Despite Challenges, Opportunity Zones Provide Much-Needed Capital

“We have enough examples at this point to show that opportunity zones are helping projects that either would not have happened or would have taken a very long time to move forward,” Mr. Seigel said. “We’ve also learned that we’re not going to achieve the outcomes we care about by doing nothing.”

In Baltimore’s southeast neighborhood of Greektown, MCB Real Estate has replaced an abandoned paint factory with a $77 million shopping center. The project is the first phase of the $200 million Yard 56 mixed-use development that includes a grocery store as well as a gym, restaurants and other shops. A second phase set to begin construction soon will add more retail, medical offices and apartments.

Mr. Bramble had worked on Yard 56 for years but was struggling to find the financing he needed. When it was included in an opportunity zone, MCB was able to attract capital from a Prudential Financial fund, which helped round out a financial package that included federal and state tax credits, private investors and conventional debt.

“Any real estate deal is hard to do, but deals in underserved neighborhoods are even harder — they typically need multiple layers of financing and incentives, and it takes time to put them together,” said Mr. Bramble, who is working on another opportunity zone development in west Baltimore. “The ability to bring opportunity zone capital to a project is a great tool to have in the toolbox.”

Industry watchers expect lawmakers to continue to tweak rules governing opportunity zones that, in addition to creating transparency, could enhance a community’s role in the projects. And the zones could play a pivotal role in an economic recovery, they say.

That’s especially true as investments in businesses tick up. Those deals had been delayed by the pandemic and the slow rule writing by the Treasury Department, but they offer a much bigger payoff potential than real estate investments, Mr. Christian said.

“A third of my opportunity zone business is on operating businesses,” said Mr. Christian, who is creating an opportunity zone fund to finance the expansion of a manufacturing business, of which he is a co-owner, that converts shipping containers into housing for homeless and low-income earners. “They’re accelerating quicker than real estate projects at this point.”

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