Opportunity Zone Magazine Opportunity Zone Magazine Volume 1, Issue 1

TRIPLE BOTTOM LINE INVESTING IN OPPORTUNITY ZONES As the tax guidance and rules make the road map to tax incentives clearer, Opportunity Funds will abound. Like so many investment sectors, Opportunity Zone investing is likely to experience the all too common herd mentality that plagues other investment sectors. As Fikri and Lettieri point out, Opportunity Fund investors could exhibit the same myopia of venture capital investors who put 75 percent of their capital in three states and in companies, the majority of which are run by white male founders. Similarly, major markets are likely to get the first wave of Opportunity Zone investment, but they're not the only places that will offer good returns. investments. Once everybody discovers a great investment, it’s no longer a great investment. No one ever got rich by following the crowd. Superior returns come from under-invested areas, so the key is to invest where others haven’t. While unsophisticated investors will continue to chase opportunities in major metropolitan areas, savvy investors will endeavor to identify investments in emerging businesses, technologies and communities where Opportunity Zone investing will have the greatest impact. 4 Investment professionals know that good value investing is not found in a crowded, competitive marketplace that is in favor. Savvy investors try to identify the attractive investment opportunities in inefficient markets or in out-of-favor market segments because they can get a better risk-adjusted return. With respect to Opportunity Zones, less efficient markets exist in relatively unknown, misunderstood, or less populated markets. Attractive Opportunity Zone investments can also be found in market segments with good demand, in non- cyclical sectors, with lower property prices and costs of living and lacking in financial intermediaries to bridge the investment opportunity with Opportunity Fund investors. IT'S UP TO OPPORTUNITY ZONE INVESTORS & MANAGERS Whether Opportunity Zones investing succeeds in truly helping distressed communities will be mostly up to investors and fund managers. If they take the challenge, then they will create the true Opportunity Funds. And instead of angry backlash there will be grateful cheers— and healthy returns on their investments. Initially, the industry will focus on large projects in major markets, but there is a limited number of these types of Opportunity Zone D eborah J. B urns ’ financial career spans more than 30 years and includes roles as an institutional investment officer in New York City, a finance officer at a New Mexico start-up that became a $58 billion NYSE publicly-traded company, and chief lending officer for a community bank. She honed her ability to determine key factors for business sustainability, profitability and growth in a wide variety of industries. During her investment career, she invested more than $3 billion. Burns founded the Project Finance Group at TIAA and she was the lead institutional investor for construction and long-term investments. Sources: 1 Redfin Blog: Ten Years Gone: Eight Graphs That Show the Unexpected Ways the Financial Crisis Changed the World Written by Glenn Kelman on September 11, 2018 2 https://www.crainscleveland.com/article/20180309/news/154511/investment-tool-could- bring- bucks-opportunity-zones 3 Congressional Budget Office; Survey of Consumer Finances 4 “The State of Socioeconomic Need and Community Change in Opportunity Zones” by Kenin Fikri and John Lettieri, December 2018 5 “Investors Lining Up to Pour Billions into Opportunity Zones by Jon Banistow, October 4, 2018, Bisnow, Washington, D.C. OPPORTUNITYZONEMAGAZINE.COM 65

Opportunity Zone Magazine Opportunity Zone Magazine Volume 1, Issue 1 | Page 67