Grocery chain Kroger Co. is finding the prospect of billions of dollars flowing to real estate because of tax incentives in the federal Opportunity Zone program doubly enticing. The company is also showing how other real estate investors may follow suit.

The Cincinnati-based grocer is dipping into two federal separate incentive programs to construct an 89,650-square-foot, full-service grocery store and pharmacy in Fremont, Ohio.

The property is in a rural, highly economically distressed area with a poverty rate of 27.7 percent, a median family income equal to 50.4 percent of the applicable area median family income, and an unemployment rate of 14.4 percent.

The new Kroger store is located in a U.S. Department of Agriculture "Food Desert" and in a qualified opportunity zone, and is eligible for benefits under different federal incentive programs and one state program. Kroger is tapping into all of them.

Finance Fund, a Columbus, Ohio-based community development enterprise, provided $13 million in federal New Market Tax Credit allocations and $2.6 million in state allocations from the same program for the construction and development costs of the Fremont store.

The New Market Tax Credit program provides incentives for business and real estate investment in low-income communities through a federal tax credit when traditional financing is hard to come by.

Each year, community development enterprises compete for New Market Tax Credit allocations from the U.S. Treasury Department's Community Development Financial Institutions Fund. Award of those allocations then allows the community development groups to raise funds from lenders for new projects. The federal tax incentives flow to the lender; and the borrower, in this case Kroger, benefits from lower interest rate loans with more flexible terms.

In addition to the lower borrowing costs, Kroger also formed a qualified opportunity fund to take direct advantage of tax benefits from opportunity zones. Kroger raised over $8 million of additional private investment for its Kroger Opportunity Fund I.

It is the first such doubling up on the two incentives of which Andrew Swary, executive vice president and general counsel of Finance Fund, is aware.

It worked, Swary said, because Kroger is large enough on its own to use its own capital gains in creating the opportunity fund.

There is nothing in either the New Market Tax Credit or the opportunity zone regulations to prevent their use on one project, according to accountants and tax lawyers. However, the New Market Tax Credit program is currently set to expire at the end of next year.

According to the Treasury Department, the New Market Tax Credit program has financed more than 5,400 businesses and created 178 million square feet of manufacturing, office and retail space.

Kroger officials did not respond to requests for comment. In a prepared statement, Rita Williams, director of economic development for Kroger, said, “Kroger is excited to build a new full-service grocery store and pharmacy in Fremont. We believe our new store will enhance the health and well-being of the community’s residents and provide much needed jobs and economic development opportunities."

Last month, Kroger announced a new $15 million New Market Tax Credit allocation to support the construction of a 345,000-square-foot food warehouse and distribution center in Atlanta for the Atlanta Community Food Bank.

That project, however, is not being built in a federally designated opportunity zone.