Dive Brief:
- Developer-builder Decennial Group — a joint venture between developers Clayco and Farpoint Development — announced it will invest $1 billion in U.S. heartland opportunity zone development projects, according to a company press release. That investment, according to The Real Deal, should come in the next three years, but the company could sink as much as $20 billion into new projects during the next 10 years.
- Opportunity zones are located in economically challenged areas and stand to benefit from investment tax incentives created through President Donald Trump’s tax reform bill. There are 8,700 designated opportunity zones nationwide.
- Decennial said it will focus on the “transformative, long-term and inclusive growth" of neighborhoods through construction of commercial, industrial, multifamily and energy projects. One of the developments to benefit from the new investment program will likely be Farpoint’s Burnham Lakefront “megadevelopment” on 100 acres of city land in distressed South Side, Chicago, according to The Real Deal.
Dive Insight:
The idea behind opportunity zones is to get money flowing into areas that probably wouldn’t see major investment without financial incentive. The program allows investors to invest capital gains in these projects, deferring taxes for investments made after Dec. 31, 2017, and through Dec. 31, 2026. That deferment turns into a reduction (10%) if the investment is held for five years, even more if held for seven years (15%). After 10 years, investors can sell their stakes in these projects with no capital gains tax on the transaction.
Gateway Development Consortium's $1 billion, 10-year Cross Bayou Point mixed-use project in Shreveport, Louisiana, is also in an opportunity zone. GDC recently signed a design-build team that will master plan, design and build the project — GraceHebert Architects from Baton Rouge, Louisiana, and Cleveland-based Ozanne Construction.
There are other programs similar to Decennial that have popped up in recent months, all promising to revitalize communities in dire need of development and to create new construction jobs.
Affordable multifamily housing firm Avanath Capital Management launched an opportunity zone investment fund this year, targeting new properties as well as some that are in the works in qualified areas. Avanath forecasted that it will be able to raise $300 million in the next six months.
New Jersey developer Ron Beit of RBH Group started a $700 million fund that will invest in the Teachers Village projects — mixed-use developments that also provide affordable housing for teachers — in opportunity zones. Beit has already built a $150 million Teachers Village in Newark, New Jersey.
