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Opportunity Funds Saw Investment Surge Ahead of Dec. 31 Deadline
Reported equity investment in qualified opportunity funds (QOFs) tracked by national accounting and consulting firm Novogradac increased by nearly $7 billion in the final six months of 2021. The total investment reported by Novogradac at the end of 2021 was $6.88 billion more than at midyear, up 39.3% and the biggest dollar increase since Novogradac began keeping track in May 2019.
Taxpayers that invested in QOFs by Dec. 31, 2021 could benefit from a 10% basis step-up for investments held five years, which likely played some role in the surge of investment, according to Novogradac
“As this incentive matures, it appears that investors are becoming more comfortable with the broad range of potential investments,” said Michael J. Novogradac, managing partner of Novogradac. “Investors and their advisors also appear to be more comfortable with the longer-term hold that this incentive encourages.”
The Novogradac Opportunity Zones Investment Report: Data Through Dec. 31, 2021, summarizes $24.40 billion in equity raised by the QOFs for which Novogradac gathers information. Novogradac tracks 1,342 QOFs, of which 978 reported a specific amount of equity raised by the end of 2021.
Novogradac’s report is based on a rolling collection of information, with QOFs voluntarily providing information or through other public sources such as SEC filings and press releases. Novogradac’s list doesn’t include proprietary or private funds owned and managed by their principal investors, so total Opportunity Zone investment is probably three or four times that reported by Novogradac. However, Novogradac says its report provides an apples-to-apples comparison over time for OZ investment.
“Our report shows that 20 cities have at least $200 million in planned QOF investment and 41 cities have at least $100 million in planned investment,” said John Sciarretti, a partner in Novogradac’s Dover, OH office and head of the Opportunity Zones Working Group. “The top 40 cities for investment are in 23 states, plus Washington, DC. That is an illustration of how the OZ incentive is providing investment to a wide variety of areas.”
Among states, California leads with a cumulative total of approximately $2.4 billion of equity investment in QOFs. For new planned investment volume over the last six months of 2021, Arizona came in first with $619 million, bumping up the state’s overall ranking to number two and placing it among the top five for the first time. Rounding out the top five are New York, Texas and Florida.
The leading city for planned QOF investment is Washington, DC, with more than $740 million raised. Other cities in the top five include Los Angeles, New York, Nashville and Austin.
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