Opportunity Zone investments have continued to generate interest, despite the expiration of some tax-deferred benefits. According to a recent report by Novogradac, Qualified Opportunity Funds (QOFs) raised $3.53 billion in equity during 2023, bringing the total amount of Qualified Opportunity Zone (QOZ) equity raised to $37.6 billion.
The figures reported by Novogradac do not include private funds operated by their principal investors, suggesting that the actual QOZ investment may be even higher than reported.
In Q4 2023 alone, QOFs raised $414 million in equity following strong performances in previous quarters. However, this annual amount was lower compared to the previous three years which saw totals exceeding $9 billion.
The slowdown can be attributed partly to economic conditions such as decreased multifamily housing construction and low annualized figures for permits since 2017.
Novogradac gathers data from public sources including Security and Exchange Commission filings and press releases on a rolling basis from reporting QOFs – investment vehicles used for capital gains deferral purposes.
RealPage reports that approximately 80% of known QOF investments are focused on developments with multifamily housing components. The number of apartments built within designated opportunity zones has tripled between 2016-2022 and doubled again in 2023 according to RealPage data cited by Novogradac. Additionally,income-generating properties made up about one-fifth of all delivered apartments last year were located within an opportunity zone; however,the anticipated slowdown may impact late-2024 or early-2025 deliveries accordingto experts at Novograda c.
Furthermore,Novograda c’s report also revealed:
-Qualified Opportunity Funds with some focus on residential property accounted for over$30billioninraisedequity,$8billionofwhichwas solely dedicatedtoresidentialdevelopment
-QualifiedOpportunityFundswithsomefocusoncommercialinvestmentraisedover$24billionin equity,with$2.20billioncomingfromfundsfocusedsolelyoncommercialactivity
In summary,despite the expiration of certain tax benefits,the interest in Opportunity Zone investments remains strong with QOFs raising a total of $37 billion in equity as reported by Novograda c.
