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Deadline Approaching for Opportunity Zones
The clock is ticking if you wish to maximize the Opportunity Zone program's advantages, said Cushman & Wakefield.
The December 31 deadline for investors to maximize tax benefits is fast approaching; the value of the tax break declines after that, Cushman noted in its Opportunity Zone: Location, Timing, Capital report.
Opportunity Zones are designed to spur economic development by providing tax benefits to investors in economically distressed communities. Investors can defer tax on any prior gains invested in a qualified opportunity fund until the investment is sold or exchanged. If the investor holds the qualified opportunity fund investment for longer than five years there is a 10 percent exclusion of the deferred capital gain.
"Overall, it's rare that a policy program aimed at low-income areas across the country garners a high level of attention and capital, but Opportunity Zones do just that," said Cushman & Wakefield Head of Americas Research Revathi Greenwood. "The program potentially makes it significantly less expensive for taxable investors to back real estate projects."
Greenwood noted the program can boost after-tax internal rates or return by up to 300 basis points in the first 10 years.
The report evaluated 45 office and multifamily markets containing 2,700 Opportunity Zones for several factors that indicate economic momentum. It divided the factors into three categories: tax and regulatory, economic drivers and commercial real estate fundamentals including 2019 office and multifamily inventory, vacancy and growth. It found Sunbelt markets ranked highest as growing populations support economic and real estate fundamentals and the tax environments are generally favorable for development. Fast-growing markets on the West Coast and the Mountain West also ranked highly, including the Bay Area, Los Angeles, Portland, Ore. and Seattle.
Cushman & Wakefield predicted nearly $100 billion could be deployed in Opportunity Zones over the next several years. The firm is currently tracking 138 large commercial real estate funds targeting more than $44 billion in equity. Most funds have national mandates and intend to invest in multiple product types: 82 percent of capital is targeting multifamily investments including senior, student and workforce housing, 60 percent is targeting the office sector and 49 percent is focusing on retail investment.
Altus Group Acquires Real Estate Software Firm One11 Advisors
Altus Group Limited, Toronto, acquired real estate software consulting services firm One11 Advisors, Chicago.
One11 provides advisory services for real estate organizations' front and back offices. Its offerings include technology implementation services and strategic advice about software, IT and process change strategies, system selection, managed services and support. The One11 team, including co-founders Jim Carr and Scott Morey and 18 employees, will be integrated into the Altus Analytics business unit.