Why Shopoff Realty Stepped into the Opportunity Zone Market

Shopoff Realty Investments has entered the opportunity zone game with the launch of its first opportunity zone fund. Launched earlier this month, Shopoff DLV QOZ has a capital raise goal of $200 million. While the opportunity zone fund will support the development of the $545 million Dream Las Vegas hotel on the Las Vegas Strip, the impetus was to support the firm’s long-term outlook and growth strategy.

“Our purpose in bringing this opportunity to market was that it was an exceptional and unique investment that fit very well into our corporate strategy and long-term outlook, with the opportunity zone designation being an added benefit, but not the core reason,” Bill Shopoff, president and CEO of Shopoff Realty Investments, tells GlobeSt.com. “We believe strongly that an investment must intrinsically be a good economic investment regardless of tax benefits, and only then, if it is a quality investment, should the tax benefits be considered.”

The Dream Hotel in Las Vegas fit that bill. “The Dream Las Vegas development is in our opinion a remarkable project on many levels, including its location (on Las Vegas Blvd, 0.7 miles and an easy walk to Allegiant Stadium), operator (Dream, the premier lifestyle and entertainment brand), and design (at the forefront of a new wave of more intimate and personalized experiences in Las Vegas),” says Shopoff.

While the pandemic has dramatically impacted the hotel market, the 450-room property isn’t scheduled to break ground until the third quarter 2021. “Our underwriting on this asset indicates that it has incredible potential, particularly as a result of the timing of the opening of the asset, currently slated for the end of 2023, when we anticipate we’ll be well into a strong economic recovery,” adds Shopoff. “We believe that opportunity zones are a significant and important part of legislation, that as intended, is generating employment, housing and other important drivers for underserved areas. We are grateful that this project will contribute to the economy of Las Vegas and will serve as an example of what can be achieved through collaboration and vision.”

This project has also been a long time in the making, well before the pandemic was on anyone’s radar. “We sourced the asset back in the third quarter of 2019, as a potential land entitlement project. At that time, we saw the incredible promise this property might provide and pursued it diligently,” says Shopoff.

In fact, the opportunity zone benefits were merely icing on the cake because the property happened to be located in a qualified zone. “When we learned that it was also in an opportunity zone, we understood that the entitled project would have a higher value, but it wasn’t the primary focus at that time. As we delved deeper into the project, we determined that we would also want to take on the development of the hotel, in conjunction with our co-general partner, Contour, and that the opportunity zone feature would allow us to access an additional segment of the market and capital,” says Shopoff.

As a result, Shopoff is open to participation from both opportunity zone capital as well as cash investors. “The fund includes the ability for investors that are converting short- and long-term capital gains into a QOZ investments, but also, we allow for and anticipate some cash investors who are not applying capital gains, as the investment itself is strong enough that the tax benefits are just an added benefit, but not the sole reason to invest,” says Shopoff. “The QOZ tax benefits just build off of an already great return potential and make it even more exciting. But it is an excellent opportunity either way.”