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Erik HaydenJul 30, 2020 12:07:16 PM2 min read

Your Money Manual - How Opportunity Zones Benefit Communities and Investors

Urban Catalyst founder Erik Hayden was recently invited to speak in the financial podcast “Your Money Manual - How Opportunity Zones Benefit Communities and Investors,” hosted by Vince Annable, founder of the Wealth Strategies Advisory Group and creator of the Household Endowment Model.

Vince was particularly interested in discussing OZ Funds because many listeners are business owners who want to sell their venture but are worried about tax ramifications. As a matter of fact, “there’s never been a program ever created for the sale of a business (or the sale of stock and real estate) that has this type of tax-deferral and tax-advantaged nature,” said Erik.

Erik noted that many OZ Funds are part of a “much larger platform” where fund managers raise money first and then scramble around the country looking to partner with developers with projects in Opportunity Zones. That is not the case with Urban Catalyst. We are both the fund manager and developers with a proven track record of success with a portfolio of seven projects with diversified property types, which is “really the best indicator of future success”.

Highlights from the podcast include:

  • A silver lining in the downturn created by the pandemic could be a reduction in construction costs. Erik pointed out that during the 2008 recession, construction costs dropped 20%. He sees the possibility of a 5 to 10% drop in the $500 million hard construction costs for Urban Catalyst’s seven projects in downtown San Jose, which means potential savings for investors could top $100 million.

  • Southward Tech Migration to downtown San Jose. Erik said Urban Catalyst chose to invest in San Jose because of the consistent migration of large tech companies southward.

    For example, in the past 18 months, Google has purchased $450 million worth of property in San Jose and plans to build 7.5 million square feet of office space. The city is a prime choice for tech expansion in order to attract top talent. Many of these workers are millennials who want the combination of an urban environment, less traffic, an office to which they can bike, and affordable homes. San Jose has it all.

  • Opportunity Zone Funds offer unique tax benefits. If you invest capital gains within 180 days from the sale of a business, stock or real estate into an OZ Fund, taxes on capital gains are waived for six years, and after 10 years, all profits from the OZ Fund are federal tax-free. “There aren’t a whole lot (of investments) that have a tax advantage like tax-free profits." said Erik. “People call the Opportunity Zone program a “once-in-a-lifetime opportunity.”

Did you know? Bloomberg recently rated San Jose the No. 1 U.S. market poised to bounce back from COVID-19. And based upon record-breaking recent sales prices for high rises in downtown San Jose, it is apparent that the San Jose real estate market is a flight to safety.


Erik Hayden

Responsible for developing more than $3.5 billion in real estate projects, including over 2,300 residential units in the California Bay Area, Mr. Hayden has experience in acquisition, contract negotiation, due diligence, risk assessment, financing, construction, and disposition of multifamily, single family and large mixed-use and master planned developments. He maintains relationships with a broad network of property owners, enabling him to identify and acquire prime investments. Mr. Hayden also has expertise in navigating projects through the entitlement process by working with elected officials, community groups, and political organizations to gain support and get projects approved.