By Tristan Navera – Staff reporter, Columbus Business First
Columbus-based Beacon Hill Investment Advisory has a unique mission for its newest investment fund.
The financial firm is launching the Nest Opportunity Fund for investors in Central Ohio – a real estate investment fund with a shelf of $50 million designed to take advantage of the new federal opportunity zone program to renovate homes in Columbus and Lexington, Kentucky.
While the firm is typically a financial planner and not a real estate investor or developer, it said exposure to the program from clients shows there is interest in this kind of investment. Clint Edgington, a partner at Beacon Hill Investment Advisory, said the project is the result of “the right alignment of the stars.”
“Investors are looking for places with stable returns and as the bigger markets get more volatile, we find Columbus fits that bill,” Edgington said. “The developers we’re working with work in Central Ohio and look at it as a long-term goal. We’ll come in and hold a property for 10 years and let the capital gains ride.”
The opportunity zone program will be a long-term investment that takes advantage of tax benefits enacted under the 2017 legislation. A typical asset sale would be taxed at a maximum capital gains rate of 20%. But the opportunity zone legislation gives the option of deferring payment of capital gain taxes until 2026 while putting that profit into a fund that reinvests the proceeds.
If the investment is held for at least 10 years, then the fund’s sale of its opportunity zone property will be treated by the IRS as 100% tax-free. While opportunity zones are scheduled to expire at the end of 2028, investments made prior to that date will continue to accrue tax-free gains until 2047.
Beacon Hill is targeting investors who have $100,000 or more in capital gains in the past year and are looking for long-term investments, Edgington said.
The goal will be to renovate between 100 and 300 residential units in all between the two cities, mostly single family for-rent homes and some smaller multifamily projects primarily in low income neighborhoods. The fund will finance acquisition and renovations of some of these economically distressed units and “to maintain the culture and character of the individual neighborhoods,” Beacon Hill said.
It’s atypical for such a fund to target so many individual properties; they typically finance one or a few large multifamily projects. But Edgington said the strategy would “create a 2-foot hurdle rather than a 6-foot one” for rehab work that is easier to pull off in low-income areas. It has approached several investors and has had several sign on already.
“There’s really a benefit for the investors and for the community around them at large,” Edgington said