News & Noteworthy

Article - Chris Dean Quoted in Two Crain's NY Business Articles on Opportunity Zones
MAY 28, 2019 | Crain's New York Business

On May 24, 2019, Crain's NY Business published an article entitled, "Opportunity zones aren’t just for real estate: In light of the latest IRS guidelines, investors are eager to back opportunity zone startups." Christopher Dean (Partner, New York) was quoted extensively.

  • “What makes real estate an obvious choice is that real estate is not going to move. The opportunity zone’s income test is never going to be a problem for real estate,” said Christopher Dean ... referring to the “50% test” contained in the regulations. This test required that 50% of an opportunity zone business’s income had to be generated in the opportunity zone. But, he adds, “Certainly the goal of the program is not to limit investments to real estate deals.”
  • Dean also cautions investors against jumping in too quickly. “The investment has to work,” he said. “Investors have to vet the sponsors, make sure they know what they’re doing, that the business makes sense and there’s enough capital coming in, and it’s not just somebody looking to get rich quick.”
  • Dean says the opportunity zone program shows promise because it’s clear the government is paying attention to all of the stakeholders, including potential investors and the residents who live in opportunity zones and will ultimately be affected by the projects that move forward. “They’re listening,” he said of policymakers. “They’re balancing the two sides really well.”

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A second article also included contributions from Chris, entitled "Multi-asset vs. Single-Asset Qualified Opportunity Funds"

  • Single- and multi-asset QOFs can be any size. “Single-asset funds may invest in one small real estate project, while multi-asset funds are needed to deploy billions of dollars across many projects,” said Christopher Dean ...
  • Traditional real estate funds often hold multiple assets, buying and selling assets to maintain a balanced, diversified portfolio. Until recently, IRS rules were unclear when it came to the taxation on the sale of assets inside multi-asset QOFs. As a result, single-asset funds have been more common. But recent clarification from the IRS suggests that investors won’t be penalized when a multi-asset fund makes a sale, which may result in a proliferation of multi-asset funds, said Dean.
  • “You’re potentially tying up your money for 10 years, so there are opportunity costs associated with this lack of liquidity,” said Dean. “You have to be comfortable enough with your investment to make the opportunity cost worth it.”

Read the article (subscription may apply). 

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