As a real estate professional, it seems like you can't go a day without hearing about Opportunity Zones, and for good reason — the legislation offers immensely appealing tax advantages, and the industry is scrambling to figure out how to take advantage; it has the feel of a veritable gold rush. However, many investors are only seeing dollar signs and losing sight of the core intent of the legislation: to make a real and lasting impact on challenged communities. At Cedar, we often talk about doing good for the communities we serve while doing well by our investors.  Opportunity Zone investments certainly can allow us to achieve both of these objectives.

As developers and everyday investors approach Opportunity Zones, the conventional view on the opportunities presented by the legislation strike me as myopic, since it appears that the tax benefits are overwhelming the underlying project analytics. Instead, I would suggest that those already involved in Opportunity Zone investments (or others clamoring to get in) must think constructively about the specific community involved and ensure that, particularly for development initiatives, the project aligns with the needs of the people in those neighborhoods.

Some important questions that developers and their investors should be asking very early on when exploring an Opportunity Zone development project: What are the needs of this community? What type of development will work in harmony with the local socioeconomic and demographic characteristics? How will the development fit in with the aesthetics and culture of the community at large? Becoming well-versed in the tax-related complexities of Opportunity Zone legislation is one thing, but a qualitative analysis of the local market to truly understand the character and sensitivities of a historically disadvantaged community is another entirely. It is this latter analysis that will determine the long-term success of the project and thereby allow the investor to truly realize the economic benefits the Opportunity Zone legislation contemplates.