By OZ Magazine Staff
With just over 3 years since inception, Opportunity Zones have swept across the nation and spurred growth in poor and distressed areas. The investments have created jobs with the help of new OZ developments, Qualified Opportunity Zone Businesses and Qualified Opportunity Funds. It is estimated that OZs have generated about 500,000 jobs, attracted $75 billion in capital investments and are helping to lift more than 1 million people out of poverty, according to the White House Council of Economic Advisers.
THE NEED FOR OPPORTUNITY ZONES
The OZ program is an attempt to give a shot in the arm to those areas of America that are historically economically distressed. It gives a unique opportunity to investors and companies to get a return on their investment while also doing social good by lifting up poor communities.
Out of the estimated 331 million plus U.S. population, 52 million people in America are living in what is officially described as “economically-distressed” communities, according to EIG.
The designated OZs have an average poverty rate of more than 32% – a rate that is 17% in the rest of the country. The median family incomes in OZs are also 37% lower than the national average; and it is estimated that the poverty rate in one fourth of all OZs is over 40%, according to a report by the White House Opportunity and Revitalization Council.
INVESTMENT SECTORS FOR OZ CAPITAL
OZs give investors the chance to capitalize on developments in OZs by pushing them to come up with projects such as infrastructure development and housing projects that benefit whole communities; in return, the government provides them with certain tax exemptions.
One key area where OZ projects have concentrated in is infrastructure, which is backed by the fact that almost 11% of the American workforce – 14 million jobs, according to Labor Statistics – accounted for this sector. Another vital area has been small businesses, which traditionally has been a major source of new job creation in the country. An estimated 30 million small businesses are credited with creating two out of three new jobs each year, according to a report by the White House Opportunity and Revitalization Council.
OZs has made an increase in housing values, which has led to an estimated $11 billion in additional wealth for the nearly half of OZ residents who own their housing, the report says.
Private equity investment in OZ businesses grew 29% compared to businesses in non-OZs between 2018 to 2019, according to a report by the White House Council of Economic Advisers.
SUCCESS STORIES IN OPPORTUNITY ZONES
RevOZ ramps up job creation with new initiative
RevOZ Capital, which have launched a new Social Impact Initiative to increase economic development in urban centers across the country, estimates to have created 1,700 construction jobs from its projects.
“Job creation is an important measurable when it comes to the social innovation we are targeting,” said Lisa Bhathal Merage, managing partner of RevOZ Capital and chair of its Social Impact Council.
The jobs were created in a mix of industries – from temporary jobs in construction, design and engineering to permanent jobs in retail, housing, property management, minority-led start-ups, government services and non-profits.
RevOZ, which has recently launched a new Social Impact Initiative, plans to invest into $1 billion of OZ developments in growing metro areas hit hard by Covid-19, Merage said.
“First and foremost, it's about marshalling new private investment into emerging cities across the country that for too long have not received adequate attention,” she said.
Woodforest National Bank spur jobs in several funds
Another success story is created by Woodforest National Bank. Woodforest CEI-Boulos Opportunity Fund is anticipated to support the creation of over 1,800 permanent and construction jobs and create or preserve over 1,000 affordable housing units with a total of 11 investments that span across the bank’s 17-state footprint.
Woodforest is an anchor investor in both the Blueprint Texas and Blueprint Southeast Funds. There have been 300 jobs created to date for Blueprint Texas and 600 or more are anticipated, said Blueprint Local’s founder Ross Baird.
Caliber invests in medical community to increase jobs
Caliber The Wealth Development Company has renovated Phoenix Medical Behavioral Hospital in downtown Phoenix, located in an OZ. The hospital is expected to serve nearly 4,500 patients each year and bring 80 high-income jobs to the area, according to the company.
“Not only will this provide needed services to a part of the country notorious for its shortage of in-patient neuropsychiatric hospital beds but it will also offer our accredited investors a strong annualized cash flow return and the chance to see their capital have meaningful impact on the community,” said Chris Loeffler, CEO and cofounder of Caliber in an online statement.
Wellness 4 Humanity
Wellness 4 Humanity pivoted their fund from hospitality (food halls, brewery, wine bars, etc) to health, wellness and Covid-19 testing. Social Entrepreneur and Impact Investor Anh Mai, founder of Wellness 4 Humanity, decided to roll out contactless automated vending machines across the U.S. at airports, malls, office towers and colleges. They are also converting empty spaces, gyms and kiosks into testing sites, which creates jobs and opportunities, Mai said. So far, the company has created about 100 jobs but hopes to increase that to several hundreds more once additional test sites open.
Beacon Hill creates jobs with OZ fund
Nest Opportunity Fund, which focuses on markets in Lexington, KY and Columbus, OH, has added an estimated 18 full time jobs. The fund invests in rehab and affordable housing.
“In Lexington, we’ve created 9 jobs and in Columbus we’ve created a hair over 9 jobs as well; spanning the management, rehab/construction work, and the administrative functions,” said Clint Edgington, principal and founder of Beacon Hill Investment Advisory.
WeatherCheck creates successful business in OZ
WeatherCheck, a black-owned business from Louisville, Kentucky, is another business said to have been spurred by the OZ program. WeatherCheck has made a business out of monitoring real estates across America for weather-related damages. It provides clients with vital disaster recovery assessment that becomes key when claiming for damages from insurance companies. The new company reportedly already has 4 million houses registered in its customer base and employs 11 people.
Arctaris supports jobs in OZs
The Arctaris OZ investments is contributing to the designated zones across the country. Among the various projects it is involved in is high-speed internet broadband services in the cities of Belfast and South Portland that would help retain several dozens of jobs in Maine; 270 workforce housing units in collaboration with Four Points for low-income communities in rural Colorado; and $40 million revitalization projects in the city of Erie.
Investing in infrastructure projects in OZs
The Port of Camas-Washougal in Washington has been given a $3 million grant to build a 50,000 sq. ft. building in an industrial park that will generate 130 jobs and $10 million plus in private investment. The EDA is giving a $3.5 million grant to Carneys Point Township to improve sewer infrastructure in an OZ; after local funds match the grant, 4,250 jobs and $547 million in private investment are expected.
THE ROAD AHEAD FOR OPPORTUNITY ZONES
The pandemic has had a significant impact on OZ projects, just like it has struck businesses and growth in many other areas of the country. However, now that the vaccines are rolling out, it may be expected that the growth could return to the levels seen in the pre-COVID era when a simple OZ designation could lead to a 29% relative increase in equity investment.
The weeks ahead will inform investors how the OZ program will move ahead under the new Biden administration. But if past successes of OZ projects are any indicator, one can safely anticipate that 2021 could be the year when OZs spur a massive resurgence in growth and prosperity for needy communities across the United States.
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