Structuring a QOZ Fund & QOZB for Ground-Up Development – Columbus, OH

[Robert Ellis]

I’m looking into the best way to structure a Qualified Opportunity Zone (QOZ) Fund and a Qualified Opportunity Zone Business (QOZB) for ground-up construction and land entitlement in Columbus, Ohio for hotel and multifamily development. We target land plots that can make a minimum 5x equity bump or return on equity spend within 6 months and those would be sold out of the QOZB land fund. 

I know that a QOF can invest directly in real estate, but I’m particularly interested in the QOZB structure, since it allows for active business operations and working capital flexibility.

For those who have set up a QOZB:

• How did you structure it in relation to your QOF?
• Was your QOZB designed for a specific state/city, or was it structured to operate more nationally?
• What challenges did you encounter in fund formation, compliance, or deal structuring?
• Any best practices for structuring a QOZB for real estate development in Columbus, OH?

I’d appreciate any insights, lessons learned, or recommendations from those who have gone through this process. Looking forward to the discussion!

[Norberto Villanueva]

Quote from @Robert Ellis:

Quote from @Stuart Udis:

@Robert Ellis In order for the QOZ investor to reap the tax benefits the hold period has to be longer. I don't believe raising QOZ money for entitlements that would be resold 6 months later would pick up traction. More realistic to raise the QOZ money to participate in the post entitlement construction and stabilization hold period or alternatively entitlement through stabilization/hold period.

 This is the structure we were looking at which is more of a subsidiary structure and this applies to raw land development: 

📌 Structuring Plan

1️⃣ Set up a QOF to raise capital from investors.
2️⃣ Create a QOZB to handle hotel & parking development (each separate land parcels).
3️⃣ QOF owns the land & funds QOZB for development.
4️⃣ Raise capital through QOF equity, bank loans, or JV partners.
5️⃣ Develop the projects & operate for 10+ years for tax-free gains.

Yesterday, I learned that the QOZB can come before the QOF. Today I learned about the Substantial Improvement Requirement, which means that, to qualify as a QOZ business, the property must be "substantially improved", which is defined as the QOF investing an amount that is equal to or greater than the acquisition's adjusted tax basis within 30 months.