NEW BRUNSWICK, NJ—Real estate investors seeking to roll capital gains from other assets into tax-deferred opportunity zone investments need to have capital and financially viable projects ready to go before diving into the new vehicles being created, according to panelists at last week’s Opportunity Zones conference sponsored by Rutgers University’s Center for Real Estate.
Watch a video news report on the Opportunity Zones Panel in the video player below. If you do not see a video player, you can watch the video here.
“When you’re talking about the tight timeframes with respect to these projects, ultimately the best efficiency of deployment is being able to actually have the projects to deploy the capital,” says Ron Beit, founding partner and CEO of RBH Group and president of RBH Management. Beit has developed several projects in Newark, NJ, including the development of Teachers Village within the SoMa redevelopment project, a 15 million square-foot mixed-use redevelopment in downtown Newark, the Four Corners Millennium Project, and Makers Village within the Ironbound district.
“With capital on hand from OZ investors, we can tee up larger projects, we can tee it up in a way that gets it ready for these big fund investors to come in and invest,” Beit says. Ultimately when they come in and look at an OZ, they are looking at the quality of the real estate.”
The Opportunity Zone program seems “too good to be true,” says Sherry Wang, managing director of Goldman Sachs’ Urban Investment Group. After investing more than $1 billion in urban core projects in New Jersey, Wang says, it seemed like the program was written for Goldman.
“We found that just over 50% of our investments in New Jersey, or about $500 million, were actually inside the opportunity zones,” she says.
US Sen. Cory Booker (D-NJ), one of the authors of the Opportunity Zone legislation, attended the conference and engaged in a 40-minute colloquium with Prof. Morris Davis, Paul V. Profeta Chair of Real Estate and the academic director of the Center for Real Estate at the Rutgers Business School..
Watch a video of the interview with Sen. Cory Booker from the conference in the video player below. If you do not see a video player, you can watch the video here.
“The opportunity for investors to defer taxes, reduce taxes, and ultimately eliminate gains is unprecedented,” says Anthony Rinaldi of Saxum Real Estate. “There’s over almost 170 opportunities on tracks here in New Jersey. Obviously, this state’s got great fundamentals, and it’s going to continue to gain a lot of investor interest.”
“I think this program is going to force capital that’s been sitting on the sidelines to act and to get invested in some of the communities that need it the most across the country,” says Lindsay Sparacino, managing director of EJF Capital. “I really think this could be a game changer for the nation.”
The one state government official on the panel, Leslie A. Anderson, president and CEO of the New Jersey Redevelopment Authority, deferred to Gov. Phil Murphy on the key tax question on the minds of most audience members, about whether New Jersey would commit to state tax treatment for Opportunity Zone investments that mirrors the federal tax treatment under the new rules.
“I’m going to do what I always do,” Anderson says. “That is to create the environment that allows these developments to come in from a real estate development place, a business development place.”
Rutgers University wants to be a catalyst for conversations among industry participants over topics like the opportunity zones, which is why the school sponsored the conference.
“Our mission is to be impactful to the industry,” says Rutgers’ Davis. “Right now, the opportunity zones legislation is the most important tax legislation affecting geography, affecting land use, affecting businesses, in the past 30 to 40 years, so it’s important for Rutgers to be out in front of this, to educate the industry.”
Davis says he’s concerned about New Jersey’s reputation for governmental red tape when it comes to development projects like the ones envisioned in the Opportunity Zone legislation.
““The way the legislation was written, the funds have to be deployed relatively quickly,” he says. “In New Jersey, we have a reputation for occasionally tying up projects for various reasons. If the act of permitting or getting all of the approvals takes too much time, then that will adversely impact how many funds can be deployed to these areas.”