The opportunity zone program has been the talk of the real estate industry since it was created in December 2017 as a way to spur development in economically distressed census tracts. To reap the maximum benefit from the program – a 15% reduction on taxes – money has to be invested in opportunity zone funds by the end of this calendar year.
Some asset managers are steering clients away from opportunity zone funds in favor of other investments. A Cushman & Wakefield report found that of the 10 cities with the most economic momentum, five are in Florida, making the state ripe for opportunity zone deals.
Because program rules require that money go into funds this year to obtain maximum benefit, and that opportunity zone projects must be up and running within certain time frames from accepting the fund money, capital has been drawn to shovel-ready projects. Boca Raton-based PEBB Capital, a private equity firm that has $1B invested in multiple asset classes, is in the process of securing opportunity zone deals around the country totaling $250M, with some sites under contract.
“If profits can be redeployed into other qualified opportunity zone developments, then investors won’t need to hold the asset for 10 years, which will greatly increase the attractiveness of the program to a wider range of developers,” Jago wrote.