The Florida-based firm, which purchased the 10-story building March 1, was the first to qualify for tax benefits under the Wilmington opportunity zone.
These federally designated zones offer long-term tax benefits for investments in economically distressed communities.
Driftwood has pledged to raise $50 million for opportunity zone investments, including the Wilmington property and another hotel project underway in Fort Lauderdale, Florida.
“There’s a tremendous amount of excitement about opportunity zones and the potential tax benefits,” said Carlos Rodriguez Sr., chief executive officer for Driftwood. “Driftwood Acquisitions & Development has specific experience that gives us a distinct competitive advantage in this space. We’re a vertically integrated real estate firm with experience raising capital, structuring deals and developing properties, which creates economies of scale, giving us the ability to execute quickly and increase returns for our investors.”
In 2018, Delaware state officials identified 25 census tracts to locate opportunity zones. These areas span from downtown Wilmington and the STAR Campus in Newark to rural sections of southern Delaware.
“As an experienced developer and a sponsor – we maintain a 10 percent equity stake in all of our investments – we’re not going to invest in a property simply because it’s in an opportunity zone,” said Rodriguez. “The deal has to make sense regardless of the potential tax benefits. At the end of the day, opportunity zone investments require a 10-year hold period in order to maximize the tax benefits, so deals need to be underwritten responsibly.”
Since launching in 2015, Driftwood has built a portfolio that includes 18 operating hotels and three new-build hotel developments underway across the U.S.