Phil Castle, The Business Times
Shane Phillips foresees a lot of opportunities for investing in opportunity zones.
The company for which Phillips works invested in townhomes under construction in Grand Junction and is evaluating additional projects in the Grand Valley. It’s part of an effort he said enables investors to take advantage of tax incentives, supplies capital for projects and promotes economic development.
“It’s a three-way win,” said Phillips, president of Parsonex Capital Advisors.
Based in Englewood, the private fund sponsor focuses on real estate and businesses in opportunity zones in Colorado and elsewhere in the West.
A federal tax reform measure enacted in 2017 offers incentives for investing in opportunity zones, areas deemed distressed because of unemployment and income levels. More than 8,700 opportunity zones were established nationwide, with 130 in Colorado and seven in Mesa County.
Phillips said the incentives include the deferral, reduction and even elimination of taxes on capital gains realized on the sale of businesses, real estate and stock.
Taxes on capital gains invested in a qualified opportunity zone fund within 180 days are deferred until Dec. 31, 2026. If held until Dec. 31, 2026, the taxable basis on capital gains invested in the fund is reduced by 10 percent. If the investment in the fund is held at least 10 years, there’s a 100 percent step up in cost basis, eliminating taxes on the growth of the investment.
Investing in an opportunity zone fund also offers an alternative to exchanges allowed under section 1031 of the Internal Revenue Code, Phillips said. Under so-called 1031 exchanges, taxpayers defer recognition of capital gains on selling real estate by purchasing similar property.
Parsonex enables investors to take advantage of the incentives by investing their money in real estate and businesses in opportunity zones, Phillips said.
The company initially evaluated opportunities nationwide, but then narrowed that focus to Colorado and the region, he said. For investors in Colorado, their money is used to fund and promote development close to home, he said.
“We really like the Grand Junction market for a lot of reasons,” Phillips said. They include the growth of Colorado Mesa University and health care industry, the recent relocation of the Bureau of Land Management headquarters to Grand Junction and popularity of the area as a tourism and recreation destination. Moreover, there’s a low supply of housing in the face of strong demand, he said.
Parsonex invested in a portion of the Sundance Homes development under construction on Zenith Lanes between 24 1/2 and 25 roads — 22 townhomes expected to be available for rent this summer.
Senergy Builders of Grand Junction is developing Sundance Homes. The townhomes feature three-bedroom units with attached garages. Each unit will be certified for meeting energy efficiency standards.
Phillips said his company likes to work with local partners on projects. In the case of Sundance Homes, that includes Darin Carei, owner of Senergy Builders. Mike Foster, a broker with Coldwell Banker Commercial Prime Properties, handled the land sale.
Parsonex is considering other projects in the Grand Valley as well as elsewhere in Colorado and the West. Phillips said he expects the company to invest in eight to 12 projects in the region over the next three years.
They will include a mix of multi-family housing, light industrial and mixed-use properties. Investing in different types of properties in different markets diversifies investments and reduces risk, he said.
Parsonex also strives to achieve one goal of the legislation establishing opportunity zones in investing in projects that promote economic and community development, he said. “We’re kind of living the spirit of the law.”
For more information about Opportunity Zones, log on to www.opportunityzonereport.com.