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COVID-19's Impact on Opportunity Zone Funds May Surprise You

[Updated: Nov 17, 2020 ] Jul 27, 2020 by Liz Brumer

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Many opportunity zone fund strategies are focused on investments in hotels, retail, and office buildings, all segments of the real estate market that have seen significant headwinds during the pandemic. These funds have already felt the near-term effects of COVID-19 and could also see their long-term outlooks suffer as the economic impacts of the pandemic persist. By contrast, the renewable energy projects in our opportunity zone fund, though they may be located in low-income areas, are selling power to municipalities, utilities, and other investment-grade counterparties, regardless of their location. It's unlikely that our fund -- and perhaps others like it -- will be significantly affected by the virus because the long-term nature of our power contracts essentially smooths over the rough patches in the economic cycle, whether they are driven by a pandemic or other factors. In short, the value and prospects for our assets are not tied to near-term fluctuations of power prices or the business cycle.
Relaxations of various Treasury Department and IRS rules concerning opportunity zone investments driven by COVID-19 concerns have driven additional investor interest in these funds. Location is always critically important for real estate-related investments, but for qualified opportunity zone business funds, the project's focus matters more. COVID-19 has unveiled some of the vulnerabilities in America's food supply chains. Because the Sustainable Agriculture Opportunity Zone Fund invests in indoor agriculture, we're actually helping to build a more resilient food system, where food can be grown more local to consumers all year long.

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