Share: Share on Facebook Share on Twitter Share on LinkedIn I recommend visiting cushmanwakefield.com to read:%0A%0A {0} %0A%0A {1}

Opportunity Zone Fund Provides Retail Investors a Unique Opportunity

Zander Fried • 7/10/2019
According to the Minnesota Department of Employment and Economic Development, Opportunity Zones are littered throughout the Greater Twin Cities area.

Opportunity Zone

Opportunity Zones are littered throughout the Greater Twin Cities area.

Source: Minnesota Department of Employment and Economic Development

Written into The Tax Cut and Jobs Act of 2017 is a bipartisan tool – the Opportunity Zone (OZ) designation – intended to spark economic growth in low income areas. The legislation is capturing the attention of the real estate community, as it allows owners, developers and prospective tenants to utilize:

  • A 100% deferral of capital gains tax from the sale of other assets – such as a stock or bond – funneled into OZ investments;
  • A 10% capital gains tax reduction in OZ investments held for at least 5 years;
  • A 15% capital gains tax reduction in OZ investments held for 7 years and;
  • A 100% elimination of capital gains in Opportunity Zone investments held for 10 years or longer.

While the initial legislation generated quite a bit of excitement, most OZ money remained sidelined, awaiting further clarification of the original statutory language. Finally, in April, the IRS released a second round of updates to OZ regulations which, among other things, clarifies:

  • The amount of assets an OZ Fund must hold in an OZ business (at least 90%).
  • If an OZ fund can purchase raw land (they can) and how that purchase is dictated with respect to capital gains benefits.
  • Whether an OZ fund or OZ business is required to “substantially improve” a lease (they are not).
  • How properties vacant for 5+ years and partially finished properties are impacted by the capital gains benefits described above (they can still receive the full benefits).

In the 2019 legislative session, Minnesota passed an omnibus tax bill conforming with most federal tax code, finally aligning State and the Federal Opportunity zone benefits. It remains unclear if 2018 OZ deals will retroactively conform to both sets of regulations. As other holdout states follow suit, we anticipate these recent federal and state updates will be a much-needed catalyst for OZ funds to begin placing money in the 9,000 OZ communities scattered across the country.

In greater Minnesota, we are tracking 128 sites eligible for OZ funding. In Minneapolis and St. Paul alone, there are 37 tracts where such funds could boost overall investment and economic development in the surrounding communities. Sites in Bloomington, Minnetonka, Mendota Heights, Brooklyn Park and more are also eligible for that funding.  In the coming months we expect Opportunity Zone funds and Opportunity Zone REITS  to begin identifying sites and deploying capital for retail and mixed use development in these areas.

Cushman & Wakefield is tracking 138 large CRE funds with more than $44 billion in equity looking to invest in opportunity zones, about half of which plan to invest in retail. Click here for that full report.

So, where are the best OZ opportunities? For more, don’t hesitate to reach out to our team!

Related Insights

GWS---5-Fast-Facts-St-Pete_Card-Image
Article • Office

Five Fast Office Facts St. Petersburg

What you need to know in today's St. Petersburg commercial real estate (CRE) office market.
Chris Owen • 1/18/2022
5-Fast-Facts_GWS-Graphics3 - Card Image
Article • Office

Five Fast Office Facts South Florida

What You Need to Know in Today's South Florida CRE Office Market
Chris Owen • 1/15/2022
GWS---5-Fast-Facts-Jacksonville-Card-Image
Article • Office

Five Fast Office Facts Jacksonville

What You Need to Know in Today's Jacksonville Commercial Real Estate (CRE) Office Market.
Chris Owen • 1/13/2022

Ready to talk?

Our professionals are ready to provide further details on this and many other topics.

Cushman & Wakefield uses cookies to analyze traffic and offer our customers the best experience on this website. Close this dialog to confirm your consent, or visit this page to learn more:
Cookie Notice

MORE OPTIONS
Agree and Close
These cookies ensure that our website performs as expected,for example website traffic load is balanced across our servers to prevent our website from crashing during particularly high usage.
These cookies allow our website to remember choices you make (such as your user name, language or the region you are in) and provide enhanced features. These cookies do not gather any information about you that could be used for advertising or remember where you have been on the internet.
These cookies allow us to work with our marketing partners to understand which ads or links you have clicked on before arriving on our website or to help us make our advertising more relevant to you.
AGREE ALL
REJECT ALL
SAVE SETTINGS