Opportunity Zone focus behind creation of new Clearwater company

A new Clearwater company focused on Opportunity Zones is eyeing investments in projects throughout the Tampa-St. Petersburg metro area.

The new company, The Gateway Partners, was formed earlier this month in a collaboration between Opp Zone Capital, a private equity firm in Clearwater, and Sixty West Development, a Missouri-based firm specializing in developments that generate tax incentives.

Edmon Rakipi

“When we met Sixty West, they were putting together new developments, a lot of real estate and also some operating businesses, and we were building the back office for our own funds,” said Edmon Rakipi, director of investments at Opp Zone Capital. “We met and they said we have projects galore but not much of a back office. You have an amazing back office but are constantly looking for more projects. Why don’t we come together? And that’s how Gateway Partners was created.”

Gateway includes Opp Zone Capital’s entire team and Sixty West’s tax credit and opportunity zone specialists. The firm provides tax incentive-driven real estate projects, as well as comprehensive insight on Opportunity Zones for multi-family, hospitality, self-storage and senior living developments throughout the southeastern and western United States.

“Gateway is a collaboration of two firms that do more than just Opportunity Zones. We focus on sustainability – a lot of renewable tax credits like solar and low income housing tax credits. Our ability to combine the tax credit world with the Opportunity Zone tax incentive world is extremely important,” Rakipi said.

Opportunity Zones were created by the Tax Cuts and Jobs Act of 2017 and are designed to lift up economically distressed communities and spur real estate investment. They allow investors to defer and/or reduce their federal capital gains tax liabilities.

“This is the first time the government has truly incentivized the private sector to go out and get things done,” Rakipi said. ““Other credit programs like low income tax credits or housing tax credits are essentially government-run programs. When you look at the Opportunity Zone incentive program, although the regulations came from Treasury and they have oversight, they’ve gone to private investors and said take your capital gains and put them into these under-served communities and see what we can do, and that’s new.”

Opportunity Zones have been criticized as benefitting wealthy investors and accelerating gentrification, pushing long-time residents out of neighborhoods.

“The program has gotten a little bit of negative press for that, but we have a major housing issue nationwide so that’s something this could take care of and we don’t have to rely on the government for that,” Rakipi said.

Local projects

Rakipi, with a background in the restaurant, grocery and financial services industries, is one of two co-principals at Opp Zone Capital. He partnered with Janine Blake to launch Opp Zone Capital. Blake’s family founded PODS (Portable on Demand Storage) in Clearwater, where she was senior vice president of partnerships. She also founded two businesses of her own: Express Medical Transporters of Tampa Bay, a non-emergency medical transport company that she grew and subsequently sold in 2010, and a “Red Bag Service” hazardous waste disposal company that focused on the pharmaceutical industry.

Opp Zone Capital launched its own Opportunity Zone fund in April. The Southern US RE QOF Qualified Opportunity Fund is authorized to raise $40 million for opportunity zone acquisitions. It is focused on mixed-use, multi-family, self-storage and hotel development. That fund is active, with four projects in its portfolio.

Sixty West has its own opportunity zone fund, and the two firms are co-sponsoring two other funds, Rakipi said. One will have a national perspective, and the other will be focused on Pinellas and Hillsborough counties.

The fund just sent a request for information for properties around Imagine Clearwater, a downtown project,  Rakipi said. It also is interested in projects in St. Petersburg’s EDGE District, Tampa Heights and Ybor City.

Challenges

Launching an Opportunity Zone fund has been challenging for a couple of reasons.

“The government got the final regulations out less than a year ago, then Covid hit. So the fact that there are still Opportunity Zone fund managers and developers and business owners deploying their capital and raising money in this environment in eight months is pretty amazing to me,” Rakipi said.

Novogradac, a consulting and accounting firm, has tracked over $12 billion raised nationally for Opportunity Zone funds. Rakipi said that’s likely only a fraction of the true amount raised, because family offices and other private investors won’t have to report their investments until mid-2021.

While hotels and retail properties have taken a hit, Rakipi is confident about the prospects for Opportunity Zone funds.

“I think you will see growth stay in the housing and mixed-use area … This is a great time for industrial as well. You’ve seen a huge spike in interest nationwide, not just in Opportunity Zones, but I think Opportunity Zones now present a favorable position for any REITS that are industrial focused or logistic companies as well,” Rakipi said.

The funds, he added, will likely close by the end of 2021, unless the U.S. Treasury extended the program time period.