OPPORTUNITY ZONES/OPAL

There are reported to be 134 funds seeking to operate in the opportunity zone space, and about 80% of these are headed by people who have never run a fund before.

There was critical analysis of these investments.  Your money is locked up for ten years.  The advantage is that after ten years there is no capital gains on your profits but meanwhile you have no liquidity.  You still have a risk of achieving successful development, and the target yield was variously described as 9%, 9% to 12%, 14%, plus “300 basis points” for the value of the ultimate tax shelter.

There was no discussion of investing in companies (which is possible), only in real estate.  The expert panel thought that vertically integrated realty developers (who could put together the package of land, build the property and manage it) would be the safest bet.

The bottom line is that this is viewed as a long-term and safe cash flow play with no liquidity; it should not be entered into just by reason of the tax deferral but rather as a way to get a recurring and safer yield.

[This is the final post in the series based on discussion at the OPAL family office conference in Newport, Rhode Island held in late July.]


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