Revitalizing Arizona: How Opportunity Zones Are Transforming Communities

Hi everyone. My name is Jennifer Conrad. I'm the managing editor of the Arizona Ascent magazine. And today I'm here with Tommy D. Who's a friend of our podcast. He is here with the Buckeye Buckeye O. Opportunity Zone. Fun. Tommy, tell us a little bit what's going on with these Opportunity Zones that we're hearing about out in Buckeye.

Absolutely. Well, Buckeye Opportunity Buckeye Oz Fund is a. Is an entity that is a private equity fund that is designed for investors that want to take advantage of the Opportunity zone Act. From 2017, there was a. It was called the Tax Cut and jobs act of 2017 and it allowed capital gains investors to use their capital gains and invest those into low to moderate income areas in both real estate and business ventures.

Okay, cool. So kind of talk about what I know when I was visiting the site a little bit and you know, talking with you, I know that it's focused on, you know, turning ghost towns into campgrounds. And how do the, how does the Opportunity Zones support this kind of vision?

So our asset class is hospitality. Like you said, the, the campgrounds. During COVID there was a. A serious increase in the outdoor hospitality market and not enough places for people to go. If there was a place for people to go, it was typically run down and not necessarily fully amenitized enough to support a large amount of outdoor enthusiasts. So Buckeye Opportunity Zone Fund came out of recognizing the need for more outdoor hospitality space and the opportunity for investors to capitalize on that and help with the economic development and growth of these, of these resort campgrounds.

Okay, so how does that fund create jobs and support the local communities through those projects? I know you talked a little bit about the economic development, but can you go into some examples?

Absolutely. So in particularly Opportunity Zone Fund. The Opportunity Zone Fund program was specifically designed to be a tax shelter for investors. Now it's a bit of trickle down economics in the sense that by creating these opportunities, the investor themselves or the fund managers themselves are going to be going into things that are stable. They're going to be investing into things that make money and cash flow. Now they're going to be doing that, of course, for their own bottom lines and their profit. However, the Opportunity Zone program was written so that it had to incorporate economic development and growth. And it came through the fact that it has certain parameters through regulations to stay legitimate as a Opportunity Zone Fund that they have to meet. Now there's no like set requirement for amount of people that they have to employ. An Opportunity Zone Fund could technically employ just two People if it wanted to. But how much work can two people get done? The idea of Opportunity Zone Fund projects and developments was built on the premise that the profits of the rich would come down to develop and grow the areas of the low to moderate income areas. So job growth being a focus comes in to the extent that like for us, campgrounds can employ, we employ probably between 10 and 25 people per facility. So and sometimes those workers are often seasonal. And so they could be retired individuals who are like maybe young baby boomers or that they would come in and say, for example, be a park manager. They would be employed by us for half the year because they're maybe snowbirds. And so they would have a job based on the fact that we're providing them with a campground to manage groundskeepers and just people that would have to go into building it, like the construction companies, the plumbers, the electricians, etc. So overall, each one of our Opportunity Zone in the Buckeye Oz fund, each one of our campgrounds was developed out of a place that was already on the map and previously had a population. These places have become basically abandoned. And so what we've done is we've worked with these landowners that bought these properties and we've gotten them on a, I guess you could say a deal so that we could develop these things at a, at a decent price and provide recreational opportunities on top of jobs for those that are going to be in the recreational, you know, space. So from the standpoint of opportunity zones, though, Opportunity zones generally overall, by rule of thumb, focused on job creation through whatever it is that they're developing. So if it's not job creation, it's supporting jobs and employment, such as, like employee housing. So that's another project our company's working on as well.

So Art. So the Opportunity Zones, it can be, it, can it be anything. If anybody wanted to develop something, it doesn't have to be just campgrounds. I know that you guys are more focused on campgrounds, but if somebody wanted.

Yeah, that's our asset class. There's over 7900 opportunity zone funds across the country. I think that overall the majority of them are multifamily operation. Where. Because in the Opportunity Zone, one of the regulations is whatever the asset is, it has to be held for 10 years. And so the job growth being a regulation, the 10 year factor being a regulation, there's other regulations in there for, for example, like how much money you have to put into these things. Some people would think that you could just go out, get a hotel in an opportunity zone and do a little putty and paint, make it what it ain't and turn it into an apartment complex. Unfortunately, the regulations don't. Won't allow for that. You have to have what's called. Substantial repair. And in, in substantial repair, that means that we have to spend more money on fixing the place up than we did on buying. So the, so at that point it's sometimes cheaper to just do ground up. And so the, the goal is to create things that will add stability and longevity. You know, shelves lives of for 30 or 40 years. So it really does determine on people capitalizing at great expenses on the low to moderate income areas.

I mean, are we, are we seeing a lot of opportunity zones here in Arizona? Is there, I mean, is there a. Is there a need for them? And kind of tell me a little bit about that.

So Arizona, the opportunity zone areas were designated based on a 2010 census. And so if you go back to 2010, there was a lot of areas that were kind of low to moderate income here in Arizona. We didn't really start seeing a massive growth until like 2018, 2017. So a lot of the areas just kind of don't make sense for it anymore. And there's supposed to be some sort of maybe remapping of that to incorporate new areas that do fit the criteria of low to moderate income. But the 2010 census was what was used to draw up the opportunity zone map. And it just showed where there was a significant need for investor dollars.

Yeah.

And so. And part of that was coming up with an incentivized program that was basically allowing investors to put their money where it was needed, not so much where it was wanted.

Yeah. So where are you guys seeing the need here in Arizona? Maricopa county, for, for these opportunity zones?

Well, there's a lot of opportunity zone funds already operating. Like for example, they're developing build the rent communities they're building. A lot of building is done in the multifamily sector. We chose to go with recreational and do hospitality because of the fact that there was none of it being done at all. And so that's why we went with going with ghost towns and turning ghost towns into campgrounds. But the other aspects of opportunity zone development that we're seeing is public, for example, public works projects. We're working closely with the cities of Somerton and San Luis down at the border near Yuma. These places have influxes of population that are like 10 times, 20 times higher than what their regular population is or what I like to say is their tax based population. So if the tax based population is only 10% of the amount of people going through town, can you imagine what it, what, what happens to their, their city public works? And so we feel like we can come up with development projects and investment opportunities through those development projects to get these cities up to par with the amount of population that goes through their town. So the Yuma Proving Grounds is an area that's under extreme growth because of the fact that it's so close to the border, it has a port to the ocean and there's a lot of, a lot of economic development and growth in that area. So we'll be doing some Opportunity Zone funds and developing down there. We have Opportunity Zone development and in the tech sector where we'll be going out to like Mesa Chandler where Intel is shutting down, plants will be coming in with new opportunities for the tech sector to come in there. And do you know, say for example, converting the intel operation, building over to a data center for AI. Wow.

So, so there's a lot happening in the opportunities because you know, and you know, you and I have talked before about these, these, I mean especially now with the growth of Arizona and how Arizona is booming like crazy. Like you know, 290 people move here a day. We have, you know, just between 2021 and 2022, 56,000 people move here and all these companies are coming in. And so what do you see the future Opportunity Zones going forward for Phoenix, for Maricopa County? And how is that going to help? How do you think that's going to impact economic growth, especially now that we have housing affordability?

So in order for people to really take advantage of the Opportunity Zone, there has to be a level of acknowledgement and education about it. And so I think that that's probably the severely lacking aspect of this program is that not enough people know about it, not enough people know enough about it for it to be beneficial to a larger group. There's still a very micro, micro, microsystem, micro ecosystem of people using Opportunity Zones. I just happened to stumble into it. It was by total accident that I learned anything about this because you know, based on the demographic of people that actually use Opportunity Zone for development, we don't fit in that category. And so therefore we feel like it's, it's actually been our beneficial for us to be in that, in that micro ecosystem because then what we're able to do is understand how we can make it from micro to macro and grow it out.

Yeah.

So that would be the first thing, the second thing would be getting people interested into Opportunity Zone investing. So not just the development part, but the investing part, understanding what that means. So we're working with a couple of, of of industry leaders on getting people educated about that when it comes to investing in Opportunity Zones. Because technically you can do more investing in Opportunity Zones as an individual than what's allowed by SEC standards in most cases. So the Opportunity Zone program is about building wealth, much like the Jobs act of 2012 where President Obama was able to get the structuring of equity funds to be easier for people to get into and people to start the Jobs act and 2012 was the basis for the tax cut and jobs act of 2017. So in Phoenix and Maricopa, I think in order for us to be able to take advantage of Opportunity Zone program, we have to first get the Extension act to go through, which I do believe heavily will happen. And when we do, Independent Concepts, which is the company that I work for as director of development of the Buckeye Oz Fund, Independent Concepts is the mother of all Opportunity Zone funds in Maricopa county and Arizona for that matter. And we feel like that what we will be able to do is provide a pipeline for investors from all the different developments that we have, from our campgrounds to our public works projects to our, our, to our industrial and commercial developments. I feel like that we have quite a bit of Opportunity Zone development projects available for investors. So that way when it does hit the Extension act and we're able to expand because right now the program's supposed to end in 2026. So not a lot of people have been investing into it. And, and as a matter of fact, Opportunity Zone launching has basically come to a standstill. So I don't think we've launched a fund in the last six months. So unless it's been a private fund that is closed to public offering, there's not one going public anytime soon unless we get that Extension Act. So that's kind of the future of Opportunity Zones here in Phoenix. And again, it's because of the benefits, if you will, to the investors, but it certainly will not deter people from developing. It just changes where they're going to be developing at.

Yeah, we, I mean, what do you see, I mean, what do you see are the benefits are for investors and for the community. Can you tell me a little bit about that?

The, the investment opportunity for investors is the fact that if you, if, if you, if you get into a qualified opportunity fund that is, you know, a nice cash flowing Opportunity fund investors can, can realize a 100% tax free growth on their investment. So if somebody made $10 million on their investment in 10 years, they would not have to pay any kind of capital gains tax on it. And that's the benefit to an investor. But as far as for community, well, the community barely knows what they're able to benefit from until it's there. So as I like to say, if you actually go to the city or city council meetings or to the county manager meetings, the county board meetings, and you get involved with planning and development, then go find out what these people want to do. But if you're, if you're, not, if you're not in there doing those meetings, then you can't really, you can't really say what, what's going to come to the area, you know, as far as the community goes.

Yeah.

So I feel like that a lot of, a lot of our elected officials, city council and maybe even county managers are, are not as educated as they need to be in order for there to be productive development. So we've got to get, we've got to get those city managers and, and city officials to be a little bit more educated about the program itself. Wow.

Yeah. Wow. I mean, is there any, I mean, anything else, Tommy, that we, you think, you know, Arizona, especially with the, you know, all our magazine and you know, the kind of, the ecosystem we're in, real estate, you know, jobs, you just the community, everything we, we as we say here, everything affects the quality of life. But is there anything that you think that our viewers or readers need to know more about Opportunity Zones?

I think that the biggest thing is that if the Opportunity Zone program gets, gets the Expansion act or gets the Extension act go through, anybody that's an investor would need to, to, to find an opportunity to get with their CPA and make sure their CPA knows about Opportunity Zone funds. If they don't get a different CPA like just for that, like don't, don't get a different CPA just because they don't know. But if you want to use your capital gains as an investor into developing Opportunity Zones, then my suggestion is you find a CPA that knows how to invest into Opportunity Zone. And so I think that's the biggest takeaway from all of this is that if that Opportunity Zone Expansion act goes through, you're going to need to know the professionals that can answer the questions and help you get your funds directed into the right place. Because it is so heavily regulated and because it is so heavily scrutinized to Be equal. And that's, you know, that's the thing. A lot of people are like, oh, I don't like things that are so overregulated. Well, so make it equal, right? So the equality of it is what makes it become good for both the community and for the investor. And so having somebody that understands that so that it can be properly done to meet regulatory standards is going to be key for investors as far as anyone in, any, anybody in the community, if they own Opportunities own land, they would need to find someone that is knowledgeable about opportunities own development. Not, not necessarily somebody eligible about investing because again, that's a, that's a biased playing field and the investment person may not know how to properly advise somebody who owns land. And so like that's why I have a job today with Independent Concepts is because I understand development, I understand cost and I'm very quick at being able to look at something and tell you A, B or C on it. When I'm providing, when I'm providing an analysis on a piece of property back to the board at Independent Concepts they're analyzing just the specific data I provide and I'm breaking that down based on the regulations. I understand as a developer, not an investor. And so that value has, you know, garnered me a decent job and a paycheck. But I, I, I know that as a company we are going to be offering and providing that as a service because with this extension act going through, you're going to need to know who to call if you own Opportunities own land. You know, another thing is that a lot of times businesses are also involved in opportunity zones and it's a big part of the program. A lot of people don't understand how that works. And so people like for example, entrepreneurs, self employed business people, people with their own, with their own companies, if it was started after 2018, say you started a business in 2019, 2020, you can actually be considered what they call a Qualified Opportunity zone business, a QoZB. And then a QOZB could be used as an asset because businesses own assets. It could be classified as an asset into a Opportunity Zone fund. And that business could be then funded by the qualified Opportunity Zone fund for the next 10 years. And so these are things that people, people don't quite understand until you have some sort of like in, in, in what I do is I, I do like visual explanation or I might, I might use hypothetical examples of like business A is, is you know, a pizza place and the pizza place needs to have a, a $300,000 cash infusion to open up five new places and to expand economic development. They're going to need money to buy the equipment, they're going to need money to buy the buildings, they're going to need money to hire the staff. You can start, you can have a qualified Opportunity Zone fund come along and pay that, say it's a million dollars to get that expansion done for that pizza place. And that investor in 10 years can then turn around and with, say, for example, that that pizza place grow, grows and blows up over the next 10 years, it becomes worth $10 million. That million dollar investor becomes a, you know, a $10 million shareholder. And so at that point, the pizza cane, because that's what it became, is able to pay off that investor and move on and become even a bigger K or the investor converts over to a, a stockholder for the next, whatever home, you know, 20, 30 years. So a lot of people didn't even know that that was possible based on the fact, like I told you earlier, that not a lot of people even know the program exists. So when you're able to, to show people the different, the different facets of it, it's not just about real estate, but it's about economic development. And so when you're able to support not only the, the, you're able to, to invest in the dirt, but also support the business on the dirt, that makes your investment even, you know, even more secure. So to the community listening, if there's people that own Opportunity Zone land, get somebody that knows how to, how to develop it. If you're somebody that thinks you have an Opportunity Zone business, and, and again, there's, there's. I can't even begin to tell you how many businesses are out there that are qualified for it. It's easier to tell you what's not qualified. I think I lost her.

Yeah. Well, how do you know if you have an opportunity, if your land is an Opportunity Zone, how do you know that.

The Opportunity Zone? It's like I said, the Opportunity Zone Fund regulations and stuff.

Okay, well, Tommy, thank you so much for coming on the podcast. I do really do appreciate it. Thank you for talking a little bit about Opportunity Zones here in Arizona. If they want to get involved in Buckeye Oz funds, how, how can they find you? How can they get involved?

Well, Buckeye Oz Fund is going to be a closed fund after January 1st. So we will not be seeking any more investments into that after January 2025. But we can be, they can get in touch with us through Independent Concepts.net Independent Concepts.net is the small business incubator and accelerator fund that that has got a pipeline of Opportunity Zone projects ready to launch.

Okay. So. So they can find you guys at.

In Independent Concepts, independentconcepts.net Correct.

All right, Tommy, thank you so much for coming on the podcast. Thank you for always being a friend of the podcast in Arizona, Ascent magazine. You always have something great going on when I ever talk. When I talk to you.

Yes. Thank you. I appreciate you so much, Jennifer, and hope you have a wonderful holiday.

You, too. Thanks so much, Tommy.