Qualified opportunity zone funds raised $2.2 billion during the third quarter of 2022, bringing the aggregate total raise to $32.7 billion, as of Sept. 30, 2022, according to a semiannual opportunity zone investment report released by Novogradac, a national professional services organization that provides accounting, valuation, and consulting services.
While the quarterly equity pace has slowed, OZ funds tracked by Novogradac remain on pace to raise more than $10 billion in 2022, which would break the record annual raise of $9.24 billion in 2021.
The Novogradac report is based on a rolling collection of data from qualified opportunity zone funds (QOFs) that voluntarily provide such information, including to the Securities and Exchange Commission, and does not include proprietary or private funds owned and managed by their principal investors.
As of mid-2022, the 1,613 funds tracked by Novogradac (of which 1,231 report a specific fundraising amount) raised $32.69 billion in equity since inception. However, the actual total is “likely three to four times greater” than the reported amount since Novogradac does not track proprietary or private funds that are owned and managed by their principal investors.
Novogradac also said that residential development continues to be the leading area of investment for opportunity zone funds, reporting nearly $5.9 billion in investment.
Most qualified opportunity zone fund investment, 69.3% of all equity tracked, has been raised by funds that target one or multiple specific cities. The largest in Novogradac’s survey, those that have raised $100 million or more in equity, have raised 61.0% of all reported equity, although they make up just 5.3% of the number that have raised equity. For qualified opportunity zones, 0.7% have raised $500 million or more, but that minority has raised 24.6% of all equity. Meanwhile, the smallest, those that have raised less than $10 million, make up 65.0% of all the qualified opportunity zones and have raised just 6.6% of equity.
The opportunity zone program was created to spur investments in distressed communities nationwide by offering potentially significant tax benefits to investors, particularly those who hold their investments long term. The 8,764 designated opportunity zone tracts are home to more than 10 percent of the nation’s population.