Avanath Enters the Opportunity Zone Game

Avanath Development has entered the opportunity zone race. The firm has launched a qualified opportunity zone fund with a target raise of $300 million, which the firm plans to hit in the next six months. Avanath is a seasoned affordable housing and market-rate multifamily developer and has already been active in several opportunity zone markets.

“We have built a business about investing in markets that have been underserved by institutional capital,” Daryl J. Carter, chairman of Avanath Development, tells GlobeSt.com. “We started looking after the sites were finalized as opportunity zones, and we realized that of our 70 communities, there were roughly 15 to 18 that were in opportunity zones. When we started looking at the potential, we had three properties we had considered for redevelopment, and we realized that those deals penciled for opportunity zone investors.”

Investors have launched a bevy of qualified opportunity zone funds in the last year, but Avanath is taking a unique approach. It has already seeded the fund with four assets, and Carter believes this will give them a competitive advantage over the mass of blind funds dominating the space. “We have launched the fund by seeding it with four investments, three that we currently own and a third one that we have control over,” he says. “In each case, there is the ability to add more density, and that is how we satisfy the additional investment of 100% of our cost basis. We think our offering is distinguished because we are not offering a blind pool. We are offering specified assets that have demonstrated market demand and have existing cash flow. These assets have the potential to come online very quickly from an execution standpoint.”

Avanath in some ways is late in launching this fund—not because there aren’t opportunities or deals to be made in these markets, but rather because so many investors have rushed into launching funds. However, Avanath is happy to take its time in finding quality deals and navigating the new opportunity zone model—which is still new. There is a lot of interest, but there are still regulations that need to be finalized,” says Carter. “We think the tortoise wins here, so we have been slow. There have been other funds announced four or five months ago, but those are blind pools that still have to find product.”

So far, investors have responded to the launch, and he expects to raise the $300 million in the next four to six months. “We have initial investor interest. We are hoping to have the fund capitalized in the next four to six months,” Carter says. “We think that particularly people with capital gains to deploy that there is more urgency for them to find a qualified opportunity zone investment.”