The Real Deal Miami

Bridge Investment targets $500M in Opportunity Zone possibilities

The tax incentive development program has attracted big-money investors like RXR Realty and EJF Capital
By Keith Larsen | October 18, 2018 06:12PM

Opportunity Zones map and Bridge Investment Group chairman Robert Morse

A $12 billion real estate investment and management firm is the latest player looking to capitalize on the Opportunity Zones tax incentive development program.

Salt Lake City-based Bridge Investment Group will launch what it’s calling an Opportunity Zones initiative, targeting $500 million in “attractive opportunities” across the U.S.

The Opportunity Zones plan, part of President Trump’s tax overhaul, gives tax incentives to developers and investors for building in low-income areas. There are over 8,700 designated Opportunity Zones across nationwide.

Firms have already set their sights on the possible investment opportunities, and are looking to pour big money into these areas. Arlington, Virginia-based hedge fund EJF Capital as well as the New York-based real estate company RXR Realty have both launched funds seeking to raise at least $500 million toward Opportunity Zones investments. The program could allow them to forgo paying capital gains taxes on their Opportunity Zones investment if it is held for at least 10 years.

Real estate developers believe this could be a boon for new construction, but questions remain about the exact rules and which types of assets would work best under the program’s guidelines. So far, those rules have only been sketched out. But South Carolina Sen. Tim Scott, who is one of architects of the Opportunity Zones measures, said more detailed guidelines are expected at the end of October.

Bridge Investment Group said it could not comment on the structure of its Opportunity Zones program, including whether it is setting up Opportunity Zone funds, until regulations around the program have been released.

The company, which owns more than 30,000 apartment units throughout the country, said it expects many of these Opportunity Zones initiatives will be in new multifamily construction, but the company will consider other options as well such as office properties. The company, which is active in South Florida, bought Fountain Square office complex in Boca Raton for $54.5 million in December. Last fall, it purchased a luxury senior housing development in Lantana for $77.2 million, called the Carlisle Palm Beach.

Inna Khidekel, of Bridge Investment’s capital markets group, said the company first started looking at Opportunity Zones in April, after she attended a private session with U.S. Treasury Secretary Steven Mnuchin. The program made sense for Bridge Investment, she said. The firm has properties throughout the country, with a focus on owner-occupied developments and older, Class B space, which are well suited for the program, Khidekel added.

Jonathan Slager, the company’s co-CEO, said it wants to invest in projects that were a good investment, where the tax incentive would just be an added benefit. But he added that Opportunity Zones investments would be about 300 basis points more attractive than an ordinary investment because of those tax incentives.

The company said it is looking to invest alongside local sponsors and developers in qualified Opportunity Zones throughout the country. Metro areas would likely make more sense rather than rural areas, they said.