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Investors, including central Ohio’s largest developers, stand to save hundreds of thousands of dollars in federal capital gains taxes by investing in “opportunity zones,″ which were created by the Trump administration in December 2017 to encourage investment in poor neighborhoods. They also receive an immediate 10% state tax credit.

Many of central Ohio’s largest developers have applied for tax breaks under the federal ”opportunity zone” program designed to help blighted neighborhoods.

The 35 central Ohio projects to apply for the federal and state tax breaks within opportunity zones so far include major developments such as the Gravity and Scioto Peninsula projects in Franklinton, the makeover of the University City shopping center on Olentangy River and Ackerman roads, and the redevelopment of the former Beulah Park racetrack in Grove City.

Others include the Cooper Stadium site on the West Side, a stalled East Side apartment complex made of shipping containers, a 15-acre industrial site on the South Side and a barley-malting facility on 300 acres in Marysville.

Investors stand to save hundreds of thousands of dollars in federal capital gains taxes by investing funds from capital gains in projects within the zones, which were created by the Trump administration in December 2017 to encourage investment in poor neighborhoods. The investors also receive an immediate 10% state tax credit.

In all, investors are seeking tax breaks on 85 Ohio projects in the opening rounds of the program, according to state data obtained by The Dispatch.

“My impression so far is, ‘Wow, there are a lot of exciting things being described in these applications,’” said state Development Services Agency Director Lydia Mihalik, whose office oversees the program for the state.

“We’ve got investments in areas that have been eyesores, along with additional housing stock, including recovery housing, and some brownfield redevelopment.”

But as many expected, the applications show that the biggest initial beneficiaries are major developers pursuing large projects in well-established neighborhoods.

The list of those applying in central Ohio, for example, amounts to a who’s who of area developers: Casto, Pizzuti, Borror, Schottenstein, Kaufman, Weiler, DeHays, Wilcox and Rockbridge.

Investors also include former U.S. Rep. Jim Renacci, Jim Grote of Donatos and Rogue Fitness founder Bill Henninger.

Brady Meixell, who studies opportunity zones as a research analyst with the Urban Institute, a nonprofit research organization in Washington, said most early applicants for the tax breaks appear to be from large developers pursuing projects that would have happened without the incentive.

“A lot of the projects we’ve seen, opportunity zones are not making the difference, whether the projects are occurring or not occurring. In some cases, the projects have been underway for years,” Meixell said.

He expects that to change as those projects — sort of the low-hanging fruit — are completed and investors move into riskier neighborhoods.

Statewide, 320 opportunity zones were created, 52 of them in central Ohio. While many poor neighborhoods are included in the zones, other areas, including Franklinton, Olentangy River Road, Crosswoods and Grove City, already have attracted significant development.

The 10% state tax credit on the investments is a sweetener.

Renacci, for example, invested $150,000 into a fund that acquired the former A.D. Farrow motorcycle shop on West Broad Street. The investment allows him to cut his state income tax bill by $15,000.

In all, investors have put $240 million into opportunity zone projects in Ohio, according to the state. That translates into $24 million in state tax credits, about half of the $50 million Ohio allowed for the program, although Mihalik said the program might be extended.

Nationally, an estimated $6.72 billion has been invested in opportunity zone funds, according to the tax-advising firm Novogradac.

Azra Nakicevic, director of tax and business advisory services for the tax and accounting firm GBQ Partners in Columbus, said, “There was a lot more activity in the last of 2019 than the first part for a couple reasons: One, the rules were more clear to the investors to qualify. Secondly, to get the full benefit, you had to get invested by the end of 2019.”

While the program was designed to spur investment, some Columbus developers acknowledged that their projects would have happened without the program, although they might have happened at a slower pace.

“Without the opportunity zone designations, projects like Gravity would not be happening the way that they are, and possibly not happening at all,” said Brett Kaufman, founder of Kaufman Development, which is building the eye-catching mixed-use Gravity projects on West Broad Street in Franklinton.

“We certainly would not be able to build some of the components into the project that we are excited about, including a large amount of office space that will bring new jobs to the city, and our efforts to create affordability through our partnership with Homeport and our co-living apartments.”

Pat Kelley, managing partner with GC Beulah Investments, which applied for opportunity zone tax breaks for the redevelopment of Beulah Park, said the breaks allowed the project to move forward faster than it would have otherwise.

Skip Weiler, with the Robert Weiler Co., said the opportunity zone came as a happy benefit to investors in the redevelopment of the University City shopping center at Olentangy River and Ackerman roads.

“In this case, the project made sense, I was going forward with it when the opportunity zone came along and we saw it and said, ‘Let’s take advantage of that,’” he said.

One project that relied on the opportunity zones program is the Cargominium apartment complex on Old Leonard Avenue on the East Side, said the investors, Opportunity Zone Development Group.

“Without opportunity zones, this project wouldn’t have happened,” said Brian White, a partner in the group with Graham Allison.

White and Allison expect work to resume this spring on the project, which will include 25 apartments designed for those transitioning out of prison, homeless shelters or addiction.

White and Allison are looking for other opportunity zone investments in other underserved neighborhoods this year.

Nakicevic, with GBQ Partners, also expects to see applications for the credits grow this year as investors become more comfortable with them.

“The final regulations were issued right before the year end,” she said, “so I expect a lot more investments in 2020.”

COLUMBUS, Ohio — The Greater Columbus Arts Council (Arts Council) announced today that it signed a lease for the historic building at 182 E. Long St., formerly the Winders Motor Sales Company, and plans to move during the first quarter of 2020. With street level presence and a community meeting room, the new space will provide Arts Council constituents with improved access to resources and staff.

“The Arts Council has been searching for a space that would provide better access for our constituents and the community for nearly six years,” said president and CEO Tom Katzenmeyer. “After looking at more than 20 buildings throughout downtown and near downtown neighborhoods, we are delighted that we have finally found a building that checks all the boxes.”

A Connect Real Estate partnership owns the building and, under the direction of Columbus developer Brad DeHays, an application has been submitted for a historic tax credit from the State of Ohio due to the building’s history. Built in 1916 by Wilbur Winders, it served as a newly branded automobile sales facility. Between 1924 and the 1940s, the building served a variety of businesses but it remains one of the few original automobile dealership buildings in the downtown Columbus area.

“Columbus Landmarks applauds the Arts Council’s decision to preserve our city’s past with creative, adaptive reuse of this historic building,” said Becky West, executive director of Columbus Landmarks.

The Arts Council will have about 1,300 more square feet in office space, as well as a community meeting room. In addition, the Arts Council will now be able to provide more accessible and some free parking for constituents meeting with Arts Council staff, as well as begin hosting open office hours twice a month for artists and organizations to stop by and meet with a grants and services team member, get more information, or work on a grant application.

The cost per square foot is $1.28 more per square foot than the 100 E. Broad St. address, however, based on historical increases at 100 E. Broad St., those costs would be level in three years, and less expensive in subsequent years.

Downtown’s newest coworking space has the feel of an old-fashioned house with all the modern touches.

Haven Collective has opened the doors to its new 6,000-square-foot coworking space in the historic mansion at 620 E. Broad St. on the edge of downtown. Haven is leasing the building from owner Harrogate Associates.

It’s the company’s second location, joining its 7,700-square-foot space along Riverside Dr. Both locations offer a similar mix of conference space, gathering areas and events.

Melissa Blackburn and Danielle Lim invited the first guests into the mansion Wednesday. They said the new space offers more dedicated working space and room for “higher end” events that help the entrepreneurs who cowork there reach more professional goals.

“The building has so much established character, so our renovation was really just about adding some new touches without taking away from that character,” Blackburn said. “We really just wanted the space to speak for itself.”

The three-story mansion has desks for about 34 people in half a dozen suites, and most of the space is still available to be rented out. They said the Riverside Drive space had requests for larger suites that could accommodate more people, so the large offices are more prominent in the downtown space.

The building has been used as offices for some time, but the design was intended to honor its historic character. The mansion was built by Benjamin Huntington, whose brother founded Huntington Bank, in the 1870s, according to The Columbus Dispatch.

As is the case with its other location, Haven is offering both coworking and a range of social programs including fitness and child care intended for small business owners to connect with one another. Specifically, this location will have more room for the kinds of entrepreneurship-focused events and gatherings that small business owners and sole proprietorships can learn from to grow their business.

Haven’s memberships range from $99 for access to the space to $400 a month for a dedicated desk and $650 a month for a private office for one to five people.

Officials with the Downtown YMCA say they plan to close the 95-year-old facility because the cost of renovations are too high. Tony Collins, the president and CEO of the YMCA of Central Ohio, said the plan is to build new facilities for residents, perhaps three or four new buildings in the central city, with supportive services. The Y also plans to open new “health and wellness space” in an existing building Downtown by summer 2020.

The Downtown YMCA will close after nearly 100 years, as staff works to develop housing for YMCA residents and a location for its programs.

The closing of the building at 40 W. Long St. won’t be immediate. It could take up to three to five years, YMCA spokeswoman Tina Badurina said.

The Y houses 400 residents now. Badurina said YMCA officials met with the residents, all men, on Tuesday to tell them of the plans.

“We’re working with our affordable housing partners, looking at every opportunity we can,” she said.

Tony Collins, the president and CEO of the YMCA of Central Ohio, said the plan is to build new facilities for residents, perhaps three or four new buildings in the central city, with supportive services. The Y also plans to open new “health and wellness space” in an existing building Downtown by summer 2020. But that won’t have a pool or gymnasium, Collins said. The goal is to build a new Downtown facility for members, he said.

Badurina said the decision to close was made after an assessment found that structural issues would make it impossible to add kitchens and bathrooms for residents, who now share bathrooms and don’t have kitchens. “The rooms are extraordinarily small,” Badurina said.

She said the estimated cost of renovations of the building would be more than $50 million.

The seven-story building, with 235,118 square feet, was dedicated on Jan. 13, 1924. The building, rich with ornate trim, was designed in a Jacobethan Revival style, according to the book Architecture Columbus.

The Franklin County Auditor’s office values the building at $5.85 million.

The building is on the National Register of Historic Places, and is potentially eligible for tax credits to developers, said Becky West, executive director of the Columbus Landmarks Foundation.

She said the Y was the site of the city’s first evening high school, which expanded its curriculum to include post-secondary and professional programs that ultimately evolved into Franklin University.

Mike Stevens, Columbus’ interim development director, said he is not concerned about the building’s fate, calling it a great location that could be repurposed. He said that the city will work with the Y to addressed the organization’s housing needs.

While the building’s location and size may make it attractive to developers, it also presents a daunting task.

Brad DeHays, owner of Connect Real Estate, which has redeveloped several old Downtown buildings, including three across Long Street from the YMCA, said he thinks developers will look at the building but the potential renovation cost and lack of parking are big obstacles.

“Spending millions on a large project and not having adequate parking would make it difficult,” DeHays said.

“I hope whoever throws their hat into the ring to take that on understands the amount of care required to retain the historic aspect of that building,” he added. “It’s such a unique property that it’s going to take a group that’s done this sort of project before.”

In addition to the men living there, the YMCA has 3,400 members who use the facility for its gymnasium and pool and activities. The Y offers exercise classes and cycling, among other activities. Badurina said there is no set date to move those activities.

Badurina said selling the building is an option. “We have some interest from developers. Nothing definite,” she said.

Connect Real Estate looking to redevelop 107-year-old building at 174 E. Long St.

A vacant Downtown building could be turned into a mixed-use apartment complex with micro units.

Brad DeHays, project developer of Connect Real Estate, wants to turn 174 E. Long St. into 45 apartments with ground-floor retail.

Connect Real Estate owns the six-story building, at E. Long and N. 4th streets, and the 36,909-square-foot project is estimated to cost $12 million. DeHays has requested $1.2 million from the Ohio Historic Preservation Tax Credit, according to the application. Construction would start Dec. 1 if the project receives the tax credits. The project would create 32 permanent jobs and 88 construction jobs, according to the application.

“We need the tax credits to move forward,” DeHays said.

Of the 45 apartment units, 35 would be micro studio apartments, and 10 would be one-bedroom units. The micro units would range from 300 square feet to 380 square feet, with studios ranging from 380 to 440 square feet. The one-bedroom units would range from 600 square feet to 660 square feet. Monthly rents for the micro units would range from $1,050 to $1,100, and the one-bedroom units would range from $1,300 to $1,400. DeHays owns the parking lots around the building, roughly 150 parking spaces.

The building was constructed in 1912 and housed Standard Oil of Ohio’s regional headquarters from 1917 to 1955. It has sat vacant ever since the Central Ohio Area Agency on Aging moved to 3776 S. High St. in 2016. The building was previously slated for demolition by Continental Real Estate.

Connect Real Estate had a lot of interest in the ground floor retail and has selected an unnamed tenant. The apartments would be in a bustling part of Downtown, across the street from Pins Mechanical Co. and a stone’s throw from two existing complexes, the Normandy and the Neilston, and two new ones being built.

“It’s really good synergy,” DeHays said. “I think that area there is really convenient.”

“Introducing new residents and commercial use at the corner will also add vitality to the surrounding neighborhood and is likely to spur additional development to support the new occupants,” the application said.

Connect has been doing the work on the building, including removing cladding to expose the historic façade.

Connect Real Estate has two other Downtown micro unit projects, Microliving at 260 S. 4th and Microliving at Long and Front. Microliving at 260 S. 4th is fully leased at 52 units and Microliving at Long and Front plans to start leasing this summer.

DeHays also applied for $250,000 from the Ohio Historic Preservation Tax Credit to transform Winders Motor Sales Co. at 182 E. Long St. into a single-tenant commercial office building, according to the application. The 10,556-square-foot project is estimated to cost $1.55 million. DeHays would not comment on who the tenant is.

Also applying for tax credits are:

‒ Dwight McCabe, principal of the McCabe Companies, who is seeking to redevelop the 158,819-square-foot L. Hoster Brewing Co. complex at 477 S. Front St.

The project is estimated to cost $70 million and McCabe has requested $5 million in tax credits, his second request. He is working with Columbus architects Schooley Caldwell on the plans, which include apartments and possibly condos, a 140-room boutique hotel, event space, offices and retail space. This would create 276 permanent jobs and 159 construction jobs.

‒ Columbus developer Eli Adahan, who is seeking $1.75 million in tax credits – his second request – for the vacant Broadwin apartment building, 1312 E. Broad St. The 85,831-square-foot project is estimated to cost $17.58 million to revert the space back to the original layout of 46 apartments, down from 54.

‒ Dean Adamantidis has requested $250,000 in tax credits to convert the F.E. Avery and Sons Garage, 1199 Franklin Ave., into a mixed-use space. The 32,676-square-foot project is estimated to cost $3 million. The development would include up to 7,500-square-feet of commercial tenants and 14 apartments on the second floor.

The state is expected to announce credit recipients in June.

Developer Brad DeHays plans to break ground on his new Trolley District development near Franklin Park this summer.

The $14 million project at 1600 Oak St., which will include a market, restaurant and Columbus Brewing brewpub, will take up to two years to build, said DeHays, of Connect Realty. He also plans to develop a $15 million, 102-unit apartment complex across the street. Construction on that should begin next year, he said.

The Columbus Development Commission signed off on the project last week. The Near East Area Commission has approved it as well. The Columbus City Council still needs to OK zoning changes.

“Everything is moving forward nicely,” DeHays said. He is talking to the Columbus school board to create some programming for students. One idea: a program in which students could learn about healthy food. The second: internships for construction management.

It’s a project that community leaders and residents have long awaited, not only because it will transform what had been a neighborhood blight — six vacant buildings previously used by the city’s electric trolley system — into an attraction for the area, but also because it could be an anchor and catalyst for development.

“People haven’t realized the potential over there,” said Kathleen Bailey, who leads the Near East Area Commission. “I think our neighborhood is ripe for it.”

The Near East Side has good housing stock and is a walkable community, Bailey said. “It lends itself to that kind of commercial development,” she said, though the area still needs a grocery store.

“The people over there are passionate,” DeHays said of the neighborhood.

James Flannery of the Franklin Park Civic Association said residents have been asking when the project will begin.

“It’s going to be a big economic boom to the neighborhood,” Flannery said.

DeHays said he’d like to begin work in June. The brick buildings have been vacant for years and are in rough shape, he said. Workers have been stabilizing the structures.

DeHays bought the 3-acre trolley barn site in 2014, which includes the six brick buildings that were built between 1882 and 1920. One building will house a market. Another will hold Columbus Brewing’s 13,000-square-foot brewpub. The Trolley District project received $2 million in state Historic Preservation Tax Credits to help finance it.

DeHays said that although there are no other large-scale developments planned near him, he does see other improvements such as the city spending $2.2 million for the second phase of a project to restore the Franklin Park Cascades, which were built for the 1992 Ameriflora exhibition. In 2016, the falls stopped running because of problems with the pump system. The city already has spent $583,000 on engineering and construction to renovate the system.

“The cascades are beautiful when they’re running,” DeHays said.

Investors are searching for deals throughout the Columbus area in hopes of capitalizing on a federal program that could save them a bundle in taxes while reshaping the development landscape of central Ohio.

They are targeting their search in central Ohio’s 52 “opportunity zones” — neighborhoods that local and state officials have identified as blighted and in need of investment. They’re scattered from Marysville to Buckeye Lake but concentrated in Columbus.

“We wanted to focus on neighborhoods of need … places where we can create a lot of jobs,” said Mark Lundine, who led the opportunity-zone effort for the Columbus Department of Development.

Although some details of the tax benefits of opportunity zones are still unclear, investors think the main benefit — allowing investors to defer or perhaps even eliminate capital-gains taxes — will drive money to the neighborhoods.

“I think this will spur a lot of activity in the Columbus market,” said Jide Famuagun, the chief executive officer of Alpha Capital Partners, a Pittsburgh investment group that is targeting opportunity zones in Columbus and other cities.

Through its opportunity-zone fund, Alpha Capital is buying a South Side apartment building that it plans to renovate. Alpha was considering buying the building before the creation of the opportunity-zone incentives but probably would have invested less in renovations without them, Famuagun said.

Alpha’s experience, and that of others, raises a question: Will the opportunity zones draw new investment or merely provide tax breaks for investments that would have happened anyway in neighborhoods already on the rise?

Researchers at the Urban Institute, a Washington-based nonprofit organization, studied the nation’s 8,762 opportunity zones and concluded that 28 percent already had received substantial investment without the zones. Of the 44 in Franklin County, 17, or 39 percent, were on the rise before the zones were created.

“Those are already strong markets,” said Brady Meixell, one of the three researchers on the Urban Institute study. “They’re already receiving a substantial amount of investment, so they probably don’t need a federal incentive to draw more investment.”

Franklin County’s opportunity zones include several neighborhoods already enjoying a resurgence: east Franklinton, where the city’s major developers have assembled large plots of land; the area west of Route 315 that includes OhioHealth Riverside Methodist Hospital and has enjoyed a medical boom; Crosswoods near Worthington, where several apartment complexes have been built in the past few years; and the area around Rickenbacker Airport that is alive with new warehouses.

Other neighborhoods more in need of revitalization, such as west Franklinton, the Eastland area and parts of Linden, the South Side and the Hilltop, also are designated as zones.

Lundine acknowledged that some city neighborhoods need the investment more than others, but “because it was a brand-new program, we thought, ‘Let’s get a diversity.’”

The city used four criteria, Lundine said. The neighborhood had to be: in need, capable of absorbing investment, able to benefit from new jobs, and on major transit routes.

For investors, the zones are a magnet. Experts forecast that up to $150 billion will be invested across the country through opportunity-zone funds.

“I do expect it to make a difference. I’ve probably talked to more than 100 people who have (capital) gains who are interested in investing,” said Darci Congrove, managing director of the Columbus CPA firm GBQ Partners, who has helped explain the program to several central Ohio community and investment groups.

“I’ve been doing tax work 25 years. This is one of the most interesting and exciting provisions we’ve seen.”

Columbus developer Brad DeHays recently bought property in South Linden for an affordable-housing project in one of the opportunity zones.

“We pay a lot of attention when these programs come out,” said DeHays, who, with the help of tax credits, is redeveloping an old trolley-barn site near Franklin Park on the Near East Side into a market, brewpub and space for retail and offices. The trolley barn is in one of the zones.

“After you’ve invested for 10 years, the entire capital gain in investment is tax-free,” he said.

But DeHays also said that some investors who own land in opportunity zones are using the designation to pump up their prices.

“We’ve had a couple of groups we’ve purchased property from who tried to command a premium,” DeHays said.

Chris Haydocy, the auto dealer who has championed redevelopment in the Hilltop area, hopes the opportunity-zone designation will help drive the redevelopment of the dead and blighted Westland Mall, a major hurdle to reviving the West Broad Street corridor.

“The appetite to invest in a neighborhood such as Franklinton or in our neighborhood is greatly enhanced with a tool such as this,” said Haydocy, who is investing $7 million to build a recreational-vehicle resort on a 20-acre property he bought in 2018 that is in an opportunity zone.

Pizzuti Cos. recently bought the former Graham Ford property at 707 W. Broad St. in Franklinton. That, too, is in an opportunity zone. The company plans to redevelop the site, but Joel Pizzuti, the company’s president, said tax breaks weren’t the only reason to pursue the site, which was already attractive.

When Columbus developer Graham Allison first saw the opportunity-zone rules, he said “it was like being struck by lightning.”

Allison partnered with Columbus developer Brian White to create the Opportunity Zone Development Group. Although the company is targeting projects of $20 million to $50 million, it is also pursuing some smaller ones. One of the company’s first projects, Allison said, is in a nonprofit enterprise that was facing bankruptcy. Because details aren’t final, he did not identify the organization.

The funds allow investors to benefit in multiple ways, but Allison, Famuagun and other investors say they expect the most common investments, at least initially, to be in real estate.

Because investors receive the most tax benefits by keeping an investment for a decade, the zones will discourage quick property flips, the investors say.

Famuagun said his fund expects to hold onto the South Side apartment complex for a decade — longer than it probably would have otherwise — because it is in an opportunity zone. And spending more on renovating the property than he might have otherwise is good for the neighborhood, he said.

“It needs a lot of work,” he said. “But we’ll end up with a solid affordable-housing component in the community south of the city, where working-class families can call home. … We also think our $20 (million) to $30 million investment in this neighborhood will spur investment by others.”

Columbus Mayor Andrew Ginther laid out plans in his State of the City address for building more affordable housing, expanding broadband access and increasing opportunity for local and minority workers in the Mapfre Stadium replacement.

“I see an affordable city with dynamic, inclusive growth, mixed income neighborhoods that support family stability and mobility that provides equity and improves the quality of life for all of our residents,” he said Thursday in prepared remarks.

The city land bank will convert to a land trust – a difference that allows requiring affordable development when the deed transfers – in a continued collaboration with the Central Ohio Community Improvement Corp., a nonprofit that manages the Franklin County land bank and coordinates in a shared office with the city’s.

Columbus has pledged $3.8 million, plus city bond funds, for a pilot land-trust project to build 30 affordable homes in Franklinton, South Side, Near East Side and Weinland Park. That funding will attract $7.2 million in private investment. Ginther credited City Council President Shannon Hardin for leading the initiative.

As the city implements the One Linden master plan for redevelopment adopted last year, Ginther said, the Department of Neighborhoods have attracted “enthusiasm” from private developers to collaborate on building single-family homes, townhouses and commercial developments. He characterized the work as early, but named Crawford Hoying, Connect Realty, Kaufman Development, Pizzuti Companies and Wagenbrenner Development as partners.

Ginther also announced public-private partnerships would “make an unprecedented, historic commitment to expand high-speed internet to all of our neighborhoods,” and create digital literacy training.

The city will create a Community Benefits Agreement, which guarantees a percentage of local workforce, for construction of the Linden Community Recreation Center and Columbus Community Sports Park to be built when Mapfre is vacated for an Arena District stadium. Ginther cited success with such an agreement to build a fire station last year.

“And we will do it together, like we’re doing with CelebrateOne, like we’re doing with Smart Columbus, like we did to Save the Crew – not just to keep soccer in Columbus, but to leverage private partnerships for affordable housing, jobs and historic minority participation in the building of a new stadium and the new community sports park,” he said.