The Capital Stack Behind a Rural Healthcare OZ Deal
Rural hospitals are closing and patients are driving an hour or more for care, but one developer is betting a surgical institute in Chillicothe, Ohio can reverse that math.
Graham Allison of Opportunity Zone Development Group joins the show to break down the full capital stack behind the deal, layering OZ equity with EB-5, New Market Tax Credits, and Ohio's 10% OZ tax credit. Plus, how IRS notice 2026-40 lets an OZ 1.0 deal carry investors into OZ 2.0 benefits.
Guest: Graham Allison
Episode Summary
From a Land Purchase to a Rural Surgical Institute
Graham Allison introduced Opportunity Zone Development Group, a fund management and development company headquartered in Columbus, Ohio, that focuses on rural health care as one of its leading verticals while also working in everything from energy to housing.
He explained the firm came into the business through a pretty simple step. A physician bought some land, thought it was in an Opportunity Zone, and, working with a financial adviser, asked what that meant. At the same time, they had gone through a national RFP process.
The firm looked at a 40 acre site about forty minutes away in Chillicothe, Ohio, and came up with a structure that enables physicians to lead health care. That work led to the building Graham is developing, Great Seal Methodist and the Great Seal Ambulatory Surgery Center, which he calls the Great Seal Surgical Institute.
Why Rural Health Care
Graham described rural markets as having really strong demand while having been left behind. He pointed to closures of hospitals and other facilities, and to patients driving an hour or more for care or simply not receiving it. He noted that changes in the market, for example Medicaid, have led to many closures.
What he finds interesting is that while the federal government reduced some ways to pay for services, it produced a creative incentive to enable rural health care investment through Opportunity Zones, marrying a tax incentive with private capital to backfill what had been taken away.
He cited the additional step up in basis, the five years, and the 50% improvement requirement, which give investors the ability to retrofit older facilities and put new equipment in. On this project, the firm set up physicians funds as well as the real estate fund, helping both the tenant and the real estate investors.
Structuring an OZ 1.0 Deal for OZ 2.0 Benefits
Recording in June 2026, Jimmy Atkinson framed the moment as a key pivot point, with OZ 1.0 winding down at year end and OZ 2.0 coming. Graham explained the firm has an OZ 1.0 site, 50 acres with a five acre site for the surgery center, and has positioned the surgery business to give investors an OZ 1.0 project that enables them to gain OZ 2.0 benefits.
He credited recent IRS notice 2026-40, released the prior week, with providing sufficient guidance to feel comfortable meeting the requirements, given the project is underway, the land is bought, and sufficient capital has been spent and raised alongside a working capital safe harbor business plan. He suggested it might be the first transition plan in the country to get OZ 2.0 benefits for an OZ 1.0 project.
Because of the timing, the physicians will land on their investment in a 2.0 world. He described a $32,000,000 project, with physicians putting about $22,000,000 into the ASC alongside joint venture partners, a hospital to be announced.
Jimmy walked through notice 26-40, noting section five's requirement that deals be identified and the QOZB's working capital safe harbor written plan be set up before the end of 2026, with 10% of working capital funded and 5% deployed into actual QOZB property by year end.
Clearing those hurdles means qualified opportunity zone business property in an OZ 1.0 tract that does not get redesignated still qualifies going forward, OZ equity can keep coming in after 12/31/2026, and new equity from a timely rolled over capital gain gets OZ 2.0 benefits.
Graham confirmed this is the document the firm created for its investors and said the project is oversubscribed. Through a venture called OZ Impact Partners, the firm is looking at markets across the country for its next ASC. Eight years into the space, Graham called operating businesses the new frontier and set a goal of enabling physicians to lead health care with their own opportunity fund.
Why It Resonates With Physicians
Graham said physicians are often higher W2 earners, and the firm positioned the deal from a wealth creation standpoint, letting operators create tax free wealth with a large multiple over a ten year period. That helps attract other physicians into the partnership and lets them determine whom they want to serve, potentially taking more Medicaid patients because of the additional tax benefits.
Jimmy noted that OZ requires capital gains, not just W2 income, and asked where eligible gains come from. Graham pointed to older physicians who get into a partnership and buy property that generates a gain, some who sold property through their broker, and younger physicians who used a home equity line of credit to put post tax cash in a deal, with flexibility to restate it as an OZ investment later in a mixed fund.
He framed it as a long term deal of ten years or maybe twenty, and a great retirement plan for a 55 year old physician seeking a tax free exit.
Layering the Capital Stack
Beyond OZ equity, Graham walked through the other capital on the project, which helped the firm beat out about 12 larger, multi billion dollar developers in the RFP by identifying rifle shot opportunities. New market tax credits fit because the project supports 194 jobs and about $17,000,000 in payroll a year in a community of 20,000 people.
The firm is also using grants and Ohio's 10% OZ tax credit, which Graham called unique in the country, plus a program related investment, where foundations provide mission aligned capital at a straight 5% rate, similar to pref equity, without participating in a waterfall, which enhances the OZ investors' returns.
He described marrying incentives at all levels, including tax increment financing through a joint economic development district and about $4,700,000 in infrastructure across the greater 50 acres, with the catalytic ASC positioning the firm to add a hotel, restaurant, and community resources.
At the federal level, Graham confirmed the firm is doing EB-5 and has looked at USDA rural development's guarantee program. He noted that under the OBBB, cost segregation on $10,000,000 in equipment has serious punch, likening the tax yield to a forgivable loan from the fed, and recalled telling the physician that not doing an opportunity fund would leave about $40,000,000 on the table.
EB-5, he explained, enables a permanent green card for foreign investors and their family at a minimum around $800,000, and combining five to eight to ten EB-5 investors fills a meaningful gap. He offered an example of a surgery center with $3,000,000 of OZ equity, $5,000,000 of EB-5, and a local bank at a 65% loan.
Through OZ Impact Partners the firm plans to do about 50 of these, noting OZ 2.0 raised the bar with the AMI threshold increasing toward 70, but that marrying these resources can still make profitable projects.
How to Get Involved
Graham invited physicians and investors to reach out through opportunityzonedevgroup.com, noting the firm works with both investors and sponsors. He recounted that the project came originally from a landowner who happened to be a physician, and that in fifteen months the firm is breaking ground on about $100,000,000 in investment.
He added that some investors do not have their capital gain yet and are getting in now in anticipation of a future gain. Jimmy echoed the point, advising anyone with a large sale coming to do the leg work now rather than wait until after the transaction.
Jimmy also noted that Graham presented a Masterclass on this capital stack to the OZ Insiders group in May and presented at OZ Pitch Day in March.