The Real Deal New York

Real estate has found its answer to startup culture in Opportunity Zones, panel says

NKF president James Kuhn moderated discussion on the new tax code feature at NYU event
By Eddie Small | November 15, 2018 06:30PM

L-R: Jeffrey Fine, David Welsh, Rob Wrzosek, Paul Edwards, Seth Pinsky and James Kuhn

If you’re young and in real estate, Opportunity Zones are the place to be, according to Newmark Knight Frank president James Kuhn.

“I think this is going to be analogous to the beginning of the startup world, where young people were able to wake up, go on the internet, go on their laptop, create an app, create a company,” said Kuhn. “And I think that for all our NYU graduate students and all the young people in America, I think this is an opportunity … to do very small projects to start and become entrepreneurs.”

Kuhn moderated a panel about Opportunity Zone funds at New York University’s 51st annual conference on capital markets in real estate Thursday afternoon. The panelists were largely optimistic about the new program and its chances for success.

Several New York firms have already announced their intentions to launch such funds, including RXR Realty, which said over the summer it was planning a $500 million fund.  Seth Pinsky, executive vice president at RXR, said that the company had already been looking at projects in areas that turned out to be Opportunity Zones simply because they seemed like good investments.

“Many of these areas have largely been overlooked before by institutional investors,” he said, “so a number of projects that we have are now likely to be accelerated as a result of this.”

Pinsky sat on the panel with Goldman Sachs managing director Jeffrey Fine, Normandy Real Estate Partners founder David Welsh, Berkadia managing director Robert Wrzosek and Capri Capital Partners vice chair Paul Edwards.

Edwards said it was important to focus on investing resources intelligently and not overpromising to investors when working in Opportunity Zones, saying they need to “make sure that we just don’t wind up gentrifying areas that would have been gentrified with time anyway.”

Wrzosek, who spoke about Opportunity Zones more from a lender’s perspective, was slightly more skeptical about the program. He stressed that revitalizing downtrodden areas is an extremely hard thing to do, and while Opportunity Zones are an interesting new idea, they are not guaranteed to work.

“We think the money to invest will be there if the deals are good,” he said.

Fine emphasized that he did not see a huge rush to invest in Opportunity Zones right away, as the program will ideally be sustainable and extended. He mentioned that sales of sites in Opportunity Zones were up by 80 percent already, which he viewed as excessive.

“Everybody’s rushing in. It sort of feels like there’s this fleeting opportunity that’s going to be gone in six months,” he said. “And if that’s the case, then it really wasn’t a very good program to begin with.”