NEW FUND BOLSTERS ‘OPPORTUNITY ZONES’
Aims to connect undervalued real estate with growing startups
Orlando entrepreneurs and small business advocates Monday launched a fund that they expect will bring together undervalued real estate properties with growing startup companies by taking advantage of tax incentives President Donald Trump signed into law in late 2017.
The idea is to create a pool of money to invest in properties that might be underused and lure small businesses to locate there.
Orlando has 12 areas designated as “opportunity zones,” which provide deferrals on paying federal taxes on capital gains if investors take a stake in them.
“It is an idea we have been putting together for a while,” said John Cooper, a veteran investor who will serve as president of startup investments for the fund. “This is a return-focused fund. It’s not only for the good of the [startup companies], but we intend it to be very good for investors.”
The Orlando Opportunity Fund has a target of raising $20 million from investors.
The fund will seek out small businesses that have moved beyond their initial stages, often called seed-stage because that’s when companies raise money that allows them to seed their idea and build it.
Meanwhile, the real estate side of the arrangement will look for properties in designated opportunity zones, which stretch to portions of Lake to Orange, Seminole and Osceola counties in Central Florida.
Organizers would not say how much the fund has raised so far, although Orlando entrepreneur Gregg Pollack said he has invested $200,000.
“It helps me with the capital gains tax, and they are investing in things I care about,” said Pollack, who sold his company Code School for $36 million in 2015 and has since been investing in local efforts.
Orlando’s startup community is home to several programs that help new companies and new entrepreneurs learn how to run a business. But once they can move beyond that first stage, they often have few options in Orlando, which often results in companies moving.
This new fund will encourage more companies to stick around, organizers said.
Opportunity zones were created as part of Trump’s Tax Cut and Jobs Act in December 2017.
U.S. Secretary of the Treasury Steven Mnuchin has championed the program as a way of lifting poverty-stricken areas.
“Attracting needed private investment into these low-income communities will lead to their economic revitalization and ensure economic growth is experienced throughout the nation,” he said in a news release that identified the first group of opportunity zones in April 2018.
But critics have said the opportunity zones have become little more than sweet investment deals for billionaires.
On average, leaders expect to invest between $1 million and $5 million in commercial properties within the zones with another $250,000 to $500,000 being set aside for eligible startups.
“We want to bring them together and help them succeed,” said Sherry Gutch, the city’s business development manager. “Our goal remains to grow our own companies and keep them here, so having them in these opportunity zones will help.”