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As the frenzy about Opportunity Zones continues, one trend has emerged that is hard to deny as investors scramble to determine all the nuances of the new program. The main question we keep hearing within the investment community is, “Where are all the deals?” Once the initial novelty of what sounds like a game-changing tax deferral vehicle has worn off, investors want to know where they can turn to get actively involved and gain consistent access to quality deal flow. It turns out the answer to that question is not as simple as one might hope.

The main issue that we continue to see as we evaluate potential Opportunity Zones (OZs, or OZones) is, “Do the deals make sense on their own merit, independent of the potential tax advantages an investor might realize?” If a deal doesn’t pencil out on its own over the 10-year hold period required to meet the OZ, an investor could end up losing money even though they are able to offset some significant capital gains on the front end. This reality seems counterintuitive to why the program was created in the first place.

Like any new program, the early adopters tend to rush in in search of low-hanging fruit. This means they are not necessarily targeting lower-income areas in need of economic stimulus like the program was originally created to try and revitalize. Instead, groups are targeting designated areas that tend to be adjacent to stable submarkets or those that have already experienced significant development growth in recent years where they can benefit from an existing tailwind of economic activity. For example, almost the entire downtown area of Portland, Oregon is a designated Opportunity Zone, despite being one of the fastest-growth markets in the country.

The result of this flight to safety is that many of the areas that need the development activity the least are the ones getting the most attention. In my…