Large Opportunity Zone investment

[Tyler Pertree]

Investment Info:

Large multi-family (5+ units) commercial investment investment in Oklahoma City.

Purchase price: $30,000,000
Cash invested: $18,000,000

We are working on a project in Oklahoma City with the following incentives:Opportunity Zone, Empowerment Zone Area Round III OKC, Tax Increment Finance (TIF), Core to Shore OKC, Urban Renewal, General Obligations Bonds, New Market Tax Credits, Historical Tax Credits, Community and Economic Development,Community Renewal InitiativeCommunity Development Block Grant ProgramsPartnerships for Sustainable Development CommunitiesNeighborhood Stabilization ProgramPlace-Based InitiativesQuality Jobs Act

What made you interested in investing in this type of deal?

First purchase was back in 2015 and the project started out pretty small. As time went on and we acquired more and more properties, many incentives were placed on the land. We found out that it was a TIF district, had historical and new market tax credits available, and now is an Opportunity Zone. I invested with the group before anything but the TIF was available because it's an excellent area for development.

How did you find this deal and how did you negotiate it?

Like many deals, I was referred by a friend who had the opportunity to invest. When I got in, the investment was $1000 per share, but the land was being bought at $7/sqft. Now the shares are $4000, but the land is $50/sqft. The projected exit price is $100 million + which would net me about a 700-900% profit on my investment.

How did you finance this deal?

So far, it has been investor financed - so basically it's completely unleveraged.

How did you add value to the deal?

We met with the city to get development hurdles handled in advance. Most easements were removed by the city and it was zoned to multi-story mixed used. We have also negotiated the TIF money and are now one of the only 20 Opportunity Zones in the state of Oklahoma.

What was the outcome?

The current outcome looks very good. Our initial exit strategy put the initial investors as making about 300% on our money. We were taking all of the risk, of course. However, now that it has so many incentives, we could easily break a 1000% increase for the initial investors and still have plenty of return for new investors with substantially less risk.

Lessons learned? Challenges?

Large projects have TONS of moving parts. Working with the mayor, the city, large national corporations, law makers, and developers takes a substantial time investment. I have experience with single family rentals and they are now very easy, however - this (estimated $2 billion in development costs) development had me learning so many additional pieces of a much larger puzzle. I was grateful for a smart team and good mentorship.