Here’s the deal with “opportunity zones,” a little-known, little-regulated program from the tax overhaul

Developers and investors are racing city officials and nonprofits to define the rules of the new program

TRD New York TRD WEEKEND EDITION /
Jul.July 15, 2018 05:05 PM

From left: Eric Garcetti, Donald Trump signing the Tax Cuts and Jobs Act of 2017 in December, Keith Rubenstein. (Credit: Wikimedia Commons, Getty, iStock)

What does a 130-room Marriott hotel have in common with an affordable housing complex? They’re both eligible for federal tax breaks under the new “opportunity zone” program.

The program allows investors to defer taxes on capital gains income until 2026 so long as 90 percent of their investment stays in designated low-income communities via properties or businesses, according to the Wall Street Journal. But the Treasury Department has yet to set out the rules of using the program, leaving it open for interpretation–for the time being at least–and prompting a nationwide free-for-all driven by all kinds.

“This is the biggest initiative of this type by the federal government with the least debate, the least staff support, the least research and still the least clarity,” said Los Angeles Mayor Eric Garcetti to the Journal. But that’s not a bad thing in his books: “It hasn’t really been fleshed out and that’s exciting for me.”

City officials like Garcetti, non-profits, real estate investors and developers are positioning themselves to take advantage of the new program, which is expected to allow quicker fundraising  and comes with tax breaks that, for the moment, have no strings attached. Several players believe those who pioneer the use of the program will likely chart its course in terms of precedent-setting rules and political support or opposition.

In New York, developer Keith Rubenstein has a $200 million opportunity zone fund in the works to support new projects in the South Bronx, while across the Hudson opportunity zones are among the hottest topics of discussion in Jersey board rooms right now, according to Stuart Saft, partner and head of Holland & Knight‘s real estate department.

If it seems like a tailor-made solution for real estate developers in search of cash, that was the intention. After all, the program “was written by and for real-estate investors,” as VC firm president Ross Baird of Village Capital Group told the Journal. [WSJ]Erin Hudson


Related Articles

arrow_forward_ios
With a cooling trade war, stocks perform well, including real estate. (Credit: iStock)

Real estate stocks push up this week as U.S.-China trade tensions ease

Real estate stocks push up this week as U.S.-China trade tensions ease
416 West 25th Street and Maverick Real Estate Partners principal David Aviram (Credit: Google Maps and LinkedIn)

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case

Chelsea landlord claims “predatory” lender is charging a crippling interest rate as punishment after losing foreclosure case
Gov. Andrew Cuomo has given the go-ahead to reopen schools for in-person learning statewide (Getty; iStock)

School’s back on. Will the NYC resi market follow suit?

School’s back on. Will the NYC resi market follow suit?
New York’s real estate market is becoming two different stories: Manhattan, where deals are falling — and the suburbs, where demand is spiking. (iStock, Unsplash)

Manhattan is cold, the suburbs and Brooklyn are hot: Here’s what the resi market looked like in July

Manhattan is cold, the suburbs and Brooklyn are hot: Here’s what the resi market looked like in July
Home sale price declines are expected for July, after a recent bump, according to a CoreLogic report. (iStock)

Home sale prices got a bump, but a drop is coming: Report

Home sale prices got a bump, but a drop is coming: Report
(Images courtesy of Victor Group)

The Getty condo chops prices up to 53%

The Getty condo chops prices up to 53%
From left: Trinity Investments CEO Sean Hehir and Benchmark Real Estate Group principals Aaron Feldman and Jordan Vogel (iStock, LinkedIn, Trinity Investments)

“Blank-check” companies make a comeback in real estate

“Blank-check” companies make a comeback in real estate
28 Liberty Street (Wikipedia)

Manhattan’s office leasing sees busiest month since January

Manhattan’s office leasing sees busiest month since January
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...