Five attorneys of the Saul Ewing Arnstein & Lehr LLP firm attended the annual OZ Expo Conference in Las Vegas.  The conference was very well attended with an estimate of 1,400 participants and further solidifying that the OZ Expo team is best in class with its reach and expertise in this space.  The two-day event had an extremely diversified agenda that addressed many of the issues currently faced in the industry.  Takeaways from the meeting can be summarized as follows:

1. Various governmental agencies were represented at the conference, including specific states as well as a contingency from Puerto Rico.  Those government representatives discussed the incentive being provided by their particular jurisdictions to support the OZ program.  It is quite evident that, based upon current research, approximately 25 states have some form of OZ legislation that has been proposed, with specific legislation that has been adopted in Maryland and will soon be adopted in Puerto Rico.  Such legislation is being made in a bid to incentivize not only direct development of OZ projects, but also to provide specific incentives for development that will hopefully lead to significant impact in certain targeted communities that such officials are most interested in addressing  In particular, Puerto Rico will be adopting significant legislation that addresses not only tax credits but a system of expedited processing of plans, permits and licenses to simplify the entire process of obtaining permits for the development of projects.  Basically, the government processing agencies will rely primarily on certifications from licensed architects and engineers in connection with the plan approval process.

2. The conference addressed many critical aspects of the OZ program including the newly published regulations.  The event also focused on key strategy issues involving structuring and provided samples of opportunistic investments currently available in the market.  In connection therewith, my panel focused on:

A.    How To Achieve Impact Investments and Factors to Be Considered:

(i)    Existing buildings to be renovated and improved.

(ii)    Issues regarding substantial improvement.

(iii)    Can expanded projects count towards substantial improvement tests?

(iv)    Pre-existing land ownership issues.

(v)    Government or institutional ownership of property.

B.    Impactful Result.

(i)    Whether the project is financially sound.
(ii)    Environments concerns related to the projects.
(iii)    Financial and Economic benefits to the community.
(iv)    Community resources to enhance benefits to all parties.

C.    State Initiatives-Pending (21 states & Puerto Rico).
D.    State Concurrency regarding Opportunity Zone Legislation.

3.  In connection with the above, it is apparent that today’s developers are attempting to take advantage of local and state government incentives to further increase the liability and economics of an OZ development.  In fact, several of the developers at the conference were existing developers in OZ zones before the OZ program was actually even adopted.  Therefore, they seem to have an easier time adjusting to the program since they are already actively involved in under- serviced/impoverished areas where government incentives are standard and utilized in order to prove the viability of the project.

4. It is comforting to note that many participants at the conference are actually very concerned about the social impact of OZ investments and believe that those developments that have a very positive social impact should be factored into the equation by the federal, state and local governments in otherwise subsidizing development of an OZ zone.

5. It is noteworthy that the Department of Treasury, along with the regulations published on April 17, 2019, issued a Request for Information on Data Collection and Tracking for Qualified Opportunity Zones (attached as Schedule 1).  In connection therewith, the Treasury Department invited comments from the public as to what types of tracking should be utilized in connection with the notice provisions that will eventually be adopted.  I have developed my own standards which include the following:

  • Development of good jobs.  This includes job training and improvements to the standard of living of community residents by having governments incentivize developers or public companies to provide such job opportunities to residents in the OZ area.
  • Creation of affordable housing to avoid the displacement of the residents.
  • Increase the services available for the lower income population including transportation improvements, health care improvements, healthy food options and educational services.
  • Engaging local residents in the process as well as local officials.
  • Analyzing the property tax base in relation to the enhanced value being created by the OZ development.
  • Government agencies effort to work with investor groups and the affected residents in the OZ designated areas to effectuate many of the recommendations suggested above.
  • Taking advantage of community redevelopment agency grants to provide assistance to existing residents to acquire or rent affordable residential units. Therefore, residents who could not otherwise afford to acquire or rent upgraded or new units can now afford to do so based upon the grants and incentives that could be provided.
  • Assistance for monitoring the ultimate results of development in OZ areas to determine what social issues are being addressed.
  • Analysis of institutional lending for multi-family, single family, commercial buildings and small business institutions in OZ areas to determine what OZ areas have already attracted financing because they are already being gentrified.

All in all, the conference brought together many different participants in the OZ program that were providing different services to benefit the program, including not only developers, OZ funds and an incredible number of family offices/investors (which was quite heartening to see), but special service providers that focus on administration, financial accounting, assistance in government incentives and even assistance in running the entire program from start to finish as well as providing fundraising at the same time.

OZ Expo announced that it plans to do regional conferences in numerous cities around the country on an ongoing basis.  We look forward to participating in such future conferences and welcome our clients and readers to join us at them.