NORF Companies, a New Orleans-based real estate investment firm that specializes in developments that offer tax breaks for investors, has launched its fifth fund.
The NORF 5 Opportunity Zone Fund is the company’s third since the Tax Cuts and Jobs Act of 2017, which created incentives for investing in state-designated areas deemed to be underdeveloped and in need of economic growth. NORF has two other funds that were created prior to the legislation.
Opportunity Zone funds are aimed at investors who have realized or unrealized, long- or short-term capital gains including sale of stock, bonds, real estate, businesses, cryptocurrency or other real property, and would like to defer and potentially eliminate some or all of their accrued taxes.
NORF’s latest fund will target investments in non-major markets where there is less competition with larger players and where local governments are more likely to support developments and streamline the permitting process, a NORF news release said.
Projects that have been identified include a high-rise building in downtown New Orleans that is in the middle of Tulane University’s campus in the medical district. In 2021, NORF began demolition on the site at 380 S. Liberty St. that it acquired in 2019 through two of its previous investment funds. The structure, located across from City Hall and formerly used as a mechanical building for the Warwick Hotel, has sat vacant since Hurricane Katrina. Preliminary plans called for the development of a 12-story, 58,000-square-foot vertical building. The property is part of NORF’s marquee project, 1315 Gravier, which includes the redevelopment of the former Warwick Hotel into housing for Tulane students and faculty.
A mixed-use development in St. Bernard Parish is also under discussion, according to NORF, and the company is looking at a third project in Alabama.
NORF funds have varied in size; the company is looking to raise between $20 and $25 million. The funds are on the smaller side in the real estate investment industry, allowing the company to invest in niche markets with less competition, said Paul Tiranno, NORF’s executive director of investor relations.
Investors have been a mix of entrepreneurs and other business people, he said. About half are in Louisiana, and the other half are from outside the state.
Most of the projects have been historic redevelopments and renovations. NORF started with duplexes and triplexes and has graduated to larger projects; most are multi-family developments with 25 to 100 units and some retail or commercial space. The company has added commercial and industrial projects, and says it sees more opportunity for new construction due to “a greater availability for well-priced land.”
“There has also been a steady increase in the number of high quality distressed/opportunistic acquisitions available at attractive valuations that they believe will create even greater opportunities for (Qualified Opportunity Zone) projects with a downward cycle in the economy,” the release said.
NORF’s first Opportunity Zone Fund project was completed in late 2021: a 3-story building at 3100 Banks St. in Mid-City with 21 apartments and 5,000 square feet of commercial space. NORF also redeveloped a building that was part of the former Gallier Court in downtown New Orleans into a mix of short-term rentals and commercial space.
This year, NORF expanded further into Tyler, Texas with its NORF 4 Opportunity Zone Fund, which closed last December and raised over $20 million from 40 investors. The company acquired three historic buildings and announced plans to renovate them into mixed-use, multi-family rental and office space. NORF is also renovating the former Carlton Hotel in Tyler into apartments and commercial space. The company says it is “bullish” on the market, where the University of Texas at Tyler is expected to complete construction on its medical school next year.
NORF plans to continue expanding beyond New Orleans and is looking at areas primarily in Louisiana, Texas, Florida and Georgia. The region is attractive because of its population and job growth, demographics for multi-family rentals, friendly local governments and a lack of developers experienced in navigating the types of tax-driven, incentive-laden projects that NORF has, the release said.
“Given our portfolio’s concentration in the New Orleans market, we have been expanding to other areas of the southeast with stronger than average economic growth in an effort to improve diversification,” Tiranno said.