Triple Bottom Line Returns in Opportunity Zones, with Loren Schirber

Loren Schirber

How can real estate investing in opportunity zones create triple bottom line returns? And what are some ways we can measure the social impact of these investments?

Loren Schirber is project pipeline manager for Minnesota Opportunity Zone Advisors, which recently started raising capital for their DREAM Fund. DREAM stands for “Developing Real Estate in Emerging Areas of Minnesota.” The fund is a Qualified Opportunity Fund that targets community-driven economic, social, and environmental impact.

Click the play button below to listen to my conversation with Loren.

Episode Highlights

  • How the DREAM Fund plans to deliver impact to local communities throughout the state of Minnesota.
  • How Minnesota Opportunity Zone Advisors are hosting seminars to educate community leaders and other parties interested in OZs.
  • Examples of what types of impact investing that local communities are looking for.
  • The challenge of finding the right projects and the right tenants.
  • Creating triple bottom line returns: Economic, Social, and Environmental.
  • The challenge of measuring socially responsible developments.
  • Who the DREAM Fund’s investors are, and where they’re coming from as tax season kicks into full gear.
  • The challenge of sourcing capital and sourcing shovel-ready projects.
  • Why partnership K-1s will create a crescendo of investment deadlines in June.
  • Examples of small-town projects that lend themselves well to not only Opportunity Zones credits, but HTC and NMTC as well.
  • How thinking like an investor can help local community leaders drive more capital into their opportunity zones.
  • The issue of tax conformity in Minnesota, and the business case for investing there nonetheless.

Featured on This Episode

Industry Spotlight: Minnesota Opportunity Zone Advisors

Minnesota Opportunity Zone Advisors

Minnesota Opportunity Zone Advisors seeks to inspire and serve mission-driven investors to contribute to the economic and social vitality of Minnesota by funding and executing new construction and substantial improvement real estate projects. MN-OZA’s DREAM Fund delivers impact investing to opportunity zones throughout the state.

Learn More About Minnesota Opportunity Zone Advisors

About the Opportunity Zones Podcast

Hosted by founder Jimmy Atkinson, the Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in opportunity zones.

Show Transcript

Jimmy: Welcome to the Opportunity Zones Podcast. I’m your host, Jimmy Atkinson. The Minnesota Opportunity Zone Advisors recently launched their DREAM Fund, a qualified opportunity fund targeting community-driven economic, social, and environmental impact. And today I’m joined by their project pipeline manager. Loren Schirber. He joins us from his office in Saint Paul, Minnesota. Loren, welcome to the show.


Loren: Thanks. I appreciate the opportunity to be here today.

Jimmy: Yeah, you bet. Thanks for coming on. I appreciate your time. So let’s…I want to talk to you about the DREAM Fund. Can you tell me more about it? What is it and where are you guys investing?

Loren: Sure. Yeah. We’re up here in frigid Minnesota, the heart of the north up here. And we’re investing across the State of Minnesota and the metropolitan area as well as in greater Minnesota. The DREAM Fund is an acronym for “developing real estate in emerging areas across Minnesota.” So we hope that our investments help to make these areas emerge and prosper. And that’s kind of a little bit of an overview on us.

Jimmy: Good. Yeah. And I’ll dive into that a little bit more with you in a minute. I’ll ask you some follow-up questions so you can give me some more detail. But first I want to get some of your background. Where did you come from, Loren? And how did you get your start and what’s been your career trajectory that’s taken you to working with the Minnesota Opportunity Zone Advisors?

Loren: Sure. Well, starting at the beginning of time, I’m from Minneapolis, grew up in the city, and ended up going to college in North Dakota in Grand Forks, and got a business degree in marketing and entrepreneurship and worked a couple of years in the corporate world. Ended up deciding to get my MBA and joined my dad’s remodeling business, castle building and remodeling, about 16 years ago.

So I worked a lot in the construction industry and used my MBA at the University of Minnesota to help grow the family construction business and got a business partner there and opened 4 show rooms and grew from 5 to 40 employees. And so, I worked in residential construction on older houses and in the rehab and renovation of residential over the last 15 years. But about 5 years ago, I got involved with a neighborhood group, a cooperative that was taking investors at $1,000 to invest in commercial real estate. And so, I got involved in joining the board of the NorthEast Investment Cooperative. And we’ve done a few commercial renovations and that piqued my interest about development and kind of fundraising and managing a fund of capital. And so, we kind of worked on the small side where we’ve got after five years that two properties and about a half a million dollars in community investment.

And so, ultimately I bought a piece of land on the east side of Saint Paul where I was working on developing a cooperative, tiny home village. And then the Opportunity Zones legislation came along. I had met Jamie Staples, that’s my partner, who has worked more on the big institutional side of investing in real estate and managing billions of dollars at a time. So we kind of married the two together and he had a development and an opportunity zone and I had a development and an opportunity zone. And we said, “We should create a multi-asset fund that maybe can fund our projects but could fund projects across the state and help people get this tax benefit but achieve triple bottom line at the same time.” So, that’s the history of the world or my world anyways in the last 40 years. So…

Jimmy: That’s great. Thanks for that level of detail on your background. So you and Jamie, you’re partners, you mentioned you both just happened to own some property in these opportunity zones, that was kind of a happy accident I suppose?


Loren: Yeah. Yes, exactly. Where we said, “Yeah, mine’s an opportunity zone and yours is an opportunity zone, and isn’t that interesting?”

Jimmy: Yeah, that is interesting. When did you first learn of the program? I know that the legislation was released at the end of 2017 and the zones were designated the following summer, July, I believe is when they were certified by the Treasury Department. When did you pick up on the program?

Loren: About the time that the zones were certified.

Jimmy: Yeah. What a pleasant surprise that must’ve been for you. So you spoke about having impact and delivering impact to the State of Minnesota and these local communities. And I get a sense that you have some passion for delivering that local impact. How are you doing that? How are you engaging with the local community to ensure that you’re delivering impact?

Loren: Yeah, well, we’re really trying to get out into the community and meet with the leaders of these communities through… We’ve done a series of seminars in partnership with a few non-profits like LISC Help Support, our first one, as well as McKnight and the Saint Paul Foundation. We took that content where we met with and presented opportunity zones to community developers and developers a color associated with LISC in the twin cities area. You know, kind of presented on opportunity zones, had a panel that had different perspectives and opinions on how it was going to be used and how communities could get ready for it, how they could steer it, how they could have social impact or ensure that it was favorable to their communities.

I took that and kind of went around the state with the Initiative Foundations. But at this point, we’ve had 4 of these seminars that are half day seminars, had about 200 community leaders, bankers, accountants, local investors, city administrators, HRA people, economic development folks come to these conferences, learn about them, ask questions, figure out how to position and market their communities to attract outside capital or local capital or to decide if people want to create their own funds, or work with another fund. And so it’s been a great process, exciting to get out and meet with the community folks, drive around the towns, look and see what areas look like they’re in need a reinvestment and talk to those, you know, find out about projects and then go to those cities and get a tour and drive around and find out what’s happening, and who’s opening new plants and, you know, why there’s housing needed or when the last time housing was built or, you know, what historic property is sitting empty, and we bought it still. So, it’s been really just a matter of getting out and driving around and looking for those…listening to what the communities have and need and want, seeing where there’s overlap.

Jimmy: Yeah, actually, hitting the street and talking to the local communities. So, do you have any specific lessons or examples of lessons that you’ve learned along the way about these communities and what they are looking for and what they feel are the most effective ways to create impact?

Loren: Yeah, no, I’ve got a good example. I think I’ve got a project I’m working on in Brainerd, Minnesota and I originally went there and met with the head of the HRA Housing Authority who does a lot of the economic development. And they had a specific project in mind that it was kind of complex and involved putting several parcels together and taken out a building that had a three or four-year lease on it, but was empty, but had a high at a high value. And, you know, they have a huge initiative to revitalize their downtown and this is part of that. But ultimately after driving around the town and talking about, well, here’s a cool old building, or here’s a historical building, or how much do you think they’d sell that for? Them saying, you know, “250 grand, maybe,” you know, you’d start to go, “Well, if your goal is to revitalize downtown, you know, like, maybe you shouldn’t be so sold on any one of these projects.”

But look at, you know, what’s the lowest hanging piece of fruit? Or how can we attract developers to this building or that building or, you know, hit a single or a double instead of trying to hit this home run, and maybe the home run comes, you know, two or three years down the road because these opportunity zones will be here for a while. And go back to that one once the lease runs out and the value falls way down. So I would say that you just take some creativity, you know, and it takes thinking like an investor or thinking, you know, looking at a lot of different possibilities. And there aren’t a ton of the shovel-ready projects out there in opportunity zones. It takes some creativity to put them together and find the tenants and make it all work.

Jimmy: Yeah, it definitely can take a lot of work to find the right projects and the right tenants. Absolutely. Your focus is on delivering a triple bottom line strategy that you alluded to earlier and those returns being economic returns, social returns, and environmental returns. Could you drill down into each of those specific types of returns, and what you’re doing to create those returns and what types of returns exactly you’re looking for?

Loren: Sure. Yeah. Well, let’s start out with the economic side is pretty simple. We’re basically running a private equity fund that invests in real estate in the State of Minnesota within, you know, certain geographic census tracks that are tax-advantaged. And so, you know, besides trying to get an economic return for our investors, which we shoot for around 8% after fees or about a 10% IRR, we are trying to create an economic incentive or improvement of local community.

And so that might be through the creation of local jobs or construction jobs or ongoing operations. And also in how we hire, of hiring local architecture, engineering, construction firms. And so the economic impact is really easy on the one side of how well does this perform for investors. It’s a little harder to measure on the social side, the trickle down or that side of things. The second one being social impact. Our goal is to…or we’ve made a commitment not to displace residents. And so our goal is really to be additive to communities, to take properties that are empty and to improve them, make substantial rehabilitations investments to them and attract new people to communities. And so that limits our properties a little bit, but it fits really well actually with the intentions of the opportunities don’t lie and with the actual IRS regulations and the need for substantial investments. So, you know, additionally, we’re looking at a whole lot of partnerships with local non-profits and other groups that can have a social impact on residents or work in conjunction with multifamily housing developments. So we put together, and it could be simple as, you know, enhanced recycling benefits or shared electric vehicle that’s also available to the community or a community garden that’s also available to the community. And so we really look at how do we create developments that have community aspects and intentionally bring people together within the spaces. And so we like projects that have those elements and try to pursue those. And then the third piece being environmental returns might actually be the easiest to measure. There’s quite a few different systems for measuring, you know, lead certification or net zero scoring systems basically.

The general overall, you know, they usually have four or five categories and kind of look at the energy consumption, you know, how much stuff are you reusing versus building new…you know, what are the environmental impacts of those materials as far as off gassing or inhabitants of those buildings through the categories. And so that’s a little bit easier. We can programmatically encourage elements to be added in all of our developments by having partners who, say, bring in solar or bring in electric vehicle charging stations. So we’re looking at plug and play partners that can add on to developments and handle tax benefits and add value to projects without making it much, much harder for our developers. So I’d say that that’s kind of a synopsis of the triple bottom line strategy. No one project’s going to have everything or be perfectly aligned in the middle of exactly perfect, but I’m trying to get as close to that center of hitting on all of those elements is our goal anyways.

Jimmy: That’s great. I’m glad you brought up measurement because measurement’s become a pretty big topic here these last few weeks, especially since at the IRS hearing in Washington, D.C. last month, so many of the speakers brought up the desire to have some sort of reporting requirement or at least some sort of measurement framework to measure the success of the program. And I just wanted to get your thoughts on that, and I know that the environmental part is pretty easy, but how do you measure the social impact of this program, and of your fund specifically? Are you doing anything? Are you staying attuned to that desire by someone in the opportunity zones ecosystem?

Loren: Yeah, we are. I’m just kind of through setting up a Google Alert. We’re getting quite a few hits on different systems or groups that are trying to codify that a little bit or create checklists or frameworks for socially responsible developments. So yeah, we struggle a little bit, and then we have read up on it, understand it, we’re trying to hit that point but also kind of realized that to be legitimate and accepted, we’re probably going to need a third party verification or some kind of system out there that is more like a lead certification. I’m not saying that the government’s going to necessarily require that because right now there’s not a whole, like, anything built in a lot. It actually requires any kind of reporting or scoring or anything. I do believe that it would be beneficial and it would be probably the least you could ask people to do in return for a giant tax break was to, you know, fill out some kind of form or check some boxes or disclose at least the level of, you know, social impact they think their project’s going to have. But that gets hairy.

Jimmy: It does. It does. Yeah. And I know that that was never written into the…well, it wasn’t written into the final legislation that ended up passing. I think some sort of reporting requirement may have been in the original draft legislation, but didn’t get passed as part of the tax cuts and jobs act at the end of 2017. So now we’re left with a more, I guess, a system with a lot less oversight, which has its pros and cons. Of course, it’s a lot more flexible and open to the different types of investments and systems and eliminates a lot of the bureaucracy. But I guess it’s a double-edged sword. There’s pros and cons, I guess, is what I’m trying to say there.

So, and I agree with you. I don’t know if the government’s ever going to require it just because it…you know, it’s not required in the legislation, but maybe some private sector frameworks will start appearing. And it’ll be interesting to see what the IRS has to say here as they get ready to release the final regulations pretty soon.

Loren: Ah, you know, I think at a minimum, more like a benefit corporation has to file an annual report. Not a super complicated, you know, maybe a one or two-page report that says, you know, “Here is at least our intended social impacts and what we did.” You know, because otherwise I think we’re going to have…at least having that in the public realm or in the public light would be good.

I think, you know, the open market will ultimately decide if funds like ours that have a triple bottom line but not the highest possible return are where they want to park their money and make an impact in multiple ways. Or if they’ll go for the project that was already going to happen, that just happens to be in an opportunity zone that gets them an extra 400 to 500 basis points, you know, as a single asset fund, or builds a hotel by the Mall of America when we were already going to have a hotel by the Mall of America.

Jimmy: Right. And there will be investments like that that take advantage of the program and aren’t really contributing the way that the program promised that it would, in that it would create transformational economic impact and distressed communities around the country. So yeah, you know, not everything would pass the smell test, I guess, for lack of better term. And yeah, well, it will be interesting to see if there’s any sort of reporting requirement or data transparency that’s required. And if there is, I hope it is something a little bit simple like you suggested and isn’t too onerous on the fund managers.

Loren: Yeah. You could have a situation where it’s a six-month review process, like historic tax credits, you know. And that would probably slow things down and make things a lot harder. But if there was an easier way to judge that, you know, this isn’t just the pro…I don’t, you know, who knows?

Jimmy: Yeah, we’ll find out soon enough. I hope. So you started taking capital for your DREAM Fund only a short while ago. It was pretty recently, I think. Can you tell me about that process so far and who have your investors been typically and who are you hearing the most interest from on the capital raising side?

Loren: Yeah. Well, we did just start taking capital last week. And so, our investors and the interested parties so far are mostly in the real estate industry. And that seems to be who’s most aware of opportunity zones. But as tax season kind of gets rolling and then people worry about taxes and gains, we’re starting to get a variety of people referred to us from financial advisors and CPAs who have heard about opportunity zones. They’re mostly folks that…not all of them who live in Minnesota, but a lot are from Minnesota and want to invest in the Minnesota or know the state.

So we’re seeing a lot of local investors. At the real mix, you know, we’ve heard from folks that used to run Fortune 500 companies and have huge gains, and mostly, though, we’ve heard from folks who have, you know, $100,000 gain from selling a stock or selling a business or selling a piece of real estate. So, you know, it’s all over the board, but we’re getting a mix of people that really want to see that triple bottom line investment to or make an impact. So it’s been fun to meet all the different types of folks that are interested.

Jimmy: Yeah, sure. Are you taking money from anybody or do they have to be accredited investors? Is there a minimum they need to reach?

Loren: Yeah. So we are just working with accredited investors at this time and there was a minimum of $50,000. Our goal in three to six months is to get approved as a state minvest approved crowd funding portal. So we would have a separate portal login for accredited or unaccredited investors, and essentially what that will allow is people do not invest in the DREAM Fund but to invest directly into a single project or multiple projects. And as an unaccredited investor, they could invest up to $10,000. The real transformational part of that is that it allows people to connect their 4019(k)s or IRAs through a self-directed IRA. And now Alto Ira offers a pretty simple way to do that at pretty low cost. And so, people can make direct investments into a building in their community or the apartment building that they live in at $2,000 or $5,000.

And it’s a lot more gratifying and exciting and interesting and relevant than the 2040 fund, you know. And I’m not saying people should put all their money into it, but it is $1,000 or $3,000 or $10,000 into a project or property, that’s real estate back. We’ll start to list them on there as we’ve been bank approved and received enough equity investment that they’re fairly stable in a safe investment. So…

Jimmy: That’s great. And that’ll make these projects a lot more accessible for folks who don’t have the huge gains that they need to defer. But that wouldn’t qualify for the qualified opportunity fund tax treatment, am I correct?

Loren: No, that is correct. So, if you can connect a 401(k) or retirement savings account, you can use pre-tax dollars. So that is a taxable benefit, but that they wouldn’t actually qualify for opportunity zone. So it’s better for funds that don’t have a deferral, or the result of a sale.

Jimmy: Right. And what’s been your biggest challenge so far? Has it been finding money, finding investors and raising the capital, or has it been the deal flow, finding shovel-ready projects to deploy the capital into?

Loren: I’d say it’s like the chicken and egg nature of the two of those. We’ve got three to four a shovel-ready deals that we like, of various sizes around the state. And so we’re eager to start announcing those in the next 30 days, hopefully sooner. I think that real estate is so tangible. That’ll really help our investors, you know, continue to commit. We see that really the big crescendos of investment deadlines will come around the end of June because K-1s or partnership docs are all dated 12/31. And so there’s this 180-day window after that. And so, we’re really building up to announce some fun, exciting, impactful, good returning projects in the next month or two. So, it’s a chicken and an egg where, you know, the shovel-ready projects are trying to raise capital and get going as soon as possible. And if you don’t have capital in the bank, then they’re leery to commit to working with you. And so, it’s a confidence game at this point, basically. So I’m glad to have the experience of good partners who have a lot of experience. And I would say too that my partner Jamie is working more on the raising capital side of things. And so he’s going to conferences and meeting with family offices and has more experience. And so I guess our goal is to raise up to $100 million, and there’s the easy and hard way to do that. And so if it comes in $2 million or $5 million chunks, we get there pretty quick. If it comes in $200,000 or $50,000 chunks, it takes quite a bit of work. And so, it’s still pretty early to know which one of those is going to happen.

Jimmy: Right. Yeah. It’s kind of…I guess you were a little bit early in the game to be able to give me a definitive answer as to whether or not the capital or the finding the projects will be more of the challenge. That makes sense yet.

Loren: They’ll both probably be challenging.

Jimmy: I’m sure in their own way they will be, absolute. But no, it’s sounds like you’ve got good timing there. You’re right to bring up that fact that the partnerships, investors and partnerships have 180 days beyond when they received their K-1s. That’s when they’re 180-day clock starts ticking. Just to clarify that point for any listeners who may not be familiar with that part of the rules. So that basically starts there, 180-day clock on December 31 of the previous year, regardless of when the partnership itself recognized the gain, the partnership might have recognized the gain, you know, months and months earlier.

But the partners receiving the K-1 dated December 31, in most cases like you say, have 180 days from that point forward. So yeah, toward the end of June is when that clock runs out. And so, yeah, you coming out with those projects and getting ready to announce those around that time or a little before that time when this kicks into high gear. That’s good timing for you, absolutely. Do you have any examples of projects that you are willing to share it with us right now that you’re looking at or at least the types of assets or types of properties that you’re looking to invest in?

Loren: Sure. Yeah. Well, one example, I kind of mentioned a little bit earlier in Brainerd, Minnesota. We’ve got a letter of intent to purchase a historic 1909 three-story brick building. It’s about 80% empty right now, except for a jeweler on the main floor who owns it and a hair salon. And so we’ve been working and analyzing, you know, boutique hotel into this. And so it actually, you know, being on the historic register could qualify for some historic tax credits. It balls in a new market tax credit zones. So we may be able to get some of assistance on those tax credits. And so it’s a project that we’ve got a good hotel operating partner who’s really interested and excited about it. And so that’s about three and a half, $4 million project. And in a small town, in a downtown that’s working hard to revitalize itself and the city itself is really excited about seeing some revitalization in this area. That’s had some contest to attract new businesses with $50,000, destination, Brainerd, move your business downtown contest, shark tanks out contest.

And so there’s a lot of community momentum and support for redevelopment of this area. And so we’re excited about that project and then have a… We’re really working hard on workforce housing. And so we’ve got a couple of workforce housing projects that we’re looking at in Saint Paul. One being kind of, yeah, near the university in Raymond, four-story. So that one’s moving along through due diligence and architectural drawings. We’re looking at a project in Luverne, Minnesota, which is in very southwest corner. That’s a town square type concept that has housing and also retail, but also a kind of a neat concept of putting up a senior housing facility in with the daycare, sharing a kitchen between those. And so it’s a model that we hope is replicable across a few different communities and uses green technology of SIPs panel construction, very energy efficient, all Minnesota-made products. And so, we’re moving forward with a few projects and we should be able to announce more details soon.

Jimmy: Good. Yeah, I’ll look forward to those announcements. And it sounds like you’re doing a lot of economic development in small downtown, central business districts, and a lot of mixed use type properties, is that fair to say?

Loren: Yeah, that’s fair to say. You know, a lot of times it’s a little… A lot of these…I would say that in general, we’re finding that the greater Minnesota communities are more excited and more supportive of development or have a lack of development in a lot of these areas. And so when you are the town of Pipestone, Minnesota and you haven’t had a lot of development or new apartments built in a while, they’re pretty excited and supportive.

When you’re in the City of Minneapolis and you have a ton of development going on, maybe not in these areas where the opportunity zones are, the resources and the time to devote or the attention or the speed at which things happen aren’t necessarily the same. And so that’s been interesting to see just how supportive a lot of the greater Minnesota communities have been in, you know, getting projects going that were closed but couldn’t quite get going or that are needed, but haven’t drawn attention from outside investors.

Jimmy: Yeah, and particularly in those smaller towns where you’re able to command some more attention when you come in. I’m sure… Are you guys targeting…? Well, I guess you mentioned historic tax credit buildings. I mean, obviously in that situation you’re targeting properties that need substantial improvement. Are you for the most part revitalizing buildings and substantially improving them? Or are you going to do mostly new construction or would be a little bit of both? What does the breakdown look like there?

Loren: It’s going to be a little bit of both, I’d say. A lot of these opportunity zones are fairly dense and built up and have a lot of empty storefronts and, you know, a lot of opportunities for redevelopment. So my experience is strongest in, you know, redevelopment, and I love older buildings, and so I tend to be drawn to those types of projects. So I think those could be commercial or residential rehabs. But we also will be doing new construction and we’re studying modular factory built and multistory, multifamily projects. We’re studying modularized and SIPs construction and stick belt. So I don’t think there’s any one right answer to a lot of what we’re going to end up doing.

But given that construction industry is busy and prices continue to rise, the hard part about opportunity zones are that these projects have to cash flow and get a return for investors. And you’re ultimately looking to build housing in areas that haven’t sustained housing or new development. And so the question really becomes why will…would somebody pay as much rent to live here as they would in the cool, trendy part of town? So what makes this development so cool or so unique or so subsidized that it can work out and be affordable enough? Or just has X, Y, and Z that people really want and can’t get anywhere else, so they’re willing to come live here.

Jimmy: Right. The last couple of weeks here, I’ve had a couple of different guests on who have had a community-driven element to their experience and opportunities on investing in real estate development and business investing. And I’ve asked them the same question I want to ask you now also. For community leaders who are listening, for mayor’s offices or economic development teams within local communities, what can those local community leaders do to drive more capital into their opportunity zones and get in front of more real estate developers and fund sponsors like you?

Loren: Sure. And that is kind of the…I mentioned some community engagement seminars that we had put on and that we called them “Think Like An Investor” seminar and it’s about a four-hour seminar, but I’ll try to summarize it down. We do have some videos on our website too and on our YouTube page that show and answer some of them.

Jimmy: And we’ll link to those in the show notes for today’s episode as well.

Loren: Awesome. So, I would say that I recently saw John Uphoff from the Benton County economic development seminar, gave a really good presentation of kind of how they’re putting together development in Benton County outside of St. Cloud, Minnesota. And ultimately it’s a lot like how you can be helpful to a developer or a fund, is to think a lot like a developer or a fund. And so the more that you can identify properties with historic character or that are empty or neglected that wouldn’t displace people but could be additive, and if improved or with the right tenants, or it would make a very big impact on your community, the more that you can envision that, think about the realities of renovation, resources to help with those renovations, you know, market studies, pollution testing phase ones, phase twos, pollution remediation, anything you can do to come in advance that building and reduce friction as the developers look at the property. TIF and tax abatement and grants, all those things kind of help get people excited and make the numbers work better.

So I would say that thinking like a developer and trying to package that all together to say, “Hey, here’s why we’re a great community. We’ve got these new, you know, jobs that are coming to town. We’ve got, you know, this Rotary Club, this group that, you know, helps with the schools. We’ve got wonderful hospital. We’ve got this new thing, $50 million in new roads coming through the county next year. And this is why we need housing.” So it’s really about promoting the community, showing the good things that are going on. And, you know, even highlighting sites like, “Here’s site A, B, C, D, and E. This one’s perfect for your manufacturing plant. This one we’d love to see housing. You know, here’s the rents that people pay in this area.” So just the more information you can give about your community and really packaging yourself up and letting people know you exist. “And here’s this major highway that comes through and we’ve got access to these resources and, you know, here’s the unemployment rate or average income and here’s why you should move here.”

Jimmy: All good tips. Thank you for sharing those for some of the community leaders who may be listening today. A little earlier you mentioned resident displacement, and that’s been one of the parts of the “Opportunity Zones” program that people have used to attack the program for those that don’t like it. Some critics say that the program may end up just leading to resident displacement, not actually helping the residents who it’s intending to help. To that point, what’s your response? How is your funding and how are you guys preventing resident displacement? Is there some sort of…I know you mentioned workforce housing. Is there an affordable housing component to your funds or are you aware of…are you just keeping aware of not displacing current residents?

Loren: Yeah. So I’ll be the first to admit that, you know, just doing a construction project or building something may or may not have any community impact whatsoever. And so we really look at like who occupies those buildings from a tenant perspective and from a commercial perspective as probably having a lot more impact on the community than actually the building of it. So the ongoing operations, the important part, we’ve just made a commitment that we’re not going to buy buildings and keep people out and displace residents. And so, I would say that the people who use that as a reason to say this is not a good program don’t really understand the economics of the program that well. And that I think one of the blessings is that this program does not work well to displace residents because of the need for substantial rehabilitation.

The pure numbers just don’t make sense for displacing residents in most cases. In the economics of buying an apartment building or a rental unit at $90,000 per unit and putting $90,000 and do it just purely doesn’t work out. Now, if you can, you know, say, buy an apartment building and then build another apartment building next to it or add two more stories on top and upgrade the main floor, you know, units like…I’m not saying it can’t happen, you know, if there’s a way to do it, people will probably end up doing it. But in general the numbers don’t really work out for displacing residents unless it’s just a…you know, it’s not the extremes, I’d say.

Jimmy: Yeah. It doesn’t work out for those who want to take full advantage of the program, I guess, within qualified opportunity funds.

Loren: Yeah, and I’m not saying it doesn’t happen out there. It’s just a different sector of the apartment economy is the value add sector basically. That would be the gentrifying sector of the economy basically.

Jimmy: Right. Well, the IRS hasn’t yet published its final regulations. Is there anything that you’re waiting on before you move forward with any of these deals and projects or are you proceeding it ahead without the final regulations being published?

Loren: We are proceeding ahead without the final regulations being published. We anticipate that much, like, this will be a little bit of a moving target over the coming years as things are challenged and go through the court system. We think we have a pretty good understanding that it’s firm enough, that the type of investments that we want to do will firmly qualify. That’s how we feel right now anyways, or been led to believe. I think that, you know, where some of the issues that we would like to see more clarification on come around, you know, how much improvement do you need to make to raw land? Like, you bought a piece of land for a dollar, do you have to do a dollar’s worth of improvement? Do you have to build $1 million worth of new buildings? Can you just clean it up from a pollution standpoint? What are the minimums or maximums or minimums really? They would have to deal with raw land. It seemed like the last hearing had a lot more to do with people who wanted in and wanted the rules loosened and, you know, some around social impact. And since we have a focus on social impact, we feel pretty good about that, and that we could meet any reporting requirements needed, or actually we’ll have to do that as a benefit corporation as it is. So…

Jimmy: Right. So you’re already on top of that. And for real estate investing, a lot of the rules are already pretty straight forward. I think it was mostly the business investing people who really are interested and keen to receive some more guidance because there’s a lot more questions surrounding business, and there is real estate at this time. So it likely does not affect you as much as it does some who are looking to do venture investing. If I may be a little bit negative about the State of Minnesota right now, forgive me, but I was looking at my tax conformity map before our call here and I noticed that Minnesota is one of the, I think, roughly about a dozen states who have a capital gains tax that does not conform to the federal program. So, in a way, anybody investing in a Minnesota-based qualified opportunity fund faces a headwind at 9.85% capital gains tax in the top bracket at least. Are you aware of any efforts to get the state to conform to the “Opportunity Zones” program?

Loren: We have heard that the… I mean, there is a tax conformity in a push at the state capitol to bring the state in compliance or in conformity with the tax changes of 2017 on a few different fronts. And so, I guess my own personal belief is that the state also has a very vested interest and a desire to see a lot more affordable housing created. So I would like to see back to that scoring system or social impact rating system or affordability, some type of metric that allowed before that date for giving us tax, so long as the projects actually met some kind of social impact score or affordability metrics. I think that added benefit would really help to drive the affordable housing units or mixed affordability housing units that we need really desperately in the state. So, I’m hoping that the state can conform, you know, with the federal, what they’ve done federally.

Jimmy: Yeah, I would love to see something like that, that the state says, “Well, prove to us that it’s worthwhile and then we’ll give you the tax break as well.” And I know there’s some other states still working on this, in addition to Minnesota, there’s, you know, other high income tax states like California and New Jersey and Pennsylvania are not conforming at the moment yet either. So it’s a hurdle that Minnesota is not alone in having to clear here, I suppose, but hopefully they get there. But now give me the business case for investing in Minnesota despite the tax headwind.

Loren: So yeah, the business case for investing in Minnesota is that we’ve got a really strong economy, really low unemployment rate. We’re expanding. There’s a lot of great Fortune 500 companies here, a lot of entrepreneurs who are starting businesses. There’s a lot of great real estate investment opportunities in up and coming areas. And so I think that they are, you know, of all sizes really, but some great cities and economies and stories where the local communities have bought in and have invested in want to see these deteriorating and dilapidated areas improve. And so we’re identifying those areas and partnering with those communities, and it can really be a win, win, win. I think that, you know, Minnesota has a workforce or work ethic and trustworthy, reliable people that we’re proud of, and we think is unique. And generally, although we have some higher taxes, we’d say we’re at a high value add state that works and functions and is ethical and reliable. So it’s a good place to do business.

Jimmy: Yeah. You do have that tax rate headwind as I said, but definitely a lot of good things going from Minnesota as well. Thank you for sharing that with us and, hey, if the state can conform all the better. But either way, I think the State of Minnesota has a lot of good things going for it. I know we’re getting toward the end of our conversation here today. Loren, thank you for joining me. But before we go, I wanted to ask you if you had a favorite investment of all time, favorite real estate deal of all time, anything that’s really made an impact on you or stuck with you, and if you wouldn’t mind sharing it with us.

Loren: Yeah, well, as a member of the NorthEast Investment Cooperative, we worked together with a bike shop. I had to buy a building that was a furniture store. They were selling used mattresses, cleaning bedbugs. I mean, it was the grossest place you’ve ever seen. It was a couple of guys and a dog who lived in there. And the bike shop ended up taking half the building. And the cooperative bought a shelf for $85,000 and had no plumbing or electricity or any utilities or mechanicals, and ended up getting a tenant that’s a cooperative brewery and then a German bakery that makes great pretzels. And so, between bikes and bread and breweries, we’ve got the hipster Trifecta, the Star Tribune said. And so it’s just amazing to see, you know, when you take the worst building on a block and you make it one of the nicest, how transformational it can be.

You know, the architects put together drawings and people on bikes outside and sport coats and whatever. And when you start, you think that is the funniest looking thing I’ve ever seen. And when it’s all said and done, you know, you walk down there someday and you’d go, “I just saw two guys with, you know, suit jackets walk out of this place. And they were at a, you know, MBA conference for whatever,” and you go like, “It all came true.” And so it’s really cool when you can see that kind of transformational investment take place because of community members’ investments. So…

Jimmy: Well, that’s great. Well, Loren, thanks again for joining us today. Before we go, can you tell our listeners where they can go to learn more about you and the DREAM Fund?

Loren: Yeah, you can google “Minnesota Opportunities Zones Advisers DREAM Fund” or our website is

Jimmy: Great. And I’ll have links to learn more about the DREAM Fund and Loren on my website, the Opportunity Zones database at Well, again, Loren, thanks for joining me today. I really appreciate your time and I hope we chat again soon.

Loren: Thank you.

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