OZ Lessons from Opportunity Alabama, with Alex Flachsbart

Alex Flachsbart

How can Opportunity Zones ignite a place-based economic development revolution in one of the nation’s poorest states?

Alex Flachsbart is president and CEO of Opportunity Alabama, the nation’s first nonprofit organization to create a marketplace for Opportunity Zone investment in a particular state.

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

Episode Highlights

  • Alabama’s capital gap and how Opportunity Zones can help close it.
  • The keys to creating positive outcomes in Opportunity Zones.
  • Best practices for raising Opportunity Zone capital for real estate developers and business entrepreneurs, and the importance of engaging with the local community.
  • The volume and types of projects that Opportunity Alabama is seeing in its marketplace, and engagement from larger national funds.
  • The rise of impact funds, and how the Opportunity Zones incentive is engaging more investors to think about real estate investing through an impact lens.
  • How Birmingham has become a model for municipal-led Opportunity Zone development.
  • The four core stakeholder groups that comprise the Opportunity Zone ecosystem — communities, project sponsors, investors, and third-party supporters.

Featured on This Episode

Industry Spotlight: Opportunity Alabama

Opportunity Alabama

Based in Birmingham, Opportunity Alabama is a nonprofit organization dedicated to driving capital into Alabama’s distressed communities by creating a statewide Opportunity Zone investing marketplace.

Learn more about Opportunity Alabama

About the Opportunity Zones Podcast

Hosted by OpportunityDb.com 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.

Opportunity Alabama, or OPAL for short, is the first example of a statewide nonprofit organization that has created a marketplace specifically for Opportunity Zone investment. Joining me on the program today is OPAL’s founder and CEO, Alex Flachsbart. Alex joins us from the road in Baldwin County, Alabama. Alex, welcome to the podcast.

Alex: Thanks so much, Jimmy. Great to be here.

Jimmy: Great to have you, Alex. I’ve been following you from a distance for some time, and I think you’ve done the same with what I’m doing. So it’s good to get you on the phone, and really looking forward to it.

Alex: I was gonna say, with all the mileage I’ve been putting on my car over the course of the last year, so it’s been good to have a stable podcast that I can listen to you as I’m driving around the state. So thank you for being the fuel that keeps us going.

Jimmy: Well, good. I’m glad I can help out in any small way I can. So let’s dive in. Tell us a little bit about what you’re up to. Maybe you can tell us first a little bit about Alabama and specifically, the capital gap that exists in Alabama and what you feel like the Opportunity Zones program and OPAL can do for the state.

Alex: Sure. We, you know, over the course of the last year or so, since we set up this organization, one of the key factors for us has been actually trying to identify what need looks like within Opportunity Zone communities, both from a, you know, what…as a community, what are the big asset classes where we see growth. Is it, you know, commercial, industrial, residential, affordable housing, childcare facilities, senior care? Sort of what are the asset classes we need? And then, you know, what’s current…you know, what’s sort of in budget, what’s in scope for a lot of these places?

And, you know, we are working, I would say we’ve thought-penciled probably north of 200 potential things that could happen across the state of Alabama just in the last, you know, probably six months of really beating the bushes around this. And if you wanna put dollar values to it, I mean, you’re talking about, you know, well over $1 billion worth of just projects that are actually ready to go where we’ve identified a capital gap, let alone the projects where it’s an idea, it’s something that the community needs, but there isn’t yet a hard proforma and hard numbers around the project. So, I mean, the scope of what this program could do for low-income places and for the people who live in them within the right structure is just, it’s insane. It’s remarkable. But again, it’s only within the right structure and only within that approach that we’re ever gonna see any kind of a realization of a closing of that gap.

Jimmy: Good. I’ll ask you a little bit more about what OPAL is doing specifically to help close that gap in a minute, but I wanna back up for a minute and learn a little bit more about you, Alex, a little bit more about your background. How did you get into this, first of all? What compelled you to set up Opportunity Alabama?

Alex: So it’s kinda funny. As with all good things in life, this happened completely by accident, by backing through open doors. So, you know, I was an attorney here in Birmingham. Although I will say I’ve kind of always had a real interest and a passion for doing cool, transformative, specifically like economic development, community development-oriented things in low-income places. You know, did Teach For America before going to law school, spent as much time as I possibly could in rural parts of Alabama thinking about, you know, interesting and creative ways through my lens as a lawyer in Birmingham to bring new capital to projects across the state, whether that was, you know, 100,000 new job, giant project up in North Alabama or, you know, thinking about how we can revitalize downtown Selma. Sort of across the board, that was a part of what I did as an attorney, working in the economic development for the practice area that we had at our firm.

But as a part of that job, one of my sort of standing obligations was be the nerd who actually reads the tax bill and all the new potential incentive programs that come out so we can figure out which of these cool new things we can use to go do more interesting projects and create value for people in Alabama. So, you know, it was kind of troll finding literally through the tax bill for the phrase “low income” and just stumbled across this. Because I was worried that the Senate version had just like the House version of the Tax Cuts and Jobs Act at the New Markets program and stumbled across this and thought, “Wow, this is really cool.” And good gracious, if this thing happens and gets put in the final version, I mean, it’s gonna…you know, it is going to be 1,000 times what the next closest program could be in terms of scope, because it’s so open-ended by very definition.

So sort of at the back of my mind, there was a thought around, you know, we in Alabama have always had this sort of chronic underfunding of our low-income places. We haven’t been first to market on taking advantage of CDFIs or programs sponsored by the CDFI fund or New Markets Tax Credits. Those are all sort of very historically underutilized programs here. And so thanks to this new incentive that was [inaudible 00:05:38] at the time, I think we sort of immediately saw that if…because it’s so…because it was open-ended in nature, you could, if you had the right infrastructure in place, rally groups to a conversation around this new incentive that could ultimately help to close that access to capital gap for our low-income places. And that was kind of where the idea for Opportunity Alabama was born. It was quite literally like, you know, here’s this thing in the Tax Cuts and Jobs Act that, you know, if we build an infrastructure around it, we can really get the four stakeholder groups to the table that we need to do to create an economic development engine for our low-income places that we’ve needed for a very long income.

Jimmy: Oh, that’s great. So you latched onto this concept pretty early on if you were searching through some of the initial versions of the tax bill before it was passed. It’s good for you kind of hitting the ground running when it was passed, I suppose. And you’re absolutely right, it is very open-ended, the program. And that’s part of what makes it so powerful. And for better or worse, you know, that opens it to potentially some abuse, but can also do a lot of good things that we’re hopeful that it ends up doing and that a lot of these projects end up following congressional intent. And so, you know, with that in mind, what are the keys, would you say, to creating positive outcomes in Opportunity Zones, not just in Alabama but nationwide?

Alex: Yeah, so fantastic question and I think one that we all, given the nature of the incentive, yes, exactly as you said, we need to all actively wrestling with all of us who are thinking about this new incentive that is not, as other guests in your show have said previously, a program, right? Like, it’s an incentive. And so I think the easy answer is you’ve got to have intentionality from a third-party perspective, whether that’s nonprofit like ours, whether that’s city and local government, whether that a foundation actor, perhaps even if it’s just, you know, an investor group, as we’ve seen with the sort of the rise of the impact funds in this space over the last six, seven months. You know, it’s, you’ve got to have someone who’s bringing that sort of perspective of how do we…how can we, at a systematic level, measure and assess A, what a community needs, and then B, what are the projects that are getting done or that are getting worked on are actually responding to those express needs from communities across the state?

And again, it’s just intentionality. It’s having boots on the ground to think creatively about how to use a completely open-ended tool to rally groups to the table who can actually help you achieve the outcomes you wanna achieve. So it all, at the end of the day, comes back to, if this tool weren’t open-ended in the way that it is, if it was just an application process where we had to send in our projects all to some central federal clearinghouse, you wouldn’t be able to get community-oriented investors to the table. You wouldn’t be able to get hometown heroes really excited about this. You wouldn’t be able to get local elected officials or neighborhood association presidents or local bankers all talking to each other around the table, which is what we’re doing across the state of Alabama now.

And, you know, because each of those stakeholder groups has some role to play in this ecosystem, if they are informed of what that role is and then invited to the table to collaborate with each other, then, to me at least, as long as you’re shepherding that conversation in the right direction, then positive outcomes are far, far, far more likely to be achieved. So it’s just intentionality and creating that ecosystem in your local…in your backyard,

Jimmy: Having boots on the ground, getting in touch with the local community leaders and the local residents. Yeah, I think that’s key. That’s a theme that’s kind of popped up on a few different episodes of the podcast. I’ll admit, I’m guilty of calling it the Opportunity Zones program myself pretty frequently. I should start referring to it more as the Opportunity Zone incentive. I kind of like that term better. You’re right. I think that’s a better term there.

I wanna speak to a specific segment of our audience listening right now. I know we have a lot of real estate developers listening. We have a lot of business owners listening who are looking for opportunity-zone capital. In your experience, what are some best practices for them for going about raising opportunity-zone capital not just for Alabama but again, across the country?

Alex: Yeah. No, and I think what’s so interesting about that question is that, like, the way that one can approach capital all depends on how connected you are to it and whether you have intermediaries in place on the ground where you are, it can be helpful to you and connect you to capital, right? And I think that’s part of what should counsel any of your listeners who are thinking about how to…you know, who are real estate developers or, you know, who have projects and who are thinking about, “How do I go find the funds?” And who haven’t been super engaged with local foundations or with the city or with the county or with kind of other more public-sector actors, well, at the end of the day, you know, think about you as a repeat actor in a broader ecosystem, right? If you can be a part of helping to stand up capacity within a foundation or within a new (c)(3) or, you know, within city government or whatever makes sense in your backyard to kind of have that deal jockey, that matchmaker who can be constantly out there looking for potential investment dollars for your community, then that relieves the burden on you to have to troll through every single, you know, fund listed on the Novogradac site or the NCSHA site. And it shifts the burden to someone else.

So, like, that’s…obviously here in Alabama, it’s as simple as any developer who wants to figure out, you know, anything about what people are funding or what they’re not funding in the OZ space. What funds are cutting checks, how big those checks are, what kinds of return profiles they’re looking for, who’s serious about urban in Alabama, who’s serious about rural. And it’s literally one phone call to us, right? But for other places, it’s a lot tougher. It is a lot more like work. And I’d say like, you know, it’s going to…it’s figuring out the guests that are on this show and listening to them. It’s going to the national trade show associations, going to Novogradac Energy Expo and, you know, and the other events that get put out there. You know, and working through LinkedIn. I mean, like, those are the best ways at this point that we’ve seen because it is so decentralized, unless you have that kind of an intermediary.

So I guess I would just encourage any of your listeners who sort of have remained reluctant to get engaged with the sort of the community reporting side, the community engagement side, like, that, it actually, in the end, even if you’re, you know, like a shameful, ruthless capitalist, you know, as like the pejorative term is used at heart, which I don’t believe in, but like, at the end of the day, you know, no matter what your perspective is at the table, there is extreme value in having someone who can kind of be that dedicated intermediary between projects and investors.

Jimmy: Well, I think that’s great advice. That’s excellent advice, Alex. Thank you for that. Getting back to Alabama now and the data that you’re collecting on OPAL specifically, on Opportunity Alabama, what does the pipeline look like there? What types of projects are you seeing mostly and where are they located?

Alex: So across the board, Jimmy, we’ve got everything. So like, I mean, I mentioned this earlier in passing, but we’ve got, I would say, you know, probably 200-plus things that we’re just sort of tracking as potential opportunities. I would say about 30-ish of them are shovel-ready enough that we feel good putting them in front of our national fund partners. And that’s real estate. Until about two months ago, that was almost exclusively real estate. I think we’re really starting to see sort of the operating company wave start to crest coming out of the April guidance. I think, like, the message, thanks to pounding the pavement like we’ve been doing here for the last few months, is finally starting to sort of seep into the active business community that like, “This is now a tool for you to use, too.” And that we have a clear enough path to feel good about potential investments.

And honestly, the big difference, at least for us, is that we had actually been telling operating companies that we hadn’t really done actively trying to get them into our pipeline because we hadn’t seen this sort of national fund interest, you know, up until a couple months ago in operating companies either. So, you know, even at the national level, really mostly real estate-oriented funds. But in the last month or two, we’ve seen…I mean, we’ve got the inbound probably a half dozen or more requests from operating company-only fund that are looking specifically at OZ businesses. That’s been interesting and heartening to see.

Percentage-wise, I’d still say probably, you know, 80% to 90% of our pipeline is still real estate, and then probably the other 10% to 20% is operating companies. And those range everywhere from, you know, the $500,000 to $1 million project that are looking for like $200 grand, $300 grand in equity, all the way up to the, you know, $150 million to $250 million project. Even the, you know, sort of 5 phase, you know, $500 million, $600 million project in a couple different places that obviously we can get it achieved over, you know, a series of years, not months.

So it’s across the board. But, you know, what we’ve kind of done is tried to segment pipeline into buckets that we think are the most appealing to a different asset classes, a fund manager that we see out there. So I’d say, you know, for our urban projects, and I’d say most of the dollar value of our pipeline is used towards urban, because we’re seeing just, again, it’s just possible to have larger projects in Birmingham and a handful of places, you know, Tuscaloosa, Mobile, Montgomery, places like that. And so, in those places, again, you can also typically see slightly…you know, slightly lower reasonable cap rates, slightly higher, you know, justifiable preferred returns. And so, you know, you can easily squeeze mid-teens IRR projects out in those places.

When it gets to rural projects where, you know, we’ve got a preponderance, probably, you know, 30%, 40% of our pipeline is probably in places that are not sort of Birmingham and Huntsville. But at the end of the day, those are the projects where because they’re just smaller dollar value, it’s just hard to do a giant project in a rural area, and certainly a lot riskier if you are doing a giant project in a rural area. I think that’s where we probably had the hardest time to date making connections consistently with national capital, and where, like, we’ve been most focused on trying to find local investors to bite off those chunks.

Jimmy: Yeah, I think that’s smart of you to segment it the way that you are by asset class and location. Talk to me more about the engagement that you’re seeing from national funds. What is that looking like?

Alex: Yeah. So it’s been really…it’s been great to see. So, you know, we’ve sort of shoot for…been talking to a lot of folks that were really interested, I mean, again, you know, larger national folks that were interested in sort of larger dollar value projects in places like Birmingham and Huntsville, which is great. And there’s an incredible need in those places, just like there is across Alabama. And again, our entire pipeline, I mean, it’s…you know, I mean, to give you some tangible examples you can wrap your head around it. You know, a $40 million, you know, mixed-use development, or a $120 million mixed-use project in a place like downtown Birmingham, all the way down to a $12 million senior care facility in a place…in a rural place like Heflin, right?

And so on the national fund side, I think we’ve seen, you know, definitely some interests, you know, projects moving through diligence processes in Huntsville and Birmingham. Hadn’t really seen that for a rural or for, I would say disenfranchised portions of urban. But what we’re starting to see more of are, you know, larger national impact funds, people like Arctaris, for example, that are really excited about not just stuff that’s happening in the rural places, but sort of alternative asset classes. And what I mean by that, you know, thinking about broadband, thinking about solar, thinking about even municipal sale-leaseback, stuff like that, where, you know, we’ve been very excited about having partners who once you sort of think outside the box want to be outside of just sort of core major urban areas and, you know, be doing kind of cool things on the real estate side, you know, where there’s extreme sort of community need. So we’ve been actively trying to tee up more projects that fit that mold as we’ve been going around the state. So, you know, we’ll see how it all shakes out, but we’ve been excited to see that.

And then on the local side too, I mean, I think we’ve seen tremendous interest from local investors in this, but then, though, it’s really been a question of having a consistent vehicle that they can use to make investments and to feel good about the investment they’re making. And that’s still an open question, I would say. That it’s harder to find…it’s harder to aggregate and then control local capitals. And you may just go call an opportunity fund that can put your project or a diligence process and then cut you a check.

Jimmy: Right. Yeah, I can imagine. You mentioned Arctaris, and that reminded me of something that you said a few minutes ago I want to follow up with you on you. You mentioned that there’s been a rise of impact funds over the last several months here. What did you mean by that? What are you seeing? What’s that trend look like?

Alex: So, yeah, it’s like the most heartening thing that we’ve seen in the Opportunity Zone space since we got started honestly. You know, like even just today, had a wonderful conversation with a fund that I didn’t know existed before 2 days ago that’s looking to cut, you know, $1 million to $3 million checks to primarily rural project, which is great. I’m thinking about it from an impact orientation. So I think that like, you know, whereas before there had really only been 1 or 2 people that we’ve kind of thought-penciled as impact-oriented folks, and we’re probably working with, shoot, I would say more than 10 sort of national or regional, yeah, you know, specific, dedicated, have already raised capital and are looking to deploy at funds that are thinking about, again, there’s places that are not core downtown areas. Or that if they’re looking at core downtown areas, are looking at projects that are childcare facilities in those places, or that are, you know, charter schools, or that are, you know, unique asset classes in those spaces.

So, I mean, and I think, I don’t exactly know what to put my finger on other than the incredible work that people like the Beeck Center and the U.S. Impact Investing Alliance and Sorenson have done to really kind of beat the drum on this and to flush a lot of these people who are sort of thinking about investing in real estate as an impact play out of the woodwork. And it really is, it’s creating a whole new language for people who really had never thought about real estate-oriented investing as anything other than real estate-oriented investing, never really thought about this weird confluence of impact and real estate before. And I think that the beauty of sort of what, you know, the Impact Investing framework and what, you know, Beeck and, you know, and USIAA and, you know, the Fed and others have worked on it. Like, it’s given a language for people who sort of share our value set to express how they want to engage with groups like ours and with project sponsors. That that alone has been incredibly helpful.

Jimmy: Yeah, I agree. I’ve heard anecdotally from a few fund managers and real estate developers that they had never really heard of impact investing until the Opportunity Zone program came along. I think just that concept of impact investing has kind of broadened its reach to market-rate investors who may not have otherwise been “impact investors” before. Maybe they’re considering it more now.

Alex: Right.

Jimmy: I wanna talk about what’s happening in your neck of the woods, specifically in Alabama, in Birmingham and the big city there in Alabama. It’s been held up as a model for Opportunity Zone municipal involvement kind of in the same realm as Erie, Pennsylvania, who I had on the podcast a week or two ago, and Louisville, Kentucky comes to mind, South Bend, Indiana comes to mind. Birmingham is right up there with them in terms of a model for municipal involvement with Opportunity Zone development. What are they doing right in Birmingham and what are they doing that other municipalities should emulate?

Alex: So, I mean, A, Birmingham has been…had a finger to the pulse on OZs from day one for a lot of the same reasons that we at Opportunity Alabama and kind of the initial philanthropic sponsors option, you know, we got excited about that concept, which is that again, you know, Birmingham has got 99 neighborhoods, 77 of them have opportunity zones. And that was very intentional. That was because the city got engaged from day one with the governor’s office and said, “Well, look, like, we need zones not just in places where, you know, we can make a strong case for investment, but also in places where, you know, we want to create, over the next decade, a strong case for investment.” And they were successful in that.

So, I mean, again, you know, almost 80% of Birmingham has at least some kind of Opportunity Zone in it, at least touching a neighborhood. So they’ve almost had to be very proactive about this because so much of the city [inaudible 00:24:01]. They have appointed an OZ tsar internally, whose name is Melanie Genkin, who does nothing but wake up every day and think about how to find new projects, how to get local folks engaged. So, I mean, specific avenues that have come out of that that I think are easily replicable by pilot cities. Obviously, one, you know, having a centralized OZ point person is incredibly helpful, makes my job as a sort of a backbone supporter to the city of Birmingham and also the other places across the state that we’re supporting, that I can…I have such an easier time facilitating, you know, cool things happening in Birmingham because I have that point person, because there’s no easy point of contact. And it just makes everything about the organizing so much easier.

Two, Birmingham isn’t very intentional about trying to engage residents in the OZ process. And I think that makes it very unique nationally. Because they’ve convened a board called the Community Investment Board. It’s comprised of citizens whose whole job it is to work with their fellow residents of opportunity zone to identify potential OZ projects. They’ve twinned this with sort of two aligned strategies, one being education. Because it’s really hard to identify OZ projects if you don’t have a clue like sort of what the OZ program is or what it does and what it doesn’t do, more importantly. And so, you know, they’re on the path now towards educating 500 local folks about what this program is and is not and how it dovetails with other local incentives, other small business development real estate investing programs so that, you know, people who come to one of these three-hour sessions can get sort of a pretty comprehensive education on toolsets that are available to them.

Second sort of aligned program is, it’s actual direct-to-community survey. The city is working with this group called Public Democracy, which is just an incredible thought partner, and, you know, strongly recommend for anyone who’s thinking about sort of community engagement in this space to reach out to them. Because they’re actually working…survey local area residents on what their, you know, uniquely expressed preferences are and what their needs are.

So, you know, I mean, to give you an example, we’ve been thinking that grocery stores was going to be the number one issue area for residents of opportunity zones. And, you know, while obviously that’s an incredible need, what we found with the actual data was that while grocery stores are important, childcare facilities are actually by far and away the most important thing to people who live in low-income places, that having better access to quality, affordable childcare near their houses. And so now, like, we’re having this old-new kind of pivoted conversation around, yeah, we have to deliver grocery and affordable housing, but where’s childcare [inaudible 00:26:45]. And how do we make that childcare a part of every OZ project that we work on? So that’s been kind of a cool thing to see.

And the final thing that they’ve done is actually stand up a group of, you know, kind of called hometown heroes, local high-net-worth individuals, sort of, you know, prodigal sons that have moved away and are in places like New York and Chicago who care about Birmingham and wanna see it grow. And they’ve marshaled this group called the Investment Advisory Board that sort of is the mirror image of the community…sort of the community board, but whose job it is to actually kind of identify capital for the projects that have been identified and are actually investable. So that part of it is sort of the last. Obviously, you know, you need to kind of scaffold up to that. So that’s the last piece that they’re hoping to implement sometime this fall.

But yeah, I would say in terms of architecture rate, the scope of what Birmingham is trying to do, and then overall commitment to using OZs as a tool to fund not only real estate and placemaking, but also to fund sort of the incredible startup culture that Birmingham has if you use OZs as a lever to, you know, actually make Birmingham one of the places aside from, you know, the Silicon Valley, Boston, New York, and Austin, that actually get, you know, real third-party looks from venture capital because of the quality of the operating companies that we’re trying to attract to downtown. It’s a lot, but I’d say it certainly sort of sets the bar for what you should be thinking about as a community.

Jimmy: That is a lot. There’s a lot to do there, to pull all of this together, I suppose. And again, it starts with that OZ tsar. If every city had one of those, maybe that would go a long way, if nothing else. But yeah, obviously, a lot of other components need to come together as well.

So you’re in your car right now. You’re on the road. You’re on your way back to Birmingham from a community event that you spoke at. Can you talk to me more about these events that you’ve done throughout the state? How many of them have you done so far, and which stakeholders are you getting together? And are these meant to be educational or more transactional or a little bit of both?

Alex: Yeah, a bit of both. And it sort of depends on where the community is in its lifecycle is where the focus is, and sort of how many of these we’ve done in a place, too. So I would say, you know, at a base level, every one of these events engages four…sort of the four core stakeholder groups that comprise the opportunities on the ecosystem that I referenced earlier. And those are, I mean, just so we’re clear, one, communities, so local elected officials, economic developers, chamber folks, others who kind of have a community’s best interests in mind. Two, project sponsors, the folks you referenced earlier, the real estate developers, the landowners, the entrepreneurs, the business owners, others who could have potentially investable assets. Third are actual investors or people who can get to investors, right? So, whether those are financial advisors, the high-net-worth individuals themselves or just even their accountants, but having them all in a room.

And then fourth, third-party supporters that we actually think of as kind of the bedrock of a stable OZ ecosystem going forward. And these are folks that they might not have capital gains. They might not have projects necessarily, you know, kind of like immediately for investment, but they’re the people that can sustain the ecosystem going forward and find the human capital needed to make this thing work. So that’s banks to do the debt piece. It’s community foundation to provide support. It’s utilities who can be super helpful in this space. It’s lawyers. It’s colleges and universities who have a lot of capacity if given the right engagement structure to actually help with all kinds of different angles on building out an OZ ecosystem.

So those are the kind of the core stakeholder groups that we like to see around the table. And sometimes, depending on the community, it’s two meetings or it’s three meetings more so than it is one. But particularly when we go to smaller places, it’s kind of fun, actually, to see all those groups all around table, all talking to each other, because it really doesn’t happen very often. That sort of you have one thing that that sort of very disparate group of people can all talk about together all, you know, and again, if given a common framework for thinking about this, all in a way that kind of helps them to pull their oars in the same direction, which particularly in a smaller rural place, it’s so critically important.

So that’s sort of the broader ecosystem. Those are the people we have in the room. And then what we do with them once they’re there, obviously, you know, on first touch, it’s education, right? So the first time we’ve been to a community then yes, like, the number one thing that we do for an hour is spend time figuring out what the OZ program is, figuring out what it’s not, and then really going around the room and figuring out sort of what people’s roles are in building this ecosystem out, right? So as a project sponsor, where do you go to say that you’ve got a project ready to go? Is it the local chamber? Is it us at Opportunity Alabama? Is it the local tsar? I mean, who is it? As an investor, where can you start? Who do you need to reach out to? As a bank, where do you find the projects? How can you get CRA for this? As a university, what departments need to be engaged in this? Can your marketing folks help build out a perspective? Can your real estate department actually help to underwrite some of these projects, right?

So it’s giving people sort of assigned roles around the table. And then obviously, second visit, third visit to a place it’s, how’s it going? Are we finding projects? Are we actually getting stuff teed up? And then hopefully, you know, in some places that are far enough along, it’s, okay, let’s put the investors in a room. Because sometimes they don’t wanna be there for the first meeting or two. And sometimes you know, it helps to actually kind of build out the project base, build out the pipeline, and then put them in a room and say, “All right, guys, you know, here’s the marketing materials on the project. Here’s why our community is awesome now. Here’s why it’ll be more awesome 10 years down the road, you know, kind of what do you guys think?”

So that’s been fun to see. And again, it all comes back, at the end of the day, to capacity building. And if all we do, thanks to this program, is rally roomful of people together and sort of like get them all talking to each other about what community development looks like and how, you know, again, particularly as a rural place or as a disenfranchised urban place, how you can build out a strategy for identifying why you’re awesome now, but more importantly, why you will be a lot more awesome 10 years down the road. If that is all because of this, honestly, that’s not that bad of an outcome. If across the state we’ve got people all of whom can actually be on a plan to make their community better all talking to each other around the table about how to make that plan happen.

Jimmy: Yeah, that would be a huge success, even if nothing else happens. I suspect you’ll have more success than that even.

Alex: Yeah. And I was gonna say, just to be clear to your listeners, don’t think I’m gonna cop out or something, we’ve already gotten…we’ve already had our first, you know, probably, gosh, seven, eight projects that we’ve touched, get done, get closed, get under construction, you know, get started. So, like, we’re already starting to see the fruits of this strategy pay off. And I think that, you know, we’re only gonna see more projects get done across the state in the coming months.

You know, I think that the thing that gets lost so often in the national conversation around this incentive is those kinds of local conversations, those really, like, interesting thought-provoking, you know, where do we go 5 years from now, 10 years from now to make this community a better place? How do we rethink the intersection of community and economic development? All of these conversations are happening because of this new incentive. And, like, it just never gets talked about in the national media. It never gets reported on. And it’s just such an incredible outcome of this. I think maybe that’s what John Lettieri and Glickman and the rest of the gang intended when they created this. But it’s certainly been one of the coolest byproducts that we’ve seen.

Jimmy: Yeah, I completely agree. It sounds like it was much needed. And I’m glad to hear from people like you and some other guests that I’ve had on relay these anecdotes about how this is getting people together at those levels like that wouldn’t have gotten together otherwise. Especially that fourth group you mentioned that gets overlooked from time to time, the banks and the philanthropic organizations, the community foundations. I think those are essential, as we’ve discussed previously.

I want our listeners to get a sense of just how much mileage you’re logging, Alex. So can you tell us how many of these events around the state you’ve hosted over the last year or so?

Alex: North of 75. So yeah, I actually, you’re right, for tax purposes, if nothing else, I need to retally my mileage. I haven’t done it in a while. I know it’s at least 60,000 miles I’ve put on my car since I started this. So yeah, it’s been a lot of fun. It really has.

Jimmy: Well, yeah. No, good for you getting out there and actually hitting the street and getting these local stakeholders engaged together. I think that’s incredible what you’re doing.

So you mentioned that you’ve already closed on your first, I think you said seven or eight projects. I know it’s really early still. This incentive is just getting underway in many respects, but what has the Opportunity Zone incentive done for Alabama already? I think we’ve talked a little bit about, at least it’s getting these stakeholders to the table, but do you have any other anecdotes to share or any other success stories?

Alex: Yeah. So a couple thoughts here actually. One, you know, obviously projects, right? Like, you know, that I alluded to earlier, but like the $12 million senior care facility in Heflin, Alabama, the new stock of build-to-suit industrial that we’ve got down in Opelika, the new, you know, sort of right above sort of at workforce-level housing that we’ve got in Baldwin County, the new affordable housing we’ve got in Birmingham. I mean, just all over the state you’re already seeing deals get done that are creating cool, wonderful community-oriented outcomes, right? And there’s a great, for anyone who’s interested, there is an article on our state media outlet, AL.com, about, you know, kind of LM is billion-dollar opportunity, and that it kind of talks about our pipeline and that it kind of goes through all those projects. So that’s one whole piece of, I think, benefits. And that will only continue. And then obviously, there’s the community planning, the kind of community visionings, community conversations that are coming out of this. And we just talked about.

But the third piece that I didn’t necessarily expect but it’s really interesting to see has been this last legislative session. And we actually, we put together a incentive that was designed to sort of fill a gap that we saw in the OZ marketplace. Which was, again, that conversation we had earlier, at the time, we really weren’t seeing a whole lot of even impact-oriented funds, get really excited about sort of, you know, kind of core role or, you know, projects that were in really sort of distressed urban areas where you’re doing a whole lot of blight remediation, where you’re, you know, taking a chance on projects.

And so we advocated for the passage of some legislation that would essentially do what the Kresge, Rockefeller guarantee did for Arctaris and for CCM. And that is offer $50 million worth of first loss protection to impact-oriented opportunity funds that are actually investable, that have a really quality, vetted pipeline of potential OZ project. And, I mean, this is pretty…it’s pretty radical medicine for a state like…for a pretty conservative red state like Alabama. I mean, this is certainly the most, you know, sort of progressive, most, again, you know, kind of impact-oriented [inaudible 00:39:26], you know, impact-tracking language in the incentive itself. There’s even, you know, again, kind of in the application form that we proposed for implementing this, it tracked exactly back to the impact and, you know, investing alliances to the OZ framework, right?

So, like, again, very sort of progressive, very…you know, it’s a big incentive, but it passed both houses of the legislature almost unanimous. And I think it’s because, like, you know, this is not a…like, at the end of the day, trying to make quality projects happen in rural places, in underserved urban places, in disinvested places where you’ve got a preponderance of low to moderate-income people, creating better outcomes for them, it’s not a [inaudible 00:40:14]. It’s just not. And, you know, it doesn’t matter if you’re the bluest state or the reddest state, that, you know, if there is a quality community-facing program that really can move the needle, that, you know, that it can become a no brainer as policy, especially if that policy can ultimately actually prove to be revenue-positive for the people that are creating it. So that’s been an interesting takeaway, I would say, from all of this.

And by the way, that incentive has now totally changed the way that I can have conversations with funds about, you know, the portfolio they’re looking at Alabama. Now instead of just single one-off, “Here’s this project,” now it’s, you know, “Hey, look, you come here and, you know, you put together a portfolio of five or six investments, maybe we can actually get them guaranteed so that your investments aren’t losing money.” So it’s that…I would say those three things.

Jimmy: Yeah, that’s very powerful incentive. That’s a nice byproduct of this incentive, that additional legislation there. That sounds pretty incredible. What have been some of the biggest challenges that you faced with Opportunity Zones and with Opportunity Zone development specifically in Alabama?

Alex: Oh, man. A lot of the ones we’ve talked about, right? It’s thinking about rural, thinking about how we can bundle packages, how we can bundle projects. It’s thinking about, you know, how we scale our sort of collective statewide effort to identify and then elevate, get shovel-ready a project that a community really needs. Like for example, if there’s extreme need for workforce housing, how do we get a developer in place that can build the proforma? How do we get that vetted? How do we build a demand study? How do we do a feasibility assessment? And then, you know, all the things that are necessary to get it in front of an investor, how do we do that at scale across a broad geographic area, which is sort of our mandate. And that’s one of those areas where I think, you know, [inaudible 00:42:19] and has been incredibly helpful in helping address challenges like that.

But at the end of the day, it’s just sweat equity. It’s just how much time, how many early mornings, how many late nights are you willing to sit? Once you’ve got a person in place, you can do this. You know, how hard are you willing to work and make it happen?

Jimmy: And how many miles you’re putting on your car, right?

Alex: Exactly.

Jimmy: Yeah. No, I hear you. And you’re doing an incredible job tackling these challenges in Alabama, and I applaud you for it. Alex, this has been a great conversation. Looking forward to speaking with you again soon, getting the update. But until then, where can our listeners go to learn more about you and Opportunity Alabama?

Alex: Go check out our wonderful website, www.opportunityalabama.com, or just check out the Twitter. We’re not Rachel Riley, but we’re close. So come check us out. And yeah, if there’s any way that you wanna get engaged with us, feel free to use the contact form on our website, or feel free to reach out to me or any of our staff directly.

Jimmy: Good. Well, for our listeners out there, I’ll have show notes on the Opportunity Zones database website at opportunitydb.com/podcast, and you’ll find links to all of the resources that Alex and I discussed on today’s show. I’ll have links to public democracy, to the AL.com article that Alex cited a few minutes ago, and of course, to opportunityalabama.com and their Twitter account. And now I may have to get a link up to Rachel Riley’s Twitter account as well. So all that good stuff for you guys to check out, head on over to opportunitydb.com/podcast/.

Alex, this has been great. Thank you.

Jimmy Atkinson

Jimmy Atkinson

Hi, I'm Jimmy Atkinson... I founded OpportunityDb in August 2018. I'm a veteran Internet entrepreneur with a background in economics and Web marketing. I previously founded ETFdb.com. These days, I am passionate about impact investing and tax-advantaged investment opportunities. At the crossroads of these two ideals is the opportunity zones program, a place-based tax policy intended to economically transform some of the poorest areas of the United States with new real estate and business development.

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