The federal Opportunity Zones program has drawn interest from investors around the country, and policy experts and fund managers expect a flood of capital to flow into the space as soon as the regulations are finalized. Pexel The program, part of the Tax Cuts and Jobs Act President Donald Trump signed into law in December, gives large tax breaks to investors who place capital gains into funds that invest in opportunity zones, a set of largely low-income areas across the country. Local governments nominated their opportunity zone census tracts in April, and in recent months, several funds have been set up specifically targeting opportunity zones. Treasury Secretary Steven Mnuchin last week predicted $100B of capital would be invested into opportunity zones. Develop founder Steve Glickman, the original architect of the Opportunity Zone policy, who launched a consulting firm last month to advise investors on the program, said he has spoken with hundreds of investors eager to deploy money into opportunity zones. “We always knew this would be a larger incentive than any previous community investment program, but I think the actual market demand and interest is way higher than even I thought earlier this year,” said Glickman, who will speak Oct. 16 on Bisnow’s D.C. Opportunity Zones event. “There is a huge amount of appetite to take advantage of this program.” Google Maps A building in Ledroit Park, one of D.C.’s Opportunity Zone areas, that Fundrise plans to redevelop as part of its new fund The next step that many investors are waiting for before they begin to pour money into opportunity zones is the release of specific regulations on the program from the Treasury Department and Internal Revenue Service, which are expected to unveil them this month. Investors are looking for guidance on several issues the law did not make clear, such as how long capital can sit in a fund before it must be invested into opportunity zones, and whether capital can be recycled through multiple investments. “I think you’ll see the big catalyst will be the release of the regulations,” Glickman said. “People are waiting on the sidelines to announce, they are in the process of forming their investor documents and fund structure depending on the regulations.” It is possible to close opportunity zone deals within the parameters of the provision written into the tax law without the detailed regulations, and some investors have done so, but the majority of them want more detailed guidance before making their next move. “We are raising money and closing deals but have thousands of people on a waitlist waiting for more clarity,” said Fundrise CEO Ben Miller, who launched an opportunity zone fund in August. “Once the regulations get released, I expect they’ll begin a tsunami of demand.” Fundrise is aiming to raise $500M to deploy into opportunity zones. Miller said it has already closed at least two opportunity zone deals, a multifamily-over-retail redevelopment in D.C.’s Ledroit Park neighborhood and a creative office project in Los Angeles. Several other investment managers have begun setting up funds targeting opportunity zones and say they are getting strong interest. Enterprise Community Partners, one of the nation’s largest affordable housing developers, is currently sourcing deals for a national opportunity zone fund, and it also plans to launch regional funds in the future. “We have a lot of incoming inquiries for financing,” Enterprise Director of Impact Investing Rachel Reilly said. “What we want to do is make sure we have deals we think we can deliver returns to investors as well as deliver a social impact.” New York-based RXR Realty is exploring launching an opportunity zone fund and has had many inquiries from investors and high net worth family offices. RXR Executive Vice President Seth Pinsky, who manages the firm’s emerging markets strategy, said he has long been active in areas that are now designated as opportunity zones, and the program is making investors pay attention to these neighborhoods. “One of the things that’s particularly attractive about the Opportunity Zone program is, in the past, we had to convince capital to look at these areas, but now capital is asking us to target these areas,” Pinsky said.”A lot of people are looking into the Opportunity Zone program as potentially a very valuable opportunity.” D.C. Deputy Mayor for Planning and Economic Development A map showing the census tracts designated as opportunity zones in D.C. One investment manager is so bullish on the program he launched a private equity firm specifically targeting opportunity zones, which he says is the first of its kind. Craig Bernstein, who spent the last 11 years as chief investment officer of White Star Investments, in July started D.C.-based OPZ Capital with co-founder Jill Homan. He is now meeting with high net worth individuals to put together an opportunity zone fund with a $500M target, and he is looking at developments he plans to invest in as a joint venture partner. Opportunity zone deals provide the chance to increase returns by 50%, Bernstein said, but there is still the typical risk associated with new development in emerging neighborhoods. He said OPZ is only pursuing deals that would have a strong likelihood of success even without the opportunity zone tax breaks. “We’re being very conservative in terms of the deals we’re pursuing,” Bernstein said. “We’ve narrowed it down to a handful of excellent deals with strong sponsorship.” Bernstein said he has identified $150M worth of deals across the country in D.C., Florida, New York and Los Angeles, focusing primarily on multifamily, student housing and self-storage projects. “There’s a tremendous opportunity moving forward in terms of potential new capital coming to the market and a new capital source for developers,” Bernstein said. Glickman, Miller, Reilly and Bernstein will speak Oct. 16 on Bisnow’s D.C. Opportunity Zones event at The Watergate Hotel.