Opportunity Zone Funds Work to Regain Momentum
Capital raising for opportunity zone funds slowed in the wake of COVID-19, but managers are seeing an uptick again as market conditions improve.
June 8, 2020 | Beth Mattson-Teig | National Real Estate Investor
COVID-19 has created a new headwind for developers and sponsors raising capital for opportunity zone (OZ) investments.
The 2017 tax reform legislation that created OZs unleashed a frenzy of new funds and groups chasing what was projected to be billions of dollars in fresh investment capital aimed at revitalizing economically distressed communities. Delays in getting clarity on those new tax rules created frustrations and took some of the wind out of the sails in early fundraising. “Things were starting to get some momentum at the beginning of the year. There seemed to be a good pipeline of things coming,” says Stephen Sharkey, a tax partner at DLA Piper who advises clients on tax structuring of OZ projects and funds.
In some cases, fund sponsors were reaching fundraising targets and quickly moving to launch second funds right behind them to capitalize on early success. In March, for example, it was reported that Avanath Capital Management LLC was moving forward with plans to launch a new OZ REIT focused on affordable housing with an IPO that hoped to raise more than $300 million.
