Toro Real Estate Partners Makes First Opportunity Zone Acquisition
Toro Real Estate Partners, a private real estate investment firm, has purchased a vacant 121-unit multifamily property located in a qualified opportunity zone in Columbus, Ohio for an undisclosed amount.
Toro Real Estate Partners, a private real estate investment firm, has purchased a vacant 121-unit multifamily property located in a qualified opportunity zone in Columbus, Ohio for an undisclosed amount.
The new opportunity zone program was established as part of the 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 qualified opportunity zones.
“We have been closely following the developing possibilities that surround opportunity zones and have been eager, and yet patient, to find the perfect first deal for us to undertake,” said Toro co-founder John Cohen. “We feel that there is going to be an incredible opportunity in this space over the next 3-4 years and we are incredibly happy that we were able to secure this deal before the end of the 2018 calendar year.”
The company noted that their total capitalization is well below replacement cost and an identical building sold for a “significant premium” less than six months ago.
“We’ve really stress tested this deal because of the newness of the rules and regulations surrounding the opportunity zones,” said co-founder Don DiRenzo. “We wanted to be ultra-comfortable with this deal should we be at point in the cycle where things might start to go in a different direction.”
He added, “We feel that we can spend quality capital to reposition this asset, and it is going to be an incredible vehicle to hold for 10+ years and take full advantage of all the benefits opportunity zones have to offer our investors.”
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.
“We are continuing to explore other opportunities that can capitalize on the benefits that opportunity zones have to offer and are looking to have a comprehensive plan in place for the first quarter of 2019,” said Cohen. “With the ability to develop new properties or re-develop/overhaul existing properties, but with a longer-term horizon, we feel it fits in better with our companies’ priorities and return expectations, rather than the typical short-term timeframes expected with these types of deals.”
Toro Real Estate Partners focuses on multifamily acquisitions in the Southeast and Midwest and has purchased 14 properties since 2015.
