After federal tax reform introduced the Opportunity Zone program in late 2017, a significant portion of the New York City real estate community evolved their investment strategies with an eye toward developing in these areas, according to GFI Realty Services’ most recent research report.
The report, entitled The Land of Opportunity Zones, explains the various criteria that must be met by investors seeking to capitalize on the program, while detailing the growth of transaction activity and fund formation related to these areas.
With interest in these opportunity zones increasing rapidly, the report notes, it is not surprising that, on a national level, sales of development sites in opportunity zones spiked by 80 percent in the first three quarters of 2018 when compared to the same period last year.
As detailed in the report, the program will defer and reduce or eliminate taxes on capital gains invested in opportunity zones, in an effort to bolster development in these historically distressed neighborhoods.
By putting their capital gains in a Qualified Opportunity Fund – which is required to have 90 percent of its assets invested in opportunity zones – and investing at least the purchase price in capital improvements, developers are able to reap significant benefits and avoid or reduce their tax payment on those capital gains.
“While the increase in investment was expected – and was indeed the objective of the program – the fact that activity increased so dramatically before details of the program were even finalized is…