(Bloomberg)—When U.S. lawmakers enacted a new tax break to help low-income communities last year, backers said it would lift up some of the most distressed parts of the country.
But that wasn’t the pitch former White House spokesman Anthony Scaramucci used on Tuesday to recruit investors for a real estate investment trust that will seek to claim the tax incentives by investing in some of the nation’s newly created “opportunity zones.” Here’s how he described one of the REIT’s first projects, a Moxy Hotel on the site of a gas station in Oakland, during a conference call with potential clients:
“For those of you who have yet to go to Oakland, California, or that part of the Bay Area, I can tell you that it’s fully gentrifying. Oakland is effectively becoming the Brooklyn Heights of San Francisco,” Scaramucci said. “We think we’re going to be building a swank, boutique hotel there that’s going to create excessive economic rents for the REIT.”
The opportunity zone incentives have been heralded as a novel way to spread economic growth at a time when wealth is concentrating in a handful of cities. Yet researchers and non-profits have questioned whether some of the eligible communities were in need of a boost. (Amazon.com Inc.’s new headquarters in Long Island City will sit inside one.) Other critics have said the policy might accelerate the displacement of low-income residents or attract investments that don’t serve current members of the community.
In addition to Oakland, fast-changing swaths of New York, Los Angeles and Seattle were also earmarked for the incentives. Still, a study by the Urban Institute this year found that the vast majority of opportunity zones -- which range from rural parts of Idaho to suburban Atlanta to downtown Detroit -- aren’t gentrifying.
To be fair, Scaramucci also outlined a project in South Carolina near the Port of Savannah. That investment -- a warehouse and logistics facility -- may help create 1,000 jobs, which will pay higher-than-normal wages for the area, according to Manny Friedman, whose EJF Capital will help manage the REIT.
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