The Grow Conference & Opportunity Zone Insights by Primior CEO, Johnney Zhang

The Grow Conference & Opportunity Zone Insights by Primior CEO, Johnney Zhang

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The Grow Conference & Opportunity Zone Insights by Primior CEO, Johnney Zhang

Johnney Zhang, CEO of Primior, was a featured speaker at the recent GROW Conference hosted by the Santa Ana, California, Chamber of Commerce.

Under the theme of “The Rise of Urbanization in the Heart of Orange County,” the conference addressed the exciting and innovative economic development activities underway that are transforming the city, regarded as the county’s “hub” and “downtown” with a 2018 GMP estimated at $281 billion.

Speakers included a distinguished line-up of city, community and business leaders who are helping to drive the vision for Santa Ana’s urbanization. Zhang was selected for the roster based on his expertise in addressing the topic of Opportunity Zones (OZ).

Read on to learn what Johnney had to say about Primior’s strategies and the latest OZ updates:

What was the process in selecting the First Harbor location?

  • Santa Ana is home to a wealth of history with beautiful downtown architecture, a memorial park and the Santa Ana Zoo. It’s a wonderful city that showcases diverse arts and cultural experiences. However, despite its overall beauty and positive attributes, there are areas that can be enhanced to gain a substantial economic return for the business and resident communities.
  • We chose the First Harbor Plaza location for its potential to advance the Harbor Mixed-Use Transit Corridor Specific Plan. The intention of that plan is to create a place for people to connect to their city through various mixed-use options for retail, shopping, restaurant and worship as well as utilizing the new OC Streetcar transit.
  • We at Primior are committed to supporting this ongoing revitalization effort, to reinvigorating the economy and preserving its legacy of culture and rich history.
  • From an economic standpoint, since 2014 unemployment in Santa Ana has decreased by over 50%. And the Santa Ana retail vacancy is 2.6%, which is lower than the Orange County rate of 3.7%
  • The 2018 GMP was $281 billion for this vibrant metro area, a number that can be improved with the help of Opportunity Zones.
  • The First Harbor Plaza project will also create short-term jobs in construction and development as well as long-term retail and business employment to help further invigorate the Santa Ana economy.

Who are the current signed tenants and what do they bring to the area community?

  • Currently, our signed tenants include Taqueria Zamora, Optima Salon Suites and Chase Bank.
  • Taqueria Zamora is a well-known and loved restaurant with local roots. And it’s opening its second location at First Harbor Plaza. Local businesses like Taqueria Zamora honor the surrounding culture and preserve the Santa Ana way of life.
  • Optima Salon Suites is a contemporary concept in the salon market. This tenant’s innovative design for their space will complement First Harbor Plaza and reflect the ongoing effort to refresh the area’s aesthetic.
  • Chase bank is our anchor tenant that will stimulate strong foot-traffic and provide a familiar face to First Harbor visitors.

Why does Primior see OZ investments as worthwhile for its investors?

  • We see Opportunity Zone funds as a potentially worthwhile option for investors. If used to their full advantage, investors could keep the interest made on their gains from the fund tax-free if the investment stayed in place for a 10-year period. In addition, taxes on capital gains invested in an Opportunity Zone fund could be reduced by 15% over a 7-year period.

What kinds of investors are they best suited for?

  • Opportunity Zone investment funds are for the patient investor. This is a fundamental consideration. Opportunity Zone investments must remain in place for the required timeframe in order to derive the full tax advantages. This is similar to a buy-and-hold strategy due to the time commitment required.
  • Another motivation can be the potential for both the community and the investors in terms of revitalizing economically distressed communities, updating infrastructure, modernizing architecture, stimulating businesses and creating housing using long-term private investments as opposed to burdening taxpayers.

Are there ways to expedite these projects?

  • These kinds of projects can be expedited by partnering with an experienced investor and developer.
  • There are a number of very specific requirements that must be navigated, such as a requirement to place rollover gains into an Opportunity Zone fund within six months.
  • Another is that a property must be substantially improved within 30 months or have its original use commence with the Opportunity Fund in the Opportunity Zone.

Other thoughts on latest OZ regulations?

  • The U.S. Treasury Department recently released Final Regulations for qualified opportunity zone investments. Under the opportunity zone program as originally developed, capital gains tax obligations could be deferred and reduced by 10% for investments made in qualified opportunity zone funds and held for at least five years. Investors also were able to take advantage of a 15% tax reduction for investments held for at least seven years.
  • However, the most recent regulations stipulate that the15% reduction at the seven-year mark applies to investments made by December 31, 2019. Investments made after that date will not be able to receive this advantage because the deferment would have to be realized by December 31, 2026. As a result, the maximum deferment is now 10%. Even so, 10% can still represent a significant amount.

On Opportunity Zones being a bipartisan program:

  • Lastly, it’s worth mentioning that this unique, win-win program is a bipartisan effort.
  • This aspect in itself should be celebrated. It’s a rare occasion in which both sides of government have unanimously agreed on legislation, because this program truly benefits everyone.
  • The Opportunity Zone program is more than the sum of its advantages as it transcends party lines and has become extraordinary proof that there’s hope for diplomacy in a contentious period in American government.

Primior develops its own Opportunity Zone projects with a uniquely integrated suite of services tailored to expedite the process and reduce costs. This experience in real estate finance and management, along with extensive development knowledge and experience, provides a deep understanding of what it takes to make these projects successful.

With a combination of in-house services such – architecture and design, development management, construction management, asset management, property management, leasing, acquisition and sales, and financing – this strategy maximizes returns while minimizing risk. Contact us today to get started.

Featured in Commercial Property Executive, Bisnow, Newsmax, commercialsearch.com, and Modern Contractor Solutions.

Johnney Y. Zhang

CEO, Primior Asset Management

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