OZ Deals
Massive long shots here - We have few MF OZ deals going and recently found ourselves negotiating another deal that is under construction and will should open this fall. The property was put under contract and equity committed with non OZ $ and frankly the area that it is in should have never been an OZ. We are negotiating now to buy out equity/developer prior to U&O/lease up (eliminate construction risk on our side/lease up risk on their side) and get some of our OZ $ going...$30MM or so to still get the OZ benefit. We like this idea and curious if anyone else has any deals in progress that are similar where capital may not be OZ but found themselves in OZ and would get out early..
additionally, we have a little pipeline of OZ deals going and are considering looking for more LP OZ $ beyond the traditional LP's we play with, these are suburban surface parked and urban wrapped deals, 200-400 units
I have two examples:
1. We optioned some land and entitled it prior to Opp zones coming out, found out it was in an opp zone, and pivoted it from a traditional execution to an opp zone one.
2. We sold a pre-tco building to an opp zone buyer back in 2019 (oh how long ago that was...). Pretty lucky exit obviously and weird how opp-zones allow for that type of transaction, but it worked.
We have some other opp zone deals, but they were all acquired as such.
Getting out early doesn't really leverage the tax benefit of an OZ deal.
Is this in reference to the 2nd deal I mentioned?
More the OP than your post
gotcha. just checking to see if I needed to clarify.
Understood. The equity on the deal we are looking at had no intention of using OZ benefits as projects was conceived before it was an OZ. They will get out for a premium prior to TCO and we just take on the lease up risk and our equity can come in and use the OZ benefits that they want. Essentially we are buying at 5-5.25 cap on something where as leased it would be 4.25 or so, splitting the difference in ROC and stabilized. There is a brownfield that helps boost it a little more as well.
We think it is a interesting execution and can get our OZ $ to work sooner.
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