How do we perform a due diligence process for Qualified Opportunity Funds?

Answers

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  Matthew Rappaport

  Falcon Rappaport & Berkman

  October 04, 2021

  This is an interesting question. I would say this depends on whether the fund is single-asset or a large pool of capital. If it's single-asset, you can do the due diligence on the underlying project. If it's a pool of properties, you can vet what's been purchased already, but the most important aspect of that would be the sponsor. Either way, even though Qualified Opportunity Funds themselves have no track record, the sponsors will, and that's where you will find the best information to guide your decision.

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  David LeGrand

  LeGrand Legal

  September 30, 2021

  I suggest you look at the experience history of the fund manager and look at the locations. See what their plan is and how that lines up with the market in that area. Experience is often a great indicator of the future.

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  Marko Belej

  Taft

  October 01, 2021

  I would pull out the applicable elements of the statute/regs into a checklist, to guide the process. I would then request the following documents from the Qualified Opportunity Fund (QOF) (as applicable/available): the organizational documents of the QOF and its Qualified Opportunity Zone Businesses (QOZBs), their financial statements, copies of any tax returns, including Forms 8996 that have been filed, any documentation for working capital safe harbors used by its QOZBs and a purchase agreement for or summary of any material asset that has been acquired.

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