, 19 tweets, 6 min read Read on Twitter
1/ I read today’s @NYTimes piece on #Opportunity Zones. A few thoughts: nytimes.com/2019/08/31/bus…
2/First reaction: it's impossible to say that Opportunity Zones have been a “Bonanza” for anyone. We are in *such* early days. Opportunity Zone funds will not have any returns for ten years, minimum (this was intentional, it’s patient capital!)
3/ The narrative that a “wave of developments” is happening is not yet true. Opportunity Zone funds across the country have raised less than 10% of their goals. It is a new market and most people are very cautious.
4/ As an example, the article mentions that @scaramucci has “already” raised $50M. His fund’s goal was to raise $3B, so they’re less than 2% of the way towards what they want to do. So let's hold our judgment that anyone has "won" yet (compared to other subsidies and tax breaks)
5/Second reaction: what the article gets right: it's true that there are players in the Opportunity Zone world (named in this article) who are not acting with the intent of the legislation, to lift up economically distressed areas. This is bad and should not happen.
6/ These player are seeking to capture value, not create it; were almost always already very wealthy; and as a result, have been able to get off to a fast start with projects that were already underway. Again, this is not ideal.
7/ Yet the third reaction: the disturbing parts of this article are not unique to Opportunity Zones, but to the “two pocket” dissonance that is a bigger issue in society.
8/ One quote really bothered me: a colleague from the @KresgeFdn (who I like a great deal!) said “Capital is going to flow to the lowest-risk, highest-return environment. Perhaps 95 percent of this is doing no good for people we care about.”
9/ As context, charitable foundations are only required to grant 5% of their assets to charitable projects. The other 95% of capital typically goes into firms like the ones that the NYT describes as having a “bonanza.”
10/ I've been lucky to work with great foundations like @FordFoundation, who founded @ImpactInvest, and @KresgeFoundation, who supported the @BeeckCenter, to create a framework for mission-aligned OZ investing to avoid what's bad in this article. (#OZFramework). Important stuff.
@FordFoundation @impactinvest @BeeckCenter 11/ Yet some real talk: The other 95%--even of great foundations—isn’t always aligned. As an example, Kresge’s endowment (the 95%) is invested in firms like Blackstone and Bain Capital, who are often criticized for gentrifying/hollowing out distressed areas.
The Ford Foundation is a direct investor in Cadre (the Kushner-linked real estate Opportunity Zone piece in the article). Investment teams of foundations, pension funds, and universities say that it is *only* their job to go with the "highest return, lowest risk" opportunities.
12/ The reality is that EVEN in foundation world, for nearly all foundations, 5% is pursuing the mission but the other 95% is sometimes working against the mission. The world is in two pockets, my “do-gooding pocket” and my “moneymaking pocket.”
13/The moneymaking pocket is much bigger and if the world remains in two pockets communities will lose. Until the two pockets merge into one we will continue to face these problems, far beyond opportunity zones.
14/ Most people in the capital markets are looking for the “lowest risk, highest-return” opportunities—but I would argue that this outlook is short term.
15/ There are good return opportunities that also have good and sustainable impact-they almost always take longer to put together and are more complicated than one-off deals. They're not going to make overnight headlines.
16/ Which brings me to my final observation: this story isn’t complete. The most famous and wealthy early actors are maybe being extractive. I see great actors across the country doing important work—a few, like @alex_flachsbart, were mentioned in the article.
17/ I’ve been involved in projects in over a dozen communities that are building a different narrative. There is a movement to create community wealth, as I’ve written about with @bruce_katz, that is encouraging. thenewlocalism.com/newsletter/uni…
18/ Ultimately #OpportunityZones, like any tax strategy or law, are not going to save our communities that have been hollowed out (often intentionally) over the last generation. But @innovateeconomy’s work has helped many people notice gaps in the system and try and fix them.
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