Opportunity Zone Magazine Volume 1, Issue 3 | Page 29

SCALING OPPORTUNITY ZONE INVESTMENTS 29 INTERMEDIATE STAGE 2020-2022: SCALING UP OZ INVESTMENTS As we move from early to intermediate stage OZ investments, investors will rely on municipalities moving conceptual, larger scale projects to investment ready status to generate a pipeline of investable assets. The most compelling projects will combine three elements to optimize potential OZ deal offerings: 1) identify specific investment strategies related to the targeted projects; 2) commit to completing predevelopment activities that either support targeted projects such as infrastructure improvements and/ or build capacity to complete transactions such as technical assistance and training and; 3) clearly outline incentives in exchange for municipal deal requirements. The financial calculus that makes a project “fundable” will usually require some incentive in addition to the opportunity zone benefit. Cities hoping to attract OZ capital will need to create a plan to secure predevelopment funding activity from county, state, federal and/or philanthropic sources. Cities hoping to attract OZ capital will need to create a plan to secure pre-development funding activity from county, state, federal and/or philanthropic sources. Despite a municipality’s limited funding ability, many pre-development activities have a double benefit. First, this form of public investment can serve as an OZ investment in and of itself as long as it has an associated revenue source such as a fee, toll or public lease. Secondly, the pre-development project can serve as a catalyst that encourages follow on investments. LATE STAGE OZ INVESTMENTS: COMMUNITY SCALE INVESTING As the industry moves to the third and late OZ investment phase, cities will need to develop a holistic operating investment strategy. Operating investments favor smaller scale, community level investments. There are a series of possible operating investments to both encourage new venture business as well as to provide expansion capital for existing business that can be pursued. Many of these operating investments will also include real estate components that will provide investors the best of both worlds – the stability of real estate assets with the unlimited upside of the operating investment. A robust strategy to attract operating investments can provide a boost to local entrepreneurship and job creation. The most successful strategies will contemplate an exit strategy at the outset. Scale matters. Right now, single asset projects reign king or queen as they are most likely to be “investment ready,” but cities must begin planning to create a pipeline of projects at a larger, master planned scale now to be ready for future OZ investments. At the same time, municipalities need to aggressively pursue smaller, community scale projects that more immediate address local needs and demonstrate the tangible benefits of the OZ legislation. Bo Kemp partners with a national network of advisors, advocates, government and business leaders to help drive growth, tackle major initiatives and boost efficiency in municipalities. Highly experienced in the structuring and execution of public-private partnerships, Kemp drives innovation in municipal utilities, public infrastructure and economic development for legacy cities. Kemp previously worked with Senator Cory Booker who co-sponsored the Opportunity Zone bill. Kemp currently works with the city of New Orleans, the southeast Louisiana regional economic development organization and the Tampa Innovation Partnership among others to develop and implement comprehensive Opportunity Zone plans. OPPORTUNITYZONE.COM