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Opportunity Zone Businesses Receive Key Support in Riverside County

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OPINION

By Stacy Cumberbatch — Content Contributor

While the Opportunity Zone tax incentive introduced at the end of 2017 has well known benefits on the real estate development side, a lesser known aspect is how businesses can take advantage of the incentive for their own benefit. Riverside County aims to change that, doubling down on efforts to attract investment capital and new job opportunities to the county by fully utilizing the tool as part of its overall strategy. 

First, a bit of context. The Opportunity Zone incentive was introduced in December of 2017 as a bipartisan act as part of the Tax Cut and Jobs Act, in essence, largely intended to be a job creation tool. Capital gains invested into the zones from the sale of real estate, stocks, or even cryptocurrency can receive attractive tax incentives including deferral, exemption, and exclusion of taxes for investing long term into the zones, with the maximum benefits coming from a 10 year investment period. In return, local communities, developers, and business owners can gain access to hyper local equity investments for development projects and business expansion. Now, in addition to seeking bank loans, or venture capital investments, Opportunity Zones capital is an entirely new source of capital with built in selling points to investors for project sponsors. Investors can be as small as local neighbors pooling gains or as large private equity funds or family offices, making the capital source truly ubiquitous. 

The zones were subsequently certified in June 2018, and guidelines around the legislation were released across three sets of regulations which took place between October 2018 to December 2019. With full clarity finally available, 2020 was poised to be a strong year for business investments into Opportunity Zones. Then a global pandemic hit in early February 2020, putting the world to a halt and leading the IRS to extend timelines for investment activity into the zones first to December 2020, and in January 2021, again extended relief to March 2021. In short, for individual investors with any capital gain event between October 4, 2019 and October 2, 2020, the deadline to invest could have been as long as a year versus the standard 180 days. 

Still, tremendous funds have been moved into the zones with estimates of equity raised by qualified opportunity funds (QOFs) tracked by Novogradac surpassing $15 billion at the end of 2020. More importantly, the number of investments in businesses is growing. NES Financial, a leading fund administration platform announced on its 2021 Trends report that after analyzing 300 QOFs there is a growing investment in operating businesses, up from roughly 20% of funds on their platform in 2018 to close to 32% in 2020. 

Businesses considering expanding in Riverside County are starting to notice this trend. Opportunity Riverside, an economic development advisory group focusing on Opportunity Zones and adjacent areas in the county, has been assisting and tracking both real estate and business projects in Opportunity Zones and has a current pipeline split almost 50/50. Some of the businesses preparing for Opportunity Zone capital range from an electric microgrid company in the Coachella Valley to a water desalination plant in the Salton Sea to an autonomous vehicle SaaS company with offices in Los Angeles and the Inland Empire. 

A huge opportunity ahead. For business owners, some of the incentives of being in an Opportunity Zone or relocating to one include:  

  1. You make your business more attractive to potential outside investors and can seek investments (tax incentivized investment opportunity)
  2. You have the potential to retain more ownership in your business when receiving investment from a Qualified Opportunity Fund (a bigger slice of the pie)
  3. You have your own capital gains and want to invest them into your business and receive tax benefits (invest in yourself) 
  4. You want to receive priority consideration for federal contracting opportunities (via OZ and HUB Zones overlaps– 44 of the 49 OZs are also Hub Zones)
  5. You want to defer duty payments on merchandise until it is entered into U.S. commerce (via OZ and Foreign Trade Zones overlaps– 11 of the 14 cities that contain OZ census tracts also contains Foreign Trade Zone census tracts)
  6. You want preference points or priority consideration for grant opportunities (over 300 grants & programs aligned to OZs, some restrictions apply–nonprofit and/or local government partnership required in most instances)*
  7. You want to bring jobs into and impact a historically under-invested community that has been designated an OZ (impact investment / do good & do well)*
  8. You want to be in potential future paths of progress (following the zones)*

In fact, Blake Christian, CPA Partner with HCVT states that “Riverside County represents one of the top counties in the U.S. to start or move an OZ business into due to existing OZ buildings and infrastructure, large tracts of undeveloped land, excellent demographics, and very pro-business leadership. Due to the very flexible final regulations it is relatively easy to meet the OZ tests and entrepreneurs can start, acquire or move an existing business into an OZ census tract and begin the OZ tax-free period. Furthermore, Internal Revenue Code Section 1202 (Qualified Small Business Stock) can offer added flexibility for businesses in certain industries.

To qualify as a Qualified Opportunity Zone Business (QOZB), a few criteria have to be met according to IRS regulations including: 

  1. Be located in one of the 49 Opportunity Zone census tracts in the county
  2. 70% of tangible property owned or leased must be located within the zones and acquired after December 2017
  3. 50% of total gross income must be derived from active business conducted in the zones
  4. 40% of intangible property must be used in the zones
  5. Additional tests for Non Qualified Financial Property (e.g. stocks, bonds, and long-term notes) and sin businesses apply
  6. Additional tests for timeliness of use of funds and working capital safe harbors apply
  7. Additional investment criteria/underwriting may apply varying by investor

What’s Next in Riverside County. Given the number of tests needed to qualify as a QOZB, specialized CPAs and Attorneys are always needed in the process. To connect businesses and projects needed with the resources needed to complete deals, Blended Impact Labs, a venture development firm and innovation lab, is hosting a series of webinars in the month of April as part of Riverside County Innovation Month to focus on supporting businesses expanding and raising capital in Opportunity Zones with access to investors, CPAs, state and local resources, and more. 

Stacy Cumberbatch, Managing Director of Blended Impact Labs, adds “Riverside is unique in the variety of industries we support that would be ideal for Opportunity Zone investments. From life sciences labs and R&D anchored by UCR in opportunity zones in the west, to clean energy, agritech, and manufacturing businesses in zones in the central over to the east, our geography supports a wide range of possibilities for business expansion and gives investors great diversity in options. Additionally, local leaders have coalesced around key growth areas including sustainable logistics, cyber security, air emissions and environmental technology, and advanced manufacturing creating a welcome environment for businesses seeking to relocate to Southern California and grow their business.”

Interested businesses are invited to join the upcoming webinar series: 

  • April 7th: Opportunity Zones for Expanding Businesses
  • April 14th: Opportunity Zones, A Founder’s Perspective Raising Funds
  • April 21th: Inland Empire Innovation Ecosystem Report Launch 
  • April 28th: Opportunity Zones, Developer Roundtable

RSVP for any of the webinars here: https://www.opportunityriverside.com/news/march-21-newsletter

*Information within does not constitute tax or legal advice. Please consult with your tax advisor for specific advice.*

The Inland Empire Business Journal (IEBJ) is the official business news publication of Southern California’s Inland Empire region - covering San Bernardino & Riverside Counties.

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Inland Empire Celebrates Entrepreneurial Excellence at Spirit Awards Gala

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Honoring Visionary Leaders Driving Innovation and Community Impact

The Spirit of the Entrepreneur Awards Gala, held at the Riverside Convention Center, celebrated the brightest entrepreneurial talent across the Inland Empire. Among the evening’s finalists was Edward Ornelas, Jr., President & CEO of the Inland Empire Regional Chamber of Commerce, who was honored in the Social Entrepreneur category for his outstanding leadership and commitment to the region.

Although Ornelas did not win, the Social Entrepreneur award went to Cesar Navarrete, President & CEO of Children’s Fund, a proud Chamber member. “Being a finalist alongside such remarkable leaders is an incredible honor,” said Ornelas. “I am especially thrilled to see Cesar, a Chamber member, recognized for the transformative work he’s doing to improve the lives of children in our community. It’s a proud moment for us all.”

Another highlight of the evening was the recognition of Hilda Kennedy, President & Founder of AMPAC Business Capital, another Chamber member, who was awarded the Top Female Entrepreneur category. Hilda’s leadership at AMPAC, a mission-driven business lender, has been instrumental in empowering small businesses and fostering economic growth across the region.

“It’s amazing to see leaders like Hilda and Cesar being celebrated for their contributions,” added Ornelas. “Their achievements underscore the talent and dedication of entrepreneurs in our Chamber and across the Inland Empire. They are setting the standard for excellence and impact in their fields.”

The evening also featured the prestigious “Best of the Best” Award, sponsored by Best Best & Krieger LLP, which was awarded to Mauro Gomez, Chief Growth Officer of Anita’s Mexican Foods Corp.. Based in San Bernardino, Anita’s Mexican Foods has grown from modest beginnings into a leader in the food production industry under Gomez’s strategic direction.

The Spirit of the Entrepreneur Awards Gala continues to shine a spotlight on the transformative work of Inland Empire entrepreneurs, celebrating their innovation, resilience, and commitment to the community.

For more information about the Spirit of the Entrepreneur Awards, visit https://www.spiritawardsie.com.

For more details about the Inland Empire Regional Chamber of Commerce and its members, visit www.iechamber.org.

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Inland Empire Chamber President Edward Ornelas, Jr. Named Finalist for Spirit of the Entrepreneur Awards

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Celebrating Leadership and Innovation: Ornelas Recognized for Advancing Business Growth and Social Impact in the Inland Empire.

Edward Ornelas Jr., President of the Inland Empire Regional Chamber of Commerce and owner of the Inland Empire Business Journal, has been named a finalist in the famed 2024 Spirit of the Entrepreneur Awards. Ornelas is honored in the Social Entrepreneur category for his remarkable leadership and vision in fostering business growth and development across the Inland Empire. The award ceremony will take place on November 21, 2024, at the Riverside Convention Center, celebrating the best of entrepreneurship throughout the region.

The Spirit of the Entrepreneur Awards, often regarded as the “Oscars of Business” in the Inland Empire, recognizes the innovation, leadership, and impact of outstanding entrepreneurs across various sectors. Ornelas joins a select group of 34 finalists, each representing the entrepreneurial spirit and resilience that define the I.E. business community. The Social Entrepreneur category highlights individuals like Ornelas, whose work goes beyond profit to positively impact society.

In his role as President of the Inland Empire Regional Chamber of Commerce, Ornelas has been a powerful advocate for the business community, connecting small businesses with essential resources and creating opportunities for growth. As the owner of the IE Business Journal, the only publication in the region dedicated solely to business news, Ornelas has provided a platform for local businesses to thrive by sharing their stories and promoting their success. His innovative, forward-thinking approach to marketing has earned him a reputation as a “visionary” and a “get-things-done” leader across both public and private sectors.

“I’m deeply honored to be recognized as a finalist for the 2024 Spirit of the Entrepreneur Awards. This nomination is a reflection of the incredible businesses and community leaders across the Inland Empire who inspire me every day. At the Inland Empire Regional Chamber of Commerce, our mission is to empower businesses and foster economic growth, and this recognition highlights the collective efforts of our entire community. I’m excited for what the future holds as we continue to work together to make a lasting impact,” said Ornelas.

Other notable finalists for the 2024 Spirit of the Entrepreneur Awards include leaders in healthcare innovation, green technology, and digital transformation. Each finalist, selected by a distinguished panel of judges, represents the best in their respective industries and contributes to the Inland Empire’s continued growth as a hub of innovation and entrepreneurship.

The Spirit of the Entrepreneur Awards is an annual event that brings together business leaders, community advocates, and entrepreneurs to celebrate the entrepreneurial excellence that drives the region’s economy. This year’s event promises to be a night of inspiration and recognition, showcasing the achievements of finalists like Ornelas, who continue to elevate the Inland Empire’s business landscape.

For more information about the Spirit of the Entrepreneur Awards and to see the full list of finalists, visit www.spiritawardsie.com

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CBRE Opens Newly Renovated, Tech-Enabled Office in the Inland Empire

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The office is designed to support hybrid work and employee wellbeing

CBRE announced the opening of its new 10,159-sq.-ft. office suite on the ground floor of 4141 Inland Empire Blvd., in Ontario, Calif.

The office is part of CBRE’s Workplace360 program, which features innovative office designs and functionality, including in-office technology and a wider variety of collaborative spaces designed to support hybrid working. CBRE launched its Workplace360 program over a decade ago in its downtown LA office. Since then, the company has opened more than 100 Workplace360 offices worldwide, continually updating the program as work habits have changed over the years, especially with the increase in hybrid work.

“Our newly renovated space provides us with a great opportunity to deliver a collaborative, experience-driven workplace that supports hybrid work,” said Ian Britton, managing director and market leader for CBRE in Inland Empire. “Our Workplace360 office will also serve as a showpiece to help clients conceptualize flexible work strategies for their employees.”

The renovated office has several different work areas including focus, huddle, living, and conference rooms. The open-space lobby, known as the “Heart,” features a variety of seating and a communal space for collaboration. A large 86” media display with a speaker system welcomes employees, visitors, and clients and assists with onsite events.

New office technology, including touch-enabled video conference rooms, allows for hybrid work collaboration between in-office and remote employees and clients. Additionally, the Mt. Baldy conference room has Liquid Galaxy, a geospatial visualization platform set across large format curved screens providing a cinematic presentation experience. This room has an operable wall that opens to the Heart, creating an onsite event space.

A cornerstone of the Workplace360 model is its free-address approach, in which there is no dedicated seating. The free-address approach allows employees who are in the office on a given day to use any workstation or office.

The office’s design led by CBRE Design Collective, took inspiration from the Inland Empire’s orange groves and mountainous landscapes of Mt. Baldy. Images of Route 66 from local photographer VC Torneden features the role the highway plays in the area. 

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