey of realizing the tremendous tax benefits.