With Forest City behind them, the Ratners rebuild

Congress created Opportunity Zones in 2017, as part of the Tax Cuts and Jobs Act.

The idea was to spur economic development by giving investors reasons to place money into real estate or businesses in low-income communities. State officials selected the qualifying Census tracts in 2018, and the IRS released the final regulations the following year.

That timing couldn’t have been better for the Ratners, who had a long history of tapping public incentives and parsing complicated government programs. They had six months to place their gains into Opportunity Zone funds. Then those funds had a year to make investments.

“It really gave us an impetus to move fast,” said Kevin Ratner, 54, who lives in Los Angeles and serves as the Max Collaborative’s chief development officer.

The IRS made some adjustments to the program last year, to account for the economic upheaval from the coronavirus pandemic. But the broad strokes remain the same: Tax deferral on the redeployed gains through 2026 and tax breaks for investors who keep their money in a fund for at least five years.

Long-term investors will see the greatest benefit, though. People who hang onto their Opportunity Zone investments for a decade won’t pay any taxes on gains from those new projects.

And the Ratners have no intention of selling anytime soon.

“Our real estate approach is to develop quality assets and hold them over the long-term — and not to build and flip,” Jon Ratner said.

The Max Collaborative and Uplands, with two local partners, recently broke ground for One River North, that eye-catching Denver apartment tower. The 187-unit building, scheduled to open in late 2023, is the first U.S. residential rental project for Beijing-based MAD Architects.

Six miles away, the Max Collaborative is preparing to start construction on Wilder, the first phase of a broader residential development near Denver’s stadium district. And in Aurora, east of Denver, Uplands is leading the charge on Broadleaf, a 370-unit rental project across the street from a medical campus.

In Los Angeles, the Max Collaborative expects to start moving dirt next year for A34, a low-slung, three-building project on a 5-acre warehouse site in the Lincoln Heights neighborhood. Fifty-five percent of the 468 apartments are reserved for middle-income or very low-income renters.

The Ratners scouted sites in other cities, including Nashville and Austin. But they settled on projects in markets they know well — where, in many cases, they could work with companies led by former Forest City employees.

“It’s what they love to do, and it shows,” said K.C. Yasmer, a Forest City alumnus and co-founder of Wynne Yasmer Real Estate Inc., a Denver-based developer playing a supporting role on One River North and Broadleaf. “It’s kind of infectious when you work with people who are just so smart and driven and love the journey of development so much.”

This first wave of ground-up projects is much simpler than the long-gestating, mixed-use endeavors that Forest City tackled, including the redevelopment of Denver’s former Stapleton International Airport as a massive master-planned community.

“It’s a great first step in demonstrating what we can do outside of Forest City, and we’ll use this as a stepping stone to do more development,” said Palmisano, the Max Collaborative’s 35-year-old chief operating officer.

The company also might pursue acquisitions of existing apartments, he said.

Dan Walsh, a Cleveland banking executive turned multifamily investor, isn’t surprised to see the Ratner family focusing on apartments.

“Housing is generally undersupplied nationally, and the Opportunity Zone legislation is meant to help address some of that,” said Walsh, the founder and CEO of Citymark Capital, a company that employs a handful of Forest City expats. “Given that the Ratners have always been civic-minded people who also happen to be talented and experienced real estate people, it just makes a lot of sense.”

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