Qualified Opportunity Funds Continue to Proliferate
February 9, 2022 | James Sprow | Blue Vault
In a recently updated roster of Qualified Opportunity Funds (QOFs) compiled by Blue Vault researchers, there were no fewer than 444 funds listed. The total offering sizes of these funds range from a high of $10 billion to a low of $100,000. The minimum investments required range from a low of $1,000 to a high of $25 million for those funds that specify their minimum investments allowed. The Blue Vault list includes a wide range of investment types specified by the QOFs, with the most commonly cited as Multifamily (128 funds), followed by Affordable Housing (103 funds). Other types of real estate that are cited by the funds include Industrial, Mixed-Use, Office, Business, Hospitality, Retail, Diversified and Other. Some of the more interesting investment types include Farmland, Hydroponic Farming, Hemp and Energy Development. The managers of these funds are located in at least 44 different states in the U.S.
There are several data sources available that catalog Qualified Opportunity Funds on the web. For example, www.opportunitydb.com, www.novoco.com, and www.qozmarketplace.com each have a list of QOFs that are updated, but none of these sites have the full list of funds that are in the Blue Vault list. For example, OpportunityDb tracks 307 funds with a total investment capacity of $64 billion as of February 1, 2022. The site has featured QOFs with fund overviews and, in some cases, webinars about the funds. The site has resources such as a “Beginner’s Guide to Opportunity Zones” and various maps showing the locations of Opportunity Zones. Novogradac is a company that provides a broad range of tax-related services, of which Opportunity Zone investments are just one area of their expertise. QOZMarketplace lists Qualified Opportunity Zones, which are census tracts in which QOFs can make tax deferred investments by state.
The most interesting aspect of QOFs and the most difficult to compile is the total amount of investments these funds are making and the total capital they are raising. Some QOF managers, such as Griffin Capital will put out press releases that describe their success in raising capital. For example, on January 12, 2022, Griffin Capital announced that the Griffin Capital Qualified Opportunity Zone Fund II, L.P. closed in the 4th quarter of 2021 after having successfully raised over $585 million of investor equity. This fund executed joint venture agreements with seven best-in-class institutional multifamily developers to construct twelve multifamily communities in eleven Qualified Opportunity Zones consisting of more than 4,000 residential units and total development cost exceeding $1.2 billion. Griffin Capital closed its first QOZ fund in September 2020.
Unlike Griffin Capital, most other managers of Qualified Opportunity Funds are not reporting their total fundraising or their investments in any consistent way. These funds do not file reports with the SEC and therefore, their activities are difficult to track. On January 13, 2022, Senator Ron Wyden (D-Oregon) sent letters to several Qualified Opportunity Funds seeking detailed information about their projects, including details such as a list of their Opportunity Zone projects, details of their tax benefits, timelines and more. Opportunity Zones were created under the Tax Cuts and Jobs Act of 2017, and since the initial authorizing legislation, different states have proposed or enacted legislation to require better reporting by QOFs, including timelines, estimates of jobs created as a result of the investment activity, and ongoing employment impacts. The fanfare that accompanied the legislation that authorized QOFs back in 2017 included estimates of how much new investment would be encouraged by QOFs. So far, any kind of accurate estimates as to the actual effects of the programs are hard to come by.
Sources: Blue Vault, www.opportunitydb.com, www.novoco.com, www.qozmarketplace.com, Griffin Capital
