The Mooch’s $3B Opportunity Zone REIT Selects Westport, Following EJF’s Departure

NEW YORK CITY—SOZ REIT, the $3 billion opportunity zone REIT launched by SkyBridge Capital in December, has a new sub-advisor, Westport Capital Partners. In a conference call last month, SkyBridge’s founder and co-managing partner, Anthony Scaramucci, had announced they would be teaming up with hedge fund and private equity manager EJF Capital. Earlier this month The Real Deal had reported that SkyBridge and EJF had parted ways.

Brett Messing, who joined SkyBridge as president in November, tells GlobeSt.com that EJF’s resignation was amicable. “We raise capital primarily with our relationships with the large wirehouses and they serve as our distributors,” he says. Messing notes EJF did not have a dedicated real estate fund in the past.

“The reason they are stepping out as a sub-advisor simply was we were going to endeavor to access our large distribution partners and given the absence of a dedicated real estate track record we were unable to do that. So, it made sense for both of us to call it a day,” states Messing. He adds opportunity zones present a very big opportunity and it didn’t make sense for SkyBridge to dedicate the kind of resources they have to go forward if they couldn’t partner with their largest distributors.

“They are going to carry on with their own fund and we’re going to proceed with the REIT and Westport Capital Partners,” Messing says.

A spokesperson for EJF, which had launched its own, separate $500 million opportunity zone fund in September, sent GlobeSt.com the following statement on January 17 after its break from SkyBridge: “EJF has substantial real estate experience and looks forward to continuing to identify and execute on attractive and socially responsible real estate investments in Opportunity Zones through its strategy that pre-exists the SkyBridge Opportunity Zone REIT.”

As to one reason SkyBridge went with Westport, Messing says they have worked together for over a decade. He pointed out that Russ Bernard who has been in the business for more than 30 years, founded Westport, bringing an experienced team with him from Oak Tree Capital Management.

Messing says Westport’s track record in investing in real estate relates to opportunity zones in two specific ways: The Westport team is experienced in ground-up development and substantial redevelopment, the type of work required by law in the opportunity zone projects. Also, they have focused on distressed real estate. “There are communities that have opportunity zones in them in areas for a variety of reasons. They need more capital, need more attention, are more challenging areas to execute. Russ’s track record in distressed real estate is applicable and will enable him to be successful in this.”

Other than the new sub-advisor whom the board approved, the REIT is still the same. It has kept its $3 billion goal and three-year fund raising cycle. Messing says all of the investors have been contacted and will have the opportunity to redeem or to stay in the fund. He notes SkyBridge expects all of the investors to remain in the fund, with the exception of EJF, who has redeemed its shares. Due to confidentiality reasons, he declined to disclose the amount of EJF’s prior investment.

Regarding any potential conflicts of interest of EJF’s having started a separate opportunity zone fund prior to its relationship with SkyBridge, Messing says the companies believed and continue to believe those would have been manageable. He states this was not a factor related to the change in sub-advisor.

Some critics voice caution with opportunity zones, noting investments in real estate based on tax credits instead of underlying fundamentals can be problematic. Messing opines that people often make decisions based on tax incentives. People buy homes for mortgage interest and property tax deductions or invest in municipal bonds. He agrees that people should not go running to invest in an opportunity zone strictly for tax benefits but says such incentives do not necessarily result in unwise investing.

He also adds, “I have sort of a do-gooder streak in me. The social good aspect of this is very appealing.”

In addition to having served as a senior advisor to former Los Angeles Mayor Antonio Villaraigosa, Messing for the past nine years has been an advisor to C40 Cities, a network of cities committed to reducing greenhouse gases to fight climate change. New York City’s former mayor Michael Bloomberg serves as president of the board of the coalition.

And one more thing about SkyBridge’s president. He’s actress Debra Messing’s brother.