Cresset-Diversified QOZ is a leader in the Opportunity Zone market and has been an early mover in the industry – being one of the first to launch a QOZ fund in December 2018. In Q1 2020, we closed our first fund, having raised $465 million, and launched the Cresset-Diversified QOZ Fund II.
Contact UsCresset Partners, led by Eric Becker and Avy Stein, and Diversified Real Estate Capital, led by Larry Levy, partnered to create the Cresset-Diversified QOZ Fund. The Fund is managed by an experienced team of investors along with legal, tax and accounting experts.
The Tax Cuts and Jobs Act of 2017 created QOZs to provide potentially significant tax benefits to investors who re-invest capital gains into long-term investments into communities designated for economic development. This solution is useful for investors who have substantial capital gains and a desire to realize them in a tax-efficient manner.
Cresset Partners, led by Eric Becker and Avy Stein, and Diversified Real Estate Capital, led by Larry Levy, partnered to create the Cresset-Diversified QOZ Fund. The Fund is managed by an experienced team of investors along with legal, tax and accounting experts. Cresset-Diversified QOZ closed their first fund in Q1 2020 after successfully raising $465 million. The team subsequently opened up Fund II which is now open for investments.
Fund I closed on its investment in Houston in April 2019 and started construction shortly thereafter, making the Preston one of the largest QOZ investments in the U.S. to start construction. Fund I has six other investments under construction and under contract: Eleven West (Portland, OR), North Wynkoop (Denver, CO), The Mercantile (Omaha, NE), The Finery (Nashville TN), Cormac (Charleston, SC), and Ripley II (Silver Spring, MD).
After-tax gains on a QOZ Investment can be more than double those of a similar investment without the QOZ benefits. The table below illustrates an investor’s potential after-tax returns in a QOZ investment compared to the investment of capital gains in a traditional investment both appreciating at 10%.
| Traditional Investment | QOZ Investment | ||
|---|---|---|---|
| Invested Capital Gain | $1,000,000 | $1,000,000 | |
| Less: Capital Gain Tax Investment (23.8%) | ($238,000) | 0 | |
| After-Tax Investment | $762,000 | $1,000,000 | |
| Year 10 Value (assumes 10% annual investment appreciation) | $1,976,432 | $2,593,742 | |
| Less: Year 10 Capital Gains Tax (23.8%) | ($289,035) | 0 | |
| Year 10 After-Tax Value | $1,687,397 | $2,593,742 | |
| Less: Cap Gains Taxes on Invested Gains Due on 12.31.26* | 0 | ($214,200) | |
| Total Year 10 After-Tax Value | $1,687,397 | $2,379,542 | |
| Total Year 10 After-Tax Net Gain** | $687,397 | $1,379,542 |
By investing in an opportunity zone, investors are able to defer taxes on capital gains, reduce taxes by holding the investment, and eliminate taxes if held for 10 years, as illustrated below.
Capital gains invested, deferring payment of capital gains tax.
Tax on original capital reduced through a 10% step-up in basis.
12/31/2026: Original capital gains tax due unless the asset has already been sold.
When sold, investor basis stepped up to FMV, eliminating tax on QOZ capital gain.
The Cresset-Diversified QOZ Fund partners with top developers to build institutional quality core real estate assets in high growth primary markets across the United States. Our investments are structured conservatively with strategic loan-to-cost leverage. Below is detailed information on our Fund I investments.
| Investment | Market | Developer | Multi-Family | Office |
|---|---|---|---|---|
| Fund I: Brava | Houston, TX | Hines | ||
| Fund I: Residences at RiNo | Denver, CO | Hines | ||
| Fund I: Eleven West | Portland, OR | DDG & Gerding Edlen | ||
| Fund I: The Finery | Nashville, TN | Hines | ||
| Fund I: Ripley II | Silver Spring, MD | Washington Property Co. | ||
| Fund I: The Mercantile | Omaha, NE | Hines | ||
| Fund I: Cormac | Charleston, SC | Lennar |
