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Report: QOFs Top $37B in Equity Raises

While some of the tax-deferred “goodies” offered by Opportunity Zone investments have long expired, the interest in these vehicles has not. According to a report by Novogradac, Qualified Opportunity Funds (QOFs) tracked by the company raised $3.53 billion in equity during 2023. This increased the total amount of Qualified Opportunity Zone (QOZ) equity raised to $37.6 billion.

Because Novogradac’s figures don’t include private funds owned and operated by their principal investors, the actual QOZ investment is likely higher than the Novogradac total.

Novogradac reported that during Q4 2023, QOFs raised $414 million in equity, which followed strong second and third quarters. But the annual amount raised was lower than the totals of the three previous years, which surpassed $9 billion.

“At least part of the reason for the slowdown was the general state of the economy, specifically a decrease in multifamily housing construction, which ended December 2023 with the lowest annualized figure for permits since 2017,” the report noted.

QOFs are the investment vehicle used by taxpayers to defer capital gains. Novogradic obtains numbers on a rolling basis from QOFs that provide information and data from public sources, including Security and Exchange Commission filings and press releases.

Approximately 80% of known QOF investment is focused on developments that include multifamily housing. In quoting RealPage, Novogradac said the number of apartments built in QOZs tripled from 2016 through 2022, then doubled again in 2023. The RealPage data also indicated that 20% of all delivered apartments in 2023 were in a QOZ. However, Novogradac anticipated the slowdown in multifamily permits in 2023 will be felt in late 2024 or 2025.

Novogradac also reported that:

  • QOFs with at least some focus on housing raised $30.93 billion, $8.10 billion of that focused solely on residential property
  • QOFs with some focus on commercial investment raised $24.93 billion; $2.20 billion was raised by funds focused only on commercial activity
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