By Jon Bell
Portland Business Journal
For the past few years, the development scene in Portland has hummed right along.
But at the same time, market watchers and developers have wondered just how much longer this extended development cycle could possibly last. Some slowing — fueled in part by rising construction costs, a tight labor market and new affordable housing mandates — has caused some developers to ease off the gas.
Recently, however, the federal government added a little something to the tank that could keep development in Portland and elsewhere cruising right along into 2019 and beyond — Opportunity Zones.
A product of the Tax Cuts and Jobs Act of 2017, the Opportunity Zone program provides tax breaks on long-term investments in certain low-income census tracts. Through the program, investors can invest capital gains into a Qualified Opportunity Zone Fund and postpone capital gains taxes until 2026. The funds in a Qualified Opportunity Zone Fund can back new development projects and business improvements.
Originally unveiled in April 2018, the program kicked off in earnest in the fall after the government made a few tweaks and clarifications. In the Portland area, which counts 31 of Oregon’s 86 Opportunity Zones, its potential impacts are already surfacing.
“It’s pretty exciting in the real estate world,” said Vanessa Sturgeon of Portland-based Sturgeon Development Partners.
In December, SDP announced it had launched a $330 million Opportunity Zone Fund that could fuel a $285 million mixed-use tower in Portland and a $43 million hotel project in Salem. The partners want to raise that money by April.
A week before that announcement, word arrived that California private equity firm LLJ Ventures had acquired a Portland property using money from an Opportunity Zone Fund. The firm is exploring the possibility of developing that property, at Southeast Second Avenue and Ash Street, with a creative office building.