A multifamily project consisting of nearly 400 units in South Seattle has demonstrated a strong interest from individuals looking to invest in opportunity zone projects. Construction is currently underway for the eight-story 900 Rainier project, strategically located near the future Judkins Park light rail station on Rainier Avenue South. The development is led by O.Z. Navigator, a collaboration between two Seattle companies, Nitze-Stagen and Housing Diversity Corp., along with other partners. The project has been fully financed by Mack Real Estate Strategies and opportunity zone investments.
Leo Backer, the managing principal of Pinnacle Partners, a Seattle-based company providing opportunity zone equity for the project, mentioned that approximately 100 investors, both local and national, have contributed funds to the project. Pinnacle Partners is also a member of the joint venture for 900 Rainier and played a role in sourcing the 1.5-acre project site. When factoring in the additional investors who invested directly with O.Z. Navigator, the total number of investors exceeds 100. Over the past seven months, Pinnacle has significantly increased the number of private opportunity zone investors for the 900 Rainier project. The demand from high-net-worth individuals and family offices to invest in opportunity zone affordable housing projects has been robust, leading to the near-oversubscription of Pinnacle’s fund. This trend highlights the availability of “patient capital” and the strong appeal of the federal opportunity zone program, according to a report in the Puget Sound Business Journal.
Backer noted that investors are required to make a minimum investment of $100,000 and must be considered accredited. The federal opportunity zone program offers tax breaks to investors who make long-term investments in economically disadvantaged areas. Since its inception under the Tax Cuts and Jobs Act of 2017, opportunity zones have gained significant popularity. The program is overseen by the Washington State Department of Commerce, which has observed widespread interest in opportunity zones across various urban, rural, and tribal areas.
However, research conducted by economists from the University of California, Berkeley, suggests that the opportunity zone programs are expensive and have limited job creation potential. Instead, these programs primarily offer substantial tax benefits to affluent investors. The economists’ findings were highlighted in an article published by the Center for American Progress think tank. Although the opportunity zone program is set to expire at the end of 2026, a bipartisan group of members of Congress is actively working to extend the program.
Earlier this week, the project team held a ceremonial groundbreaking event for 900 Rainier, marking the beginning of construction for this mixed-income property, which had actually commenced six months ago. O.Z. Navigator views 900 Rainier as a model for private development aimed at addressing the affordability gap. This project is the largest privately funded endeavor in Seattle that incorporates a range of mixed-income apartments. The units will be available for rent to individuals earning between 40 percent and 100 percent of the area median income. Additionally, the development will feature 2,000 square feet of commercial space, intended to accommodate local small businesses and nonprofit organizations. O.Z. Navigator did not disclose the total cost of the project, but it did secure a $112 million construction loan from a Mack Real Estate Credit Strategies affiliate.
Jackson Main Architecture designed the project, and Venture General Contracting is responsible for its construction.