developing two new projects
within Opportunity Zones.
Virtua Capital’s Uldricks
can relate. Before the release
of the guidance, there had
been a roadblock in fundraising, he says. Now that there’s
some clarity, there has been a
massive uptick in investment.
“On the retail investor side
we’ve averaged about
$125,000 worth of invest-
ments per investor, which is
pretty good,” he shares. “On the ultra-high net worth side, it’s
about $370,000, on average, and it’s going up.”
There is a third, somewhat surprising, group of investors in
these funds beyond the qualified purchasers and family offices,
Uldricks observes. Though they won’t get the same tax benefits
as taxable investors, institutional are still expressing interest in
the asset class. Many of them have mandates for ESG (environ-
mental, social governance) and an investment in an Opportunity
Zone can check that box. “They don’t care much about the tax
benefits; they just want to underwrite deals that have a social
impact,” he says.
Virtua has made a few investments already through one of its
Opportunity Zone funds, including an apartment building it’s
developing next to Arizona State University in Tempe, AZ. There is
an allocation to affordable housing within the apartment, which
both the Tempe community and the university encouraged.
As it happened, Virtua already had this transaction in its pipeline because it was such a good deal. When it became clear that
it qualified under the Opportunity Zone guidelines, “it became
much quicker for us to raise the capital for that transaction,”
Uldricks reveals. And without the Opportunity Zone qualification, he adds, it’s debatable whether the company would have
been able to pencil in the affordable component.
For these very reasons it is clear that more of these types of
deals will come to the market in the coming years, resulting in a
significant rebalancing of portfolios as investors rush to take
advantage of these new opportunities. One could, in fact, make
the case that in 2019, portfolios will rebalance not only for
Opportunity Zone transactions but for other emerging categories of investment as well. ◆
“We are going to see fewer flagship
stores and more retailers incorporating
their brands into specific projects that
cater to the surrounding community.”
COLEMAN MORRIS, JLL
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