Capital Square Completes Lease-Up of Virginia OZ Development, Pays Special Distribution to Investors

Capital Square, a sponsor of tax-advantaged real estate investments and developer of multifamily communities, announced the completion of initial lease-up and stabilization of “GEM,” a 71-unit, luxury multifamily development owned by CSRA Opportunity Zone Fund III, LLC located in Richmond, Virginia’s Scott’s Addition qualified opportunity zone.

In addition, Capital Square secured permanent financing on the property and has made a special distribution to investors in the fund. The company says the special distribution is intended to provide investors with funds to pay their taxes due in 2026 under the opportunity zone legislation. The amount of the distribution was not disclosed.

“By combining tax deferral and exclusion from the sale of any asset, the opportunity zone legislation is one of the most favorable tax provisions in the history of the U.S. tax code,” said Louis Rogers, founder and co-chief executive officer of Capital Square. “But there is a flaw in the opportunity zone legislation ─ the deferred taxes are due in 2026 but there is no source of payment. Capital Square has solved this issue by making special distributions to investors when the opportunity zone properties are permanently financed. And the icing on the cake ─ the special distributions have been made many years in advance of the 2026 tax due date.”

Located at 3001 W. Leigh St., GEM is a ground-up development that includes a five-story, luxury multifamily community with 71 units, co-working space, gym, amenity deck, a dog washing station, market-leading unit fixtures and finishes. Additionally, Capital Square says the ground-floor restaurant space is leased to Lillian Oyster Hall, a concept from the chefs at the award-winning Scott’s Addition restaurant Longoven. Construction on the property began in May 2021 and was completed in November 2022. With the project stabilized, Capital Square closed permanent financing with a long-term loan made by Affinius Capital (formerly known as USAA Life Insurance Company).

“Richmond’s Scott’s Addition neighborhood has undergone a true transformation in recent years, thanks in part to Capital Square’s opportunity zone funds, which have financed significant new residential and retail development that have contributed to the revitalization of the area into one of the city’s most popular communities,” said Whit Huffman, co-chief executive officer. “The success of GEM and our other developments within the Scott’s Addition opportunity zone have helped to reinvigorate a previously underutilized and overlooked part of Richmond while providing significant benefits to the investors in these funds.”

GEM is the third and final development project that constitutes Capital Square’s Scott’s Collection, a group of boutique multifamily communities within Richmond’s Scott’s Addition neighborhood. “INK,” the first of these projects, opened to residents in January of 2022 and achieved 100% occupancy shortly thereafter, according to Capital Square. “VIV,” the second of these projects, opened to residents in June 2022 and achieved 95% occupancy within three months.

In addition to Scott’s Collection, Capital Square is constructing a 352-unit, Class A mixed-use multifamily community in Richmond’s Scott’s Addition qualified opportunity zone. Development of 2950 W. Marshall Street is being funded with proceeds from Capital Square’s seventh qualified opportunity zone fund, CSRA Opportunity Zone Fund VII LLC, which is currently raising equity from accredited investors.

Capital Square also serves as the co-developer, in a joint venture with Greystar Real Estate Partners, of The Otis, a 350-unit multifamily community with ground floor retail space also located within Richmond’s Scott’s Addition opportunity zone. Construction of The Otis was completed earlier this year and is currently in lease-up.

As of year-end 2022, Capital Square has sponsored 132 investment offerings comprised of 165 individual properties for the firm’s DST programs, qualified opportunity zone funds and the REIT.

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