Numerous companies are beginning to offer exchange like services for Opportunity Zone investment. As rules solidify around utilizing the Opportunity Zone tax incentive, challenges emerge around connecting projects with investors. Regulations likely will not permit Opportunity Zones to operate like a primary and secondary exchange. Concurrent regulation around Crowdfunding and the asset tokenization are accomplishing this function.
Even though investors may not invest in an Opportunity Zone with the ease of purchasing a stock, mutual fund, or cryptocurrency, there is still value in publishing information about a specific investment.
What are the pieces of information that a potential opportunity investor needs in order to qualify an investment?
This information can be applied to investments outside of Opportunity Zones. An index of information could help attract outside capital to a local development project.
Contextual Investment Information
Large development projects benefit from complimentary investments within a specific location. Coordinated reinvestment is usually driven by a local development plan such as a comprehensive plan or a downtown Master plan. These plans are frameworks usually ratified and approved by a local City or municipal council. They serve to ensure that development occurs in the right proportion across different types of infrastructure (commercial, industrial, residential, etc.). They also ensure that the development coordinates with public amenities such as parks, transportation, utilities, etc.
The keeper of local development plans should act as a coordinator for project investment. Ideally, we should understand the financial value that a development plan can bring based off its quality and public buy-in and the collective value of nearby investments.
Investors should see information about large grants applied to a certain area, for example the remediation of infrastructure, so they can move quickly to coordinate their development projects and ultimately benefit from the rise of nearby property values.
Key Property Information
In order to qualify an investment, investors need to identify numerous variables within the property. These variables relate to basic financial information such as estimated costs of redevelopment or whether there is a willing seller. The must understand the capacity of the nearby region to support the reuse of the property. Is there enough nearby demand for residential space? What is the collective income for a region? who are key employers, etc.?
Ideally, this information should be made available at the click of a button and should be comparable with other projects. We don’t have a score or rating that can sum up a property’s development potential and future value – not in the same sense as secondary markets can provide a comparable stock price to quantify a firm’s value. Developing a score should not be an issue with the amount of economic databases that are available in the United States.
That type of score could help municipalities understand the resources needed to make a property investable.
Improved Visualization of Local Development and Cities
With augmented and virtual reality, we have the ability to give potential investors, whether that is an institutional investor or individual investors, the ability to experience what a development might look like. We can use virtual reality to showcase a potential development project or offer a virtual tour of a City.
When we think about a true investment exchange for stocks and bonds, in many cases the product is something that many can experience. Think of large corporates such as chain retailers, insurance providers, etc. In many cases you can experience that product and recognize its value to society and the individual.
This is an important aspect of investing in City infrastructure as well. We should offer individuals a chance to experience what that investment looks like, feels like, and the benefits that it could bring to the nearby population.
There is a movement at all levels of society to open up stock exchanges for assets that we currently think about as privately held such as the tokenization of assets in cryptocurrency, the JOBS Act, or the recognition that small to medium size cities in the US need sophisticated financial tools to compete with their counterparts in the larger metros.
Such changes could deliver one of the largest periods of wealth creation our County has ever seen. But in order to provide exchanges we must build the infrastructure of financial exchanges that extend beyond the transaction to include information, awareness, and the curation of opportunity.