EquityMultiple’s Growing Portfolio of Opportunity Zone Investments
This learning series on Modern Commercial Real Estate Investing first appeared on the EquityMultiple blog. Please check in there for updates and additions to this series
EquityMultiple’s First Few Opportunity Zone Investments
In March of this year we were excited to announce our first Opportunity Zone investment opportunity in Goodyear, Arizona — part of the Phoenix MSA. EquityMultiple’s investors participated in financing the ground-up development of a combined 325,000 SF of industrial space between two buildings. The business plan for this 10 year Opportunity Zone investment includes construction of the Property, lease-up, optimization of the tax benefits associated with the Qualified Opportunity Zone Fund (“QOF”) guidelines and an eventual sale of the Property. EquityMultiple’s network ultimately contributed over $2.4M. The investment is located within a Foreign Trade Zone (FTZ) magnet site, which is an area designated to facilitate international commerce by reducing operational costs and facilitating customs clearance, and has the potential to generate substantial job growth, along with attractive post-tax yield for investors.
For a full breakdown of the potential tax incentives afforded by the new Opportunity Zone program, please refer to our Resource Page on Opportunity Zones & Opportunity Funds.
EquityMultiple’s second Opportunity Zone investment opened in late June — a National Manufactured Housing Fund. Again, this offering was structured to qualify for the substantial tax incentives afforded under the law, with an anticipated hold period of more than 10 years. This investment offered built-in geographic diversification as well as exposure to a new niche asset class: Manufactured Housing Communities (MHCs).
While the “mobile home” concept has been stigmatized in the past, modern Manufactured Housing Communities can offer quality, affordable housing to families — particularly in Opportunity Zones that have suffered from affordable housing shortfalls. Due to high barriers of entry and a pronounced demand/supply imbalance, the asset class is drawing increased interest from institutional investors.
Rolling Over Capital Gains into Qualified Opportunity Zone Investments
EquityMultiple investors began expressing interest in the Opportunity Zone concept in early 2018, but investors were given the requisite confidence in the program after the U.S. Treasury issued a highly-anticipated second set of proposed regulations on Opportunity Zones in April 2019. Our Investor Relations Team is working actively to help investors understand requirements as they manufacture gains through not just traditional public stock sales, but also a wide array of capital events. For example, individuals we have worked with have sold private stock in Biotech companies, single-family homes, a billiard manufacturing company, a roll-up of dermatology clinics. The list goes on. Overall demand from investors has increased heading toward the end of the year. Taxpayers seeking to maximize their increase in basis (increase their basis from zero to 15 percent of the deferred gain amount) must invest in a Qualified Opportunity Fund before December 31, 2019.
Moving Ahead
EquityMultiple’s third Qualified Opportunity Zone Investment is now live (please create a free account to view details). We continue to move cautiously as we source further Opportunity Zone and Opportunity Fund investments, conducting rigorous diligence on the sponsor, operator(s), market, and QOZ investment thesis.
Simply put, we believe that Opportunity Zone investing represents a groundbreaking opportunity for tax-advantaged real estate investing, and we are excited to continue to scale our QOZ offerings across markets and property types. Many investors are (understandably) sensitive with regard to market, property type, and risk/return profile when it comes to a 10 year hold. As such, we intend to source a wide range of potential Opportunity Zone investments to align with the objectives and preferences of all investors.
Further Reading
For a full breakdown of the potential tax incentives afforded by the new Opportunity Zone program, please refer to our Resource Page on Opportunity Zones & Opportunity Funds.
If you are interested in speaking over the phone with our Investor Relations team about Opportunity Zones, please feel free to schedule some time on our calendar.
Originally published at https://www.equitymultiple.com on September 8, 2019.
