Healthy Portfolios, Healthy Communities: Moving Forward with Opportunity Funds

by Jim White

We are living in a strange new world indeed, where our current health crisis and its fallout clearly overrides any other concerns we may have had just a few short weeks ago. But this crisis will end, hopefully sooner rather than later, and when it does, we will have significant rebuilding to do, in our economy, our local businesses, and our portfolios.

And while the coronavirus doesn’t distinguish between its hosts, those people living in thousands of impoverished American communities are likely feeling even more anxious than the rest of us. Distressed communities may have fewer resources in place for urgent health care: fewer hospitals, fewer ambulances, fewer walk-in clinics, fewer health care workers. And, in those communities, health and safety fears often are compounded by other stressors like poverty, preexisting unemployment, drugs, and crime.

“…while the coronavirus doesn’t distinguish between its hosts, those people living in thousands of impoverished American communities are likely feeling even more anxious than the rest of us.”

To date, nearly 8,800 distressed communities across the country have been identified as Qualified Opportunity Zones (QOZs) – that is, neighborhoods which would benefit greatly from an influx of investment dollars to reinvigorate businesses, rebuild infrastructure and bolster residents.

Fortunately, investors have a convenient vehicle through which to help these distressed communities: Qualified Opportunity Funds (QOFs). Through them, we have a chance to work together in innovative ways to turn approved, distressed communities around… and make money. 

This bold plan was laid out in the controversial, bipartisan Opportunity Zones initiative established by Congress in the Tax Cuts and Jobs Act of December 2017 as a breakthrough approach to spurring long-term private sector investments in low-income rural and urban communities nationwide.

Whether or not you support the Tax Cuts and Jobs Act itself, the Opportunity Zones initiative within it is a hidden gem. The initiative is an extraordinary possibility, both for channeling economic help to distressed communities, and creating an outsized return for investors.

Political barriers should not factor into the equation; if nothing else, the coronavirus is teaching us that we are all in this together, and that all of us, across the country and globally, must be responsible for one another.

If businesses in QOZs thrive, the communities will have more jobs and better salaries to offer. More people will want to relocate to these areas, which will increase real estate values and breathe new life into local shops and stores. When residents and business owners are doing well, they spend more money on beautifying their homes, storefronts, public buildings, streets, parks, and monuments. Their infrastructure will improve, crime will decrease, and better health care will be available for residents. Spread out over many communities, QOFs can help our nation flourish as a whole.

“…the Opportunity Zones initiative … is a hidden gem. The initiative is an extraordinary possibility, both for channeling economic help to distressed communities, and creating an outsized return for investors.”

Investors have a triple win with QOFs. They can: 1) benefit from the initiative’s capital gains tax breaks 2) make money, and 3) positively impact low-income urban and rural QOZ communities and the lives of millions of people. Opportunity knocks: QOFs are a win-win-win for investors, business owners, and citizens of urban and rural QOZs.

One lesson we are learning the hard way from this historic plummet of the stock market is to diversify by identifying long term alternatives to equities, precisely to avoid drops like these. When the COVID-19 madness ends, and it will, investors will be scrambling to find new revenue streams and improved avenues of investment.  

I believe investing in the health of our poorest communities will be the right avenue to take.

Jim White, PhD is Chairman and CEO of Post Harvest Technologies, Inc. and Growers Ice Company, Inc., Founder and CEO of PHT Opportunity Fund LP, and Founder and President of JL White International, LLC. His new book is a heartfelt rallying cry for investors: Opportunity Investing: How to Revitalize Urban and Rural Communities with Opportunity Funds, launches March 31, 2020. Dr. White holds a B.S. in civil engineering, an MBA, and a doctorate in psychology and organizational behavior. He acquires struggling businesses to revive and develop them into profitable enterprises using his business turnaround strategy. To date, he has generated more than $1.8 billion in revenue. Learn more about Dr. White on his website.