Brad Alexander and Doug Lamb Discuss Opportunity Zone Program, P3 Deals in Law360

January 17, 2019

In a Jan. 10 article for Law360, McGuireWoods Consulting senior advisor Brad Alexander of Atlanta and McGuireWoods Richmond partner Doug Lamb (Public Finance) discussed proposed regulations of the opportunity zone program and how public-private partnerships may help realize the potential of opportunity zones.

The program, which aims to spur investments in the more than 8,700 designated opportunity zones across the United States, provides tax benefits and deferral of capital gains for qualifying investments. Although gating issues hindered those initially interested in the program, regulations proposed in October 2018 and set to be finalized in early 2019 would fix these problems.

“After reading these requirements and benefits, many may wonder how to put together a commercial real estate deal that will appeal to investors and leverage the opportunity zone tax benefits to enhance returns,” they wrote. “The answer to this question is complicated.”

Opportunity zones are located in areas with chronically low employment rates and incomes, traditionally not appealing for investment. The tax benefits are meant to promote the inflow of capital to opportunity zones to help create jobs and raise incomes, but finding successful real estate deals in economically depressed areas remains a significant hurdle.

“This is where public-private partnerships, or P3, can help facilitate deals,” Alexander and Lamb wrote. “In the U.S., a large number of state and local governments have updated their laws to facilitate P3 deals. At their core, P3 real estate deals combine public and private assets into real estate facilities that serve public and private uses.”

Partnering with the public sector can be a significant benefit, easing the cost of basic infrastructure, locating facilities outside of class-A commercial zones and providing tax advantages. “The state and local governments that figure this out first, and put P3 deals on the table in opportunity zones, will capture the early advantages from the program,” the authors said.