NJ Governor, Sen. Booker Beat Drum for NJ Opportunity Zones

Choose NJ Seminar Touts Economically Distressed Areas to Investors (Correction)

New Jersey Governor Phil Murphy and U.S. Senator Cory Booker on Monday touted the Garden State’s new Economic Opportunity Zones, wooing a large group of potential investors who could win capital-gains tax breaks for doing real estate projects in those financially ailing areas.

Murphy and Booker, who helped draft the Opportunity Zone legislation that was incorporated in President Donald Trump’s tax overhaul, addressed the group at an Investors Symposium on the program. The seminar was sponsored by Choose New Jersey, a privately-funded nonprofit that encourages economic growth in the state.

Booker told attendees at the event, held at the Rutgers University campus in Newark, NJ, that Murphy’s collaborative and savvy selection of Opportunity Zones in New Jersey is "going to bring billions of dollars new investment into our state and increase our tax base."

The governor called the program a "home run" and a "game changer."

Booker (D-NJ) described how he and Senator Tim Scott (R-SC) jointly worked on the Opportunity Zone legislation, which aims to spark long-term economic development and job creation in low-income census tracts. Governors had to nominate zones in their states for certification by the U.S. Treasury Department.

The program allows investors to put capital into new projects and enterprises in those zones in exchange for certain federal capital gains tax advantages. The audience of roughly 200 for Monday’s event included investors, economic developers and business and community leaders.

Murphy said that the federal treasury approved the 169 Opportunity Zones, located in 75 municipalities representing every New Jersey county, that he proposed.

"I’m proud to say we jumped on this early," the governor said.

Right now companies and individuals have $6.1 trillion worth of capital-gain obligations, according to Booker. If they take that money and make an investment in an Opportunity Zone, and keep that investment for at least seven years, they will get a 15-percent break on their capital gains taxes, Booker said.

If even a fraction of that $6.1 trillion comes into communities like the ones designated in New Jersey and the other 49 states, "This will be the biggest economic development program we’ve seen in a generation, the single biggest in driving investment in low income areas, rural and urban," Booker said.

To participate in the program, firms must create Opportunity Funds, private-sector vehicles that invest at least 90 percent of their capital in Opportunity Zones. Prudential is poised to set up such a fund, Booker said.

Virtua Partners, a private-equity real estate investment firm based in Phoenix, was one of the first companies nationally to create an Opportunity Fund. It is looking to raise $200 million from investors, and seeded the new fund with an initial investment of $60,000, according to records on file with the U.S. Securities and Exchange Commission (SEC).

The state's Department of Community Affairs will administer the Opportunity Zone program in New Jersey, according to Murphy, with some involvement by the state Economic Development Authority.

The forum yesterday, moderated by New Jersey broadcaster Steve Adubato, kicked off with Murphy and Booker.

There was then a panel that included Margaret Anadu, managing director of Goldman Sachs Urban Investment Group; Christopher A. Coes, vice president for Real Estate Policy and External Affairs, Smart Growth America and director of LOCUS: Responsible Real Estate Developers and Investors; Steve Glickman, co-founder and chief executive of the Economic Innovation Group; and Evan Weiss, a senior analyst at HJA Strategies.

Under the Opportunity Zone program, there is:

»   A temporary tax deferral for capital gains reinvested in an Opportunity Fund, and the deferred gain must be recognized on either the date on which the opportunity zone investment is sold or Dec. 31, 2026, whichever occurs first.

»   A step-up in basis for capital gains reinvested in an Opportunity Fund. The basis of the original investment is increased by 10 percent if the investment in the qualified Opportunity Zone Fund is held by the taxpayer for at least five years, and by an additional 5 percent if held for at least seven years, excluding up to 15 percent of the original gain from taxation.

»   A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in a qualified opportunity zone fund, if the investment is held for at least 10 years.

Editor's Note: The news story was updated from an earlier version which incorrectly identified the sponsor of the seminar as Grow New Jersey. It was Choose New Jersey.

Linda Moss, Northern New Jersey Market Reporter  CoStar Group