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Chicago real estate firm raises $655 million for Opportunity Zones

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Separately, Cresset announced that it has raised $ 250 million in the last 12 months for its first fund for industrial development. The money will be used to develop nine warehouses, betting on the continued strength of industrial property rights to provide storage and distribution services for products purchased online.

Cresset also said it had launched new funding for both the Opportunity Zone and industrial projects, but did not say whether any of the future projects would take place in the Chicago area. The second Logistics Fund aims to raise $ 400 million, while the Third Opportunity Zone Fund does not have a specific $ target.

After the program was created in late 2017, Cresset quickly jumped into the Opportunity Zone and partnered with Chicago investor Larry Levy’s Diversified Real Estate Capital to establish the first Cresset-Diversified Qualified Opportunity Zone Fund. Both parties formalized the partnership last year under a single banner, now known as Cresset Real Estate Partners.

The $ 1.1 billion raised by the first two funds of the partnership has spurred the development of 17 projects nationwide with construction costs totaling more than $ 4 billion, Cresset said in a statement. According to the Cresset website, many of the projects are homes that include real estate in Houston, Seattle, Phoenix, and Portland, Oregon.

“The project is still there and investors are still attracted to the program,” said Dominique Derose, director of Cresset Real Estate Partners.

The Cresset project has never been done in the Chicago area. Chicago has several other Opportunity Zone projects, but most of Chicago’s 135 zones are in extremely devastated areas to the south and west. Opportunity Zone critics point out that such places have been largely overlooked by investors.

Mr. Derose said Cresset was evaluating the Opportunity Zone project in the Chicago area and wanted to find it in the domestic market, but “it’s just a matter of whether they exist.” “The Chicago pipeline isn’t as deep as it can be found in other markets.”

Cresset’s Opportunity Zone Fund is one of the largest of its kind. As of the end of 2021, only 2% of all eligible Opportunity Zone funds had raised more than $ 250 million, according to data tracked by San Francisco-based tax advisor and consulting firm Novogradac. Of the 978 funds the company is tracking, only five have raised more than $ 500 million.

As of March, Opportunity Zone has raised a total of nearly $ 28.4 billion in funding since the program began, according to a Novogradac study. According to Novogradak, the total number could double or triple because it only tracks publicly available funding disclosures.

Meanwhile, the warehouse, developed with funding from Cresset’s first Logistics Fund, spans Phoenix, Indianapolis, Dallas, Houston, Savannah, Georgia, and is located along Interstate 81 outside Washington, DC.

The Chicago area is flooded with new warehouse development, but the company didn’t specify where to target the project with its second logistics fund. According to Colliers International data, vacancy rates for local industrial property fell to a record low of 4.91% in the first quarter.

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