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Starwood Capital Commences First Two Opportunity Zone Projects

Updated: May 16, 2019

Miami Firm Sets Sights on Mixed-Use Project in New York City, Apartment Building in Los Angeles


Starwood Capital Group's 550 Harborfront apartment project is located in the Los Angeles neighborhood of San Pedro. Illustration: Starwood Capital Group

Just a couple of weeks after the IRS released more definite guidelines for taking advantage of tax incentives for investing in federally designated opportunity zones, Starwood Capital Group, a global private investment firm, has sprung into action on its first two such projects.

Miami-based Starwood announced an agreement to develop a mixed-use opportunity zone project in the South Bronx area of New York City. It also formed a joint venture with Holland Partner Group to develop a 375-unit apartment project in a Los Angeles opportunity zone.

Opportunity zones were created by the 2017 Tax Cuts and Jobs Act to offer investors certain tax advantages for developing and operating assets in low-income areas.

Starwood launched its opportunity zone fund in January with a target goal of $500 million. The firm is focusing its opportunity zone strategy on markets in regions where it has developed a strong real estate presence, including the West Coast, Southeast and large metropolitan markets such as New York and Washington, D.C.

Starwood is already well positioned in many of these markets and said it will continue to invest, reposition and develop real estate assets in these communities. In California, for example, Starwood affiliates already control nearly 600,000 square feet of industrial space in more than 20 buildings in opportunity zones; another 387,000 square feet of office space in about 25 buildings; as well as two hotels, according to CoStar data.

In Los Angeles, Starwood and Holland’s Class A multifamily project, 550 Harborfront, is located in the emerging coastal community of San Pedro. The firms expect to complete the development in the spring of 2020.

"The Los Angeles multifamily market is among the strongest in the United States, and San Pedro in particular stands to benefit from its favorable supply/demand fundamentals," Anthony Balestrieri, senior vice president and head of Starwood's opportunity zone investment business, said a statement. "San Pedro's opportunity zone designation has accelerated investment into the neighborhood, which we expect to grow."

At the other end of the country in New York, Starwood is set to develop a 147,000-square-foot mixed-use facility. The 10-story development at 425 Westchester Ave. will be anchored by a charter school and include office space for a nonprofit organization as well as ground-floor retail. Construction is expected to begin this month.

"The Bronx is New York City's fastest-growing borough, and we see continued opportunity to help bring new investment in the services, schools, office space and retail that have long contributed to the Bronx being such a vibrant community," Balestrieri said.

Article from CoStar

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