Central Mass. needs Opportunity Zone investments
If a developer was to pick an underutilized Worcester commercial property to revitalize and make his or her mark on the city, the 24-story Worcester Plaza would be a good choice.
The glass tower office building is tied for the tallest building in the city, has an adjoining parking garage, and sits in the heart of a redeveloping downtown. While it never lost its iconic stature, years of minimal upkeep and deferred maintenance have led to a good amount of tenant churn. While it won’t be cheap to bring back the building’s original luster, the developer able to pull off the revitalization would be credited for making a premier office property out of a tired, old building.
David Greaney, president of Boston firm Synergy Investments, has his eyes on that prize, thanks in part to a three-year-old federal program called Opportunity Zones. Greaney bought the Glass Tower in October for $16.5 million with the express purpose of taking advantage of the Opportunity Zone program, and if he makes enough improvements and holds onto the building for long enough, his company can reap significant tax incentives.
Under the federal Opportunity Zones program, which was enacted into law in 2017, developers can defer paying federal taxes on money invested in an Opportunity Zone property. If they hold onto the investment for five years; they receive a 10% tax break, and for seven years the break is 15%. After 10 years, the investors can forgo taxes on the increased value of the property. Central Massachusetts has 24 designated Opportunity Zones, which were chosen by the Gov. Charlie Baker Administration and certified by the U.S. Treasury.
While the Opportunity Zone program may be complex, the end result is Greaney will only pay a fraction in taxes on the $16.5 million invested into the Glass Tower, as well as on the increased value of the skyscraper as he makes improvements. On the flip side, the City of Worcester will see an aging 46-year-old building transformed back into a premier commercial property.
Because the Opportunity Zone program has no reporting requirements to local governments, the only other known development taking advantage of the tax benefits is the 112-unit Gateway Village apartment complex in Fitchburg, which is being built on a vacant lot on Main and Day streets by Fitchburg developer William Krikorian.
While the program has come under fire nationally for simply being an avenue for the well-heeled to avoid paying taxes on the money they make – including criticism from Sen. Cory Booker (D-NJ), one of the two main authors of the law – we benefit more from looking at the ground-level realities of the program’s implementation here in Central Massachusetts. Opportunity Zones are another way to incentivize real estate investments in communities like Worcester and Fitchburg, where the cost of new construction or major renovations are often harder to justify, based on prevailing rents. So, setting aside the argument over who actually benefits more – the investor or the city where the development takes place – it appears a nice upside is there for both parties.
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