At the end of this post you can scroll down and see the industry sectors that drive OZ investments.
So far we only have "guidance" from the U.S. Treasury and IRS that complicates everything and poses more questions for both investors and attorneys.
Let's look at that first . . .
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AFFORDABLE HOUSING FINANCE
Attorneys Dissect Treasury Guidance on OZs
John Gahan and Daniel Ryan outline key takeaways and what questions still need answered.
Treasury issued its long-awaited guidance on Opportunity Zones (OZs) in October. Not all questions were answered; Treasury itself acknowledged that and promised further guidance. That said, it’s useful now, especially for developers with projects in OZs who would like to access capital in Qualified Opportunity Funds (QOFs), to summarize a few important takeaways:
1. Debt is not itself an acceptable qualifying investment in a QOF, and using debt doesn’t reduce the capital gain investor’s ultimate tax benefit.
2. For purposes of the “tangible asset” test, the term “substantially all” means 70%.
3. A “working-capital safe harbor” aligns the OZ legislation with the mechanics of how capital usually flows into development projects.
4. Rev. Rul. 2018-29 provides that the land and building costs of purchase can be separated for purposes of the “substantial improvement” test.Values can be attributed to both, and then the “substantial improvement” test can be satisfied by improving the building by the required amount.
5. Pre-existing entities can be used but are subject to important preconditions.
What Comes Next?
The industry still awaits answers to many questions, including:
The industry still awaits answers to many questions, including:
READ MORE > News in Housing Finance 10 Jan 2019
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AFFORDABLE HOUSING FINANCE
A New Tool for Housing
Industry players embrace Opportunity Zone incentive.
Out of the 2017 Tax Cuts and Jobs Act [TCAJA] came a new community development tool aimed at spurring investment in low-income neighborhoods.
With high hopes, many in the affordable housing and community development industry are exploring how to turn an idea into reality by utilizing this resource to benefit the communities where they already work and the people who live there.
Blogger Note: With 11 Opportunity Zones here in Mesa we all have high hopes along the line where we live. Where will the roads to opportunities take us along the lines using public transit as a platform . . . So far LISC Phoenix has a track-record of success that started here in Downtown Mesa in December 2013 with the opening of Encore On First, the first new multi-family housing in 30 years, continuing with Escobedo-Verde Vista and El Rancho del Arte and El Rancho Del Sol, with Mesa ArtSpace Lofts opening in 2018.
With the TCAJA 2017 the financing landscape has changed: the article cites innovative projects in different states. Please take a look at those, while we take off on a diversion for about two minutes: We're Off To See The Wizard of OZ
With the TCAJA 2017 the financing landscape has changed: the article cites innovative projects in different states. Please take a look at those, while we take off on a diversion for about two minutes: We're Off To See The Wizard of OZ
It might be Terry Benelli, President/CEO of the Local Initiatives Support Corporation.
There's nothing about Phoenix or Arizona in the report from Affordable Housing Finance.
We do have high hopes . . .
Here are the pre-designated 11 Opportunity Zones in the City of Mesa. Note the areas to the left that are on the Valley Metro Light Rail lines. At the same time you can see that two large areas in Northeast Mesa and Southeast Mesa - in "The Outer Loops" where there's the most investments in just these two Opportunity Zones for commercial real estate [tech, industrial, and residential] and growth in job creation. Growth in the car-driven commuter culture expanding Suburbia reflects land-use planning.
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Here's a map of income distributions in the city of Mesa that needs some up-dating to fill-in the data gaps, especially in Southeast Mesa.
The color codes in the red-orange-yellow spectrum show higher-income areas concentrated in north and northeast Mesa. The darker-blue areas show lower-income areas.
[This is zip code data from the 2010 U.S. Census, It may or may not show the census tracts chosen as pre-designated Opportunity Zones, with the exceptions that qualify the NE and SE areas with higher-than-median-income levels but are nonetheless contiguous with distressed and neglected areas.
There are some areas and neighborhoods with a diverse mix.
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“We see it as a critically important new tool that can have significant impact for affordable housing and community development, especially for economic development in communities that haven’t seen capital investment in a long time,” says Lori Chatman, senior vice president of Enterprise Community Investment and president of Enterprise Community Loan Fund.There's nothing about Phoenix or Arizona in the report from Affordable Housing Finance.
We do have high hopes . . .
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Here's a map of income distributions in the city of Mesa that needs some up-dating to fill-in the data gaps, especially in Southeast Mesa.
The color codes in the red-orange-yellow spectrum show higher-income areas concentrated in north and northeast Mesa. The darker-blue areas show lower-income areas.
[This is zip code data from the 2010 U.S. Census, It may or may not show the census tracts chosen as pre-designated Opportunity Zones, with the exceptions that qualify the NE and SE areas with higher-than-median-income levels but are nonetheless contiguous with distressed and neglected areas.
There are some areas and neighborhoods with a diverse mix.
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SOCIAL IMPACT INVESTINGFor Local Initiatives Support Corp. (LISC) and its affiliates National Equity Fund (NEF) and New Markets Support Co. (NMSC), 924 of the 8,761 OZs that have been designated across the nation are in communities where they have made prior investments, so they know the area and have developer partners who work there.
“It makes sense for us to be a leader in OZs, given we know these communities, and we can try to increase development by utilizing this new source of capital.
It’s pretty exciting to tap these capital gains and see if we can use them for social impact investing,” says Karen Przypyszny, managing director of special initiatives at NEF.
Przypyszny says LISC and its affiliates will focus on the social impact piece to
- enhance communities
- provide jobs and housing
- help create more economic development.
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