Cresset, led by ex-Willis Stein, Sterling Partners execs, forms impact-related partnership

  • Why this is important: Funds targeting opportunity zones are finding traction among family offices

Cresset Capital, formed by ex-Willis Stein and Sterling Partners executives, formed a partnership to take advantage of a government program meant to encourage investment in low-income communities.

Cresset-Diversified QOZ Fund, a partnership of Cresset and LCM Opportunity, signed its first letter of intent and will hold a first close by early December.

The fund, targeting $500 million, aims to take advantage of the economic opportunity zones program created by the Tax Cuts and Jobs Act in December 2017.

The program is meant to give the private sector incentive to invest long term in qualified low-income communities to spur economic growth and job development.

Investors in qualified opportunity funds can defer capital-gains tax from the sale of assets in the funds.

Cresset-Diversified QOZ Fund signed its first letter of intent of $200 million with an $88 million equity component for a new development, Nick Parrish, managing director said.

The property is a 46-story apartment building, he said. “We are casting a wide net with the fund,” Parrish said.

Apart from real estate, the fund will invest in private businesses, helping them expand or relocate operations to these opportunity zones, he said.

Think data centers, technology firms and cellphone towers, among others, Parrish said.

Apart from generating returns, the Cresset-Diversified QOZ fund also aims to create meaningful impact for the communities in these zones, he said.

To that end, Cresset recently hired Matt Reilein to lead community development for the QOZ fund, Parrish said.

Most recently Reilein headed impact investing at O’Brien-Staley Partners.

Before that he built JP Morgan’s New Markets Tax Credit business, overseeing more than $5 billion of qualified investments into low-income communities, a news release says.

The minimum investment required for Cresset QOZ fund was $1 million, Parrish said.

LCM Opportunity is led by Larry Levy, Jeffrey Cherner and Michael Miller, owners of Diversified Real Estate Capital, which provides equity capital to real estate developers and owners in the U.S.

LCM will create institutional quality assets focused on office, retail, multifamily, industrial, residential and mixed-use properties in QOZs, a news release said.

Levy is also a real estate investor and ideal partner for Cresset, Parrish said.

Action Item: Read more on opportunity zones: https://bit.ly/2JtrAAU