Workforce and affordable housing developer Avanath Capital Management is launching a real estate investment trust to target investments in opportunity zones.
An Avanath entity called Aspire REIT has filed an initial public offering, Bloomberg reports.
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Bloomberg reports that the Aspire REIT is aiming to raise as much as $500M to rehabilitate some of Avanath’s existing properties and invest in opportunity zones, which are low-income and distressed neighborhoods nationwide chosen as part of a federal tax program.
Avanath CEO Daryl Carter will serve as the chairman of the REIT, according to the report.
The opportunity zones program, which passed as part of the Tax Cuts and Jobs Act of 2017, allows an investor to roll over capital gains into an opportunity zone fund, which is then used to invest in a business or real estate property in any of the 8,700 designated zones in exchange for tax breaks.
The goal of OZs is to spur job growth and economic development in distressed communities, while incentivizing investors to hold long-term investments there. But the program has been under fire from opponents who argue it only benefits rich investors and will increase gentrification in minority neighborhoods. The list of zones, which came from the 2010 census, has been criticized as outdated.
Since the passage of the new program, home prices have jumped in opportunity zones, according to ATTOM Data Solutions. The median home price in opportunity zones rose 9.4% from $235K in the fourth quarter of 2018 to $257K in the fourth quarter of 2019, according to ATTOM. Homes nationally increased by 8.3% year-over-year.
Based in Irvine, Avanath specializes in developing affordable and workforce housing. The company operates 79 properties across 12 states and has $1.7B in assets under management.
Carter previously told Bisnow that he was launching an opportunity zone fund last year. Carter said he planned to raise $300M, with the money going toward the acquisition of a multifamily development in Detroit and improvement and renovations of three existing Avanath multifamily properties in California, North Carolina and Orlando.
It is unclear if the Aspire REIT stems from the opportunity zone fund Carter was referring to, or if it is a separate entity.
The Aspire REIT offering is not on the Securities and Exchange Commission's website and Bloomberg said Avanath confidentially filed the IPO. An Avanath Elevate REIT had raised $120M as of Feb. 28, 2020, according to SEC documents.
Carter declined to comment.
Bloomberg reported that the Aspire REIT would be one of the "first publicly traded companies to raise capital dedicated to the [opportunity zones] tax incentives."
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