Insights

Having described program strictures related to direct investing in Qualified Opportunity Zone Business Property (“QOZBP”), in this post we describe the constraints to indirect, or joint venture investing in real estate, which describes investment positions across a continuum of investor control, ranging from passive stakes in a commingled fund, to separate accounts (e.g. family office or corporation allows investment manager to invest its capital into a QOZB alongside a developer subject to control over key decisions). In either case, the investment manager is placing joint venture equity into a QOZ business entity that is formed to invest in QOZBP. We begin with a line-by-line exploration of the relevant constraints before shifting to a more holistic discussion of investment strategy implications.

Before discussing investment strategy, we will first discuss its vital inputs, program constraints and the manner in which we might expect the Qualified Opportunity Fund (“QOF”) after-tax return premium to map unevenly to identical deals executed across geographies. As the primary lens through which we will evaluate geographies and investment strategies, we begin with a two-part discussion of the constraints that the tax code imposes upon investment selection, starting with those that derive from fund structure in the context of direct QOF investments.