Cantor Fitzgerald and Silverstein Properties have closed the Cantor Silverstein Opportunity Zone Trust with approximately $530 million of equity raised.
Along with CSOZ Northern Boulevard and CSOZ 3.0 University Place co-investment funds, Cantor and Silverstein have now completed the fundraise for three Qualified Opportunity Zone Funds totaling approximately $600 million of equity.
Launched in mid-2019, CSOZ Trust was formed to invest in, develop, redevelop and manage a diversified portfolio of institutional quality commercial real estate assets with an emphasis on multifamily properties located in Qualified Opportunity Zones in the United States.
Trust Has Four Projects Underway
CSOZ Trust currently has four development projects underway and a fifth with an executed term sheet. 3.0 University Place is under construction with a planned 246,000 square foot, pre-certified LEED Platinum v4 life science enabled office building located in University City, Pa., in Philadelphia’s growing life science and gene and cell therapy ecosystems. And, [email protected]ows is a planned 334-unit, two-building multifamily property near the heart of Las Vegas’s medical district, downtown, and the Las Vegas strip.
Northern Boulevard is a planned 354-unit class A multifamily property located in the Queens neighborhood of Astoria, just across the East River from Midtown Manhattan, a hotbed of international culture and dining with an established and growing film industry.
Its 420 Carroll Street is a planned 360-unit Class A multifamily property on the east bank of the Gowanus Canal with waterfront access from two sides of the property and part of the larger Gowanus Rezoning District initiative. Yesler Terrace West is a planned 200-unit Class A multifamily property within walking distance of downtown Seattle in the Yesler Terrace Redevelopment Area with views of the Puget Sound.
Collectively, the planned portfolio totals 246,000 square feet of life science property and 1,248 multifamily units, 231 of which are targeted to be affordable, with an estimated total project cost of approximately $890 million.
Some of the OZ Hype ‘Has Faded’
Eli Randel, chief strategy officer, Crexi, tells GlobeSt.com that seasoned investors and operators like Cantor and Silverstein are capitalizing on opportunity zone incentives and providing affordable housing to underserved markets and communities.
“With that said, some of the opportunity zone sizzle and hype of a few years ago has mostly faded as the incentives and tax benefits remain secondary to sound fundamentals and execution for real estate development and investment. Whereas previously there were some less than experienced syndicators and operators raising funds for OZ deals, much of the hype has faded while the cream has risen to the top evidenced by this fund.”
Still, it is indisputable that investment has rushed into this tax vehicle. Reid Thomas, Chief Revenue Officer and Managing Director of JTC Americas, who oversees the day-to-day operations of the Specialty Financial Administration business unit, which includes the Opportunity Zones initiative, tells GlobeSt.com that across its client base specifically, it saw the rate of investment double last year. “In part we believe that is because our clients focus on providing the right combination of quality investment opportunities with projects that really can make a difference within communities in need.”
Directing Capital ‘Where It’s Needed Most’
Karlin Conklin, principal & co-president, Investors Management Group, tells GlobeSt.com that opportunity Zones and 1031 exchanges provide something critical: the freedom to direct capital to where it is needed most. “The magnitude of these tax incentives on local economies is underappreciated,” Conklin says.
As an example, consider how a vacant commercial space can lead to deterioration in the immediate landscape and possibly attract criminal activity to the site. Opportunity Zones and 1031 exchanges allow tax-advantaged investment opportunities for restoration and revitalization. The infusion of funds into one dilapidated property triggers a renovation cycle and fuels other neighborhood improvement projects.
When an apartment community is renovated, jobs are created for inspectors, contractors, lenders, designers, and more. Opportunity Zones and 1031 exchanges are responsible for generating billions of dollars annually in construction/retail sales and billions more in labor income.
“The backgrounds and motivations of every commercial real estate investor are different, but the one thing we all have in common is our desire to make a positive impact,” Conklin said.
“IMG’s investors tend to prefer traditional business plans over opportunity zone deals. They’re cautious of the inherent risks associated with owning/operating commercial real estate in economically challenged areas.
“Aside from personal investment location preferences, everyone seems to agree on the resilience of affordably priced apartments. Experts continue looking favorably on multifamily as a safe bet over other CRE asset classes.”
Meeting the Deadlines
Michael Greenwald MPPM, CPA, Partner, Friedman LLP, tells GlobeSt that the timing of the fund’s closing is related to OZ’s tax benefit window to take advantage of the 10% gain exclusion (actually a basis step-up) in the original Opportunity Zone legislation.
“Investors needed to invest their realized capital gains in a fund by [Dec. 31] to get the step-up in basis. There is still a significant benefit to investing in OZFs without the basis step-up since any appreciation on the investment will fully escape taxation if the investment is held for at least 10 years. That has always been the most significant benefit of Opportunity Zone Fund investments. Remember, too, that the original deferred capital gain, net of any basis step-up, will be recognized on Dec. 31, 2026.
Cantor and Silverstein have a longstanding relationship sharing a historical connection to the tragic events of 9/11 at the World Trade Center and played central roles in the recovery that followed. This joint venture partnership is a natural extension of the companies’ shared history and underscores both firms’ commitment to rebuilding.