LA: Land of Opportunity

Posted on January 29, 2019

We mentioned it in January and this month we want to take you a little deeper. The Opportunity Zone Program is the new economic tax incentive program that, in short, offers tax breaks and other incentives to developers with projects aimed at improving low-income neighborhoods. These savings can then be passed back to investor partners, sweetening their return. Economic Innovation Group estimates that around $6 Trillion USD in unrealized capital gains is available for investment into Opportunity Zones. If that doesn’t wet your palate, I don’t know what will.

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According to an analysis by our contacts over at The Real Deal, in Los Angeles more than a quarter of upcoming residential units and nearly half of commercial space lies in Opportunity Zones. This is based on construction plans filed with the Department of City Planning from October 2017 through September 2018.

The Brookings Institution conducted a study that looked at the effects of states being able to nominate designated Opportunity Zone areas, and California was among the standout states in choosing a vast array of areas that are particularly distressed. California’s program provides exceptions from the strict poverty or income thresholds for less-populous neighborhoods or for certain areas that adjoin qualifying low-income neighborhoods, creating even further opportunity and supply.

While many developers, attorneys and advisory firms are sprinting to set up practices that can tap into the new well of investor money, “we are comfortable in a lane we niched down on several years ago”, says Gidi Cohen, CGI CEO. “We are happy to see incentive programs show up to the game, not because of the increased return or improved ease of financing, but because more people who live in low income and forgotten inner-city corners, can now get the attention, services and living conditions they need and deserve.”

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