OZ Pitch Day - March 7, 2024
Novogradac is a national professional services organization that consists of affiliates and divisions in certified public accounting, valuation, and consulting. Novogradac is also a proven leader in the New Markets Tax Credit (NMTC) program and Opportunity Zone funding, with their spring OZ conference scheduled for April 21-22, 2022, in Long Beach, California, and online.
Brent Parker, CPA, is a partner in the Long Beach, California, office of Novogradac. Brent is experienced in affordable housing and community development, nonprofit organizations and public housing authorities, historic rehabilitation, and renewable energy.
Click the play button above to listen to our conversation with Brent.
- An overview of the upcoming Novogradac 2022 Spring Opportunity Zones Conference in Long Beach, CA, including speakers and topics.
- A fund manager’s perspective on what may happen with OZ legislation and what policymakers have to say about the outlook.
- Details of Novogradac’s OZ projects and their investment goals for the remainder of 2022.
- Results from Novogradac’s Opportunity Zone capital raising survey from 2021.
- Market trends and investor perception specific to opportunity zones in 2022 and beyond.
- Some best practices for identifying the right opportunity zone investments.
Featured On This Episode
- Brent Parker on LinkedIn
- Novogradac 2022 Spring Opportunity Zones Conference
- Promo Code OBD22 for 10% off Novogradac OZ Conference
- Novogradac Opportunity Zones Working Group
- Long Beach, California Opportunity Zones & OZ Funds
- OZ Pitch Day
Industry Spotlight: Novogradac
Based in San Francisco, Novogradac is a top 50 national accounting firm with an emphasis in the real estate sector, specializing in tax credits. In recent years, the firm has become one of the foremost thought leaders in the Opportunity Zone industry and are one of the leading providers of education and live events in the space.
Learn more about Novogradac
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.
Jimmy: Welcome to The Opportunity Zones Podcast. I’m your host, Jimmy Atkinson. Novogradac & Company is a national professional services firm with deep expertise in Opportunity Zones. If you’ve been following OZs for any sort of time, you’ve probably run across them. They also lead the Novogradac Opportunity Zones Working Group, a coalition of OZ industry professionals that helps advise IRS and Congress on the Opportunity Zones policy. Joining me today from Novogradac is partner Brent Parker, CPA. Brent joins us today from Long Beach, California. Brent, welcome to the show, and thanks for coming on.
Brent: Hey, Jimmy. Thanks for having me.
Jimmy: You bet, Brent. Pleasure to have you on here. Looking forward to hanging out with you in Long Beach in a few weeks for the conference. A lot happening with Novogradac, obviously. As I mentioned, you know, your firm has been one of the leaders in the OZ space, really since the very beginning, before the legislation was passed even, and your big Opportunity Zones conference, an industry staple, is coming back, and it’s going to be taking place in Long Beach, California on April 21 through 22. And we’ll talk a little bit more about that and how our listeners can register and attend a little bit later in the episode today. But first, I wanna get your thoughts on the working group. You’re heavily involved with the Opportunity Zones working group. What are some initiatives that the working group is currently working on here? You know, I last spoke with John and Mike about the working group on an episode we did back in fall of 2021. So maybe you can give us some of the updates that have taken place over the last six months and what you’re looking to do this year.
Brent: So, number one, you know, we’re excited to introduce and talk to some of the new policymakers and regulatory people, such as Lily Batchelder and make our introduction, discuss some of the topics that I think are hot in the industry, and that maybe need a little bit of clarification or help sort of evolving in the incentive. So, we issued a letter…the most recent letter we’ve issued was a letter in March to Miss Batchelder, and she’s assistant secretary for tax policy in Treasury. So, just kind of introducing ourselves, discussing some of the incentive, and talking about some of, I think, the important topics that our working group and other stakeholders in the industry are interested in. You know, rules regarding operating businesses, working capital, safe harbor, things of that nature. There’s a lot of detail in that letter, and it’s on our website, so feel free to take a look at that letter.
One of the items that is being discussed in this letter, and of course, it’s a working group, or our working group is interested in is really data collection and monitoring within the incentive. Obviously, this is a sensitive area, where I think interested parties on both sides of aisle are very interested in what is happening in the zones. It’s obviously a powerful incentive. So, how do we measure that? So, you know, there are other areas of tax law and other tax credits and incentives that Treasury uses to measure, or they use, you know, different functions to sort of measure performance and compliance and things of that nature. So, one of the thoughts is that possibly we could sort of leverage some of those programs, to try and measure and provide some sort of feedback on the performance in the incentive.
Recently, also, there was a letter from, you know, Senator Wyden that was looking for detailed information that was sent out to various qualified opportunity funds. So that has a lot of people sort of talking as well. We wanna make sure that the incentive is successful, obviously. So maybe some clarity and some information that we can provide, in a more organized manner, can sort of help to measure the incentive and provide strength, I think. We’re looking for some sort of a system that can provide clarity and transparency. And I think looking at some of these other areas may help, and may help, like I said, senators like or, you know, interested parties like Senator Wyden to identify that the incentive is working successfully and hopefully will continue to work successfully.
Jimmy: We can hope so. We can hope so, right?
Jimmy: We can definitely hope that something like that gets passed, because I think that’s really a bipartisan issue that everybody on both sides of the aisle really would like to get passed is some sort of data collection. Do you think that might happen as a result of a regulatory change that treasury makes with the IRS, or do you think it might be something that’s introduced as legislation into Congress?
Brent: Possibly as more of a regulatory process. I don’t know that legislation…and we’ll see, it may be legislation as well. There’s a possibility that it could be included in some of the proposed legislation that’s coming out now. I’m sure that everybody listening to this podcast you know, Build Back Better plan, that was a piece of legislation that didn’t make it through, but it’s still sort of in the works, and maybe something that…make its way through in pieces of legislation. So it could be something that, you know, that’s compliance and is something that’s built into some of that legislation. Also something that’s possibly administered by Department of Treasury, similar to the New Markets Tax Credit program. And that program sort of uses a organization or an arm of Treasury that’s called the CDFI Fund, so, Community Development Financial Institutions Fund, and they have an annual reporting requirement. So it could be something like that, but there’s a lot of different opportunities, I think, here to make some sort of a system that’s successful, and enables the incentive to build a lot of good credibility.
Jimmy: Yeah. The Build Back Better rather, limp response from Congress and, not a very favorable outcome for the administration there, trouble passing there. Would’ve been their landmark legislation for 2021 or 2022. Do you think it could be revived in any way in some point? What do you see happening with that initiative, and how might OZs be incorporated in there if at all?
Brent: You know, hopefully, we’re very hopeful, obviously, with the Opportunity Zone incentive that at some point, it’s, you know, extended or there’s some sort of a continuing investment opportunity. At this point, you can invest in a fund until December 31st, 2026. And then, you know, obviously, you can hold your investment for basically as long as you like, and get a step up at some point after 10 years. But, you know, we’re hopeful that at some point, there’s gonna be some sort of extension of that. It hasn’t happened yet, but we might see the Build Back Better…you know, I’m not a complete expert in the Build Back Better plan, but I’ll tell you that the people in our company, which is Peter Lawrence, and he talks on a lot of podcasts as well, he’ll talk about the ability maybe for the components of that legislation to make it through in different pieces of legislation, maybe as a budget reconciliation process or something like that. So there’s different ways for Congress to sort of get some of that legislation through, but it obviously would’ve been nice and cleaner, I think, if it had come through originally, but there’s definitely opportunities that will come up in the future for that to pass, or pieces of it to pass.
Jimmy: Very good. Well, let’s turn our attention to one of the things that makes Novogradac so famous, in my mind, which is the Opportunity Zone capital raising survey. This is a voluntary rolling survey of qualified opportunity funds that you have in your network. Not every qualified opportunity fund in existence responds to the survey, of course, but you guys capture a pretty large share of the market. Correct me if I’m wrong, maybe 15%, 20%, 25%-ish? What’s the latest there with that capital raising survey? How much capital has been raised by qualified opportunity funds to date?
Brent: This is a really exciting sort of trend that we’re seeing, and in our latest report, we have a report that came out through December 31st, 2021. And prior to that, our report was through midyear 2021. And that report as of the end of 2021 showed that the funds raised by the funds reporting in this, or encapsulated in this report, was $24.4 billion in funds raised. There was almost 1,000 funds that actually reported equity being raised, and it tracked, you know, 1,300 opportunity funds. And the interesting thing is that, of those funds, you know, $6.8 billion, or $6.9 billion almost, was reported in that second half of the year 2021. So this was an increase of almost 40% over the midyear total. So, very exciting. I think there’s a lot of activity. Obviously, there was expected to be a lot of activity at the end of last year due to the sort of 10% step-up expiring.
Jimmy: There was a huge pick-up in Q4, likely due to that very fact that that incentive was expiring.
Brent: That’s right. But, you know, what’s really interesting, I think, is that, it’s not necessarily slowing down. So, I think we’re still seeing a lot of that. Now, our report doesn’t go past 12/31/2021, but from what I understand, and maybe you can tell me, Jimmy, but it seems like, you know, investors are still very interested.
Jimmy: Yeah. Well, we’re recording this episode just before my spring 2022 OZ Pitch Day event, but it’s gonna air, I think, the day after if I’m not mistaken. So we’ll already have that in the books behind us, but just gearing up for my OZ Pitch Day event, I have not seen a slowdown, at least in terms of sponsor interest in the event, or in terms of investors registering for the event, compared to the event that we did last fall. So, anecdotally, from my side of things, I still see a lot of activity. And I think that holds true for you guys as well, is my understanding. Yeah.
Brent: Yeah. Yeah. And I think what’s exciting, too, is that we’re seeing all different types of, you know, activity, different size funds. And in this report, we had seven fund managers that e-trades half a billion dollars or more. So, those are pretty big funds, obviously. But also, you know, very wide range of investments throughout the country. I think 20 cities that had at least $200 million. There were 40 cities with a planned Opportunity Zone investment, in 23 states plus D.C. So, a lot of stuff going on. And as you said, you know, it’s maybe, like, a quarter of actual investment, so, very exciting.
Jimmy: Yeah. So, whatever numbers you guys are reporting, multiply it by at least four. And I think that might be more indicative of the actual numbers, but you guys are doing phenomenal work with that survey. I’m jealous I didn’t think of it, actually. It was a great idea you guys had. And I love reading it every update you guys give. Hey, well, let’s talk about the big event coming up later in April, April 21 and 22. The Novogradac Spring Opportunity Zone Conference is coming to the Hilton Hotel in Long Beach, California, right in your neck of the woods there, Brent. So, answer a few questions about the conference for me that my listeners may have. One, who should attend? And then, what else can you tell us about the conference, and what should attendees expect?
Brent: Well, I think it’s a very educational conference. I think it’s geared toward all different stakeholders, and to sort of attract, you know, individuals that are looking to understand more about the incentive, figure out how they can sort of resolve maybe some of the issues that they’re having, and meet other interested parties. So, anywhere from investors to fund sponsors, obviously, developers, professionals such as myself. There’s a lot of professionals that also go to our conferences. So, yeah, there’s, like, a huge range of interested parties. Of course, it doesn’t hurt, I think, that it’s in, you know, sunny Southern California. So, it’s gonna be at the Hilton in Long Beach, nice hotel. But yeah, it’s gonna be a great event. There’s actually three days. So, the first day is April 20th, which, we’ll have two workshops. There’s gonna be a 101 workshop, where we go through sort of the basics of the incentive for about 4 hours, I think, or 3 or 4 hours.
And then there’s gonna be a 201, which I myself am hosting. And that goes for the second half of the day. And that’s where we get into very interesting topics, such as, like, mergers, PIK interest, circular cash, things like that, very sort of sensitive and interesting topics that myself and my speaking partners will talk to. And one of them is, you know, tease a lot of interesting activity, named Mark Schultz. And he’s gonna be talking with me on that workshop. And then, you know, days two and three, on the 21st and 22nd, the 21st, obviously, is the day not to miss, get to hear the “Washington Report.” We hear Mike Novogradac talk and fill us in on some of the most interesting stuff that’s happening, as well as other lawmakers, and then get into a lot of different sort of topics, which, fund sponsors speak, business managers speak.
We talk about some of the rules and regulations surrounding different aspects of the incentive. So there’s a lot of interesting stuff, a lot of very competent experts that are gonna talk about a wide range of topics. So I don’t think it’s something that’s gonna be a boring event, hopefully not, but should be pretty exciting, and will have a lot of interesting folks there.
Jimmy: Well, I’ve never been bored by a Novogradac event, but I’m an Opportunity Zone nerd, so… But I think most people listening are Opportunity Zone nerds, and we welcome all of you there. And, you know, for our listeners of this podcast, I’ve teamed up with Novogradac once again to offer a 10% discount on the event. So, you can use promo code OBD22, that’s O-B-D-2-2, at checkout, to save 10%. I’ll be sure to link to the conference, and include that discount code in the show notes for today’s episode. You can find the show notes, as always, at opportunitydb.com/podcast. Brent, before we go, a couple other questions I’ve got for you before I cut you loose and get you out of here. What about trends? We touched upon some fundraising trends with the capital raising survey. What other Opportunity Zone trends are you keeping an eye out on in 2022? The 10% step-up expired a few weeks ago. I don’t know if you’ve seen a slowdown. I think we kind of touched upon that already. But what trends are exciting you for the rest of the year?
Brent: You know, one big incentive right now is that the sort of protection from COVID, that there were certain IRS notices that offered protection for funds that were having trouble meeting a 90% test, which is a requirement of the fund that most listeners will know about…so, that expired end of 2021. So now, we’re coming up on a testing date, June 30th, for most funds. And so those funds will need to…that were not passing or would not otherwise pass the 90% test are now looking to, I think, place capital. So that’s interesting. So, you know, there’s a lot of funds out there that are looking for good quality investments. So, obviously, I think we’re still seeing a lot of real estate-oriented investments. I mean, both commercial and residential, but, you know, I see also there are some lease transactions going on, things like that.
I think there are operating businesses that are, you know, I’m aware of several operating businesses and, you know, larger companies that are using the incentive internally as well, to sort of build out. But I think we’re still seeing some of the same investment, but I’ll be curious to see how that plays out with some maybe additional incentive to place capital. But yeah, I’m seeing some interesting trends. I mean, a lot of investment. It’s definitely not slowing down. And so, that’s exciting. But I think also a lot of placement, and now projects that are sort of being realized.
Jimmy: Absolutely. It’s exciting. And to me, it’s somewhat surprising, but in a good way. Well, Brent, did you know that there are 19 Opportunity Zones in the city of Long Beach California? And on top of that, the hotel where the conference is going to be is right across the street from one. It’s not in one, but it’s almost in one. Any thoughts there?
Brent: Yeah. I mean, Long Beach is a very exciting place for developers. And I think it’s an area in Southern California, in particular, that has a lot of, you know, please excuse the wording, but opportunity. And there’s a lot of area there that is, you know, sort of prime for development. There’s also a lot of development that’s going on, but we have zones that are extremely close to the waterfront, that need good investment. So, Jimmy, like you were saying, right near the hotel, there’s a zone, and there’s zones sort of throughout that area. So, I think there’s a lot of activity in that area, and there’s a lot of room for development as well. So, very excited to see what happens in Long Beach, as well as other areas in Southern California. Southern California is, you know, a huge market, and there’s a lot of zones in Southern California, Inland Empire, things like that, that are really sort of building out and gaining momentum.
Jimmy: Yeah. There are indeed quite a few zones out there in the entire state of California, but yeah, particularly so in Southern California. I’m looking forward to joining you out in Long Beach in just a few more weeks here, for that spring conference. Brent, it has been a pleasure speaking with you today. Before we go, can you tell our listeners where they can go to learn more about you and Novogradac?
Brent: Sure, definitely. I mean, listeners, hopefully, most of you are familiar with the website. If not, I urge you to check it out. It’s www.novoco.com. And then from there, there’s resource centers, and you can sort of select the Opportunity Zones resource center. You know, it’s one of the areas we work in. We obviously also work in affordable housing and, you know, various other tax credit incentive investments, but lots of good resources there. There’s some discussion, if you’re sort of not as familiar with the incentive. There’s good white papers to read and learn about the incentive also. You know, there’s a working group contact. So if you wanna join the working group, you can. We have calls that are, you know, almost monthly, I think, and very informative.
There’s some leading sort of stakeholders in the industry that are in the working group. We have lots of letters, lots of sort of…or lots of publications through that, as well as just generally on our website, we have a mapping tool where you can sort of check out, you know, your area, or check out areas that you’re interested in and see what is in the zone. So, yeah, definitely take a look, and, you know, feel free to contact us if you want to discuss further any opportunities that you have, or any sort of discussion that you wanna have on the incentive.
Jimmy: Excellent. And one last plug for the conference. Please do consider attending. And, of course, you can use promo code OBD22 to save 10%. I will be sure to link to that, and all of the other resources that we discussed, in the show notes on the Opportunity Zones Database website for today’s episode. And you can find those show notes at opportunitydb.com/podcast. And there you’ll find all the links to the resources that Brent and I discussed on today’s show. Brent, it’s been a pleasure. Thank you for joining.
Brent: Thank you very much.