The Biggest Misconceptions About Opportunity Zones, with Bob Richardson

Bob Richardson

What are some of the biggest misconceptions, inconsistencies, and disconnects surrounding the Opportunity Zone tax incentive?

Bob Richardson is managing partner of Blue Cardinal Capital, a real estate private equity firm with Opportunity Zone projects in upstate New York.

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

Episode Highlights

  • The key differences between tax credits and the Opportunity Zone tax incentive — and the implications of these differences.
  • Disconnect #1: The disconnect embedded in the Opportunity Zone tax incentive around rigid timing requirements, vis a vis real estate development reality.
  • Disconnect #2: How typical real estate principles may not apply in blighted communities, or how the first rule of real estate (Location, Location, Location) is directly in conflict with OZ investing.
  • Disconnect #3: The challenge of developers who have had to become fund managers, and fund managers who have had to become real estate developers.
  • Disconnect #4: How Opportunity Zone funds may be treated as regulated securities by the SEC, perhaps unbeknownst to many real estate developers attempting capital raises.
  • Disconnect #5: How large firms needing capacity often times rules out smaller, locally run projects — the very projects that may be the most likely to have successful impact.
  • Disconnect #6: The headwinds that fund sponsors face in getting wealth managers and financial advisors to buy in to Opportunity Zone investing on behalf of their high net worth clients.
  • The most likely Opportunity Zone investor candidate.
  • The importance of educating municipalities.
  • Blue Cardinal’s real estate project in Niagara Falls and how it exemplifies Bruce Katz’s concept of “corridors and street corners.”
  • Strategies for de-risking a project.

Featured on This Episode

Industry Spotlight: Blue Cardinal Capital

Blue Cardinal Capital

Based in Buffalo, NY, Blue Cardinal Capital is a full service real estate private equity firm that invests in secondary and tertiary cities. Their Niagara Falls economic development fund was one of the first Opportunity Zone funds in the nation.

Learn more about Blue Cardinal Capital:

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. And joining me on the program today is managing partner of Blue Cardinal Capital, Bob Richardson. Bob joins us today from his office in Buffalo, New York. Bob, welcome to the podcast.


Bob: Good morning, Jimmy. I’m glad to be with you.

Jimmy: We’re glad to have you here, Bob. Excited to dive in here. So today, I wanted to discuss with you, I think you’ve really identified a lot of the biggest disconnects or inconsistencies with this Opportunity Zone tax credit. And so I wanted to focus our conversation around that topic. So first, I wanna tackle this misconception that a lot of people have or the misconception of the Opportunity Zone incentive being a tax credit, but really it’s not a tax credit. So can you talk about that concept of a tax credit versus the Opportunity Zone incentive and what implications does that distinction have?

Bob: Sure, that’s a really important distinction. And like you, I hear often people describe Opportunity Zone program as a tax credit, which it is not. And it’s significantly different than a tax credit. A historic tax credit or a brownfield tax credit is an incentive to engage in a project that actually changes the economics of the real estate transaction. It can make a project that would not otherwise be profitable, a profitable one. Whereas the Opportunity Zone program is designed to minimize the tax that an investor pays on a project when it is profitable.

So the key implication there is that first step is you must be able to identify an opportunity that generates a profit. And if you don’t generate the profit, the consequence, the opportunity to benefit for the investor is really zero. In fact, there’s a bit of a cushion that you might be able to lose a little bit of money and still be okay in terms of getting your principal back, but it’s not like tax credits that really changed the basic economics. So that really begins to help us understand how to differentiate these 8,700-plus Opportunity Zones around the country and decide which ones are the most interesting as investment opportunities.

Jimmy: Great. Yeah. I think people need to consider the Opportunity Zone tax incentive as another tool in the capital-raising tool bag so to speak. But it doesn’t yeah necessarily make the economics of a deal any better. I think this is was your main point.

Bob: That is correct. And so you have to have a basic project that generates a risk-adjusted return that’s relevant compared to other opportunities. The risk-adjustment return in the case of an Opportunity Zone investment is enhanced on an after-tax basis, but that requires the project to be profitable in the first place.

Jimmy: Good. Yeah, absolutely correct there. So I wanna touch upon more inconsistencies or misconceptions or disconnects that have kind of cropped up as a result of this legislation and the pending regulations from IRS. But first, let’s back up for a minute. Bob, could we get your background? I’d like to hear about your career path and how did you get to where you are today? And maybe you can tell us when you first became interested in Opportunity Zone investing.

Bob: Sure. So my career began here in Buffalo, New York. I came to work at M&T Bank Corporation based here in Buffalo and I was a bit of an entrepreneur-in-residence and started new business lines and product lines at M&T and was there for about 12 years. And then spent some time as a retail consultant traveling the country for various electronics retailers. And in that process, I met a real estate investor who was building an investment platform and needed some of my banking expertise. And then I got involved in the early days of a project, a master plan redevelopment of a blighted community here in Buffalo, which became the Buffalo Niagara Medical Campus, which now employs about 17,000 people. And in terms of a real estate investment program, it’s probably the most expensive real estate in upstate New York after the renovation of that neighborhood and really the consolidation of institutional and entrepreneurial ventures within that district in Buffalo.


So I was actively involved in investing in real estate there on the medical campus, and then a couple of other really large signature projects in upstate New York that we put deals together on. In 2016, I went out on my own and started Blue Cardinal and started looking for opportunities to do the master plan redevelopments in different parts of the country. And we were well on our way to a redevelopment in Niagara Falls that maybe we can talk about later, but later happened to be identified as part of an Opportunity Zone. So when the legislation passed at the end of 2017, we’d already been working on our project for well over a year. And so the Opportunity Zone benefits really enhanced the project and the performance of the project that we were already pursuing.

Jimmy: Good. Well, thank you for providing some of that context on your career path and, yeah, I do wanna ask you about that Niagara Falls project that you’re working on. We’ll get to that a little bit later in the program today. Let’s get back to our conversation around what you referred to on the phone with me last week as unholy marriages between things that don’t belong together or maybe disconnect or inconsistencies, maybe another way of putting it. If I counted correctly, I think we identified five or six such disconnects. Could you go through each of those for us?

Bob: Sure. I think the first one that’s really easy for most people to understand is the disconnect or the inconsistency embedded in the Opportunity Zone program around timing. So the IRS is well known for its specificity and rigidity with respect to timing. When I say April 15th, everyone in the United States knows exactly what I’m talking about, largely because the IRS really isn’t flexible about when we all decide to file our taxes. So that and the rigidity of timing embedded in the Opportunity Zone program are really diametrically opposed and in conflict with the way real estate development really works. And if you sit down and you talk to a municipality or you talk to a development company and you say, “How many times is your project come in exactly on time in the way you thought it would?” The answer is, “It almost never does.” It’s a rare occasion when a project comes in on time.

And in particular, when it comes to Opportunity Zone program, a lot of the early steps in real estate development are the time-sensitive steps from an Opportunity Zone perspective, and those are the ones that are often most delayed. And the factors that caused the delay are not really in control of the developer or a fund manager and can wildly change the timing of the implementation, and the timing of progress, and the timing of realizing the substantial improvement tests that embedded in the Opportunity Zone program.

Jimmy: And then those could all knock the qualified opportunity fund out of compliance.

Bob: Absolutely. And if you’re the fund manager in that situation, there may not be a lot that you’ve…can do about it. And it may not be your fault at all. So that inconsistency is probably one of the most difficult elements to manage as the leader of one of these initiatives.

Jimmy: That is a really good point there. But let’s continue, let’s move on to that second inconsistency or disconnect. You were speaking with me about the typical real estate principals, how they may or may not apply in blighted communities. Can you talk a little bit more about that?

Bob: Sure. I, you know, again, one of those euphemisms that everyone understands, first principle of real estate is location, location, location, which is directly in conflict with the idea that we’re gonna go and focus on a primary investment in a challenged, blighted community. That wouldn’t necessarily be the location that you would want to select. And in fact, the Opportunity Zone declaration, meaning identifying a particular location as an Opportunity Zone, may in fact change the economics of the real estate in that particular place.

So just a simple example of how the normal principles of how we find places that we want to invest and what we want to in those places really is in conflict with the idea that we have artificial boundaries that are drawn by census tracks and identified by governors as Opportunity Zones. Some of the best options in terms of adding value to real estate is assembly. And so what happens if you have one piece of property that’s in the Opportunity Zone and you’ve liked to assemble it with something that extends out two or three blocks in the other direction. That may be allowed, but it adds level of complexity that, again, is one of those consistencies that’s hard to determine whether or not the Opportunity Zone program is aligned to the real estate development strategy.

Jimmy: Right, right. Yeah, that’s also a good point there. And then these Opportunity Zone investments, they need to flow through a new investment vehicle that was created by the legislation, a qualified opportunity fund. But the fact of the matter is there are a lot of real estate developers out there doing fund management now and they have no experience or expertise in managing funds. And then on the other side, you have fund managers entering the space who may have fund managing experience, but they have no experience doing real estate development. So that’s our third disconnect there, if you wanna expound on that topic a little bit more.

Bob: Yeah. That one I find fascinating and it is I think an indication of some of the challenges of investing in blighted communities as well. Starting with the fund managers, so there are lots of great private capital sources in the world who are very efficient, very responsible, very deliberate about raising capital. They have great reputations, great experience, great history, and they look at an Opportunity Zone program and say, “We are able to raise lots of capital. This is great. We can certainly figure out this real estate thing. It can’t be that complicated. We’re really good at this business.” That’s a particularly a big challenge because not only is real estate very local, but the abilities to succeed in a blighted community is very much dependent on your local knowledge and the local relationships and connections and understanding the history and pitfalls and things that have been tried before the interconnectivity of the community that you’re working in with those around it.

All of those factors are very hard for a fund manager, who’s effective at raising money, to get engaged in a new place and understand. For example, in our case, when we look at a new market, we typically spend a couple of years building relationships there before we even entertain a first purchase of property. So again, that timing component of the Opportunity Zone program doesn’t allow for that. And so you have funds with lots of capital with no local feet on the ground or local presence and very hard to make those dots connect.

On the flip side, you have the opposite problem where you have local developers who have great insight into property, they have potential profit-making business ideas for what that property can produce and benefit the community, but they’re not really fund managers and they don’t really have a lot of experience in the kinds of things like structuring of funds, compliance reporting, investor relations, all of those blocking and tackling issues of being a fund manager. And they make themselves and the other parts of their business somewhat vulnerable to the performance of this Opportunity Zone Fund on factors that they’re not used to managing and not particularly good at controlling.

And so that disconnect makes for a really, frankly a potential bonanza of lawsuits for mismanagement of funds. And yeah, I would say in my opinion, even worse than developers trying to become fund managers, there are municipalities I understand who’ve launch funds and that to me it seems like the recipe for all kinds of problems that would probably not be worth the benefit.

Jimmy: Yeah, I agree with you there. It takes a lot of experience and expertise to run a fund properly, especially a fund that has the complexity that a qualified opportunity fund has in terms of its need to stay in compliance with IRS regulations as the timing requirements and the capital requirements in terms of the percentages that are in good assets versus bad assets. It’s a lot for the local real estate developer to manage. Absolutely.

Our fourth inconsistency or disconnect that we identified on the phone the other day was the issue of the SEC and the fact that a lot of these qualified opportunity funds are likely going to be interpreted by the SEC as securities possibly catching Opportunity Zone developers and fund managers a little bit off guard. They may not be aware of this issue. Could you speak about that a little bit further and some of the ramifications of that?

Bob: Absolutely. I do share that view that an Opportunity Zone Fund by its definition is gonna be a regulated investment instrument. And that has real implications for how this process works and who participates in it and who gets the opportunity to earn money from it. Again, factors that most developers don’t understand and are unaware of are the limitations for issuing private securities and how they are to be sold and who can make money in the process of selling them. There are other examples in the past of programs generated by one area of the government that implicitly created securities, which the SEC then later came and issued enforcement actions against those programs because their expectation is that the securities law is a toolkit to help understand what’s proper and appropriate in terms of how securities are transacted and those requirements, those regulations can be applied consistently as new investment products are invented, created, conceived just like the Opportunity Zone Fund has now been conceived.

So the rules for engaging with investors that apply to stocks and bonds and other types of real estate alternative investments can be applied to Opportunity Zone Funds. But what’s very clear from just reading or googling Opportunity Zone Funds is that many people are not aware of those requirements and already are at least very deep into the gray area, if not overstepping their bounds in terms of how they engage and solicit investors, how they compensate the various parties involved in the investment process, and so on. And I expect that at some point we’re gonna start getting enforcement actions from the SEC as a form of guidance for the industry in terms of how to interpret the overlap between Opportunity Zone Funds and the SEC regulations of funds.

Jimmy: Yeah, I agree with you there. It’s still very much a Wild-West type of atmosphere out there in terms of marketing these funds and in engaging with potential investors. I agree with you. The SEC, along with NASA, did issue a staff letter of…I don’t know if it was official guidance. I forget how they referred to it. I’ll be sure to link to it in the show notes for today’s episode at and it does address some of these issues at least in broad terms. And I agree that, you know, at some point down the road here we may see some more official guidance coming from them.

So the fifth disconnect that we identified, and I think there’s a little bit of overlap with that third disconnect of fund managers doing real estate development, that this fifth one we identified as large firms needing capacity kind of rules out smaller locally-run funds. And we think, you and I share this thought, that those smaller locally-run funds are probably the very funds that are likely to have the most success with boots on the ground. Can you speak about that disconnect a little bit?

Bob: Sure. And this really relates to this general idea of how real estate capital is raised and how it’s deployed. And so you have, again, large firms who have very successful infrastructure and track record and process, and they have minimum requirements because they have to be able to take in large amounts of money and deploy it efficiently. And some of those firms, because of those requirements, actually prohibits smaller investments. They prohibit investments that are specifically regional because that doesn’t really align to their need to deploy lots of capital and to manage it from afar. And again, that a separation between the process of how money is raised in real estate and how sensitive the deployment of real estate investment in a challenging community can become really creates this disconnect, I guess is the best word in this particular case, because ultimately what we want these Opportunity Zone Funds to produce is a disproportionate return based on risk-return balance.

And so in order to accomplish that, you really have to be hyperfocused on this specific transaction, this specific property that you’re going to develop or what’s it going to become, how is that going to generate the kind of cash flow and or appreciation that generates a yield that’s disproportionate to what an investor can produce in the open market in any real estate investments somewhere else. The Opportunity Zone benefit is only material to the extent that it out produces the yield of an investment that has a similar risk profile at least on after-tax basis. So that is really very much a local process. And being able to not only comply with the requirements of the program, but to deliver the return largely depends on your understanding of that specific neighborhood, the specific property and the specific business plan that’s going to generate the return.

Jimmy: Right. So maybe some of these larger, you know, $500-million or billion-dollar-plus blind pool funds, you and I may not like quite as much as the smaller locally-run funds, is that correct?

Bob: They may do just fine, but I would suspect the challenge they’re gonna have is producing deal flow at that level and managing it through end-to-end for 10 years to a point where it’s successful. A lot happens in 10 years and a lot can go wrong and being in a position to manage that from New York or Los Angeles is difficult to do.

Jimmy: Yeah, absolutely. I agree with you there. One final disconnect, this is number six now for those of you counting at home. Most people with capital gains, we’re talking about the retail investor channel now, most high-net-worth individuals with capital gains will use a wealth manager or financial advisor. But those wealth management firms often don’t necessarily want their client’s money to leak of their portfolio where they’re, you know, typically generating a management fee of maybe 100 or 150 basis points. They don’t want that money leaking out of their portfolio wrapper and into Opportunity Zone Funds. And then couple that with the fact that smaller independent wealth managers, IRAs, are not typically equipped to evaluate what makes a good Opportunity Zone investment. That’s a pretty big challenge for raising capital then at that point. Can you discuss that challenge and are you aware of any efforts to remedy that issue?

Bob: Yeah. So it is a very big issue because there’s multiple layers of understanding that have to really be achieved in order to complete and close on an investment in an Opportunity Zone Fund. First of all, as you rightly point out, the high-net-worth individual investor who is an Opportunity Zone investment candidate because of their capital gains is well-equipped with advisers. They generally have a wealth manager, maybe a team who helps them understand different aspects of the market. They generally have a tax planning expertise that is directly advising them as well that may or may not be within the same firm. So you have those two parties, in order to provide competent guidance to their client, need to be fully educated on the Opportunity Zone program itself and have enough of an awareness about the particular opportunity, the particular project that’s being evaluated to make a contribution to that and help the client understand how it fits in their investment strategy.

And beyond that, there is a level of really discovery of what the value proposition is for the client and how to make them comfortable as an investor, if they’re not already investing in similar assets, right? So just because someone has a capital gain and because they’re a high-net-worth individual investor doesn’t make them comfortable with real estate investments in general. So what we find is the most likely Opportunity Zone investor candidate is somebody who already invest in real estate and they’re just looking for this opportunity to enhance what they would normally be doing anyway.

Jimmy: Good. Yeah, I’m with you there. I think it does take a special type of investor. You’re absolutely right, it’s not just an investor who may have capital gains. They need to be comfortable with real estate investment for the most part, especially during this initial Opportunity Zone investment push that is focused mostly on real estate. Although we have seen some business funds pop up here and there and I think we’ll continue to see more. But for the most part, at least early on, this is largely a real estate place still.

Bob: That’s right. I think there will be other creative ways to use the Opportunity Zone program to finance various other things, other strategies. I always sort of described that is playing the middle of the fairway versus playing the fringe. I think because of the amount of guidance and the level of the guidance that we received from IRS so far, the safe play is to be in the middle of the fairway and that largely leads you right back to real estate, which is a little bit more specific, more clean in terms of how it applies to the program.

Jimmy: It is, absolutely. No disagreement from me on that point. We’re probably a few weeks away at least maybe toward the end of the year here, 2019, in getting final rulemaking from IRS. But until then, we’re gonna see a little bit of a restriction of capital flowing into Opportunity Zone investments, particularly those investments that may lie outside of that middle of the fairway as you put it. And one of the other biggest challenges, beyond the fact that we’re still waiting for final regulations from the IRS, is that educational component, being able to educate the decision makers with capital gains, whether that’s the individual investor or their advisors or the team of advisors, their accountants or wealth managers. What have you done in that regard to help bring individual investors and their advisors up to speed?

Bob: We have a really complete campaign on that regard. I think it’s part of our more general outreach to investors. It gives us an opportunity to first engage with municipal partners. Again, one of those factors that influences your success in the Opportunity Zone program is your ability to comply with timing. And so the municipal partner in the project that the city itself is a big key to making sure that you can stay on track to the extent that they can commit and follow through on timing objectives of the project. It really becomes a major factor in de-risking the project.

So we have started our education with working on educating municipalities about what they can do to prepare themselves to be successful as an Opportunity Zone target and an Opportunity Zone candidate. And that opens the door to talk about all the various things that can happen that might challenge the success of the project. And that sort of knowledge base becomes really relevant in terms of engaging with the advisor community, whether that’s the financial advisor or the tax advisor who has heard about, familiar with, maybe been to a couple of Opportunity Zone conferences, maybe listens to your podcast. But there’s an applied layer of this that is really in the weeds. And helping them kind of understand how two evaluate particular investment funds and talk to their clients about the risks and benefits, especially if they’re not accustomed to the profile of a real estate fund investment, that’s a real educational service that we help our friends in the advisory community and the accounting community be able to enrich their relationship with their client.

And we hope, in our case, by doing that, that we’ve given them a leg up in terms of being competitive in their particular field and made them comfortable in working with us and putting us in a position to actually sit with their client and take them through a much deeper explanation of our particular investment opportunity. So to that end, we’ve produced two white papers so far, one for municipalities and one for the trusted advisor community that helps sort of guide them through this process. And those had been very well-received.

Jimmy: Oh, good. Good. Yeah, that’s quite helpful. Any knowledge that you can pass on to educate these Opportunity Zone participants or potential Opportunity Zone participants, the more the better. So, but I wanna turn our attention to your fund now, Bob. Can you tell us a bit about what you’re doing? Tell us a bit about the Niagara Falls Project that Blue Cardinal is involved with?

Bob: So I mentioned that there’s 8,700-plus Opportunity Zones around the country, and one of the first challenges, one of the first practical issues is finding the right market where there is a real-estate-based profit-making opportunity that can now be enhanced by this Opportunity Zone benefit. And so that analysis is really looking for the sort of the shape that doesn’t fit with all the others. What’s the outlier, what’s the community that has a little of a different profile from all of the rest? So one thing that I hear from folks all the time is well, that kind of leads you to these places on the map where we questioned whether or not this really should be an Opportunity Zone. It’s already had a resurgence, it’s already beginning to thrive and show some vibrancy, and yet somehow it was identified as an Opportunity Zone.

And so I think the natural tendency, particularly among non-real estate people, is to look at that place and say, “Wow, this is a great opportunity because it’s already more vibrant than the Opportunity Zone would suggest.” However, I point that out as a real red flag because that vibrancy and that potential is frankly already baked into the price of the property. And so because Opportunity Zone process really starts with an acquisition transaction, I’ve basically committed to a return in the purchase of the property that may be even more difficult now to achieve because I’ve overpaid for property.

And so again, I’m sort of coming back to this idea that what we’re looking for is places on the map where there is a business case that’s unique and different without having to pay for that in the price of the property. So Niagara Falls, in addition to the fact that it’s 20 minutes from our home base here in Buffalo, is really one of those interesting places. The real estate in Niagara Falls has underperformed for a very long time. As the city has been shrinking and changing from its historic energy and chemical heavy manufacturing history to a tourism-based economy, the real estate really hasn’t kept up and really hasn’t performed up to the level of its potential. And you need not look farther than across the river to the Canadian side of Niagara Falls to see what that potential looks like.

So we were able to acquire a very substantial portion of a particular neighborhood that sits at an international crossing. It is connected to the commuter rail system of the Greater Toronto Area. And it is the neighborhood that has a recently been identified as new park frontage for the expansion of the New York state Niagara Falls State Park. So our neighborhood where we’re investing will have three miles of park frontage along the Niagara River and an old commercial corridor and an international crossing with a brand-new intermodal train station. So we look at that and say, “If you can acquire the property at the right price, the really fundamentals are in place to make a transformative shift in the value of these properties and really recognize and achieve their potential.”

One of the things that is also extremely relevant is adjacency. And again, when you’re looking at Opportunity Zones, you might wanna look for places where the real estate within the Opportunity Zone has underperformed and is affordable. But the real estate in the adjacent census track is high-performing. Those conditions don’t often exist partly because that the land value or land appreciation sort of trickles over the line and affects the Opportunity Zone. In our case, because of the international boundary, we really sit on a remarkable inconsistency in that we have the neighborhood in Niagara Falls, New York, which is very undervalued and priced low, next to one of the most expensive real estate markets in the world, and only could exist that way because of the border.

So we’re really next to vibrancy and thriving, even though we’re not paying for that in our acquisition price. And it really gives us an economic base to grow the economy, not to mention that Niagara Falls is still the ninth most visited place in the world every year. And so we have, you know, somewhere around 20 million tourists coming that provide an opportunity to really enhance the revenue stream for these properties.

Jimmy: Well, yeah, that’s impressive. And that’s a pretty good investment case that you’ve made there for Niagara Falls. I’ll be curious to see how that area transforms over the next decade or so coming forward here. I know you recently hosted Bruce Katz from Accelerator for America there in Niagara Falls. Can you talk a little bit about his visit to your region and the good things he had to say about what you’re doing there?

Bob: Sure. So we had a very fortuitous meeting with Bruce Katz. He was here in Buffalo to speak at a conference about Opportunity Zone. And you may or may not know Bruce Katz was part of the group that was the architects of the Buffalo Billion, which was a major infusion of capital to rent or renovate and trigger resurgence of Buffalo that has largely been effective. So it was a bit of a homecoming for him and [inaudible 00:38:52] in that conference and there was a dinner the night before the conference and it just so happened that I sat next to Bruce and Mary Daystar[SP] from the city of Niagara Falls and we were able to have a really deeper conversation, much deeper conversation about our project and how it worked or how it’s going to work.

And we did not realize at the time we sat down that in preparation for the conference, Bruce and a number of the other speakers had tour the Opportunities Zones around Buffalo including our neighborhood in Niagara Falls. And when we shared with him a little bit of the description of the properties that we have acquired, you recognize it right away because it aligned to sort of a theme that he had been developing for the conference. I think he called it street corners and commercial corridors as a focus area for investment. And if you look at the map of our properties, it’s really, you know, four consecutive blocks of the historic commercial corridor of the city of Niagara Falls, clustered around some significant intersections where we really can create synergy, create critical mass that it would be hard to create with a single property, even if a very large property somewhere in the middle of the city.

So he had been developing this idea of focusing on corridors and streets corners as a strategy for putting down a pocket of success in these blighted communities. And so when we told them where we were and reminding him of some of the properties, signature properties along that stretch, he knew it right away and it really resonated with him. I think he also commented on a lot of the work that we’ve done in the community to make sure that we are in alignment with what’s happening in the city and in the neighborhood. Again, you know, working in a blighted community is a lot more challenging and requires a lot more consensus and coordination of resources.

We acquired these 39 properties and it’s very clear, even after a few months of ownership, that real estate isn’t the core problem in the neighborhood. There are all kinds other problems from mental health and drug addiction, crime and safety, unemployment is certainly an issue, under education. The list goes on and on. Those are problems that a fund manager or a real estate developer even is ill-equipped to address. And so our strategy has been to build a coalition to work in coordination to attack those problems, at the same time that the real estate redevelopment and re-imagining of the neighborhood is taking place. And I think that was another of the items that struck a cord with him during his visit.

And finally, I would say, and this kind of goes to maybe one of the more broad issues that still exist in the Opportunity Zone debate, and that is the community benefit and call it a tracking of the performance of the fund, not in terms of the return it generates, but in terms of how it impacts the community that it was intended to help. So again, it’s an area where the regulation doesn’t necessarily call for a particular solution, but it’s an area where we feel that we have to be proactive. And so we’ve taken some really extraordinary steps, at least from fund management perspective, to ensure that we’re not just causing change in the neighborhood, but bringing the neighborhood along for the benefits of the change and making them participants rather than victims. And we have committed to gathering data from the beginning of the project all the way through its life cycle about the neighborhood, its financial health, its demographic makeup and its prospects, and sharing that with the constituencies in a very open and transparent way.

And again, I think that was something Bruce picked up on and commented on as maybe a mechanism for de-risking the project from future regulation and maybe being a step ahead of future regulation on the topic of disenfranchisement or gentrification rather than waiting for that to be legislated upon us.

And then finally, the day that Bruce took his tour, we had the opportunity to host Governor Andrew Cuomo of New York, who awarded our project area $10 million downtown revitalization grant to really support the public side, in particular public infrastructure side of the project. We had been saying right along that we can do a great job of renovating the buildings that we own and bringing them back life and filling them with tenants. But if the municipality is not in a position to repair the streets or sidewalks or make sure the street lights work or put enough police officers on the street, all of those things that are needed to make a whole and effective ecosystem out of the neighborhood, our project’s not gonna achieve its potential and maybe not achieve its desired outcome.

So Bruce called that action by the state an intervention of de-risking the project to make it less risky from a public infrastructure point of view and to make sure that the city of Niagara Falls had resources to complement what we were gonna do on private real estate and really help reassure investors that all of the parts could come together in this, that it could be a successful restart of a really historic neighborhood. So those are just a couple of the comments I remember from our visit with him, but he was very engaged and he was a great visionary, great speaker and it was great to have his contribution to what we’re thinking about and trying to do in Niagara Falls.

Jimmy: It sounds like it. Absolutely. That’s very good the work that you’re doing over there and to get recognized by Governor Cuomo and receive an endorsement of some sort from Bruce Katz, that’s terrific. And, Bruce Katz, his name’s come up on this podcast a few times now for the last few weeks. I’m gonna have to get him on the show here pretty soon I think.

Bob: I’d recommend it. He’s is very, very insightful and really a thought leader in financing in general, but Opportunity Zone as well.

Jimmy: Yeah, absolutely. I know he’s done a lot of thinking about this topic. Well, Bob, this has been great. Thanks for our conversation today. Before we go, can you tell our listeners where they can go to find those white papers that you’ve written and to learn more about you and Blue Cardinal Capital?

Bob: Sure. We’re happy to connect with your listeners through our website at or connect with us on LinkedIn and we’ll be happy to share either of those white papers or both with you and your listeners. And you know, really happy to continue the dialogue with municipalities or investment advisors who are looking to understand. And whether they’re interested in Niagara Falls or not, we’re happy to really engage with and talk about the process of putting together a fund that attracts investors.

Jimmy: Excellent. Excellent. Well, thank you, Bob. And for our listeners out there today, as always, I’ll have show notes for today’s episode on the Opportunity Zone Database website. You can find those show notes, and you’ll find links to all of the resources that Bob and I discussed on today’s show.

Bob, again, thanks for joining us. This has been great.

Bob: You’re welcome. Thanks for the opportunity.

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