Capital Square’s Second Opportunity Zone Fund Completes Stabilization, Permanent Financing and Special Distribution to Investors
November 17, 2022 | Capital Square
Capital Square, one of the nation’s leading sponsors of tax-advantaged real estate investments and a developer of mixed-use multifamily communities, announced today that they have completed initial lease-up and stabilization, closed permanent financing, and made a special distribution to investors in CSRA Opportunity Zone Fund II, LLC, a 58-unit mixed-use multifamily property in Richmond, Virginia’s Scott’s Addition qualified opportunity zone.
Located at 2900 West Clay St., “VIV” is a five-story Class A apartment community that includes 1,960 square feet of ground-level retail space. Construction on the highly anticipated property began in January 2021 and was completed in June 2022. Within three months of completion, the property achieved initial lease-up and stabilization, with occupancy exceeding 95%. With the project stabilized, Capital Square closed permanent financing with a long-term loan made by USAA Life Insurance Company. Finally, Capital Square has made a special distribution to investors as contemplated in the offering documents for the fund.
“In less than two years, Capital Square delivered its second opportunity zone development to the market, delivering much needed housing to the residents of Richmond,” said Whit Huffman, co-chief executive officer. “We identified the Scott’s Addition neighborhood as an ideal location for the development of quality multifamily projects in 2019 and are thrilled to see the proof of concept provided by the success of our first two fully stabilized projects, with the third on track for initial monetization next spring.”
VIV is the second of three Capital Square development projects that constitute Scott’s Collection, a group of boutique multifamily communities within Richmond’s thriving Scott’s Addition neighborhood. “INK,” the first of these projects, opened to residents in January of 2022 and achieved 100% occupancy shortly thereafter. INK and VIV are commanding some of the highest rents in the neighborhood.
The offering documents for CSRA Opportunity Zone Fund II, LLC contemplated a special distribution to investors upon stabilization and permanently financing the property. Capital Square is pleased to report that the special distribution was made in October, well in advance of the 2026 due date for investors’ taxes.
“Despite construction cost volatility and procurement challenges from the pandemic, Capital Square has now delivered two exceptional multifamily projects in just three years,” said Louis Rogers, founder and co-chief executive officer. “This is a superb result for the firm’s opportunity zone investors. Also, the new multifamily projects are helping to relieve the shortage of quality housing along with revitalizing the historic Scott’s Addition neighborhood.”
In addition to VIV and INK, Capital Square currently has three other multifamily developments in various stages of development in the Scott’s Addition opportunity zone that will deliver more than 770 luxury apartment homes in the coming years. These projects include GEM, the remaining Scott’s Collection multifamily project, which is currently pre-leasing and opening to residents later this year. Also included is The Otis, a 350-unit joint development with Greystar, that is expected to complete its first phase of construction during the fourth quarter of 2022, and 2950 W. Marshall Street, a mixed-use development that will deliver an additional 350 Class A apartment homes in 2025.
Since 2019, Capital Square has initiated over $480 million in total development value across seven opportunity zone developments in fast growing markets in the Southeast. Among these is CSRA Opportunity Zone Fund VII, LLC, which is currently raising equity from accredited investors to fund the development of 2950 W. Marshall Street.
Opportunity zones were created to stimulate long-term private investments in low-income urban and rural communities nationwide. Conceived as part of the Tax Cuts and Jobs Act of 2017, opportunity zone funds are intended to help foster economic growth by providing tax benefits to incentivize private investments in designated opportunity zones. The opportunity zone legislation is unique; it defers and excludes gains on the sale of any asset. Unlike Section 1031 of the Internal Revenue Code governing tax-deferred exchanges of real estate, the opportunity zone legislation applies to the sale of any asset that would generate a capital gain. The legislation defers capital gains taxes until 2026 on the asset that was sold and also excludes taxes on sale of the property developed by the opportunity zone fund after a ten-year holding period.
About Capital Square
Capital Square is a national real estate firm specializing in tax-advantaged real estate investments, including Delaware statutory trusts for Section 1031 exchanges, qualified opportunity zone funds for tax deferral and exclusion and a real estate investment trust (REIT). In recent years, the company has become an active developer of mixed-use multifamily properties in the Southeastern U.S., with eight current projects with a total development cost in excess of $600 million. Since 2012, Capital Square has completed more than $6.6 billion in transaction volume. Capital Square’s related entities provide a range of services, including due diligence, acquisition, loan sourcing, property/asset management and disposition, for a growing number of high-net-worth investors, private equity firms, family offices and institutional investors. Since 2017, Capital Square has been recognized by Inc. 5000 as one of the fastest growing companies in the nation for four consecutive years. In 2017, 2018 and 2020, the company was also ranked on Richmond BizSense’s list of fastest growing companies. Additionally, Capital Square was listed by Virginia Business on their “Best Places to Work in Virginia” report in 2019 and their “Fantastic 50” reports in 2019 and 2020. To learn more, visit www.CapitalSq.com.
Disclaimer: Securities offered through WealthForge Securities, LLC, Member FINRA/SIPC. Capital Square and WealthForge Securities, LLC are separate entities. There are material risks associated with investing in DST properties and real estate securities including illiquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, returns and appreciation are not guaranteed. IRC Section 1031 is a complex tax concept; consult your legal or tax professional regarding the specifics of your particular situation. This is not a solicitation or an offer to see any securities. Please read the Private Placement Memorandum (PPM) in its entirety, paying careful attention to the risk section prior to investing. Diversification does not guarantee profits or protect against losses. Private placements are speculative.
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