Impact of new Real Estate Investment ‘Opportunity’

Mueller Prost Panel Features Projections on Impact of new Real Estate Investment ‘Opportunity’


Although they’ve not yet been in existence long enough to determine their true impact upon commercial real estate investment, opportunity zones – a byproduct of the Tax Cuts and Jobs Act of 2017 – are expected to exponentially increase the amount of money flowing into real property investments known as opportunity funds.

In short, opportunity funds – the investment vehicles associated with these zones – offer investors tax-friendly deferral options connected with real property investments in shovel-ready projects within designated project areas, those designed by the Census Bureau as low-income areas. St. Louis touts 41 of Missouri’s 161 opportunity zones. St. Louis’ zones are in downtown, midtown, north St. Louis City and elsewhere.

“No one has seen the development of an opportunity zone (investment) go through a real estate cycle yet – it’s too new,” said Michael Williams, director of investment relations at Dexter, MO-based Sixty West, a commercial real estate investment firm. Williams was one of several panelists who weighed in on the investment vehicle at St. Louis-based Mueller Prost CPAs + Business Advisors’ economic forecast, updates affecting financial statements and new tax laws update on Jan. 23.

Rachel Orr, an associate at Armstrong Teasdale, agreed with Williams. She said that since, on average, $8 million in private investment is generated for every $1 million in new markets tax credits – a similar real estate investment vehicle launched in 2000 for which investors receive tax credits against their federal income tax liability – time will tell what the impact is with opportunity funds. “These are the same areas that Congress has designated as new markets tax credits,” said Orr.

Teri Samples, CPA, partner and director of real estate and construction at Mueller Prost, said more than 8,700 opportunity zones currently exist in the U.S., Puerto Rico and Guam.

“Opportunity zones afford investors the chance to defer capital gains on the sale of any capital asset by investing those gains in a qualified opportunity fund,” Samples said. “These original taxes can potentially be deferred until 2026 or upon the sale of the new investment, whichever is earlier. In addition to the deferral, this original capital gains tax is reduced by up to 15 percent if held more than seven years. And when held long enough (10 years), appreciation from the new investment can be realized tax free.”