As Opportunity Zone (OZ) rules and regulations finalize, projects are beginning to roll-out across the United States. Project roll-outs follows a period when many regions planned for OZ capital through the development an Opportunity Zone Prospectus and the formation of project opportunities.
- St. Paul, Minnesota Phalen Village: Local groups launched two OZ projects that include an Aldi’s Grocery Store and family medical facilities. An estimated 5,000 people in the surrounding area are in poverty. The addition of family-friendly commercial and residential space could be a high priority for residents as many low-income neighborhoods suffer from a food desert.
- Birmingham, Alabama Stonewall/American Life Tower Revitalization: One of the highest profile OZ projects in the US occurs in Birmingham, Alabama. The Stonewall/American Life Tower has been vacant for thirty-six years and will transform into workforce housing with affordable rent around the $900 price point.
Officials in Phalen Village state that the Opportunity Zone incentive was not a deciding factor for the investment. However, the second project is likely driven by Opportunity Zones due to a combination of national recognition and local leadership.
In any case, Opportunity Zones are part of an investor’s capital stack to acquire and renovate a new property. The capital stack is a combination of equity and debt financing along with other tax incentives such as historical or local redevelopment tax incentives.
If OZs offer a small premium to a project’s overall return, the OZ tax incentive could be enough to tip the scales on what projects are on the table for investors.
Many States, including Alabama, are establishing advisory boards to monitor Opportunity Zones to ensure that investments are deployed in ways that improve the community. Advisory boards can help mitigate the risk of gentrification and displacement that occurs when large-scale local investment occurs in neighborhoods.
At the State level, groups are offering concierge services to prepare a regional prospectus and ensure that investors are connected to local OZ projects. These groups also help educate local investors about the Opportunity Zone incentive.