Monday, July 15, 2019 | 2 a.m.
An apartment complex expected to open in late 2020 in downtown’s Symphony Park has the distinction of being the first project finalized in Las Vegas with the support of the federal Opportunity Zones program, said Bill Arent, executive director of economic development for the city.
The 290-unit apartment complex will include studio, one-bedroom and two-bedroom apartment and townhouse units for rent, as well as 43,000 square feet of commercial and retail space.
Los Angeles-based Canyon Partners LLC invested $29.4 million in qualified opportunity zone equity into the project from Austin-based development company Aspen Heights. A spokesperson from Canyon Partners said that the deal, which closed in May, might not have been possible were it not for the Opportunity Zones program. (The spokesperson couldn’t be named, per company policy.)
“This was a perfect fit for our Opportunity Zone strategy. That was absolutely the catalyst for the project,” she said.
Opportunity Zones are a new federal program based on a familiar concept: Invest in a low-income area and get a tax break. The goal of the program, established as part of President Trump’s Tax Cuts and Jobs Act of 2017, is to encourage investment in economically struggling neighborhoods nationwide by offering investors the opportunity to defer on, decrease and potentially eliminate their capital gains tax.
In 2017, then-Gov. Brian Sandoval selected 61 low-income census tracts in Nevada to designate as Opportunity Zones, 22 of which are located in Las Vegas and another 12 in unincorporated Clark County. One selected zone, in Storey County and the site of the Tahoe-Reno Industrial Center, is not low-income, but Sandoval petitioned to have it included.
By law, states could only designate up to 25% of their low-income census tracts as Opportunity Zones, so not every eligible tract was selected.
Las Vegas sees economic possibilities in the federal program, Arent said, especially if Opportunity Zone projects could be in line with the city’s policy goals and vision. In the case of the Symphony Park apartment complex from Aspen Heights, that project will move the city toward its goal to increase housing downtown.
Critics of Opportunity Zones worry that they could lead to gentrification, given the broad scope of projects that are eligible, including high-end real estate, educational and medical facilities, office parks, hotels and mixed-use properties. Aspen Heights will be located in one of the lowest-income parts of town, and all of the properties will be sold at market-rate, so it might not be a viable housing option for residents who already live in the neighborhood.
According to an analysis from think tank Brookings Institution, Nevada allocated the majority of its selections to its most impoverished communities compared to most other states. But Ward 5 City Councilman Cedric Crear still questioned whether the allocations were equitable, noting that the core of the city’s historic westside wasn’t selected, at the July 3 council meeting.
“That was just a missed opportunity for the Opportunity Zone,” Crear said.
There is also little oversight of the program. Investors aren’t obligated to report projects that are being supported by Opportunity Funds to local officials, and there are no requirements for tracking projects’ local impacts. A bipartisan congressional bill seeks to change that by requiring the Secretary of the Treasury to collect data and conduct a report on the program.
In the meantime, Las Vegas is tracking pending and potential Opportunity Zone projects on its own, Arent said. The city is also working on developing an online portal to connect property owners, developers and investors who are looking to invest in Opportunity Zones. The portal could potentially help small, local businesses partner with larger investors to take advantage of the program.
“If we’re not actively working with our partners or engaging the developer/investment community, we may never know if those investments occurred,” Arent said.
So far, much of the interest in Opportunity Zones in Las Vegas seems to be coming from the real estate industry, said Kade Miller, an attorney in the Opportunity Fund Practice Group for law firm Snell & Wilmer. He is also hearing about interest in mixed-use projects and projects with hospitality elements — although “sin businesses,” including casinos, aren’t eligible.
Miller believes that some investors are mindful of the program’s intention to uplift distressed communities.
“Many investors are looking for a return, and there’s going to be and are investors less concerned about economic return and more concerned about social impact,” he said.
Miller noted that municipalities could combine Opportunity Zones with other financial tools and incentives to encourage investment in mixed-income housing, which is exactly what the city of Las Vegas plans to do.
“What we’re thinking is, how can we not only get money into those types of projects, but also, how can we encourage that money to meet the goals of the city, such as getting mixed-income housing?” Arent said.
With one Opportunity Fund-supported project in Las Vegas having closed and several others under consideration, time will tell how much the program spurs investment in struggling communities and what the impacts will be, Arent said.
“We’re certainly seeing a lot of interest. We have yet to see all the Opportunity Zones close and the money go into the projects,” he said. “So I think we’ll learn a lot over the next six to 12 months on whether there is a lot of money coming into (these) areas.”