Looking for advice or best practices when your coworking space is in an Opportunity Zone. Has anyone had luck using this to attract businesses to their space? Any best practices on how to talk about it, be that in tours or marketing?
Opportunity Zones need several components. First a qualified opportunity zone fund needs to be established and capitalized, then qualified opportunity zone projects need to be approved for the funds, the projects will have specific limitations (e.g. for real estate redevelopment projects, the buyer needs to spend more on rehabilitation than on acquisition).
The most direct way this could impact coworking spaces so far is by 1) making it possible to buy/rehab a new location, or 2) providing additional/better funding opportunities to businesses, which may choose to locate in the coworking space to access those fund by being within the zone. Indirectly, it could attract a lot of infrastructural improvement and new businesses into zones, improving the neighborhoods our spaces are in.
If you want to use it for attraction, my recommendation is to build a close relationship with the fund manager for your city.
I’m in Erie, PA, one of the cities leading on Opportunity Zone fund and project development. The local fund manager has been a member of our space for years. The space I run, Radius, is in the center of our 8 zones and I’m part of the economic development team working on how the city will leverage these zones to attract investment. We have a conference about in Erie later this year, if you’re interested in attending.
The team at the VC backed coworking chain Launch Pad has a growth strategy based on 1) opening or acquiring spaces in zones, 2) acquiring properties in the zones to house the coworking spaces, 3) managing VC investments in the startups that utilize their spaces (first look opportunities).
Here is their podcast about it: https://lp.co/launch-pad-on-the-opportunity-zones-podcast-creating-coworking-hubs-and-startup-investments-in-ozs/
Have you spoken to https://www.linkedin.com/in/andriscoll/ ?
Some more info.
Here is a link to the most recent interpretation of the policies around Opportunity Zones: https://www.forbes.com/sites/anthonynitti/2019/04/22/irs-releases-latest-round-of-opportunity-zone-regulations-where-do-we-stand-now/#47f9ed422772
This is the section that probably most matters for members in your space:
“The latest round of proposed regulations address this issue in detail. First and foremost, both a QOF and QOZB may now lease property. For leased property to meet the definition of QOZBP, however, the lease must be entered into AFTER December 31, 2017 and its terms must be arms-length. In general, two VERY favorable rules apply to leased property:
- A lease does not need to satisfy the “original use” requirement, and
- The QOF or QOZB is not required to “substantially improve” the lease.
Thus, a QOF can generally lease a building that has long existed in a QOF and need not substantially improve the property. This would enable a start-up company to lease its office space and have that lease meet the definition of QOZBP.”
If your city isn’t yet pitching the OZs in a coordinated way, here is the City of Erie Prospectus: https:// www.flagshipopportunityzone .com
It may be a year or two before communities have a process for leveraging OZs. The first projects are likely to be new buildings or major rehabs.
We have also been included in an opportunity zone and have the opportunity for TIF. I own the land/building that my space is in and I’ve also been struggling to figure out the best way to open a discussion as to not only how we can get support for the space but also (and maybe more importantly) how our space could support the effort.
I would love to connect with anyone who has been successful at this or is knowledgeable in the area. Seems like there might be an opportunity to consolidate efforts in creating proposals & pulling together case studies.
Thanks Sean! This is great advice and I have reached out to who I think is leading this for Columbus. Will listen to the podcast soon. I will keep tabs on the conference (love that!).
Sorry about the delay in the thank you - I posted this and then went on vacation.
I have read that but have not reached out to Anne. Once I’m ready to ask the right questions (lol) I will.
You’re in a TIF? We’re about to implement a LERTA in the city and are beginning to pursue the possibility of a TIF for our downtown core. I’m on the periphery of those discussions, but like you I want to understand how we can be more valuable. Let’s connect offline and, if we work out something valuable, document it here for others to learn from/utilize.
New Story about this: https://www.nytimes.com/2019/08/20/business/co-working-opportunity-zones.html