Cresset-Diversified QOZ Fund

Overview

Qualified Opportunity Zones

The Tax Cuts and Jobs Act of 2017 created QOZs to provide potentially significant tax benefits to investors who re-invest capital gains into long-term investments into communities designated for economic development. This measurable impact investing solution is useful for investors who have substantial capital gains and a desire to realize them in a tax-efficient manner.

The Cresset-Diversified Solution

Cresset Partners, led by Eric Becker and Avy Stein, and LCM Opportunity, led by Larry Levy, have partnered to create the Cresset-Diversified QOZ Fund. The Fund is managed by experienced teams of Real Estate and Private Equity professionals supported by community impact, legal, tax and accounting experts. The Fund is seeking to raise $500 million in capital commitments.


Measurable Impact Investing

Today, there are over 8,500 Opportunity Zones across all US states, Washington DC and Puerto Rico. These forms of private market investments offer investors the ability to positively impact American communities struggling to attract capital to generate sustainable economic opportunity for their residents.

Source: Department of the Treasury website, CDFI Fund website, IRS Website


Major Benefit to After-Tax Returns

  • After-tax gains on a QOZ Investment can be more than double those of a similar investment without the QOZ benefits.
  • The table below illustrates an investor’s potential after-tax returns in a QOZ Investment compared to the investment of capital gains in a traditional investment both appreciating at 10%.
Traditional Investment QOZ Investment
Invested Capital Gain $1,000,000 $1,000,000
Less: Capital Gain Tax Investment (23.8%) (238,000) 0
After-Tax Investment 762,000 1,000,000
Year 10 Value (assumes 10% annual investment appreciation) 1,976,432 2,593,742
Less: Year 10 Capital Gains Tax (23.8%) (289,035) 0
Year 10 After-Tax Value 1,687,397 2,593,742
Less: Cap Gains Taxes on Invested Gains Due on 12.31.26* 0 (202,300)
Total Year 10 After-Tax Value $1,687,397 $2,391,442
Total Year 10 After-Tax Net Gain** $687,397 $1,391,442
  • * Assumes investment is held for 7 years and a 15% step-up in basis is applied to original capital gain that was invested
  • ** Assumes 10-year holding periods, annual rate of investment appreciation of 10%, and a long-term capital gains tax rate of 23.8%.
  • Note: The amounts shown are not net of fees and carry in either the traditional investment or the QOZ investment. This is to illustrate the tax benefits of QOZ investments prior to any fee structures.

QOZ Investment Time

By investing in an opportunity zone, investors are able to defer taxes on capital gains, reduce taxes by holding the investment, and eliminate taxes if held for 10 years, as illustrated below.

  1. 0

    Year 0

    Harvested gains are invested into the fund.

  2. 1
  3. 2
  4. 3
  5. 4
  6. 5

    Year 51

    The original capital gain is reduced by 10%.

  7. 6
  8. 7

    Year 72

    The original capital gain is reduced by an additional 5%, for a total reduction of 15%.

  9. 8

    Dec 31, 2026

    Original capital gains tax is due unless the asset has been sold.3

  10. 9
  11. 10

    Year 10

    When the investment is sold, tax is eliminated on QOZ capital gain.

  • 1 This reduction is effectuated by increasing the tax basis of the Investor’s interest in the Fund by 10% of the capital gain that the Investor elected to roll over (invested in the Fund), and is only available with respect to investments made prior to December 31, 2021.  The amount of capital gain that is recognized when the deferral period ends will be the capital gain that the Investor elected to roll over (or, if less, the fair market value of the Investor’s investment in the Fund) less the Investor’s tax basis in Fund, all determined at that time.  The final income tax liability will vary depending on, among other things, the applicable capital gains tax rate and the fair market value of the investment in the Fund when the deferral period ends.
  • 2 This reduction is effectuated by increasing the basis of the Investor’s interest in the Fund by an additional 5% of the capital gain that the Investor elected to roll over (invested in the Fund), thus reducing the net capital gain by a total of 15%, and is only available with respect to investments made prior to December 31, 2019.  See the prior footnote for further description of the amount of capital gain that is recognized and final income tax liability when the deferral period ends.
  • 3 In which case, the tax is due when the sale occurred

Real Estate Investments

  • Multi-family
  • Office
  • Student Housing
  • Industrial / Distribution
  • Parking Facilities
  • Hospitality
  • Retail
  • Storage
  • Low-income Housing
  • Relocation of existing operating businesses into QOZs

Private Equity Target Investments

Transaction Types

  • Acquire existing QOZ operating businesses
  • Relocate / expand operating businesses in QOZs
  • Development of operating businesses in QOZs

Industry Segments

  • Manufacturing
  • Industrial & Distribution
  • IP-Centric Services
  • Infrastructure Facilities
  • Retail Services

Team


  • Avy Stein

    Co-Founder & Co-Chairman
    Cresset

     


  • Eric Becker

    Co-Founder & Co-Chairman
    Cresset

     


  • Larry Levy

    Co-Founder
    Diversified Real Estate


  • Bill Rudnick

    Fund Counsel

     


  • Jeffrey Cherner

    Senior Managing Director, Co-Founder
    Diversified Real Estate


  • Michael Miller

    Senior Managing Director, Co-Founder
    Diversified Real Estate


  • Mark Stern

    Managing Partner, Real Estate
    Cresset Partners

     


  • Chris Boehm

    Managing Partner, Private Capital
    Cresset Partners

     


  • Scott Conners

    Managing Partner, Sponsor Products
    Cresset Partners

     


  • Matt Reilein

    Managing Director, Community Development
    Cresset Partners


  • Nick Marietti

    Managing Director, Real Estate
    Cresset Partners


  • Mike Carrano

    Managing Director, Private Capital
    Cresset Partners


To learn more about the Cresset-Diversified QOZ Fund or to share a QOZ investment opportunity, contact Nick Parrish by email at NParrish@cressetpartners.com or by phone at 312-429-2450.


Disclaimer

All right, title and interest in and to the information contained in this web page is the sole and exclusive property of Cresset Partners, LLC, and LCM Opportunity, LLC (collectively, “Sponsor”).

The information contained in this web page is not intended to provide professional, investment, legal or tax advice and should not be relied upon in that regard. The contents of this web page are for general information only and are not provided with regard to your specific investment objectives, financial situation, tax exposure or particular needs. The contents hereof are not a recommendation of, or solicitation for, the subscription, purchase or sale of any security, including the fund mentioned herein. Nothing contained herein should be used as the basis for making any specific investment, business or commercial decision. You should read the final confidential offering memorandum, partnership agreement and/or other supplemental and controlling documents before making an investment decision regarding any particular security carefully before investing in any security.

Investments, including interests in real estate and private equity funds, are subject to investment, tax, regulatory, market, macro-economic and other risks, including loss of the principal amount invested. Past performance as well as any projection or forecast used or discussed in this web page are not indicative of future or likely performance of any investment product. Statements may be forward looking and are not intended as specific investment advice or guarantees of future performance. Such forward-looking statements necessarily involve known and unknown risks and uncertainties, which may cause actual performance and financial results in future periods to differ materially from any projections of future performance or result expressed or implied by such statements.

The contents of this web page are subject to change and may be modified, deleted or replaced at any time in Sponsor’s sole discretion. In particular, Sponsor assumes no responsibility for, nor make any representations, endorsements, or warranties whatsoever in relation to the timeliness, accuracy and completeness of any content contained in the web page. While care has been taken in preparing the contents of this web page, such contents are provided to you “as is” and “as available” without warranty of any kind either express or implied. In particular, no warranty regarding suitability, accuracy, or fitness for a particular purpose is given in conjunction with such contents. Sponsor shall not be liable for any loss, damage, costs, charges and/or expenses incurred as a result of or in connection with this web page or any reliance on the contents of this web page.

The provision of any services or products provided by Sponsor and/or its affiliates shall be expressly subject to the particular terms and conditions as contained in a separate written agreement between you and Sponsor and/or its affiliate as applicable. Sponsor will not provide any individualized advice or consulting unless agreed to by a separate written agreement.