The Window Of Opportunity Is Still Open For Opportunity Zone Investors
For investors who are hoping to take advantage of the unique benefits offered by the opportunity zone program, the door may be closing, but there is still room to get in. Through this program, investors can use unrealized capital gains to finance development in economically distressed areas and receive deferrals and even reductions on their capital gains taxes.
The program is set to close its window of investment on Dec. 31, 2026, but some politicians are calling for it to be extended. Even if it doesn't go past that December date, however, investment experts say there is still time.
“There’s still opportunities for investors to get in, but people need to be keenly aware of deadlines,” said Chris Loeffler, CEO and co-founder of Caliber, a real estate investment group. “For example, if investors have a capital gain on a K-1 from 2020 that they want to invest in an opportunity zone fund, their last possible day to invest is Sept. 10, 2021. And if you have a 2021 capital gain from a K-1, you've got until September of 2022 to invest.”
Caliber runs its own opportunity zone fund, which provides accredited investors access to private real estate investments. Bisnow spoke with Loeffler to learn more about the state of the opportunity zone program, the investment Caliber is currently involved in and how investors can still get in the game.
Bisnow: Can you tell me more about where the opportunity zone program stands today?
Loeffler: It's an incredibly interesting time for opportunity zone investing. Coming out of the economic disruption we saw from the pandemic, a lot of people are finally feeling comfortable making longer-term decisions about what they're going to do with their investments, which is driving interest back into the opportunity zone program.
We're also seeing a lot of inbound inquiries from investors wanting to get into the program now that regulations are final. Investment advisers, CPAs, lawyers and other people who consult with investors and help them understand what they should do with their money now feel more confident about the program and that it’s not going to change. Also, there are a lot of people with big capital gains coming out of the pandemic who are realizing that real estate is a great investment and one of the best hedges against inflation. It’s the perfect storm: the right economic environment, the right capital events for investors and the right asset class.
Bisnow: What are some common misconceptions about opportunity zones?
Loeffler: I think the first one is that because there were a lot of timelines associated with the program, people kind of assumed that they missed the boat. The reality is, people can invest in an opportunity zone fund at this moment in time up until Dec. 31, 2026. Additionally, the majority of the tax benefit that comes from this investment comes from the 10-year benefit in the program, which doesn't really have an expiration except for that December 2026 date.
Another common misconception is investors think it’s a bad idea to put money into these undeveloped areas. The reality is most opportunity zones are in places that are developing and growing fast and would be excellent long-term investments.
Bisnow: What kind of investor is the right fit for an opportunity zone fund?
Loeffler: I think any accredited investor who can find a fund that has a minimum that fits with how much cash they’re willing to have tied up is a good fit. Some people will say, "Well, you know, I'm in my 70s, I don't want to make a 10-year investment." And the answer to that is, "Well, I understand that, but there's no penalty that, God forbid, if something were to happen to you, your relatives would receive the shares." And it's no different from investing in a real estate fund. You get the potential upside of this great tax benefit and great investment without much of the downside.
Bisnow: What kinds of opportunity zone projects is Caliber currently involved with?
Loeffler: We have an entire historic downtown in Mesa, Arizona, that we bought for about $8 a square foot. We’ve put a bunch of money into tenant improvements and we're kind of transforming this downtown. This is happening at the same time as a new college campus is coming and a lot of other exciting developments are happening in the area, including one of our friendly competitors that's putting in about 800 apartment units down the road.
We've got an acute care behavioral health hospital that we bought and renovated, a ground-up deal on a hotel attached to a convention center, and we're working on a couple more medical projects and a few mixed-use residential and industrial projects. It's all based on looking at the zones that we like the best and building what those zones need, not necessarily building the same product over and over again.
Anyone who is interested in learning more about opportunity zone deadlines can get access to our Accredited Investors Guide To Qualified Opportunity Zone Investing here.
This article was produced in collaboration between Caliber and Studio B. Bisnow news staff was not involved in the production of this content.
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