FORBES: NBA Owner Makes Big Bet On Opportunity Zones As Biden Presidency Sparks Fresh Start For OZs
Steven Bertoni Forbes Staff
Forbes VP & Senior Editor: Forbes CEO Network, Tech, Investing
January 28, 2021
An owner of the Sacramento Kings is driving hard into the Opportunity Zone market. RevOZ—an investment arm of the Bhathal Family, which parlayed their swimsuit business into a real estate empire and stake in the Kings—plans on investing roughly $250 million into OZ projects over the next few years. The capital follows the $125 million RevOZ has already plowed into OZ investments, including apartment complexes in Sacramento, a healthcare center in San Bernardino, CA, and an eco-friendly hotel in Redmond, Oregon.
Lisa Bhathal Merage, who cofounded RevOZ with brother Alex Bhathal, says she got interested real estate impact investing after the Kings ownership group built their stadium, the Golden 1 Center, in downtown Sacramento in 2016. "We saw tremendous job growth and the jump in new retail stores and businesses that opened in the surrounding area," says Merage. "The social impact piece of opportunity zones resonates and makes it so different from traditional real estate investing."
Passed into law with the 2017 Trump tax cuts, Opportunity Zone legislation was designed to send a rush of capital into America's poorest communities by offering investors a chance to lower, and sometimes erase, tax on capital gains reinvested into designated OZ neighborhoods. While it became law under the Republican tax overhaul, OZs were a bipartisan backed program initially sponsored by Senator Cory Booker (D-NJ) and Tim Scott (R-SC)—and backed by more than 70 lawmakers across the political spectrum.
As I've written before, OZ was ideological surf and turf. For Republicans, it promised a tax cut, a market-based solution, and a way to put power in the hands of state and local governments. Democrats, meanwhile, liked the prospect of pouring money into areas in dire need of funding. Senator Booker calls OZs "domestic emerging markets."
All tax laws create tax loopholes. The OZ program has faced early criticism in the press over projects that seemed to enrich wealthy developers and investors while doing little to lift the local community. A slow rollout of regulations, a lack of clear plans to measure the program's impact, and controversy over where some cities put their opportunity zones drew controversy too.
Still, the potential remains for impactful projects and lasting social change. In 2019, our first Forbes Opportunity Zones Summit, powered by the Economic Innovation Group, gathered top investors, politicians, celebrities, and entrepreneurs to discuss and strategize how to use the program to spark lasting impact. Last year, the Forbes OZ 20 List, in partnership with the Sorenson Impact Center, highlighted the funds and founders using OZs to fuel positive change in underrepresented communities across America.
Merage is aware of the criticism, challenges, and potential. As RevOZ doubles-down on Opportunity Zones, it has formed a board of advisors to guide its investments and ensure each project meets specific social goals. "The board is innovative, bipartisan, and made up of different interesting backgrounds," says Merage. "We want to build a nationally recognized model to consistently integrate positive social impact into our investments and how to measure what's happening."
RevOZ's board members include former Baltimore Mayor Stephanie Rawlings-Blake, former Oklahoma City Mayor Mick Cornett, NBA veteran Josh Childress who now runs real estate investor LandSpire Group, and Derrick Morgan, who played for the NFL's Tennessee Titans and is managing partner the OZ fund, KNGDM Group. Also on the board: Kunal Merchant (managing director of Lotus Advisory and president of nonprofit CalOZ), Rachel Reilly (the former director of impact strategy at the Economic Innovation Group), and the Urban Institute's Brett Theodos.
RevOZ's new $250 million commitment and advisory board come at a time of renewed hope for OZ investing. As my colleague Jason Bischoff recently reported, The new Biden administration, further regulatory clarity, potential higher tax rates, bull-market capital gains, and economic damage from the Covid-19 pandemic could be a boon for OZ projects. Distance from the Trump administration could help too.
For Lisa Merage, the new Biden Whitehouse is a chance to depoliticize and rebrand OZs. "We're excited to see how the program can be reinvigorated under the new administration," says Merage. "It's already a rare example of bipartisan support. And I think it'll be a catalyst for unity and bipartisanship in the future."