Developer will get federal tax benefits for new luxe apartments in Raleigh area designated for investment in low-income communities

Work started Thursday on a new mixed-use development in Raleigh's warehouse district.

Richmond-based Capital Square broke ground on 297 apartments and 10,000 square feet of retail space on West South Street.

Raleigh Mayor Mary-Ann Baldwin attended the Thursday afternoon groundbreaking.

"It’s really about housing choice, and supply and demand," Baldwin said. "So, the more housing we have the better for everybody."

WRAL News spoke to Whitson Huffman, chief strategy and investment officer for Capital Square.

Huffman said the apartment building will be 20 stories tall and will feature a rooftop pool.

"A huge part of what we've spent our time doing is figuring out what residents want, and how can we elevate that residential experience," he said. "You're going to feel more like you're at Four Seasons or the Ritz Carlton or the beach when you're at the pool as opposed to an apartment building."

Developers told WRAL News the average per monthly rental rate at Capital Square will be about $2,600, about $1,000 more than the average monthly rent across the city of Raleigh, which is about $1,500. The project does not include any affordable housing units.

The building will also feature a "skylounge," which will feature a dining room table and a demonstration kitchen. Residents can rent the space and enjoy the view of downtown Raleigh.

There will also be a 3,500-square-foot fitness club and spa, a pet spa and enclosed parking.

Crews are building the development in a federal opportunity zone, which is one of five in the city of Raleigh. Opportunity zones allow developers to defer or reduce federal taxes by reinvesting capital gains in low-income communities. Conceived as part of the Tax Cuts and Jobs Act of 2017, opportunity zone funds are intended to help foster economic growth by providing federal tax benefits to incentivize private investments in designated opportunity zones. A spokesman for the North Carolina Department of Commerce tells WRAL News the department “coordinated the state’s process that first identified the Zones, which were nominated by local communities across the state”.

"The way we look at opportunity zones is we’re not looking to displace anyone," Huffman said. "If you look today, there’s no one living here on this site today."

The U.S. Census Bureau shows about 53,000 people living in the city of Raleigh's opportunity zones experienced poverty from 2019 to 2020.

“I think they should take our lives, livelihood into consideration and stop gentrifying us because that’s what’s happening,” said Heritage Park Resident Council President Iesha Cobb of Capital Square's development.

ATTOM Data Solutions data shows the average median income for people living in Wake County opportunity zones is $55,000. The Wake County median income is a little bit more than $83,000.

"It bothers me because I see things that are being built that [are] not affordable to me," Cobb said.

In April, a bipartisan group of U.S. senators and representatives introduced The Opportunity Zones Transparency, Extension, and Improvement Act. If enacted later this year, this legislation would be the first substantial update to the Opportunity Zone statute since it was enacted in 2017. The bill would:

• Extend the deferral period for qualified capital gains through 2028
• Require the sunset of certain Opportunity Zone tract designations
• Impose new reporting requirements to promote transparency
• Create a new entity, the "State and Community Dynamism Fund," to provide assistance to state and local governments

Huffman said Capital Square bought the land for the building at the height of the pandemic.

"April of 2020 was an exceptionally challenging time, as we all remember ... but I think what that represents is our commitment and interest in Raleigh, regardless of what was going on in the world. We knew the city was going to do well and continue to do well and we're very pleased to have plows on the land and be breaking ground [now]," he said.

Work on the project should be complete in summer 2024.