Monarch Private Capital, a firm which develops, finances and manages a diversified portfolio of projects that generate federal and state tax credits, has launched three opportunity zone funds (O-Funds) targeting market rate investments in qualified opportunity zones.
Opportunity zone funds are a new investment vehicle created as a result of the Tax Cuts and Jobs Act of 2017 to encourage long-term investments in underserved communities that need developments to jump-start their economies. MPC has successfully created, operated and managed numerous tax credit funds over the past 13 years that have included investments in recently designated opportunity zones.
“The launch of these O-Funds is in response to the demand we have seen for quality investments from developers that have had previous success in economically challenged environments,” says Alice Nolen, director of sales and special projects for Monarch Private Capital. “We’re excited to offer what we think are compelling opportunities with experienced developers in underserved communities where all of us can have a positive impact.”
MPC’s O-Funds enable investors to defer taxes on recent capital gains and, if requirements are met, allows investors to reduce their tax payment up to 15 percent. In order to maximize the tax reduction, the current program necessitates the majority of investments to be made by Dec. 31, 2019, and to be held for at least seven years to meet the program end date of 2026. Investors may also benefit from an elimination of taxes on the appreciation of their opportunity zone investments subject to a 10-year hold period.
“Now that the Treasury has given us adequate guidance around the tax code, it is time to take advantage of this opportunity before the seven-year tax benefit expires,” says Billy Huger, managing director of Monarch Private Capital Advisors. “While the benefits of this program are an incredible incentive for investors to allocate capital to underserved communities, they can also make a meaningful impact by increasing the after-tax returns of the investments.”
As with any new investment program, investors are being cautious as they get up to speed on the opportunity and the market.
“While many, rightly so, are hesitant to commit to [opportunity zone] projects with core market commercial developers, they need to realize there are developers that have been successful working in some of these economically challenged areas throughout a variety of market cycles,” says Huger.
