Opportunity Zones venture looking to raise $1B for projects in “America’s Heartland”

Chicago developers Farpoint and Clayco launched Decennial Group

Apr.April 04, 2019 02:45 PM

From left: Clayco CEO Bob Clark and Farpoint founding principal Scott Goodman (Credit: iStock)

A pair of Chicago development firms are teaming up on a new Opportunity Zones venture, hoping to raise $1 billion for development projects “throughout America’s Heartland.”

Farpoint Development and Clayco will spearhead the Decennial Group, and will seek to deploy the money over the next three years, the company announced Thursday.

It will target developments including Farpoint’s own “Burnham Lakefront” megadevelopment on nearly 100 acres of city-owned land on Chicago’s South Side, along with projects in St. Louis, Birmingham, Alabama, and in Indiana.

Over the next 10 years, the venture could look to fund and build up to $20 billion in new projects.

Decennial Group has enlisted one of the Opportunity Zones architects, Steve Glickman, as a “senior adviser.” Glickman, a co-founder of the Economic Innovation Group collaborative that designed the Opportunity Zones program, founded the firm Develop LLC, which consults developers and investors raising funds for Opportunity Zone projects.

The Decennial Group venture joins a host of investment funds already raising hundreds of millions of dollars for future Opportunity Zones projects across the country. Decennial Group principals said unlike most other Opportunity Funds that seek out third-party developers with viable proposals for Opportunity Zone projects, their venture will oversee design and construction in-house for most of its projects.

Farpoint managing principal Scott Goodman and Clayco CEO Bob Clark agreed last year to deploy a “soup-to-nuts” approach to leading each project, they said during an interview Thursday. That would enable Decennial Group to ovversee the process from fundraising through ribbon-cutting, which would help them stand out from the other Opportunity Zones funds, they said.

“As this law came into effect, we were getting bombarded by calls from people trying to figure out how to invest, and it became obvious that many of the people jumping into this don’t have the capability to deploy” the capital, Clark said. He added that “delivering the whole thing in an integrated way was going to be the biggest challenge.”

The 8,700 designated Opportunity Zones nationwide open a suite of tax benefits to developers and investors who can substantially raise the taxable value of the land through projects. Governors were allowed to nominate census tracts with relatively high poverty and low median incomes, or tracts adjacent to them, for the program.

Investors can defer payments on capital gains that they reinvest in Opportunity Zones and reduce their ultimate tax bill, depending on how long they keep their investment. Stakeholders can also forgo paying capital gains taxes on the appreciation of the asset if they hold onto it for at least 10 years.

The Decennial Group said it is exploring 250 potential projects in Opportunity Zones around the country, from Indiana to rural Colorado. The group is already in advanced negotiations over developments on at least three sites.

The principals are aiming away from the coasts in order to focus on the best value and return, and to maximize social impact, Goodman said. Projects will include industrial, multifamily, office and data center construction.

Chicago-based Clayco has overseen design and construction for industrial, commercial and civic developments across 35 states. Shawn Clark, president of Clayco development wing CRG, is also a managing partner of the Decennial Group.

Goodman co-founded development firm Sterling Bay in 1987 and oversaw its expansion in Chicago’s Fulton Market after the 2009 recession, helping plant the seeds for that neighborhood’s unprecedented development boom. He left the company in 2016 and founded Farpoint Development. Chicago city leaders later selected his new firm oversee redevelopment of the 100-acre site of the former Michael Reese Hospital.

Also joining the venture is Chicago-based renewable energy contractor 11 Million Acres. The firm will oversee the inclusion of a power-generation element on each new development, a process Goodman said he expects will “become the norm” during the next decade.

Not all Opportunity Zones were placed in distressed areas, spurring criticism that the program may turbocharge development in up-and-coming areas while leaving long-neglected neighborhoods behind.

Some investors are also wary of putting money behind the program until lingering questions are addressed by the next round of federal regulations, which are expected in the coming weeks.

But the program is already showing an effect on property values throughout the nation. Sale prices for homes inside Opportunity Zones jumped by more than 25 percent last year, according to a recent study from Zillow.

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