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Opportunity Zone Investment Soared In December, New Data Shows


It appears the predictions for an end-of-year rush of investment into opportunity zones came true.

Qualified opportunity funds reported raising over $2B of equity in the month of December alone, according to tracking data from professional services firm Novogradac & Co.'s January report.

The 502 QOFs tracked by Novogradac have now raised over $6.7B, an increase of more than 50% from the $4.46B reported at the start of December.

In order for an investor to get the maximum 15% tax discount on capital gains invested in opportunity zones through 2026, they needed to place such gains in a qualified opportunity fund by the end of 2019. Though other parts of the opportunity zone provision created by the Tax Cuts and Jobs Act of 2017 may prove more lucrative, some experts believed the deadline would be enough to move large sums off the sidelines.

“Barring legislation that extends the deadline for investment, the end of 2019 is a crucial date for some investors,” Novogradac Managing Partner Michael Novogradac said in a statement at the beginning of December.

Many investors had been hesitant to commit before seeing the finalized rules governing opportunity zone investing, which weren't released by the IRS and Treasury Department until Dec. 19.

The paltry 12 days between the regulations' publication and the first deadline may have prevented an even bigger rush of investment for the month overall, Develop LLC founder Steve Glickman, who helped craft the original bill creating opportunity zones, told Bisnow at the time.

A month-by-month graph of equity raising by qualified opportunity funds tracked by Novogradac & Co.

The final regulations are set to be published in the Federal Register on Jan. 13, and will likely take full effect in March, Novogradac reports. Early reactions from the industry to the news have been overwhelmingly positive, particularly for the new clarification on elements like qualified opportunity zone businesses and improvement thresholds.

The $6.7B figure may be a far cry from the hundreds of billions that key figures like Treasury Secretary Steven Mnuchin predicted when opportunity zones became law. But it is also likely to be well short of the real level of investment, because a number of firms don't voluntarily report fundraising to Novogradac, he said in his January report.

"It’s reasonable to estimate that the actual dollars raised to date are double or triple $6.7B," Novogradac said.