Qualified Opportunity Zone
A designated low-income census tract where investments in new development or substantial improvement of existing properties receive federal tax benefits under the Opportunity Zone program established by the 2017 Tax Cuts and Jobs Act. Investors can defer capital gains by investing in a Qualified Opportunity Fund within 180 days of a capital gains event. Investments held for 10 years or more may qualify for permanent exclusion of capital gains on the Opportunity Zone investment itself. The program is designed to stimulate economic development in underserved communities.
Related Terms
Ground-Up Development
New construction of a commercial property from raw or improved land. Ground-up development involves significant execution risk, including entitlement, construction, and lease-up phases. It typically requires construction financing with recourse guarantees, followed by bridge or permanent financing upon stabilization.
Value-Add
An investment strategy focused on acquiring underperforming properties and increasing their value through renovation, re-tenanting, operational improvements, or repositioning. Value-add deals typically require bridge financing and target returns of 13-18% IRR. The strategy involves more risk than core investments but offers higher potential returns.
JV Equity (Joint Venture Equity)
Equity capital provided by an institutional investor or partner to co-invest in a real estate project alongside an operating sponsor. JV equity structures typically feature a preferred return to the capital partner, followed by profit splits that reward the sponsor for achieving target returns. Common JV partners include pension funds, sovereign wealth funds, and private equity firms.
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