The developments are screened like any other development in the real estate portfolio. On a leveraged basis, the fund is executing on a 50 to 60 percent loan to cost basis. 

"In terms of underwriting and analysis it is not any different than traditional real estate," Parrish said. "The deals have to make sense, screening and sourcing are very important." 

Cresset-Diversified anticipates partnering with several of the same developers from Fund I and other new firms. Projects currently under consideration for Fund II include mixed-use, multi-family, retail, and office investments in the Southwest, Texas, Mid-Atlantic, Northeast and West Coast.

Through its business relationships, the firm has been able to establish a solid pipeline of ground-up developments, which is similar to other players in the market. About 80 percent of the Opportunity Zone projects today are ground-up developments, Parrish said. Investors are sticking to these kinds of deals to avoid the complications of the substantial appreciation clause of existing buildings, where they have to be substantially repositioned in order for investors to fully capitalize on capital gains tax deferment after ten years. 

Parrish attributes the success of Fund I to its in house tax team because essentially the Opportunity Zone benefits required learning a new tax code. Tax structuring the fund was one of the most important components at the outset for the firm, which won't really know if it's been successful ten years from now. "It is critically important to find good deals and you don't want to lose benefits because you didn't structure the tax fund right," he said.