Ron Beit, founding partner and CEO of RBH Group, spoke during a recent Rutgers Center for Real Estate conference on federal Opportunity Zones. — Photos by Fred Stucker/Courtesy: Rutgers Center for Real Estate
By Joshua Burd
RBH Group, the developer of the heralded Teachers Village project in Newark, is hoping to build on that success with a new investment fund under the federal Opportunity Zone program.
The firm on Tuesday announced the launch of the fund, with a focus on building housing for teachers and other social impact-related projects in cities across the U.S. The investment vehicle is meant to partner with other funds related to the Opportunity Zone program, which offers favorable tax treatment to capital gains that are invested in certain distressed and low-income neighborhoods.
Ron Beit, the founding partner and CEO of RBH Group, said the effort will kick off with a $40 million fund invested by tech entrepreneurs David and Leila Centner. He also aims to leverage more than $150 million of additional equity from various high-net worth and institutional investors, building off the model of the mixed-use Teachers Village project.
“The need to supply moderately priced housing for teachers, which helps to retain and recruit teachers and support revitalization efforts, is an issue of national concern in cities across the United States, from San Francisco to Miami,” Beit said. “Our development is a model for success in garnering public and private support for a crucial social impact development.”
Beit developed Teachers Village over more than five years with the support of former Newark Mayor Cory Booker — now New Jersey’s junior U.S. Senator — who is the co-sponsor of the legislation that created the federal Opportunity Zone program. Spanning five blocks, the 400,000-square-foot, $150 million project has resulted in 204 moderately priced apartments, three charter schools, open space and 65,000 square feet of retail space.
Teachers occupy nearly 70 percent of the apartments, while nearly 1,000 students attend the schools and 18 retailers occupy the commercial space.
In Tuesday’s announcement, Beit said the new fund will spur investment in Opportunity Zones as part of more than $700 million in planned development. RBH established the fund in August and subsequently completed its first acquisition, a site in Miami.
The developer and its partners touted the growing appetite nationwide for workforce housing, including residential options for teachers, and economic development in underserved communities.
“The Teachers Village projects dovetail perfectly with our mission to promote education, as when our teachers have an affordable, safe and beautiful place to live, it will ultimately enhance the learning environment for our children,” said Leila Centner, founder and CEO of Centner Academy. “Education is paramount in our family, which is why we decided to create Centner Academy from the ground up in Miami. We want our children to have all the necessary tools — both academically and socially — which will give them a competitive advantage in today’s global world.”
Included as part of the 2017 federal tax reform bill, the program allows investors to defer and potentially reduce taxes on capital gains from an unrelated investment. Some estimates, which Beit cited on Tuesday, say there are up to $6 trillion in un-invested capital gains sitting in Wall Street accounts.
New Jersey is home to 169 Opportunity Zones, which are spread across 75 municipalities in its 21 counties and have drawn interest from developers. Nationwide, the federal government has approved nearly 9,000 census tracts under the program.
Investors who redeploy capital gains into a qualified Opportunity Zone fund can defer taxes through Dec. 31, 2026. Those taxes can be reduced by as much as 15 percent at that point if they have held the investment for at least seven years, meaning investors must commit their capital by the end of 2019 in order to maximize the benefit.
Investors also have the chance to exclude the gains on all appreciation of the Opportunity Zone fund if they hold the investment for at least 10 years.
“The Opportunity Zone program made us take notice of this important initiative which matches our goal of finding sustainable solutions to important societal issues,” David Centner said. “Supporting efforts to build in underserved communities and supply affordably priced housing for teachers, we see as part of my family’s mission. We’re excited to be working with an experienced developer in Ron Beit and RBH Group.”
RBH developed Teachers Village as part of a complex public-private partnership, with investments from Goldman Sachs Urban Investment Group and Prudential Financial, along with state tax credits and other government subsidies. The firm is now looking to replicate the model in other cities, including Hartford, Connecticut and Chicago, while it is in predevelopment for projects in Atlanta and Miami and is exploring additional opportunities in Los Angeles, Denver, Baltimore and Boston.