Origin Investments, a Chicago-based private equity firm, has received $105 million in commitments from 425 investors for its new qualified opportunity zone fund within 17 hours of its launch on Friday November 14.
The Origin QOZ Fund is a growth equity fund with a $50,000 minimum investment. The company currently has three multifamily opportunity zone projects under contract including one in Denver and two in Charlotte, North Carolina.
The opportunity zone program was established as part of the U.S. Tax Cuts and Jobs Act of 2017 and offers capital gains tax relief for new investments in certain economically distressed areas nationwide that are designated as opportunity zones. U.S. Secretary of the Treasury Steven Mnuchin has suggested that as much as $100 billion could flow into opportunity zones.
According to the opportunity zone proposal, investors can defer taxes until 2026 for capital gains from prior investments, if those gains are redeployed into opportunity zone funds. For opportunity zone investments held for five years, taxpayers can eliminate 10 percent of the deferred gain. For investments held for seven years or longer, 15 percent of the deferred gain can be eliminated. Additionally, investors that hold their opportunity zone investments for at least 10 years are exempt from paying capital gains taxes on that investment.
“The QOZ tax benefit doesn’t change the fundamentals of sound real estate investing,” said Origin cofounder Michael Episcope. “These projects need to pass the same scrutiny as developments in non-QOZ areas, and be able to produce viable, risk-adjusted returns. All opportunities should be evaluated on their strength as stand-alone investments and the ability of the manager to perform.”
“Even though the U.S. has over 8,700 QOZs, 90 percent of them aren’t ready for redevelopment capital today, he added. “That makes it difficult for fund managers to find or develop viable projects.”
Origin Investments, founded by Michael Episcope and David Scherer, currently owns and manages multifamily projects in Atlanta, Chicago, Dallas, Denver, Houston, Austin, Charlotte and Raleigh-Durham, and is developing multifamily projects in Denver, Atlanta and Austin. Origin Investments serves more than 500 investors and manages close to $1 billion in real estate.