Opportunity Zones at a Crossroads: Investor Momentum, Innovation, and Preparing for What’s Next

Written By Angela S. Hwang

The Opportunity Zone (OZ) ecosystem continues to evolve as investors, developers, and policymakers navigate the next phase of the program.

In a recent webinar moderated byAngela S. Hwang of RevGen Consulting, a panel of industry experts explored how investor sentiment is shifting, how capital structures are becoming more innovative, and what stakeholders should expect as regulations continue to develop.

The panel featured Graham Allison, Founder and President of Opportunity Zone Development Group; Brett Siglin of Fennemore; and Valerie Grunduski of Plante Moran. Together, they provided a timely overview of the current Opportunity Zone landscape and practical insights for investors and sponsors positioning themselves for the program’s future.

You can watch the full webinar below and read the highlights following:

Investor Sentiment Is Rising and Evolving

One of the strongest themes throughout the discussion was the clear shift in investor sentiment over the past two years. According to Graham Allison, investor interest has increased significantly in the last 12 to 24 months. Much of this renewed momentum stems from growing confidence in the program’s durability and the belief that Opportunity Zones will remain a long-term component of the investment and tax policy landscape.

Alongside increased participation, the panel highlighted a noticeable shift in where capital is flowing:

  • Diversification into QOZBs: While the early years of the program were heavily concentrated in real estate development, Brett Siglin noted that investors are increasingly exploring Qualified Opportunity Zone Businesses (QOZBs). These operating businesses offer the potential to drive long-term economic growth within designated zones while also diversifying investment strategies beyond traditional real estate projects.

  • The Education Barrier: The panel emphasized that education remains one of the biggest barriers to broader adoption. Valerie Grunduski pointed out that many sophisticated investors with substantial capital gains still lack a full understanding of the Opportunity Zone program’s incentives. As a result, industry professionals continue to prioritize education and awareness to ensure that eligible investors recognize the unique tax benefits available through OZ investments.

Understanding “OZ 1.0” and “OZ 2.0”

The conversation also addressed the commonly used, but sometimes misunderstood, terms “OZ 1.0” and “OZ 2.0.” As Brett explained, these terms do not refer to separate legal programs or fund structures. Instead, they describe different regulatory frameworks and phases of the Opportunity Zone program over time.

Importantly, the panel emphasized that investing in OZ 1.0 deals remains viable. In some situations, these earlier structures may even present strategic advantages:

  • Valuation Appraisals: Valerie highlighted how investors may use fair market value appraisals to potentially reduce taxable obligations prior to year-end. However, she cautioned that this strategy must be approached carefully.

  • Risk Awareness: The panel discussed the increasing attention surrounding valuation adjustments, particularly as investors attempt to lower the “special amount includable” tied to deferred gains. Graham noted that investors who have received debt-financed distributions or allocations of losses should be especially mindful of the associated risks and technical requirements.

Capital Stacks Are Becoming More Creative

Another major theme was the growing sophistication of capital structures within Opportunity Zone projects. Graham observed that sponsors are increasingly experimenting with multi-layered capital stacks that combine Opportunity Zone capital with other funding sources. These structures often include partnerships with nonprofit organizations, foundations, or institutional partners that can help support community-focused development goals.

The panel also highlighted:

  • Sidecar Funds: These are gaining popularity among investors who want exposure to Opportunity Zone deals but lack the capacity or pipeline to originate projects themselves. As Brett explained, these sidecar structures allow investors to participate alongside experienced sponsors who have already identified qualified OZ businesses or development opportunities.

  • Blended Financing: The most successful projects often combine Opportunity Zone incentives with other financing mechanisms. Valerie discussed how sponsors are blending OZ equity with tools such as New Markets Tax Credits, infrastructure grants, and state-level incentive programs to strengthen project feasibility and impact.

Preparing for Greater Compliance and Reporting

As the Opportunity Zone program matures, panelists agreed that compliance and reporting expectations will likely increase. Valerie emphasized that future regulations may require more detailed reporting directly from the underlying Opportunity Zone businesses themselves. As a result, sponsors will need systems in place to capture accurate data and maintain compliance throughout the investment lifecycle.

To manage this complexity, Graham recommended:

  • Working with dedicated compliance professionals.

  • Adopting technology platforms that streamline regulatory reporting.

  • Proactive Advocacy: Regarding future zone designations, Brett encouraged sponsors and local stakeholders to actively engage with state and local officials to advocate for the continued designation of areas that still need investment, as census tracts could expire or change in upcoming cycles.

Distressed Projects and New Strategic Opportunities

The webinar concluded with a discussion of questions from attendees, including strategies for navigating distressed projects and regulatory transitions. Panelists noted that existing safe harbor provisions including those related to working capital and self-constructed property are expected to remain valid for projects that have already broken ground, even if their zones expire after 2028.

  • Publicly Traded Funds: Another emerging concept discussed was the role of publicly traded Opportunity Zone funds, which offer a level of valuation transparency not typically available in private funds. As Valerie explained, publicly traded vehicles may allow investors to more easily determine fair market value for tax settlement purposes based on observable market pricing.

  • Strategic M&A: Finally, the panel explored the potential merger or acquisition of distressed OZ 1.0 projects. While not yet a widespread practice, Graham noted that investors and sponsors are increasingly evaluating ways to inject fresh equity into struggling projects. Strategic acquisitions or mergers could allow unfinished developments to move forward while preserving the intended economic impact within Opportunity Zones.

Angela S. Hwang