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January 23, 2020

Waiting for an Opportunity Zone Project to Pencil
By Erika Morphy

Here's a question for you: If you could develop a project to a 5.75% yield on cost, would you do it at 5.825% if it were in an opportunity zone?

One investor's opinion is yes, but you'd probably be squinting. “It would be okay depending on who the investor was, what they wanted to do, but you ought not be doing a deal just because it's an opportunity zone deal,” according to PaulHughson, executive managing director at C-III Capital Partners. “It just has to make sense.”

Hughson made his comments at a recent symposium held by Transwestern and GlobeSt. Real Estate Forum in New York City. Other participants included top level executives from BentallGreenOak, AXA Equitable Life and Clarion Partners.

Now that the final regulations for opportunity zones have been put in place by the Treasury Department, investors have a clearer idea of what the related costs and returns will be. Interest in these projects remain high, albeit perhaps more muted than when the opportunity zones were first revealed two years ago. The difference between then and now, however, is that more investors have the necessary data to see if the projects will pencil. Read more.

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