Certain parts of the Richmond region could see an influx of investment dollars under a new, federal tax-incentive program intended to spur investments in low-income communities around the country.

It’s too early to say just how much investment money might flow into projects covered by the federal opportunity zones program, which would reward investors with tax breaks for putting money earned from other investments back into businesses or real estate projects in more than 8,700 census tracts around the nation.

“These are areas that have been under-invested in for a long time,” said Adam Northup, senior vice president for financial strategy at Virginia Community Capital, a community development financial institution.

“It is a great chance for an investor to make a buck and do some good,” he said.

In the Richmond region, the opportunity zones include census tracts covering land between Broad Street and Interstate 95 stretching from Scott’s Addition to VCU Medical Center. Those zones include Jackson Ward and the area near the Richmond Coliseum and Virginia Commonwealth University’s academic campus.

Elsewhere in Richmond, parcels in Shockoe Bottom, parts of Church Hill, Manchester and near the Richmond Marine Terminal are in opportunity zones.

Some suburban areas also are included such as properties in Henrico County near Regency mall, Libbie Mill-Midtown mixed-use development off Staples Mill Road, and a large swath south of the Richmond International Airport.

The Stonebridge development that’s on the site of the former Cloverleaf Mall in Chesterfield County also is part of an opportunity zone.

“The opportunity zone program is really focused on encouraging private sector investment” in those areas, said Karen Aylward, assistant director of economic development for Chesterfield, which has four census tracts designated as opportunity zones.

Area developers say having investors finance projects or businesses in these zones could be a real boost for those areas, developments and businesses.

“What it will do is it will attract more capital to those areas,” said Rob Hargett, a co-founder and principal of The Rebkee Co., a Richmond-based development company that is part owner in Regency mall in Henrico.

“A tax incentive is only as good as the real estate. You first have to have good real estate,” Hargett said. “It needs to be in areas where it is going to appreciate in value.”

Hargett expects the opportunity zone tax breaks should help in efforts to redevelop the Regency mall property by attracting outside investors to help finance the plans.

“But it will boost the whole area by attracting capital,” he said.

Yet some critics say the way the program is set up will benefit real estate developers and Wall Street funds, and will pull investment toward more well-off areas that need it the least.

“The real estate industry is completely excited and mobilized about this, and now is getting paid through massive tax cuts,” said Timothy Weaver, a professor at the State University of New York in Albany who has studied similar development programs.

He said the program “doesn’t have much of an effect other than giving tax breaks to people who are going to invest anyway.”


Congress approved the opportunity zone program as part of the federal tax overhaul in late 2017.

Under the program, an investor who has profited from the sale of stock, a business or property can defer the capital gains taxes by rolling over the money within 180 days into so-called opportunity zone funds, which would invest the money in business or real estate developments in one of the opportunity zones across the country.

Participants can take their profits from unrelated investments and plow them into a fund.

That enables the investor to defer capital gains taxes until they exit the fund.

If the investor maintains the investment for five years, the tax liability on the original gain is reduced by 10 percent. They can reduce the tax liability by 15 percent by keeping it for seven years.

After 10 years, the investor would have no tax on the gain from the fund.

“It is a pretty hefty return,” Virginia Community Capital’s Northup said. “The law is designed purposefully to keep capital locked up in these communities for a long time, and the prize is bigger if you make it 10 years or more.”

The investments are open to individuals, corporations, partnerships and real estate investment trusts. Any kind of business or real estate development is qualified so long as it isn’t deemed by regulators to contribute to vice.

The zones cover 8,761 census tracts — in every state, the District of Columbia and five U.S. territories.

The census tracts that were selected to be opportunity zones have a poverty rate of at least 20 percent or a median family income no greater than 80 percent of the statewide median income.

Governors in the states and territories put forward their choices for areas to become special development zones. Every choice — 100 percent of the areas proposed — was blessed by the Treasury Department after a four-month review.

In Virginia, 212 census tracts were designated as opportunity zones out of 901 eligible census tracts. That represented the maximum number of zones the state could have under the program.

In the Richmond area, there are 11 opportunity zones in the city of Richmond, four in Chesterfield, seven in Henrico, three in Petersburg, two in Hopewell and one in Prince George County.

The program is structurally well-suited for real estate development, Northup said.

“I think there are three other good-use cases,” he said.

One would be an entrepreneur using the program to start a business in an opportunity zone.

Another would be expanding an existing business in an opportunity zone.

“The third is if you have a good business near an opportunity zone and are looking to expand, you could expand inside the opportunity zone,” he said.


Local economic development officials and state officials say the opportunity zone program has drawn interest from potential investors.

“I would say this has garnered a lot of interest,” said Kristen Dahlman, senior policy analyst for the Virginia Department of Housing and Community Development, which coordinated the nomination process for designating the opportunity zones along with the Virginia Economic Development Partnership.

“There are some [investor] funds that have boots on the ground,” Dahlman said. “They are driving around the state looking for projects in different areas.”

Andrew Little, an investment banker and partner at John B. Levy & Co., a real estate investment banking firm in Richmond, said there has been increasing interest in opportunity zones in the past several months among real estate developers, brokers, lawyers, accountants and investors.

“There has been a whole lot of interest,” Little said. “Real estate has been intended to be a long-term capital gains maker. What is interesting is we are attracting capital to real estate that was totally unrelated like selling stock or private equity. But the change is a widening group of investors who are coming in and seeking those types of investments.”

John B. Levy & Co. put together an opportunity zone fund that closed in late December to invest in a mixed-use development that includes an apartment building in Scott’s Addition, Little said. He declined to name the specific project.

The capital raise for the fund was “millions of dollars,” he said. The total capital for the project was $30 million, which includes debt and equity.

“We had more people wanting to get into the investment than we had availability for the investment,” Little said.

What was surprising was the type of investors who took part in the fund, he said.

The fund attracted more high net-worth individuals who generally use wealth management companies or money managers.

“Typically, money managers have no interest in losing assets under management, but because of their clientele, they are looking to find deals in opportunity zones,” Little said. “That was a difference. They are doing what is in their clients’ best interest in seeking out investments in opportunity zones.”

John B. Levy & Co. is putting together another deal for a project in an opportunity zone in Hampton Roads, he said.

Some real estate brokers, including John Jay Schwartz with The Man with Square Feet, are marketing properties as opportunity zone-ready. Doing so has led to “more traffic, leads and questions, but no deal yet,” Schwartz said.


In the Richmond region, the opportunity zones include census tracts covering the area north of Broad Street in downtown Richmond around the current Richmond Coliseum.

A potential beneficiary to having the designation is the $1.4 billion proposal to redevelop 21 acres of city-owned real estate for a new Richmond Coliseum, a 527-room hotel, more than 3,000 new apartments, and new office and retail space, among other improvements.

The fact that the project is in an opportunity zone makes attracting private money easier and more likely, Little said.

Another area that also could benefit from the opportunity zone program is the Deepwater Industrial Park, a 110-acre site about 4.4 miles from downtown Richmond and 2.2 miles from the Richmond Marine Terminal.

Formerly owned by Allegheny Warehouse Co., the property on Commerce Road was acquired by Hourigan, a Richmond-based construction and development company, in late 2017. The company is razing old warehouse buildings on the site and replacing them with about 1.5 million square feet of built-to-order space for manufacturing or distribution.

Mark Hourigan, CEO of Hourigan, said his company acquired the land because of its prime location near the Richmond Marine Terminal before the opportunity zone program was established.

Tax incentives for investments “will be a nice addition to what we already thought was a great piece of property,” he said.

“It appears to be a great opportunity for someone to invest in areas where re-investment is needed and would be most beneficial and the jobs would be helpful,” he said.

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The Associated Press contributed to this report.

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