Novogradac QOF Investment Tracking Reaches New Peak: $17.5 Billion as of June 30

Published by Michael Novogradac on Monday, August 9, 2021 - 12:00am

Investment in qualified opportunity funds (QOFs) continues to grow, surpassing the $17.5 billion mark in the newly released Novogradac Opportunity Zones Investment Report: Data Through June 30, 2021.

Blog Graphic: Snapshot of QOF Investment, June 30, 2021
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The report includes 1,171 QOFs tracked by Novogradac, of which 853 reported a specific amount of equity raised. The $17.52 billion investment total is an increase of $2.36 billion from the end of 2020, a 15.5% jump.

More investment is coming, as an important investment deadline looms. Barring an extension of the OZ incentive beyond Dec. 31, 2026, taxpayers must invest funds by the end of 2021 to benefit from the 10% exclusion of gain for investments held five years. That means there may be a significant investment increase in the final months of 2021.

The total investment in QOFs is higher than $17.52 billion, perhaps by a factor of three, four or more, due to the fact that the rolling collection of information comes from QOFs voluntarily providing information to Novogradac or from other public sources such as Securities and Exchange Commission filings and press releases. Novogradac’s list includes single- and multi-asset funds, but it does not include proprietary or private funds that are owned and managed by their principal investors.

An April working paper by two economists at the University of California included findings from 2019 digital tax filings by QOFs and concluded that the amount of OZ investment at that point was roughly four times what Novogradac’s survey at that time reported.

Residential, Single-City Top Investment Types

Among investment types and the geographic areas being targeted for investment, the June 30, 2021, numbers don’t differ greatly from those six months earlier.

Blog Graphic: Residential, Commercial Top Investment Types
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Residential development continues to be the leading area of investment by QOFs. Four-hundred and thirty-three funds have at least some focus on residential development (227 of them focus exclusively on residential) and have raised $13.95 billion in equity, 79.6% of the overall total. Commercial development is the second-leading area of investment, with QOFs that have at least some focus in that area reporting an equity raise of $10.79 billion, 61.7% of the total. (Due to overlaps in QOFs with multiple foci, the total exceeds 100%.) Hospitality, operating businesses and renewable energy make up the rest of investment types.

Blog Graphic: Most QOFs Focus on Single City
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QOFs that identify a type of geographic investment continue to narrow their focus. Of the 685 QOFs in the Novogradac list, 502 report a single-city focus, an investment-target figure that continues to increase. Funds with either a single- or multi-city focus have raised a combined $9.77 billion, accounting for 60.5% of all equity raised by QOFs tracked by Novogradac.

Novogradac Opportunity Zones Investment Report, Data Through June 30, 2021, also includes a closer look at types of investment, a list of leading states and cities for tracked OZ investment, a breakdown of how many QOFs have raised different ranges of equity and the number and ranges of equity raised by QOF managers. The report also includes a historical section, tracking investment types, investment by geography, top states and cities, and percentages of equity raised by different-sized funds over time.

The report is the topic of the Aug. 10 Tax Credit Tuesday podcast.