The Future Of Opportunity Zone Deal Flow, With Todd Vitzthum

With hundreds of thousands of housing units developed and billions of dollars in capital raised, Opportunity Zones have become a major force in real estate. But how do investors find the best projects?

Todd Vitzthum, president at ACARA, joins the show to discuss the evolution of Opportunity Zone investing, the role of development in OZ projects, and the launch of OZ Listings, a new marketplace designed to connect investors with high-quality OZ deals.

Guest: Todd Vitzthum

• Todd Vitzthum on LinkedIn
• ACARA
• OZ Listings

About The Opportunity Zones Podcast

Hosted by OpportunityZones.com founder Jimmy Atkinson, The Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in the Opportunity Zones industry.

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Episode Summary

In this episode of The Opportunity Zones Podcast, Jimmy Atkinson speaks with Todd Vitzthum, president of ACARA and co-founder of OZ Listings. The conversation explores Todd’s background in real estate brokerage, the evolution of the Opportunity Zone market, the role of development in OZ projects, and the launch of OZ Listings—a new marketplace designed to connect investors with high-quality OZ deals.

Todd Vitzthum’s Background and Real Estate Expertise

Todd has spent over 20 years in institutional commercial real estate, working with major firms like CB Richard Ellis and Cushman Wakefield. His focus shifted toward capital markets when he joined Greystone, where he gained expertise in debt and equity financing. Eventually, he co-founded ACARA, a national brokerage firm specializing in ground-up multifamily development, with a particular focus on Opportunity Zone projects.

He explains that the Opportunity Zone incentive naturally aligns with his firm’s expertise because most OZ deals involve ground-up development. His firm has developed a national practice catering to developers and investors seeking to navigate this complex but rewarding segment of real estate.

The Role of Development in Opportunity Zone Investing

Opportunity Zone legislation was designed to stimulate new investment in economically distressed communities, and the primary way this occurs is through real estate development. While the statute allows for substantial improvement of existing properties and business investment, Jimmy estimates that over 90% of OZ capital flows into new development projects.

Todd outlines the key challenges of real estate development compared to other real estate strategies. Many investors are hesitant about development because of its perceived risk. Traditional syndicators tend to focus on acquiring and renovating existing properties, benefiting from predictable income streams. In contrast, development requires long-term planning, entitlement approvals, and substantial upfront capital before generating returns.

However, development can offer superior returns if executed properly. Todd emphasizes that the key to mitigating risk is working with the right team, selecting experienced developers with strong track records, and structuring capital stacks effectively.

The Complexity of Opportunity Zone Fund Structuring

One of the barriers preventing broader participation in OZ investing is the complexity of fund structuring. Every Opportunity Zone project must be structured as a Qualified Opportunity Fund (QOF), which then invests in a Qualified Opportunity Zone Business (QOZB). This fund structure adds compliance requirements and administrative burdens that many traditional real estate developers are not accustomed to handling.

Todd explains that this complexity has deterred large institutional investors from engaging in OZ projects. Institutional capital is often structured around shorter investment horizons, whereas OZ tax benefits require long-term holds of at least ten years. Additionally, many institutional investors are focused on distressed acquisitions rather than new development, making the OZ model less attractive to them.

Jimmy notes that while large firms like Cantor Fitzgerald, Griffin Capital, Argosy, Origin Investments, and Bridge Investment Group have entered the OZ space, broader institutional adoption has been slow.

The Growing Market for Distressed Opportunity Zone Properties

Todd highlights an emerging opportunity within the OZ space: distressed asset acquisitions. Due to rising interest rates and economic disruptions from the COVID-19 era, many real estate projects that were initially underwritten at lower cap rates are now struggling to achieve profitability. This has led to situations where newly developed OZ properties may be selling at or below cost.

For investors, this presents a unique entry point. Some distressed OZ projects can be restructured by introducing new capital, which allows investors to step in at a reduced basis while still benefiting from OZ tax incentives.

Todd and his team are actively exploring ways to rebuild capital stacks for distressed OZ projects and create secondary market transactions for OZ investments. He believes this will be an important evolution in the market, providing a lower-risk entry point for new investors.

The Launch of OZ Listings

One of the biggest challenges for Opportunity Zone investors is sourcing high-quality deal flow. Many investors struggle to find suitable OZ investments because traditional real estate brokers and financial advisors are often unfamiliar with the program’s requirements.

To address this gap, Todd co-founded OZ Listings, a new marketplace designed to connect investors with vetted OZ projects. Unlike traditional listing platforms, OZ Listings provides a curated selection of high-quality deals, focusing on sponsors with proven track records.

The platform also serves as an educational hub, offering resources for investors, developers, and financial advisors to better understand how to navigate Opportunity Zone investing. The goal is to increase transparency, improve deal flow, and create a centralized ecosystem for OZ participants.

The Role of Opportunity Zones in Addressing the Housing Shortage

The conversation shifts to the broader impact of Opportunity Zones, particularly in addressing the nationwide housing shortage.

Jimmy cites Novogradac’s latest data, which estimates that over 198,000 housing units have been developed or are in the pipeline through tracked OZ funds. Given that Novogradac only tracks a portion of the market, Jimmy estimates that the real number is likely between 600,000 and 800,000 units created through OZ investments to date.

Todd emphasizes that increasing housing supply is the best way to address affordability issues. He believes that Opportunity Zones have played a significant role in catalyzing housing development, particularly in areas that traditionally struggled to attract private investment.

How Investors Should View Opportunity Zone Investments

While Opportunity Zones offer compelling tax benefits, Todd cautions that they do not turn bad deals into good ones. Investors should evaluate OZ deals using the same financial metrics as any other real estate investment, ensuring that projected returns align with market expectations.

For family offices and high-net-worth investors, OZs represent a tax-efficient way to reinvest capital gains, but due diligence is critical. Todd stresses the importance of selecting the right sponsors and ensuring that the underlying real estate fundamentals are strong.

Final Takeaways

• The Opportunity Zone market has matured, with a growing focus on development, secondary market transactions, and distressed asset acquisitions.
• Institutional participation remains limited due to structural misalignment with OZ investment requirements.
• The OZ program has already catalyzed the development of hundreds of thousands of housing units, helping to address the national housing shortage.
• The launch of OZ Listings aims to improve transparency and deal flow, creating a centralized marketplace for investors, developers, and service providers.
• Investors should approach OZ investments with the same rigor as any other real estate deal, ensuring strong fundamentals and high-quality sponsors.

Opportunity Zones continue to evolve, and platforms like OpportunityZones.com and OZ Listings are working to make investing in OZ projects easier and more accessible.