DFW Opportunity Zones That Aren't Just Banking On Potential — They're Already Hot
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As investors and developers wait for the Internal Revenue Service to finalize rules governing capital gains deferments on opportunity zone investments, it is becoming clear not all opportunity zones are created equal.
Opportunity zones stem from a 2017 federal tax bill that allows investors to benefit from capital gain tax deferments on dollars invested in funds used to develop distressed communities. The IRS is still fleshing out the final rules for opportunity zones for release this month, but investors around the country are already gearing up real estate deals within the zones. Many of them are in areas that were already popular investment hot spots.
That is the case in DFW as well. Bisnow asked DFW city leaders and several panelists from the upcoming Bisnow Texas Opportunity Zone Summit to share their thoughts on the most intriguing opportunity zones in the Metroplex.
Their selections run the gamut from opportunity zones in well-to-do suburbs to zones near medical facilities and entertainment complexes in Downtown Dallas.
The Plano opportunity zone is bordered by Interstate 75 (Central Expressway) to the east, Parker Road to the south and Jupiter Road to the west.
Despite Plano's affluence, this unique opportunity zone received a designation because it houses a low-income RV park and very little other housing to make up for the average annual income.
"It's a big area — it's more than 1,500 acres," Plano Director of Special Projects Peter Braster said of the opportunity zone. "A lot of people are interested [in investing there]."
But they're "still holding back a little bit" until the IRS' complete guidelines for opportunity zones are released this month, he said.
The tract of land in the Plano opportunity zone already has ambitious plans, Braster said. In July, the Plano City Council approved The Envision Oak Point Plan, a 30-year initiative that aims to revitalize virtually the same area through commercial, residential and community development.
One of the landmarks in this opportunity zone — Plano Market Square Mall — has been a staple in the community for decades. But it is languishing, and Plano officials hope that will change.
“I think the opportunity zone will be the thing that pushes that [mall] into redevelopment," Braster said.
This opportunity zone also is unique because there is already a 250-acre farm nearby that its owners want to redevelop, he said.
Deep Ellum and The Cedars
Deep Ellum, a live music and entertainment hotbed in the east section of Dallas, is a top pick for investors. The community already houses a brand-new office building, The Epic, and high-rise apartments and a hotel will eventually accompany the modern office development.
“There are two neighborhoods with significant opportunity zone footprints ripe for investment and development — the Cedars and Deep Ellum,” said Hunton Andrews Kurth partner JR England, who will be moderating a panel discussion on DFW opportunity zones at Bisnow’s summit on April 9.
While Deep Ellum is already benefiting from a resurgence of development and investment activity like The Epic, England also sees the Cedars in South Dallas as a diamond in the rough that is about to get its due when opportunity funds enter the community within the next six to 12 months.
“Both neighborhoods immediately border Downtown and are already undergoing a bit of a renaissance with Deep Ellum a bit ahead of the Cedars,” England said. “There are other locations in Dallas County that fall within opportunity zones, but I think most of the investment will be focused on the Cedars and Deep Ellum due to their proximity to the urban core. The Cedars stands to benefit the most in terms of revitalization. It is rougher around the edges than Deep Ellum and has many more vacant buildings and empty lots.”
Bay Mountain Capital Chief Investment Officer Will Dyer also names South Dallas and Deep Ellum as top picks for potential opportunity zone investment. He said those communities are already undergoing makeovers, and opportunity funds are not even in full swing yet.
"That has been considered a gentrifying area that needs more capital to bring it along," Dyer said.
Hoque Global CEO Mike Hoque agrees South Dallas is one of the better areas to guide investments — his firm already has two projects in opportunity zones in the southern Dallas area: SoGood @ Cedars and 20 acres next to Dallas City Hall.
SoGood @ Cedars is the redevelopment of the old Pilgrim’s Pride factory just south of Downtown into an eclectic, edgy mixed-use district for creative and innovative businesses, artists and residents, Hoque said. As for the tract adjacent to City Hall, his firm is master planning for a major corporate and educational mixed-use development.
"These areas are well-positioned because they are close to downtown and are in the path of growth," Hoque said.
Opportunity Zones Near Medical Facilities
Any opportunity zones that host hospital facilities or are a reasonable distance from them should be in high demand, Stonehenge Capital President Thomas Adamek said. Dallas is home to a slew of strong medical facilities, including Parkland Memorial Hospital, UT Southwestern Medical Center, Methodist Dallas Medical Center and Baylor University Medical Center.
The Federal Reserve Bank of Dallas' map of opportunity zones shows Methodist Dallas Medical Center is near a zone. Other zones in and around Dallas don't necessarily have a hospital within them, but they are relatively close to one.
Any zone even somewhat close to Parkland should be a prime development target, Adamek said.
"The Parkland Hospital area ... would be one that is ripe for development," Adamek said. "There's green shoots in that area already and this would really kick-start redevelopment in that area."
And with the need to house workforces for medical communities and to develop affordable housing in and around Dallas, Adamek is convinced residential developments will be the first to come online once the opportunity funds begin flowing.
"I think the first ones that you are going to see are going to be mixed-use developments or multifamily," he said. "I think there is a real need for housing in that area [around the urban core] — kind of just redeveloping that urban core. And some of the deals that we have seen already that are looking for opportunity zone money are multifamily in that area."
Learn more about the region's hottest opportunity zones at Bisnow's Texas Opportunity Zones event April 9. Hoque, Dyer, England and many more will be offering their expertise.