What are the pros and cons when a Qualified Opportunity Fund invests in multiple Qualified Opportunity Zone Businesses?

Answers

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  Matthew Rappaport

  Falcon Rappaport & Berkman

  January 26, 2022

  Pros are the diversification of the risk of any QOZB failing compliance and the added flexibility that might be necessary when reallocating funds between QOZBs. It's also simpler to have all your ventures in one holding company. However, the downside is that if a large QOZB fails, it might affect the other QOZBs indirectly because the parent could fall short of the 90% test. There are also niche liability protection concerns that I don't think are material, but they could arise in narrow circumstances. Practically speaking, you need all the QOF owners to desire the same QOZB investments in the same proportions to do a single QOF; instead, it's easier to set up separate QOFs if you end up mixing and matching investors between QOZBs.

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  Maria De Los Angeles Rivera

  Kevane Grant Thornton

  January 31, 2022

  Pros: should be analyzed like any other venture investment, mostly diversification and administration. One con I see is the lack of flexibility at the exit time. It should be easier to exit a single asset fund than with a multiple asset fund.

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