Developer Riaz Capital has launched its third construction development fund with a goal of raising $100 million in equity to build approximately 1,600 units in Oakland. 

The fund, which will target developments in federally designated opportunity zones in Oakland, will close at the end of the year, according to Garrick Monaghan, the company's associate vice president of investor relations.

Riaz Capital utilizes one-third equity and two-thirds debt in financing its construction projects, he told me. If the fund successfully secures $100 million in equity commitments, that will translate out into $300 million worth of construction. 

Riaz will ultimately seek to finance between 10 and 12 projects with that capital, Monaghan said, including two of the developer’s projects already under construction, a 13-unit townhome project at 1705 Mandela Parkway and an eight-unit townhome project 2618 Martin Luther King Jr. Way. Those developments were originally financed by the company's first development fund, which was completed before the creation of opportunity zones. That will allow the developer to redeploy the first fund to projects outside of opportunity zones, according to Monaghan.

Building an additional 1,600 units would double the company’s existing residential properties. The developer currently has 1,500 units in its portfolio and another 1,700 in the development pipeline.

“This gives investors an incentive to put capital to work in a neighborhood, a community, that has not really been invested in historically,” Monaghan said of opportunity zone funds. “It’s an excellent alignment of interests between the investor and that community.”

Riaz Capital did not not provide a timeline for the projects’ completion, nor would it disclose sites it is in the process of acquiring for its latest fund. 

The fund is Riaz Capital's second targeting opportunity zones, a federal designation for economically distressed communities that may qualify for tax deferment to incentivize investment. The program rolled out as part of the Trump administration’s tax overhaul in 2017.

Opportunity zones, which in Oakland cover most of West Oakland, much of the Chinatown and Coliseum areas as well as the Oakland airport, “are really about offering a tax benefit for investors with capital gains dollars,” Monaghan said. The program was created to incentivize economic development in underinvested-in communities. 

Equity invested in an opportunity zone must be invested in improving the building or parcel in question, according to Monaghan. Some of the tax benefits are set to sunset at the end of this year.

The developer's properties are studio-type units in buildings entitled as townhomes. The units, which generally rent for a little over $2,000 each and target single individuals earning between $60,000 and $80,000, include a private bathroom and a kitchenette. Residents share a larger kitchen and common room space. 

The developer raised $92.5 million for its first opportunity zone fund in 2020. In July, I reported the company had acquired a pair of buildings totaling 200 units in Oakland's East Lake neighborhood.