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SkyBridge and EJF Capital launch Opportunity Zone REIT

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Alternative investment firm SkyBridge Capital (SkyBridge) and EJF Capital, a hedge fund and private equity fund manager, have launched the SkyBridge-EJF Opportunity Zone REIT (SOZ REIT).

The new REIT has a mandate to invest in US Treasury-certified Opportunity Zones, which are low-income communities where recycled capital gains can receive favourable tax treatment.

The offering is structured as a private, non-exchange-traded REIT available to accredited investors at a minimum investment of USD100,000 with 1099 tax reporting and quarterly distributions. SOZ REIT is expected to be diversified by geography, property type, and developer, focusing on both new development and redevelopment real estate projects. It began accepting investments from accredited investors as of 1 December 2018.
 
“We launched the SkyBridge-EJF Opportunity Zone REIT in response to demand from investors, who correctly see the OZ program as a chance to potentially generate attractive returns while having a positive societal impact,” says Anthony Scaramucci, founder and co-managing partner of SkyBridge Capital. “We worked with EJF to structure the product in an investor-friendly way to democratise access to this historic incentive.”
 
Opportunity Zones were conceived during the Obama administration and passed into law with bipartisan support as part of the Tax Cuts and Jobs Act of 2017. The program allows investors to diversify their investments and reinvest in America’s future while taking advantage of three powerful tax incentive structures, including:
 
• Deferral of capital gains: US taxpaying individuals or corporations with any capital gain – from the sale of any asset (eg stocks, real estate, a business) – can defer taxation on an unlimited amount of realised gains until year-end 2026 if the gain is reinvested within 180 days in a Qualified Opportunity Fund.
 
• Reduction of capital gains: Capital gain liabilities associated with the sale proceeds are reduced by 15 per cent if Opportunity Zone investments are held for at least seven years. Capital gains liabilities are reduced by 10 per cent if held for longer than five years and less than seven years.
 
• Tax exemption/exclusion: Investors pay no capital gains tax on new gains generated by a Qualified Opportunity Fund if held for more than 10 years.
 
“Our team’s expertise in real estate and related investments, along with our relationships with regional and community banks, gives us an edge in sourcing and developing investment opportunities across multifamily, industrial, and hospitality,” says Neal Wilson (pictured), Co-Founder and COO of EJF Capital. “We partnered with SkyBridge on opportunity zones because they understand the needs of mass affluent investors.”
 
To be eligible for the program, census tracts must have a 20 per cent poverty rate or median family income of less than 80 per cent of the surrounding area. Governors then chose 25 per cent of eligible tracts in their state to be certified by the Treasury Department as Opportunity Zones.

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