The Real Deal Chicago

Origin Opportunity Fund raises $105M in 17 hours, citing “insane amount of demand”

An hour after the fund launched, it had already landed $19M in non-binding commitments
By Alex Nitkin | November 20, 2018 01:30PM

Chicago-based Origin already counts $105 million in commitments from 425 investors.

Origin Investments last week launched a fund directed at three developments being planned inside Opportunity Zones — one in Denver, and two in Charlotte, North Carolina

Less than a day later, Chicago-based Origin counted $105 million in commitments from 425 investors.

The firm would still be interested in the three development sites, two of which went under contract last week, even if they hadn’t been drawn into Opportunity Zones, Origin principal Michael Episcope said. But the benefit created by last year’s Tax Cuts and Jobs Act gave investors an extra reason to dive in.

“There’s so much excitement around the industry right now about the benefit, which I think is one of the greatest tax benefits in my lifetime,” Episcope said. “When you take an investment that you already would have invested in anyway, and you add the tax benefits, it adds demand exponentially.”

The fund raised more than $19 million in non-binding commitments during the first hour of fundraising alone.

The “insane amount of demand” drove investors to commit about a quarter as much capital into the Opportunity Fund in 17 hours as Origin has raised in its entire 11-year history, Episcope said. The firm’s last major fund closed in June 2017, having raised $151 million over 14 months.

Origin counted more than 500 investors on the waiting list for its next major fund, and many of them converted their interest to the Opportunity Fund instead.

Origin Investments principals David Scherer (left) and Michael Episcope

Since the Treasury Department released guidelines last month on how Opportunity Zones can be used, financial managers from coast to coast have rushed to line up billions of dollars in financing to maximize tax breaks before the program sunsets in 2026.

Origin’s tactic of identifying specific projects before soliciting investments stands in contrast to most other Opportunity Funds generated so far, which are raising “blind” investments for developments to be determined later.

“You can raise $500 million, but if there aren’t projects you want to invest in, it doesn’t do you any good,” Episcope said.

Origin lists 39 office and multifamily properties in its investment portfolio, including three in Chicago and three elsewhere in Illinois.

In 2016, Origin and Randolph Street Realty Capital sold the 73-unit Lux24 apartment complex in the West Loop for $35 million, three years after buying the property for $19 million, according to Crain’s.