Opportunity Zones

Prospect is an early adopter of and thought leader on Opportunity Zones.

Overview

As part of the Tax Cuts and Jobs Act of 2017, Congress established the Opportunity Zones program. Each state and U.S. territory designated over 8,700 census tracts as Opportunity Zones. Investors can invest recently realized capital gains into Opportunity Zones, and will receive substantial tax benefits:

  • 10% of deferred capital gains eliminated after five years
  • 15% of deferred capital gains eliminated after seven years
  • All remaining capital gains deferred until December 2026
  • No capital gains tax on appreciation of Opportunity Zone investments

Example: Opportunity Zones vs. S&P 500

  • For each $1M invested at 15% pre-tax return, tax savings add 7.7% annually, or $1.9M to 10-year after-tax return
  • Every $1M invested grows to $3.7M after tax – over 2x the after-tax S&P ending capital
Prospect Opportunity Zone Fund vs. S&P 500

The Prospect Solution

Building on Prospect's established track record of investing in multifamily properties located in economically developing communities, Prospect is well positioned to capitalize on the Opportunity Zone program.

50% of Prospect’s multifamily track record located in census tracts eligible for Opportunity Zone designation

50% of Prospect’s Multi-family Track Record is in Developing Economic Communities

Prospect's Opportunity Zone initiative is largely a continuation of our existing real estate investment thesis:

  • Multifamily properties catered to workforce-level renters, a massively undersupplied property type
  • National focus with an emphasis on markets exhibiting strong long-term potential for job creation, population growth, and income levels that support ground-up real estate development
  • Investments that stand on their own merits regardless of tax incentives afforded by the Opportunity Zone program
  • Investments that are further along in the pre-development process, e.g., fully-entitled and in many cases "shovel-ready"
  • Investments that meet Prospect's ESG criteria