Could opportunity zones eclipse or dovetail with EB-5?

NES Financial, a FinTech company perhaps best known in certain real estate circles for providing compliance and reporting services under the EB-5 investor visa program, is officially on the opportunity zone  bandwagon.

Sometime over the past month, NES added a new “opportunity zones” tab to their website, effectively announcing a new line of services. And in mid-September, NES’ executive vice president Reid Thomas, who heads up the company’s EB-5 division, hosted a webinar on how opportunity zones work alongside their usual clients.

“The recent changes in EB-5 funding velocity have put pressure on the traditional EB-5 issuer business model,” Thomas said in a statement for the webinar. “In this new financial landscape, and given the similarities between the two programs — the overlap of opportunity zones with EB-5 targeted employment areas, for example — we believe that OZ investment may present a welcome alternative source of development capital to EB-5 issuers.”

He later said in an interview with The Real Deal that, of the 700 EB-5 projects NES has worked on to date, between 25 to 30 percent of the projects are located in designated opportunity zone areas. That means developers with projects located in overlapping zones could access both the opportunity zone tax breaks and raise capital through the EB-5 program.

But to Thomas, the opportunity zone program is more than just an alternative or addition.

“This [OZ program] has the opportunity to be the largest, most transformative economic development program in the history of the country I think,” Thomas said. “There’s over $6 trillion in [unrealized capital] gains sitting on the sidelines … even a small percentage of that is still going to be a bigger opportunity for everybody than EB-5.”

Others don’t quite see the programs as interchangeable. EB-5 attorney Daniel Lundy, a partner at Klasko Immigration Law Partners, said he sees opportunity zone as “another tool in the box,” but not one with the potential to replace EB-5, due to its immigration incentive for overseas investors.

Thomas expects the EB-5 program to undergo a “period of consolidation” following the tumult of the past year, but said he wasn’t sure whether that put it in competition or partnership with the opportunity zone program.

“I’m not sure how it plays out,” he said. But, “they’re focused on the same things.”

Hedging bets?

NES is far from the first company to latch onto the trend, but Thomas’ statements beg the question: in the face of EB-5’s uncertain future and intense scrutiny, is one of the largest financial service providers to the EB-5 industry abandoning ship for a (so far) more palatable federal program?

Thomas claimed NES’ focus on opportunity zones is simply a reflection of a promising new line of business. He noted that the EB-5 division is still busy — mostly with the redeployment of funds — and that the company’s work with the investor visa program will continue for “years and years,” as ongoing projects inch toward the finish line.

“It’s not something we’re doing out of desperation, it’s just a perfect fit for us,” said Thomas. According to him, NES has built a custom toolkit for opportunity zone investors and fund managers, akin to the services they developed for EB-5, after they started receiving calls from clients about the program in the spring.

But Thomas distanced NES, which he claims services roughly half of the EB-5 industry, from the criticism the program has attracted of late.

“All the bad news and the crooks and everything else — they didn’t hire NES,” he said.