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Fundrise Launches $500M Opportunity Zone Fund

Fundrise CEO Ben Miller at a 2018 Bisnow event

The new federal opportunity zone program has attracted the attention of investors across the country, and now a D.C.-based real estate crowdfunding platform is getting into the mix. 

Fundrise has launched a $500M fund targeting office and mixed-use projects in opportunity zones, and it has already identified one of its first investments in Northwest D.C.

The fund, called the Fundrise Opportunity Fund L.P., will have a minimum investment of $25K. It has already raised $388K, according to the Washington Business Journal, which first reported on the fund. 

The Opportunity Zones tax incentive program was created as part of the Tax Cuts and Jobs Act that President Donald Trump signed into law in December. It gives tax benefits to investors that place unrealized capital gains into opportunity funds, which then deploy capital into opportunity zones, a collection of census tracts designated by local jurisdictions. The deadline for governments to nominate their census tracts was in April, and leaders tried to find the balance between areas with the most need and those that could best support the investment. 

Crowdfunding platform Fundrise was founded in 2011 to make real estate investing more accessible to smaller investors and the company has expanded rapidly, recently being named No. 35 in Inc.'s list of the 5,000 fastest-growing private companies. Fundrise hopes to raise $500M for the opportunity zone fund by the end of 2019 and is targeting a 12% return on investment.

"It's very close to our existing business already," Fundrise CEO Ben Miller told Bisnow. "We have a huge investor base that are taxpayers and this is an incredible tax incentive. In practice it can double the return after tax and the real estate strategy is also very close to what we were already doing: investing in emerging neighborhoods in cities." 

The fund will invest in opportunity zones in D.C. and other major cities. One of its first investments will be the restoration of a historic building in Northwest D.C.'s LeDroit Park neighborhood, turning the building into apartments with retail. Fundrise is also looking in areas such as Eckington and Buzzard Point

"The reason I like LeDroit is it's an opportunity zone in an emerging neighborhood, but it's not too far out and it will probably emerge a lot sooner than some of the other zones that were designated," Miller said. "You want to go to the edge of where things are currently growing, but not too far beyond the edge."

Miller will discuss the fund alongside other investors and experts Oct. 16 at Bisnow's D.C. Opportunity Zones event