Capital Square Opportunity Zone V Secures Long-Term Financing for the Otis Development and Makes Special Distribution to Investors
RICHMOND, Va. (Nov. 13, 2023) – Capital Square, one of the nation’s leading sponsors of tax-advantaged real estate investments and an active developer and manager of housing communities, and Greystar, a leading global development, investment, and property management firm, announced today that the company has secured $76.5 million of fixed-rate, permanent financing on behalf of the Otis, a 350-unit mixed-use multifamily development in the Scott’s Addition opportunity zone in Richmond, Virginia.
“We are pleased that Capital Square has closed on a permanent loan for the Otis and has made a special distribution to investors,” said Louis Rogers, founder and co-chief executive officer of Capital Square. “This represents another major milestone in completing Capital Square’s opportunity zone strategy of using a construction loan and investor equity to develop the Otis as an excellent Class A residential community, leasing the property with a view to stabilization, refinancing the construction loan with a permanent loan and distributing excess loan proceeds to investors several years before their taxes are due in 2026. This is a phenomenal result for investors despite unprecedented inflation, interest rate volatility and shortages of labor and material.”
The Otis development is a joint venture among Capital Square and Greystar, the largest manager of multifamily properties in the world and one of the largest developers of multifamily units in the nation.
“This has been a challenging process with capital markets in disarray and the ten-year treasury at its highest level in sixteen years,” said Whitson Huffman, co-chief executive officer of Capital Square. “Capital Square leveraged an existing relationship with NY Life Insurance Company to secure the permanent loan. As a result, investors in this project-specific opportunity zone fund will receive distributions that total approximately 33% of their invested equity.”
In less than four years, Capital Square and Greystar planned, constructed, permanently financed and leased 81% of the apartments at the Otis. Rents being collected are among the highest in the market on a per-square-foot basis. The Otis has been delivered on budget, despite construction cost volatility and procurement challenges and has been exceptionally well received in the market.
The context is important. Capital Square’s finance team was concerned that capital markets were highly volatile and that interest rates could increase dramatically before closing. Therefore, Capital Square executed an early interest rate lock at 6.32%. The strategy paid off when the 10-year treasury rate rose dramatically, saving investors over $3,300,000 in mortgage payments over the life of the loan.
Capital Square’s opportunity zone strategy is to use special distributions to provide investors with funds to pay the taxes due in 2027 on their deferred gains as provided by the Tax Cuts & Jobs Act of 2017. This is Capital Square’s fourth opportunity zone fund to make special distributions years in advance of the tax due date.
Since its formation in 2012, Capital Square has raised more than $3 billion in equity from investors for its tax-advantaged real estate investment offerings. The company has consistently ranked as one of the leading sponsors of Delaware statutory trust (DST) investment programs for investors seeking the advantages of Internal Revenue Code Section 1031 exchanges and is also an active sponsor of qualified opportunity zone funds, development LLC’s and Capital Square Apartment REIT, a real estate investment trust that invests in multifamily communities throughout the Southeast.
About Capital Square
Capital Square is a vertically integrated national real estate firm specializing in tax-advantaged real estate investments, including Delaware statutory trusts for Section 1031 exchanges, qualified opportunity zone funds for tax deferral and exclusion and a real estate investment trust (REIT). In recent years the company has become an active developer of mixed-use multifamily properties in the southeastern U.S., with eight current projects totaling approximately 2,000 apartment units with a total development cost in excess of $600 million. Since 2012, Capital Square has completed more than $7.5 billion in transaction volume. Capital Square’s related entities provide a range of services, including due diligence, acquisition, loan sourcing, property/asset management and disposition, for a growing number of high-net-worth investors, private equity firms, family offices and institutional investors. Since 2017, Capital Square has been recognized by Inc. 5000 as one of the fastest growing companies in the nation for seven consecutive years. In 2017, 2018 and 2020, the company was also ranked on Richmond BizSense’s list of fastest growing companies. Additionally, Capital Square was listed by Virginia Business on their “Best Places to Work in Virginia” report in 2019 and their “Fantastic 50” reports in 2019 and 2020. In 2023, Capital Square was recognized by the Richmond Times-Dispatch as one of the region’s “Top Work Places.” To learn more, visit www.CapitalSq.com.
About Greystar
Greystar is a leading, fully integrated real estate company offering expertise in investment management, development, and management of rental housing properties globally. Headquartered in Charleston, South Carolina, Greystar manages and operates approximately $230 billion of real estate in 215 markets globally including offices throughout North America, Europe, South America, and the Asia-Pacific region. Greystar is the largest operator of apartments in the United States, manages more than 754,000 units/beds, and has a robust institutional investment management platform with more than $49.9 billion of assets under management, including $22.6 billion of development assets. Greystar was founded by Bob Faith in 1993 with the intent to become a provider of world-class service in the rental residential real estate business. To learn more, visit www.greystar.com.
Disclaimer: Securities offered through WealthForge Securities, LLC, Member FINRA/SIPC. Capital Square and WealthForge Securities, LLC are separate entities. There are material risks associated with investing in DST properties and real estate securities including illiquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multifamily properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal. Past performance is not a guarantee of future results. Potential cash flow, returns and appreciation are not guaranteed. IRC Section 1031 is a complex tax concept; consult your legal or tax professional regarding the specifics of your particular situation. This is not a solicitation or an offer to see any securities. Please read the Private Placement Memorandum (PPM) in its entirety, paying careful attention to the risk section prior to investing. Private placements are speculative. Diversification does not guarantee profits or protect against losses.
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