CategoriesOur Projects

Breaking Ground on a Boutique, Alternative to Austin Living

On November 9th, The Geyser Group and The Sephira Group broke ground on The Johnny, a boutique alternative to Austin living. The Johnny will be a 76-unit multifamily community in the Highland neighborhood, a highly sought after location near downtown, UT campus, and the Triangle. This property will feature condominium- like design elements that differ from traditionally large housing developments. Breaking ground on this property has been the highlight of our month! 

If location is  what you are looking for, then look no further! The Johnny provides a modern solution for those looking to live near the heart of the city. It is located steps from the red-, orange-, and blue rail lines at Crestview Station, and adjacent to the grocery stores, restaurants, coffee shops, and bookstore at The Crescent shopping center. The Johnny’s central location reduces the cost and emissions of long commutes. Additionally, The Johnny will offer limited affordable housing options to those who earn below 60% of the median family income. 

“In the years we’ve been developing in Austin, we’ve seen it become one of the least affordable cities in the nation,” said Matt McDonnell, founder and CEO of The Geyser Group. “The COVID-19 pandemic has only exacerbated the problem. By providing a spacious, metro-adjacent environment, The Johnny addresses an underserved community and puts a dent in Austin’s affordability crisis.”

Affordability is a rising problem in the Austin market. Through our efforts, we hope to provide opportunity for the community to experience the wonderful development that is The Johnny. Here’s to breaking ground! 

construction april 2022 for 3706 goodwin multifamily development in east austin
CategoriesOur Projects

Breaking Ground on a Groundbreaking Development: Goodwin Apartments

The Geyser Group and Cadence McShane Construction Company are breaking ground on the new Goodwin Apartments. We have worked closely with Davies Collaborative and Sabot Development to handpick all the design elements that will go into this project. With outstanding exterior and interior design, it is no surprise that everyone involved in this project is ecstatic to see construction begin. 

Located in prime East Austin, the multi-use development will add 364 residential units and 5,000 square feet of commercial space to the growing area. Since 2019, East Austin has become the hit location for up-and-coming bars, restaurants, and other retail developments. 

The area was deemed one of the fastest-growing areas in the city prior to the pandemic making the community in East Austin incredibly diverse. With new multipurpose developments comes the need for new housing. The new Goodwin Apartments will provide an abundance of opportunities to live where the action is. 

Pictured left to right: Managing Director Michael Bernstein, CEO Matt McDonnell, and Sabot Partner Jim Young

Following construction, 10% of the units will be affordable housing, prioritizing existing tenants at the existing complex. Current residents will be eligible for financial assistance and be given first preference to help them move back into the new development. Residents will be given access to free classes on financial literacy through Framework CDC. 

Breaking ground on projects that will benefit us and the community is something we strive for. The Geyser Group believes in opportunity, and Goodwin will provide Austin residents with up-scale housing combined with a number of social opportunities.

To learn more about Goodwin, check out our ‘Project Spotlight’ series here

CategoriesUncategorized

What’s the Deal With Opportunity Zones?

This article will explain what an opportunity zone is, how opportunity zones were created, how to invest in an opportunity zone, and how opportunity zones help incentivize investments. 

Please note that this article is for informational purposes only; Geyser is not providing investment advice. We recommend that you research and discuss these opportunities with professionals before investing.

What is an Opportunity Zone? 

In general, Opportunity Zones are areas across the United States representing distressed communities that could benefit from investment and economic development 1. In 2017, the Tax Cuts and Jobs Act redefined how capital was used to foster economic growth by creating opportunity zones to incentivize investment in lower-income communities 2.

How Were Opportunity Zones Created? 

Through the Tax Cuts and Jobs Act of 2017, low-income communities and neighboring areas sourced through population census tracts could qualify as opportunity zones 3. State legislators hand-picked communities they felt could benefit from investment and nominated specific tracts for consideration; The U.S. Department of Treasury and the IRS certified the nominated areas. Currently, the United States has 8,764 Opportunity Zones, and roughly 23% are located in rural areas throughout the 50 states, five U.S. territories, and the District of Columbia 4. Click here to view the current list of all Opportunity Zones in the U.S.

Map of Current Opportunity Zones provided by the U.S. Department of Housing and Urban Development

Benefits of an Opportunity Zone 

The main benefit for individuals investing in qualified opportunity zones is the ability to adjust their returns to the fair market value and defer tax payments on capital gains if held for at least ten years. According to the IRS, Investors are allowed up to 180 days from the date the gain is recognized for income tax purposes to place it into a Qualified Opportunity Fund (QOF). When invested, the gain will defer taxes until December 31, 2026, or when the opportunity zone is sold. 5

The delayed gains also depend on how long the deal is held. Investors can defer taxes further by holding their QOF investment for five, seven, or ten+ years. If held for five years, there is a 10% exclusion of the deferred gain; if held for seven years, there is a 15% exclusion of the deferred income. Finally, if a QOF is held for ten+ years, investors can adjust their returns to the fair market value. Because of this, returns made from the asset appreciation are tax-exempt 6. While tax benefits occur when holding for five and seven years, a QOF will ideally be held for ten years to maximize investor returns and allow them to defer tax payments on all gains made from the investment. 

Breaking it Down 

For example, let’s say an individual sold $100,000 worth of stock in 2019, giving them $100,000 in capital gains. The individual invests their entire gain into a QOF within the 180-day window. Because the individual invested before the 180-day period ended, the value of the sale was not taxed in 2019.

Now let’s assume the investment was held for five years under the same circumstances. If held for five years, the individual can defer 10% of the original investment (in this case, $10,000). Furthermore, if we assume the investor held for seven years, an additional 5% of the initial investment will be deferred (in this instance, $5,000). Finally, if the investor were to hold for ten years and the QOF is sold, they would only have to pay taxes on $85,000 of the gain they received from selling stocks in 2019. Additionally, if the investor were to sell the Opportunity Zone for $300,000, the asset’s appreciation at the time of the sale will also be tax-exempt, giving the hypothetical investor a second tax-deferred gain of $200,000. 

Chart displaying the tax benefits from holding an Opportunity Zone for 10 years- Provided by HUD.GOV

Can I Invest in an Opportunity Zone after December 31, 2026? 

Initially proposed in the Tax Cuts & Jobs Act of 2017, individuals who invested their capital gains in Qualified Opportunity Zones were eligible to have their capital gains tax deferred until December 31, 2026. Under this timeframe, investors looking further to defer capital gains tax through qualified opportunity funds will not qualify because the five-year holding period expired on December 31, 2021, and the seven-year holding period expired on December 31, 20197. Although the tax deferral benefit is no longer available, investors who hold the asset for ten years will still be able to defer taxes on the asset’s appreciation when sold until December 31, 2047. To read the complete list of opportunity zone investing deadlines, click here.

Has Opportunity Zone Legislation Changed Since 2017? 

On April 7, 2022, the Opportunity Zones Transparency, Extension, and Improvement Act was proposed by the Senate Finance Committee to revise, improve, and extend opportunity zone investing activities. Through this Act, the opportunity zone qualification process will be modified to disclude opportunity zones in areas with median family income exceeding 130% of the national median family income8. Furthermore, this revision will focus on areas where at least 40% of the population has lived in poverty since 19809

Another revision outlined in the Opportunity Zones Transparency, Extension, and Improvement Act is to extend the temporary deferral period for invested capital gains until December 31, 2028, a two-year extension from the original timeline. Additionally, the holding period to receive up to 15% of capital gain taxes differed will decrease from seven to six years. 

Finally, the bill will establish a State and Community Dynamism Fund to support small businesses, communities, and public/private investments. The bill will allocate $1 billion for states to use in the following scenarios: 

  1. Build housing in high-poverty, rural, and otherwise underserved communities 
  2. Advance investment in minority, women, and veteran-owned businesses
  3. Development of workforce housing in specific sectors 
  4. Affordable Housing with at least 50% of the units affordable to families making less than 80% of the median family income. 

It is important to note that the revised Opportunity Zone bill has yet to be discussed and is up to the decision of the 118th U.S. Congress. Click here to read the full Opportunity Zones Transparency, Extension, and Improvement Act. 

Setting up a Qualified Opportunity Fund 

One thing that makes investing in real estate attractive to investors is the ability to allocate capital to various asset classes of their choice. While several investment options are available, many investors will narrow their options based on demographics, growth potential, returns, and other incentives outlined in the deal. In the case of investing in an opportunity zone, the federal government established various tax benefits for individuals who invest through a qualified opportunity fund (QOF). For calcification, a QOF is an investment vehicle solely organized to invest in opportunity zones10. To qualify as a QOF, a corporation must fill out Form 8896 in tandem with their federal income taxes annually provided by the IRS. Furthermore, qualified opportunity funds must invest at least 90% of their assets in opportunity zones for tax benefit eligibility11. To read the complete list of requirements a firm must meet to qualify as a QOF, refer to the IRS website here.

Geyser’s Opportunity Zone Development: The Goodwin

In 2017, The U.S. Department of Treasury established 21 Opportunity Zones in Austin to promote more development for low-income areas while encouraging affordable housing12. One of these Opportunity Zones is located at 3706 Goodwin, where Geyser and Sabot’s 363 multifamily development is currently under construction. 

In 2019, Geyser and Sabot Development purchased the ‘Goodwin Apartment Homes’ in East Austin. Initially 68 units, Sabot rezoned the site to redevelop the complex into 363 units of Class- A Multifamily while keeping 10% of units affordable. Furthermore, Sabot Founder Jim Young was committed to rehousing the displaced tenants of the former Goodwin Apartments and mapped out a plan for them to return to the newly built apartment complex in 2024. 

Because The Goodwin is located in a Qualified Opportunity Zone, Geyser and Sabot allowed individuals to invest their 2019 capital gains into the deal while deferring their capital gain taxes until December 31, 2026. Geyser and Sabot plan to hold the project for at least ten years to capitalize on the Opportunity Zone’s tax benefits fully. 

The Goodwin will provide 363 units of Class- A multifamily apartments to the growing East Austin community. In tandem with the increased housing potential, The Goodwin will aid in the economic growth of East Austin through the planned 2,400 square feet of retail space on the ground floor of the complex. The Goodwin is set to deliver in early 2024, with the initial unit framing currently underway.

In summary, Opportunity Zones and Qualified Opportunity Funds serve as a vehicle to promote investments in underfunded communities by allowing investors to defer capital gains and adjust their returns to fair market value if the QOF is held for at least ten years. The ten year hold allows investors to defer taxes on the appreciation of the asset until December 31, 2047. While revisions to the opportunity zone legislation are proposed, it is unclear when the Senate will discuss these changes. 

If you would like to learn more about Geyser’s multifamily pipeline, please check out our Project Portfolio Page.

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