Mar 18, 2019 · 47m · capital-allocators
Manny Friedman – EJF on Economic Opportunity Zones (EP.91)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews EJF Capital founder Manny Friedman to examine the legislative architecture, tax mechanics, and economic potential of federal Opportunity Zones. Friedman details how bipartisan policy, private capital reallocation, and community banking partnerships can drive over a trillion dollars into distressed communities across the United States.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 24.8% of the talking time here. How this is scored →
Ted as informed peer 4.6 Guest teaching 5.8 Guest disagreement 2.4 Ted pushing back 1.5
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 39:05 Short Silicon Valley assertion
Manny aggressively challenges conventional venture geography, flatly asserting that investors should short Silicon Valley real estate as capital flees to opportunity zones.
Hardest push from Ted ▶ 37:16 Human capital ecosystem challengeTed directly challenges Manny's optimistic premise, arguing that business formation requires deep human capital ecosystems like Silicon Valley rather than just tax-incentivized capital.
Biggest teaching moment ▶ 33:20 Reframing program abuse to NIMBY pushbackManny subverts Ted's standard question about financial fraud by systematically arguing that the biggest threat comes from political NIMBYism and legacy non-profits protecting their domain.
Ted holds their own ▶ 37:16 Informed counterargument on venture clusteringTed displays deep domain knowledge of innovation clusters and human capital network effects, forcing Manny to justify his thesis with historical case studies.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| The Grand Vision Behind Economic Opportunity Zones | 4 | 5 | 1 | 1 | Ted introduces the concept based on their prior discussion and sets up Manny to explain the macro vision. Manny outlines the multi-trillion dollar reallocation goal to bridge economic inequality across the country. | |
| Tax Incentive Structure and Capital Gain Deferral Mechanics | 4 | 6 | 2 | 1 | Ted asks for specific regulatory mechanisms. Manny delivers a detailed breakdown of capital gain deferral mechanics, holding period rules until 2047, and state tax rate differentials. | |
| Geographic Eligibility Criteria and Investment Deadlines | 5 | 6 | 2 | 2 | Ted checks his understanding of investment timing and real estate concentration. Manny clarifies the 2010 census criteria, K-1 deadlines, and reframes the real estate focus as merely the initial infrastructure stage before job creation. | |
| Trillion-Dollar Multiplier Effects and Institutional Capital Attraction | 5 | 6 | 3 | 2 | Ted questions how non-taxable institutions would be incentivized without direct tax shields. Manny dismisses prior tax credits as insignificant pinheads and explains how capital momentum and CRA rules pull non-taxable capital along. | |
| Real-World Case Studies: Philanthropy, Oakland, and South Carolina Warehouses | 4 | 5 | 2 | 1 | Ted prompts for practical bottom-up examples from Manny's family foundation and firm. Manny illustrates real-world projects in Oakland and rural South Carolina, tying economic development directly to philanthropic workforce training. | |
| Sourcing Opportunity Zone Deals and Early Market Skepticism | 4 | 6 | 3 | 1 | Ted asks how investors can discover these obscure deals. Manny highlights widespread early skepticism where 90% of investors disbelieve the program, citing Sean Parker and EIG's foundational role. | |
| Legislative History, Bipartisanship, and Administrative Rulemaking | 5 | 6 | 2 | 1 | Ted asks how the legislation passed despite Washington polarization. Manny explains the bipartisan history led by Senators Scott and Booker, slipping the framework into the 2017 tax bill. | |
| Potential Risks, Abuse Prevention, and Institutional Pushback | 5 | 7 | 4 | 2 | Ted asks what could go wrong regarding program abuse. Manny offers an unconventional reframe, arguing that the real pushback and abuse will come from entrenched incumbents, NIMBYism, and non-profits resistant to private capital solutions. | |
| Business Formation and Spreading Innovation Hubs Beyond Silicon Valley | 6 | 6 | 4 | 3 | Ted pushes back with an informed counterpoint about human capital agglomeration in Silicon Valley. Manny defends his thesis with historical precedents like Austin and Charlotte, culminating in an assertive recommendation to short Silicon Valley real estate. | |
| EJF Capital's Strategy: Opportunity Zone Funds and Small Bank Debt | 4 | 5 | 1 | 1 | Ted asks how EJF Capital integrates this macro theme into its core asset management strategy. Manny explains how their niche in small bank debt provides a proprietary deal pipeline for opportunity zone lending. |
Statements from this episode (22)
Friedman: Opportunity Zones are the biggest capital reallocation effort in his lifetime
“It's the biggest thing I've ever seen in my lifetime. To reallocate capital and let it flow and let it change the different parts of the country and let it equalize the economic areas of the country.”
Friedman: Opportunity Zones will attract over $1 trillion in capital
“Right now it's probably seven, eight trillion dollars, but it's growing in another two and a half trillion dollars every year, and so that over a period of time, we believe at least a trillion dollars of capital is going to flow from one area, one geography, t…”
Friedman: New York capital gains taxes reach 53% short-term, 32% long-term
“In New York, it's 53% on short-term capital gains. It's 32 on long-term capital gains”
Friedman: Tax incentives will force all US startups into Opportunity Zones
“It's going to encourage every single business that's going to start up United States. It's going to force it for tax reasons, for economic reasons, to be in an opportunity zone.”
Opportunity Zones cover 10% of U.S. land and 12% of population
“So in fact, it's 10% of the entire United States is an opportunity zone. That's in every city, every state, every rural area, all of Puerto Rico. So it's everywhere. That's the first thing, and it covers 12% of the population.”
Friedman: Opportunity Zones Will Be a Complete Failure Without Job Creation
“The fact is, which people don't realize, 70% of this is aimed at business. If this doesn't create jobs, Jobs, jobs, jobs. Then this is going to be a complete failure. You're going to have stranded real estate.”
Friedman: Google Is Moving 20,000 AI Employees to Lower Manhattan
“Google is just moving 20,000 AI people to the tip of New York. Now, some of it's not an opportunity zone, but it's surrounded by three opportunity zones.”
Friedman: Micron Is Building a $3B Plant in Manassas Opportunity Zone
“Micron's building a plan in Manassas, three billion dollars, opportunity zone.”
Friedman: Amazon HQ2 in Northern Virginia Is Partially in an Opportunity Zone
“Amazon's second headquarters is partially an opportunity zone in northern Virginia.”
Friedman: Legacy community tax credits and job programs are ineffective
“Doesn't take away your low-income tax credits, doesn't take away New Market, doesn't take away any of the job credits, but let's be realistic. These programs are so tiny and so artificial, they're a joke. They're a pinhead in terms of the net effect, and so yo…”
Friedman: State pension funds are exploring partnering on Opportunity Zones
“So we're already seeing non-taxpayers, state pension funds, begin to look at this as a way to change areas that are in need by joining with the people doing opportunity zones.”
Friedman: Non-taxable allocators will invest in Opportunity Zones for higher returns
“There's no specific economic incentive. It's just they're going to get a higher return on their money. Do you want to be downtown New York, which where jobs are going to be moving out from, or do you want to be in Brooklyn or the tip of New York? Do you want t…”
Friedman: The Community Reinvestment Act has largely been a failure
“The truth is, it's been a failure to a great extent, because there's so much paperwork, it's so artificial at times, that you make non-economic investments, and the money disappears, and that gets people upset, gets everyone upset.”
Friedman: Port of Savannah is North America's fastest-growing port and 12% of GDP
“Savannah's the fastest growing port in North America. Period. No one's ever seen anything like it. It's now 12% of the GDP of the United States.”
Friedman: Sean Parker originated Opportunity Zone policy via EIG
“Sean Parker from Napster came up with this idea seven, eight years ago, and is really the Key driver. This is one of his think tanks”
Friedman: Regulators Will Release Follow-up Rules Followed by Anti-Abuse Guidance
“There will be another set of regulations that will allow people to really be aggressively doing things, and then there'll be abuse regulations, because whenever you create a program of a trillion dollars or more, it's only natural that there'll be abuses, and …”
Friedman: Opportunity Zones Will Negatively Impact Traditional Real Estate Markets
“It's going to have a negative impact on a lot of real estate that's in more traditional areas.”
Friedman estimates Opportunity Zones will increase US GDP by 0.4%
“We estimate it'll increase GDP by four-tenths of percent.”
Friedman: New Markets Tax Credit costs $200 to deliver $100
“Only to come up with a hundred dollars, it costs the government 200 dollars. It's a joke. It costs more to administer it, to put it together Then the net effect.”
Friedman advises shorting Silicon Valley and selling Palo Alto real estate
“In fact, I would short Silicon Valley right now. If you have real estate in Palo Alto, you should be selling it, because if you're in Silicon Valley, you're, Except for a small place in Silicon Valley, which is an opportunity zone, those businesses are all goi…”
Friedman: Opportunity Zone small banks will be overwhelmed with loan applications
“One of the secondary benefits of Opportunity Zone is many of the small banks in the United States that sit in the middle of Opportunity Zones. They're going to be overwhelmed with new loan applications.”
Friedman: Congress and the administration display unprecedented childishness and political regression
“When I watch Congress, and when I watch the administration, I feel like I'm back, not in the seventh grade, I'm back in the first grade, and I just can't believe it, and especially when all these people were, growing up, were my heroes, and I've never seen suc…”