What are opportunity zones ?
Established in the Tax Cuts and Jobs Act of 2017, Opportunity Zones are a new community development program to encourage long-term investments in low-income urban and rural communities nationwide. Investors receive tax benefits similar to a 1031 real estate exchange but applied to all types of capital gains. Developers and communities get access to capital that otherwise would not be available. Opportunity zones will help unleash investment in low-income communities throughout the country.
How does the Tax Savings work by investing in Opportunity Zones?
An investor who has a capital gain by selling an asset like stocks or real estate can receive tax benefits if they roll that gain into an Opportunity Fund within 180 days. There are three advantages to rolling over your gains into an Opportunity Fund:
Roll Capital Gain
Tax Free Growth
*Of an opportunity zone investment
Illustration Example of an Opportunity Zone Investment
DAY OAssets can be any assets capable of generating capital gains. Examples include: securities, partnership interests and real property +
DAY 0-180In contrast to 1031 exchange: Investor has no restrictions on the use of the $50M basis in the original investment. The investment does not need to be like-for-like. Capital gain from stoke can be invested in a QOF focused on real estate investments. +
DAY 0 - YEAR 5An investor can sell interest in a QOF while maintaining tax benefits provided that the process are reinvested within the same or different QOF within 180 days. +
YEAR 5 - YEAR 7If our investor sold the $100M QOF investment after having held it for five to seven years, capital gains tax would only be assessed on $90M of the original gain plus capital gain on any additional gain from the QOF investment itself +
YEAR 7 - YEAR 10Investor’s capital gains tax would only be assessed on $85M of the original gain plus capital gain on any additional gain from the QOF investment itself. +
Only gains readded and reinvested in opportunity zone funds before December 31, 2019 and December 31, 2021 are eligible for 15% and 10% original capital gains tax reduction benefits , respectively , provided for under the program.
HARD ASSESSMENT DATE
The hard date creates an incentive for investors to make immediate use of the program so as to maximize capital gains deferral and reduction benefits +
YEAR 10 ONWARDFor example, if the $100M QOF investment was made in 2019 and is sold in 2029 (10 years later) for $200M, then the investor would not have the pay capital gains on the $100 million on QOF investment gain, saving -$20M or adding 0.2x to the investment multiple.
- The investor would also have deferred the -$20M in original capital gain due from stock sale from 2019 to 2026 and reduced the tax liability by 15% or -$3M
- Total value enhancement from the use of the program would amount to $23M or an additional 0.23x multiple and further value from tax deferral
If you have a $1M capital gain through stock, bond, business or property sale. Instead of paying $238,000 in taxes, you invest $1M Splitting basis and gains using qualified Opportunity funds. into the Activated Capital Opportunity Zone Fund that is focused on double bottom line returns. Let’s say in 2028, the Fund returns almost $2M including the original investment considering 8% ROI. No taxes are due on the $1M gain. You'll only pay $202,300 in deferred capital gains on first initial sale. Below is the comparison calculation that shows this scenarios*The expected annual return is used only as an example and is not intended to represent expected performance of any specific investment.
How do I Invest in opportunity zones ?
You can invest through a Qualified Opportunity Fund which provides a tax incentive for investors to re-invest unrealized capital gains, from any source, into a fund that is dedicated to making equity investments in businesses, real estate, and other business assets located in Opportunity Zones.
What is Activated capital Opportunity Fund?
Activated capital opportunity fund was created by a team of experienced real estate professionals, investors and developers to professionally invest unrealized gains of investors to generate double bottom line - both socially and financially. The fund will distribute capital to accelerate innovation in a way that positively affects a city's social impact. We are experts in managing our investments, executing real estate projects, and providing transparency through the process.
The driving force for the fund is to deliver top-tier returns (First Bottom Line), while working with communities to enable social, environmental and economic improvement (Second Bottom Line).
How is Activated capital different to others opportunity zones funds?
Early Capital Deployment
We look for projects that are shovel ready and deals where capital can be deployed quickly and effortlessly
Activated capital main focus area are single family housing, multi-family housing, commercial real estate like hospitality , co-working spaces, storage etc. The focus is to minimize the risk of investment while maximizing the returns
Activated capital diversified its portfolio by investing in different geographical areas of opportunity zones to minimize risk
Equity alignment and co-investment from all parties
Substantial alignment from operators, tenants, managers and investors safeguard our capital preservation approach - aligning with our three C’s: Character, Commitment and Capacity.
Substantial expertise and local teams
The Activated Capital team has substantial experience in real estate acquisitions, ownership and structured investments in emerging communities and have verified experienced local team members to work on projects
Custom Investment Strategy
We work very closely with clients who want custom solutions for the investment in terms of acquiring a particular asset
Activated Capital has committed to measuring the impact of the social and economic metrics and has created its own Opportunity Zone Scoring rating system
What are the steps to invest my unrealized capital gains with Activated Capital?
Please contact us at email@example.com with your details, amount you are interested in investing and any other information that would be helpful to understand your interest
One of our investment team members will get back to you shortly and discuss various options
Once confirmed the interest, we’ll send subscription documents to sign and get the invest check
We’ll activate your investment in the Fund on Day 1, at this time our investors will receive a fully completed IRS Form 8949 in order to file to the appropriate tax authorities.
The Fund will deploy capital in our shovel-ready fully vetted projects and projects distributing cash flow via a preferred return within 180 days.