Elsewhere on our website we provide a look at the legislation that established Opportunity Zone funds and a basic description of how the funds work. But that still begs the question: why invest?
Every individual will have his or her own reasons for considering an investment but in general, there are five potential major benefits:
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Defer capital gains. There are very few ways for those who have capital gains from the sale of stock, real estate, or a business to defer taxes. An investment in a qualified OZ fund is one.
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Generate income. Income often plays a major role in the total return for real estate.
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Diversify your portfolio holdings. Real estate is its own asset class. Research has shown that real estate has a low correlation with stocks and is generally less volatile.
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No tax on fund appreciation.If you stay in a QOZ fund for at least ten years, the cost basis of the property is considered to be the fair market value at the time of sale. As such, there is no tax on the appreciation.
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Participate in the renewal and growth of a designated Opportunity Zone and the surrounding community. This is the ultimate purpose of the legislation that established OZ Funds as a worthwhile goal in and of itself
Investors with capital to deploy have many options to consider. Opportunity Zone funds have characteristics that make them particularly attractive to investors in general, but especially to those individuals with capital gains from a qualifying investment.
We would love to talk with you about our strategy here at Urban Catalyst. Contact us today.
Important Disclosures
The contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the “PPM”) which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by an issuer, or any affiliate, or partner thereof ("Issuer").
All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM. Any potential conflicts of interest are governed by conflict-resolution provisions in our PPM and reviewed by a third-party appraiser and attorney to ensure arm's length transactions.
Neither the Securities and Exchange Commission, the Attorney General of the State of New York nor any other state securities regulator has approved or disapproved of the DST securities, or determined if the Operative Documents are truthful or complete or passed on or endorsed the merits of the offering. Any representation to the contrary is a criminal offense. You may only invest in the DST if you are an accredited investor as defined in Rule 501 of Regulation D.
This presentation contains forward-looking statements within the meaning of federal securities laws and regulations relating to the business and financial outlook of the DST that are based on management’s current expectations, estimates, forecasts and projections and are not guarantees of future performance.
These forward-looking statements are identified by the use of terms and phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will” and other similar terms and phrases, including references to assumptions and forecasts of future results. Actual results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any such statements. A number of important factors could cause actual results to differ materially from the forward-looking statements contained in this presentation.
Forward-looking statements in this material speak only as of the date on which such statements were made and not as of any future date, and the DST undertakes no obligation to update any such statements that may become untrue because of subsequent events. With respect to any performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. All investments carry the risk of loss of some or all of the principal invested. Assumptions are more fully outlined in the Offering Documents/ PPM for the respective offering. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment.
These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. All offerings are intended only for accredited investors unless otherwise specified.
Past performance is no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by Issuer, or one of its partner/issuers. Issuer does not warrant the accuracy or completeness of the information contained herein. Thank you for your cooperation.
Real Estate Risk Disclosure:
- There is no guarantee that any strategy will be successful or achieve investment objectives including, among other things, profits, distributions, tax benefits, exit strategy, etc.;
- Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
- Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
- Potential for foreclosure – All financed real estate investments have the potential for foreclosure;
- Illiquidity – These assets are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.
- Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
- Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits
- Stated tax benefits – Any stated tax benefits are not guaranteed and are subject to changes in the tax code. Speak to your tax professional prior to investing.
Opportunity Zone Disclosures
- Investing in opportunity zones is speculative. Opportunity zones are newly formed entities with no operating history. There is no assurance of investment return, property appreciation, or profits. The ability to resell the fund’s underlying investment properties or businesses is not guaranteed. Investing in opportunity zone funds may involve a higher level of risk than investing in other established real estate offerings.
- Long-term investment. Opportunity zone funds have illiquid underlying investments that may not be easy to sell and the return of capital and realization of gains, if any, from an investment will generally occur only upon the partial or complete disposition or refinancing of such investments.
- Limited secondary market for redemption. Although secondary markets may provide a liquidity option in limited circumstances, the amount you will receive typically is discounted to current valuations.
- Difficult valuation assessment. The portfolio holdings in opportunity zone funds may be difficult to value because financial markets or exchanges do not usually quote or trade the holdings. As such, market prices for most of a fund’s holdings will not be readily available.
- Capital call default consequences. Meeting capital calls to provide managers with the pledged capital is a contractual obligation of each investor. Failure to meet this requirement in a timely manner could elicit significant adverse consequences, including, without limitation, the forfeiture of your interest in the fund.
- Opportunity zone funds may use leverage in connection with certain investments or participate in investments with highly leveraged capital structures. Leverage involves a high degree of financial risk and may increase the exposure of such investments to factors such as rising interest rates, downturns in the economy or deterioration in the condition of the assets underlying such investments.
- Unregistered investment. As with other unregistered investments, the regulatory protections of the Investment Company Act of 1940 are not available with unregistered securities.
- It is possible, due to tax, regulatory, or investment decisions, that a fund, or its investors, are unable to realize any tax benefits. You should evaluate the merits of the underlying investment and not solely invest in an opportunity zone fund for any potential tax advantage.
The above material cannot be altered, revised, and/or modified without the express written consent of Urban Catalyst.
