Johnney Zhang
Diamond Bar-based investment firm Primior has launched two qualified opportunity zone funds. Within the funds, it has two retail properties under construction in Santa Ana totaling 55,000 square feet. Like much of the market, the investor was attracted to the opportunity zones for the tax benefits and social impact aspect of the model.
“We have been following the Opportunity Zone program since its interception. It provides very attractive incentives for developers and investors, resulting in much higher returns and tax savings for the initial investment,” Johnney Zhang, founder and CEO of Primior, tells GlobeSt.com. “The other benefit is that, when a Qualified Opportunity Fund invests in an Opportunity Zone, it boosts the economy in the community and creates jobs. We currently have two QOFs that will make investments in Santa Ana.”
Primior acquired the two development sites in 2017 after the opportunity zone benefits were announced. With opportunity zone legislation only recently finalized, this is one of the earliest projects. “They are both entitled and ready to start construction in a few months, so I think we are ahead of most of our competitors,” says Zhang. “We have great relationships with national tenants and local cities, which allows us to create much higher returns for our investors in a shorter period of time. Our tenants are national brands such as Chase Bank that will enhance the local economy and provide good jobs.”
The firm focuses on retail as well as medical office properties, so these two opportunity zone projects are well within its area of expertise. It sees the most be returns in these two asset classes. “We are looking at almost any commercial properties but with an emphasis on retail and medical,” adds Zhang. “These two sectors are very stable as long as there are solid corporate tenants paying high rent with minimal turnover and corporate guarantees on the leases, so the income stream is very stable. We also like multifamily, but the returns on multifamily are far lower than on retail and medical.”
The investor has an integrated development model that allows it to be more efficient in building new projects. “We have in-house architects, contractors, leasing specialists, marketing experts, property managers and investment bankers,” says Zhang. “These teams handle all aspects of development and work very closely with each other. The end result has been amazing in terms of saving time as well as reducing costs, which leads to much higher returns.”
Opportunity zone funds have become wildly popular and there has been a flood of competition in new niche. However, because Primior has experience investing in retail and an integrated development structure, Zhang believes it is well positioned to generate strong returns. “There are certainly many funds and developers that have their eyes on it. So property values are going up very quickly. But if you over-pay, you will not be able to generate good returns,” he says. “Our acquisition team is actively looking for off-market deals that are less competitive. Also, since we are vertically integrated, we have the ability to identify the property and calculate the potential returns very quickly, enabling us to act faster than our competitors.”
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Kelsi Maree Borland
