One of the largest pickleball facilities in the world is rising in Scottsdale, Arizona.
The facility is on land leased from the Salt River Pima-Maricopa Indian Community, located in an Opportunity Zone, a designation granted to distressed areas to attract investment.
Since its creation in President Donald Trump’s first term, the Opportunity Zone program — likely to continue during his second — has divided its close observers: Some tout it as a boon to poor and minority communities; others criticize it for funneling investment to luxury projects.
“I think that everybody tries to adapt the mission to what their point of view in the world is,” Chris Loeffler, CEO of Caliber, which is co-developing the racquet-sport venue, said.
Like it or not, the program’s key benefits expire in 2026. An extension could be included in a gargantuan spending plan — as of press time, Trump was still pushing for this “big, beautiful bill,” though its fate lies with Congress.
To get past the talking points, The Real Deal collected dispatches from the growing list of projects happening under the Qualified Opportunity Zone program, which was approved as part of the 2017 Tax Cuts and Jobs Act. The program incentivized multifamily development, provided a lifeline of capital for others and accelerated construction in places with potential, sources said. Renewal would preserve an option for drawing equity into projects as ground-up development continues to prove challenging in many markets. Builders and investors also talked about the program’s slow start, fast-approaching tax deferral deadline, myriad uncertainties, lack of reporting requirements and failure to solve many of a project’s problems — though some of these could be addressed in an updated version.
“This is something that [Trump] ran on, something that he’s been clear about,” Michael Episcope, co-founder of Origin Investments, which has raised close to $700 million across its three Opportunity Zone funds, said. “OZ was really his baby.”
“OZ was really his baby.”
The program allows investors to defer capital gains taxes if they park those profits in a fund that infuses money into one of the specified 8,700-plus census tracts. Any deferred gains can be used to invest in real estate, which must be “substantially improved,” or in start-up businesses.
Funds take equity stakes in projects within Opportunity Zones; their assets must consist almost entirely — 90 percent — of Opportunity Zone properties.
But in general, this financing doesn’t make or break a project, though it can be critical for newbie developers or encourage a developer to build in an area that can’t command high rents.
“A project that doesn’t work in the real world isn’t going to work just because it’s in an Opportunity Zone,” Erik Hayden, founder of Urban Catalyst, a San Jose-based developer and Opportunity Zone fund manager, said.
Loeffler said the program draws dormant capital off the sidelines and creates “economic activity out of thin air.” His company has invested in a mix of Opportunity Zone projects, including workforce and market-rate housing, hospitals and hotels.
“Some of our investors have concentrated stock positions in Apple or some stock they’ve owned for a long time,” he said. “Had the Opportunity Zone program not come along, would they have sold that stock, generated cash and invested it into a real estate fund? No, they would have just sat on the stock.”
Even the pickleball project indirectly helps the construction of affordable housing, he said: “It’s creating a new tax base that the community is then reinvesting into affordable housing.”
OZ 2.0
Legislation to reform the program has found bipartisan support over the years and could offer a blueprint for the Trump administration’s latest version.
One proposal, called the Opportunity Zones Transparency, Extension, and Improvement Act, sought to extend the program’s tax deferral date from the end of 2026 until 2028. This act would have also ramped up reporting requirements to track the long-term impact of the program and struck non-low-income census tracts from the program’s list, instead allowing states to pick impoverished areas to qualify.
Another, from 2019, would have designated areas hit by hurricanes, wildfires and other natural disasters as Opportunity Zones. (That measure didn’t gain much traction five years ago but could resurface in the debate over Los Angeles’ wildfire recovery.)
Some companies are so confident the program will be extended or made permanent that they are already launching new funds or preparing to do so, Urban Catalyst’s Hayden said.
He isn’t so bullish.
“I’d kind of like to see at least a draft before I think about creating another fund,” he said.
Complicating an assessment of the program — as well as its update — is how slowly it got moving. The Treasury Department took nearly two years to issue final rules for its rollout, which left a relatively small window for investors to take full advantage of the perks. In addition to tax deferrals, the program offers a discount on those deferred taxes, so long as those gains reach the five- or seven-year mark by 2026. But those who would invest in Opportunity Zone funds today can only defer their taxes until the end of 2026, and can’t qualify for a discount.
“I’d kind of like to see at least a draft before I think about creating another fund.”
“The benefits have decreased and no longer outweigh the risks as much as they used to,” Hayden said.
Investors who keep their gains in an Opportunity Zone fund for 10 or more years can permanently avoid paying taxes on gains springing from the sale or transfer of these investments.
A second factor is where the zones should be, given the criticism that they concentrated investment in select zones and encouraged luxury projects rather than lifting up chronically neglected communities.
Governors of each state chose the low-income zones based on the 2010 census, but there was scrutiny around how some of these areas made the cut. The next iteration of this program might create new zones and adjust existing ones. Existing projects in zones that are changed will be grandfathered under the old program, Episcope expects.
“The world has changed a lot in 15 years across these major cities,” he said.
He pointed to a site the company has in Nashville near the ritzy neighborhood known as the Gulch.
“You scratch your head and say, ‘How could this be a QZ site?’ Until you realize that Nashville, in 2008, 2009, when they were drawing these maps, was a very different city.”
Loeffler, the pickleball developer, believes the uncertainty of the program’s future and its limited runway stunted the amount of capital it has attracted.
“Financial advisors and all the folks who allocate capital got involved late in the program, and if they don’t see it get renewed, it’s unlikely that a financial advisory firm is going to build a practice around Opportunity Zones,” he said.
A renewal of the program would help give those firms confidence to build out Opportunity Zone practices.
“If history dictates, every time a tax program gets renewed after its first iteration, it tends to become part of the permanent landscape of the investment world,” he said.
— Kathryn Brenzel
A Chicago project that checks all the boxes
JC Griffin thinks the Opportunity Zone program is the key to getting his first major development off the ground.
The former Transwestern broker is in talks to buy a 6.5-acre site in Chicago’s Bronzeville neighborhood, which appears to be exactly the type of property that the program was designed for. He plans to build a 50-story, 370-unit residential tower.
But there’s no guarantee he will be able to bring his plan to fruition.
Griffin recently started his development firm Griffin Venture Group after working as a capital markets broker for years. If he secures financing for his purchase, it will be his first major foray into development — not just an Opportunity Zone win, but also a career high.
During the Great Migration in the early to mid-1900s, Bronzeville was a hub for Black population growth. But the neighborhood later suffered from years of systemic disinvestment along with much of Chicago’s South Side.
As a result, Bronzeville lost more than 75 percent of its population between 1950 and 2000, according to the United Way of Metro Chicago.
Developers and investors have now rediscovered the lakefront community: Adjacent to the property that Griffin is eyeing, the city of Chicago and a group led by local developer Scott Goodman are in the early stages of a $4 billion megadevelopment known as Bronzeville Lakefront.
In a neighborhood like this one, in the early stages of redevelopment, the Opportunity Zone incentives can be the difference between a project penciling out and one that gets sent back to the drawing board, Griffin said.
“Going into these blighted communities requires way more than just a tax incentive. It requires the community itself to be ripe for investment,” he said. “There are some foundational components to Bronzeville that are attractive to investors in and of itself, without the tax incentive.”
Griffin thinks a renewed program would influence his and other Black developers’ plans for the South Side.
“If there are opportunities for Black developers to emerge in greater numbers, I think they’re going to come most likely for those that have some holdings in real estate,” he said. “If they can convert those holdings into equity stakes in projects, then that carries potential.”
At least one major developer in Chicago is so far voicing support for Griffin’s plans: Capri Investment Group’s Quintin Primo, who wouldn’t comment on whether he was involved in the financing of Griffin’s potential land acquisition.
“Capri is generally supportive of [Griffin Venture Group’s] efforts in the Bronzeville community,” Primo, who is also Black, said. “More investors of color need to be engaged in that community and across the city of Chicago.”
—Emma Whalen
‘A little more financeable’ in South Florida
In 2021, developer LD&D’s Miami apartment project got a boost with a $38 million loan.
But it wasn’t enough, leaving a 50 percent construction financing gap for the 20-story, 224-unit Wynwood Haus in the Arts & Entertainment District. That’s where a Qualified Opportunity Zone Fund came in.
“It definitely was a big factor in, I’d say, in getting the project off the ground,” Diego Bonet, of LD&D, said. “It was a benefit to be in an Opportunity Zone.”
After Florida designated 427 tracts as OZs in 2018, LD&D jumped on the program with several projects, seizing on two distinct incentives: securing equity for projects from others’ OZ funds and deferring taxes on its capital gains by investing them in its projects.
For Wynwood Haus, the OZ financing came from Bridge Investment Group’s Qualified Opportunity Zone Fund. (Multiple investors can put money in these funds.) The Salt Lake City, Utah-based firm partnered with Miami-based LD&D and Coral Gables-based Black Salmon on the project, which was completed last year. As the OZ financier, Bridge is likely to remain invested in Wynwood Haus for 10 years, exempting it from taxes on its capital gains on the building. LD&D, which also put in equity, though not capital gains, has the option to divest sooner.
After Wynwood Haus, much of LD&D’s activity has been under the federal program, though the firm doesn’t have a hard rule to only focus on OZ projects.
“If we were looking at two sites and one happened to be in an Opportunity Zone and then the other one wasn’t, it would be an extra point in favor of the site within the Opportunity Zone,” Bonet, who leads LD&D with his brother Alejandro, said. “It makes a project a little more financeable.”
In downtown Tampa, LD&D bankrolled 10 percent of a planned $200 million 28-story tower with 369 apartments and 178 hotel keys with “a few million” dollars of its own capital gains, Bonet said. This will waive all taxes on LD&D’s capital gains from the project over the firm’s planned 10-year hold.
The rest of the financing will be 60 percent construction loan and 30 percent equity, which could come from others’ Qualified Opportunity Zone Funds, Bonet said. TRD
— Lidia Dinkova
The Miami developers hoping for OZ renewal — and expansion
Developer Neil Fairman says he and his team planning the Magic City Innovation District, an 8.5-million-square-foot mixed-use complex in Miami’s Little Haiti, are late to the Opportunity Zone game.
After scoring approval in 2019, the construction start was delayed by litigation and infrastructure work, a heavy lift that included platting, undergrounding utilities and moving a street to accommodate a future passenger train station.
The developers — a partnership among Miami-based Plaza Equity, of which Fairman is chairman, Cirque du Soleil co-founder Guy Laliberté’s Montreal-based Lune Rouge and Bob Zangrillo’s Miami-based Dragon Global — are in talks for financing for the first tower, 25-story Sixty Uptown Magic City with 349 apartments.
Since late January, they have been searching for about $40 million in equity.
“If you started in 2018, it would have been very beneficial.”
“There is probably a 30 percent chance that it would come from Opportunity Zone funds and 70 percent chance that it would be private equity or private office,” Fairman said. “That’s because a lot of these groups don’t have capital gains to invest and other investors don’t want to keep the investment for a full 10 years.”
Because investors who put their capital gains in Qualified Opportunity Zone Funds now will only get a tax deferral until next year, the appetite has dried up.
“Previously, if you started in 2018, it would have been very beneficial. You would have had five or six years to defer your taxes,” Fairman said.
He is part of a crop of developers who hope the Trump administration extends the program and loosens it to allow investors with any funds, not just capital gains, to put them toward Opportunity Zone projects. Under this structure, investors won’t get to defer capital gains taxes but will get a total tax exemption.
“If you could use tax-paid funds and that would not be taxed if you kept the investment over 10 years, that would really help the program a great deal,” Fairman said. “I think the program would just go very, very well if it wasn’t restricted to just investing money that’s capital gains. It would be very easy to deploy the capital.”
— Lidia Dinkova
A real-time control group in Brooklyn
Gowanus, home to a canal once called a “stinking, cancerous sore,” became a land of opportunity in 2021.
Several forces were at play. The City Council had rezoned the Brooklyn neighborhood, following nearly a decade of efforts to do so, paving the way for an estimated 8,500 new housing units. Developers scrambled to get their projects off the ground, racing the clock to qualify for a critical property tax break that was expiring in June 2022.
Before the rezoning was finalized, the state also designated a section of the neighborhood east of the Gowanus Canal as an Opportunity Zone. It was one of 514 census tracts selected by New York’s economic development arm.
JLL’s Nicco Lupo watched how investment played out differently on the east and west sides of the waterway.
“The deals on the west side of the canal, they kind of trickled,” he said. “Whereas on the east side, where there’s Opportunity Zone capital, we did eight transactions in the span of 12 months. Every LP equity investor that was brought into those deals that were op zones were unique.”
Lupo works on behalf of developers to raise equity capital and construction debt. He has done Opportunity Zone deals throughout the U.S. but was most active in Gowanus because of the rezoning. He said the firm has worked on more than 20 capital transactions in the Brooklyn neighborhood, with a little more than half involving Opportunity Zones.
One of those projects was Avery Hall’s 544 Carroll Street. The Brooklyn-based firm, founded in 2013, began acquiring property in 2019 at the southwest corner of Carroll Street and Fourth Avenue, until the firm assembled a site that could accommodate a 133-unit apartment building.
The company formed a joint venture with Declaration and Bridge Investment Group, which formed an Opportunity Zone Fund to invest in the project. Avery Hall co-founders Brian Ezra and Avi Fisher believe the redevelopment of Gowanus would have happened without the Opportunity Zone program, given the rezoning, but not at such an accelerated pace.
“It wouldn’t have gone as fast,” Fisher said. “It’s an entire neighborhood that’s being redeveloped, and that takes a huge amount of capital.”
Some of the sites also weren’t shovel ready. Given the neighborhood’s industrial history, many project sites also have to be remediated because of years of contamination.
Many of Avery Hall’s projects “happen to fall” in areas designated as Opportunity Zones, Fisher said.
“For us, those were nice-to-have features, more so than anything,” he said. “It will allow us to maintain ownership of these projects for a very long time.”
Avery Hall is focused on large-scale residential development. The company has at least two other projects in Gowanus, including 655 Union Street and 499 President Street, both multifamily developments, each with 25 percent of units set aside as affordable housing. The company is also active in North Carolina, where it has a 383-unit residential building rising in the North Davidson, or NoDa, section of Charlotte.
—Kathryn Brenzel
A city zoned for opportunity in San Jose
In Erik Hayden’s own words, the transformation of a 12-screen movie theater into office space in downtown San Jose is a “failure.”
“We’ve leased most of the ground-floor retail, but we don’t have an office tenant,” he said of the project, dubbed Paseo.
Hayden founded his firm, Urban Catalyst, in August 2018, in response to the creation of the Opportunity Zone program. It raised nearly $300 million across two funds and has eight projects tied to them, all in San Jose, California, which is home to 11 different Opportunity Zones.
At Paseo, Urban Catalyst has reached an agreement with its lender to move forward in a few years, find a tenant and try to make the project as valuable as possible. The company has another site slated for office, called the Fountain Alley Building, but Hayden doesn’t think it will be built anytime within the next five to 10 years.
“The office market is just so destroyed around here,” he said.
But because the city is so full of OZs, there is opportunity elsewhere, meaning Urban Catalyst can turn to other asset classes to deploy its funding.
The firm is close to opening a 165-key hotel, called Keystone, and is working on senior and student housing projects.
“The office market is just so destroyed around here.”
Because of the state of the office market, the company is pivoting at another one of its sites, known as Icon, where it had originally planned to build office space. The firm is working to get approval from the city to build a 650-unit residential building there instead. Nearby, at a project named Echo, it is planning 388 residential units.
Hayden hopes that an extension of the program isn’t accompanied by the removal of Opportunity Zones in San Jose, he said. He still sees possibility in the continued pivot away from office.
“Ground-up development has been hard enough the last six years,” he said. “Especially in San Jose, we need housing so bad, and we need housing of all kinds. Anything that the government can do to help the creation of housing would be important.”
—Kathryn Brenzel
OZ Funds rain money on LA builder
Ryan Hekmat’s Uncommon Developers has other developers throwing money at his projects — via the Opportunity Zone program.
The co-managing partner of Bedrock Properties — parent to Uncommon Developers and Uncommon Builders — is juggling multiple projects that have tapped the program for its benefits, using a fund created in-house.
That has made Hekmat’s pitch to investors easy: Put your capital gains to work, he tells them.
“Because we’re so focused on how we build and the cost of what we build, people are coming to us,” Hekmat said of the fund’s investor makeup.
“Some of them are developers themselves because they can’t build it for what we build it for,” he added.
Uncommon’s current OZ development pipeline may warrant the chest pounding.
The projects include a 100-percent-affordable, 53-unit apartment building at 1305 North Cherokee Avenue in Hollywood. There’s also 1017 North Berendo Street in East Hollywood, a 128-unit apartment building with 759 square feet of commercial space. The entirely affordable community includes 99 units set aside for low-income households, 26 for moderate income, two for very low income and one manager residence.
The largest of the projects is the 405-unit apartment community at 6728 Sepulveda Boulevard in North Hills, with 41 apartments set aside for extremely low-income residents.
All three developments are funded entirely with OZ financing, and although Hekmat declined to share project costs, he said the program has been integral.
“If there’s anything I would ask for, it would be to grow the program.”
“The funding would have been more difficult to get had we not had Opportunity Zone financing,” Hekmat said. “But we underwrote it, and it pencils out very well either way. We don’t do projects unless they pencil out well. But, because of the Opportunity Zone program, the financing was more attractive.”
He also believes the program has put more money into areas long shortchanged on funding for education and growth.
“In putting my real estate developer hat aside [and] putting my career aside, just on a humanitarian level, I believe this program absolutely needs to be extended,” he said. “It’s been far too long that this country has ignored the reinvestment and the growth of the youth in these particular neighborhoods. … If there’s anything I would ask for, it would be to grow the program.”
Instead of a deferral, absolving the tax completely could further spur development, he suggested.
More Uncommon projects are slated, using the OZ fund, although Hekmat said it was too soon to discuss specifics.
In the meantime, he’s more than happy to hand his business card over to other OZ funds interested in working with Uncommon.
“We’re not against it; we love it,” he said of outside funds. “I just haven’t had the need to do it.”
—Kari Hamanaka
Funding luxury historical preservation in a Texas resort town
Opportunity flowed in the mineral waters of Mineral Wells 100 years ago; now you have to dig through federal tax incentives for it.
The former resort town 80 miles west of Dallas lost its luster in the 1970s, which saw the closure of the landmark Baker Hotel and the deactivation of local military base Fort Wolters.
But in the past two decades, tenacious natives have been hellbent on shaking the town’s unflattering nickname “Miserable Wells,” hanging the revival on its wellness-centered history and proximity to some of North Texas’ most popular outdoor recreation spots: Palo Pinto Mountains State Park and Possum Kingdom Lake.
Designating three of the city’s five census tracts Opportunity Zones helped these revitalizers open dozens of new businesses in Mineral Wells’ quaint downtown. The designation also energized them in the Sisyphean task of returning the town’s famous eyesore to its former glory.
The Baker Hotel, an homage to Spanish Colonial Revival architecture, rises 14 stories and is visible from miles away in the rolling hills of Palo Pinto County, Texas. In the 1930s, celebrities like Judy Garland and Clark Gable flocked to the hotel famous for its healing waters.
It’s sat empty since 1972. Decades of vacancy, aided by weather and vandalism, decayed the property.
A group led by Southlake-based developer Laird Fairchild of Hunter Chase Capital Partners set its sights on the restoration starting in 2008 and finally purchased the derelict hotel in 2019 to much fanfare. The project (and its successful TikTok account) landed write-ups in most statewide publications and even the New York Times.
The developers have married Opportunity Zone funding with historic tax credits, and, in 2014, voters opted to allocate a portion of the city’s sales tax to the restoration project. The programs provide a boon to the project’s challenging financials, but they also put in place a number of strict guidelines for renovating the property according to its historical construction.
In 2019, the cost of the restoration was pegged at $65 million.
“If it were not in the Opportunity Zone, I don’t know that we would have been able to come as far as we have,” Cody Jordan, a managing partner of the project and member of the development team, said.
Though the plan for luxury hospitality puts the Baker Hotel in for criticism from OZ naysayers, the sales tax and hotel occupancy tax revenue from the hotel could help revive the town — eventually. Originally, its restoration was planned to wrap up by 2022 but is now expected by 2028.
—Jess Hardin