OPZ Bernstein courts FOs in big opportunity-zones push

OPZ Bernstein, part of Bernstein Cos of Washington, looks to make a big splash on opportunity zones, and family offices have a huge role to play.

The firm recently closed its first deal, a $50 million so-called adaptive-reuse project in Cincinnati, changing an office building into multifamily housing.

“We’ve already funded our first opportunity-zone investment,” said Craig Bernstein, OPZ’s principal and CIO. “We’re currently underwriting and getting ready to fund several other deals, and we’ve seen a tremendous amount of interest within the ultra-high-net-worth space, including both single and multifamily offices.”

Craig Bernstein, unrelated to the family that founded Bernstein Cos, has deep knowledge of the family-office space, having spent 11 years at White Star Investments, a real estate-focused FO in Bethesda, Maryland, including a tenure as its CIO.

He left White Star last year and started his own opportunity-zone fund, OPZ Capital, because he saw potential in the opportunity-zone legislation when it passed as part of President Donald Trump’s tax cut bill.

“It immediately caught my attention based on the premise that we’re going to be able to provide our investors with not only compelling risk-adjusted returns in a tax-efficient manner, but also have the ability to positively impact thousands of lives across America,” Bernstein said.

It was not long before he attracted the attention of Bernstein Cos, an 80-year-old real estate company in the DC metro area that has experience with projects in parts of the country that are now part of opportunity zones.

“I spoke briefly with [President and CEO] Adam Bernstein and immediately we both realized the synergies between the two organizations,” Craig Bernstein said.

That led to the formation of OPZ Bernstein on Jan. 1. In addition to the Ohio deal, they are also creating a $500 million fund. The fund is expected to launch later this year. As of now, the firm is pursuing one-off transactions.

Opportunity zones have attracted a great deal of buzz since they were made part of the Tax Cuts and Jobs Act of 2017.

The IRS says they are “designed to spur economic development and job creation in distressed communities.” They provide three major tax breaks: a deferral of original gains on an OZ project until Dec. 31, 2026; exclusion of up to 15 percent of the capital gains from taxation, depending on how long the investment is held; and a tax-free reinvestment if the OZ investment is held for at least 10 years. About 8,500 opportunity zones exist across the country.

Bernstein stressed that every family office is different, and he said one goal at OPZ Bernstein is to create “bespoke solutions” enabling families to take as much control and as much risk as they wish.

“Some families right now that we’ve been speaking to are interested in acquiring entire assets, wanted to basically oversee the process,” Bernstein said.

Bernstein said getting the word out to families about OZs is the most difficult part of his work.

“Once family offices get comfortable and have a clear understanding, everyone’s blown away,” he said. “We truly believe this is a once-in-a-lifetime opportunity and that’s the reason why we’ve invested so much in the space.”

Bernstein added that since the announcement last week of the latest regulations governing the opportunity zones, interest has increased.

“There’s just a tremendous amount of flexibility, and also the second set of regulations eliminated a great deal of uncertainty,” he said.

Action Item: Read more on Opportunity Zones here.

Reach out to Craig Bernstein: Cbernstein@tbco.biz.