What do Opportunity Zones mean for the EB-5 industry? - EB5Investors.com

What do Opportunity Zones mean for the EB-5 industry?

EB5Investors.com Staff

By EB5 Investors Magazine Staff 

The EB5 and Opportunity Zone programs have plenty in common, and EB5 developers and fund managers are well-positioned to pivot into Opportunity Zone projects, experts say.  

Both EB5 and OZ funds have similar goals and were designed to bring new capital to struggling communities, explains Deborah Burns, CEO of investUS, an Albuquerque EB5 Regional Center that is now branching out into running Opportunity Zone funds.  

“EB5 is basically private equity with immigration bells and whistles, and Opportunity Zones are basically private equity with tax-incentive bells and whistles,” Burns says.  

Because of those incentives, both programs have complex regulatory requirements, Burns adds, and EB5 professionals’ experience shepherding investors through complex, multi-year projects will serve them well in handling Opportunity Zone funds.  

“Regional centers that have been bringing in investments in projects through EB5 have the necessary skill-sets and know the steps to put together an Opportunity Zones fund,” she says.  

Most early-stage Opportunity Zone investments will likely focus on the same kinds of high-end real-estate projects that have historically attracted EB5 funding. says Richard Shamos, a counsel in the Financial Services Group at Sadis Goldberg 

“It’s potentially a big opportunity,” he says. “There’s a lot of crossover.”  

Despite the programs’ similarities, however, few EB5 investors will themselves be able to reap Opportunity Zone tax benefits.  

“People looking to invest in the U.S., in order to take advantage, need to already have taxable gains in the U.S.,” Shamos points out. That will exclude first-time investors, although foreign investors with existing U.S. assets might still be able to capture Opportunity Zone benefits when making EB5 investments.  

The bigger opportunity, however, is for EB5 developers, for whom Opportunity Zones represent an enticing new source of funding.  

“It could be a big additional source of capital,” says Catherine DeBono Holmes, chair of the Investment Capital Law Group at Jeffer Mangels Butler & Mitchell. Many Opportunity Zones will overlap with EB5 targeted employment areas, allowing developers to draw funding through both programs, Holmes adds. “This won’t help anyone who isn’t in one of the predetermined Opportunity Zone Census tracts, but those who are may have a substantial benefit,” Holmes says. 

The potential synergies could be limited, at least initially, by the fact that only properties acquired after Dec.31, 2017 will qualify for Opportunity Zone benefits. That could lead some EB5 developers to spin off parts of existing developments to third parties for OZ fundraising. In such situations, Holmes notes, EB5 developers would still be able to keep up to a 20 percent ownership stake in the repackaged developments. 

Bundling EB5 and Opportunity Zone investments will require carefully structured deals, but should benefit all concerned, Burns agrees.  

“In a lot of cases, there’s an opportunity to bring in an EB5 investment that improves things for the Opportunity Zone investor,” and having additional OZ equity can also reduce risk for EB5 investors, Burns explains.  

Developers planning to use both OZ and EB5 capital will have to disclose any potential conflicts of interest, Burns adds, but since the deals will benefit both parties, that shouldn’t be a significant burden.  

“The two programs can benefit each other,” Burns says. “They’re symbiotic in that respect.”  

For more information about Opportunity Zones and regulations, please visit Opportunity Zone Expo at https://www.opportunityzoneexpo.com/ 


DISCLAIMER: The views expressed in this article are solely the views of the author and do not necessarily represent the views of the publisher, its employees. or its affiliates. The information found on this website is intended to be general information; it is not legal or financial advice. Specific legal or financial advice can only be given by a licensed professional with full knowledge of all the facts and circumstances of your particular situation. You should seek consultation with legal, immigration, and financial experts prior to participating in the EB-5 program Posting a question on this website does not create an attorney-client relationship. All questions you post will be available to the public; do not include confidential information in your question.