Beverly Hills-based real estate investment firm StarPoint Properties LLC has begun vertical construction on two developments totaling $115 million. The properties are in Phoenix and Denver, both of which are ranked among the top growth markets in the U.S.

StarPoint specializes in value-add acquisitions and has a track record of investing in opportunity zones – economically distressed communities in which new investments, under certain conditions, may be eligible for a tax exemption. 

In the case of the firm’s latest two projects, both properties fall within one of these zones, allowing StarPoint to expediently raise the equity from a combination of existing and new investors, as well as reap capital gain.

“As a result of the developments’ opportunity zone designations, our investors will realize significant tax benefits,” Paul Daneshrad, founder and chief executive of StarPoint, said in a statement.

Lotus Point is a 245-unit, four-story garden-style multifamily community in Phoenix, located near the intersection of Dobson Road and Main Street. Its construction is expected to cost $79.2 million.

The second property, Point Central, will be a $36.7 million industrial development in Denver. The project sits on 9.54 acres of land and will serve as a hub for urban expansion, according to StarPoint. Upon completion, Point Central will consist of approximately 157,000 rentable square feet split across two buildings.

“Investor interest came from a mix of real estate investors who elected to do an opportunity zone project over a 1031 exchange, and tech investors and business owners who realized a capital gain,” Taylor Trautloff, who led the equity raise for both Lotus Point and Point Central, said in a statement.

Both properties are scheduled to complete construction next year.

Pushing east

The company’s push east is a result of believing better returns on investment and more flexible regulations are located outside of California, according to StarPoint.

“The key to our strategy has always been our active value-add strategy,” Sandy Schmid, director of acquisitions and development at StarPoint, said. “Right now, we are expanding into the right opportunity zones, which for us are located in high-growth western U.S. metros such as Austin, Dallas, Denver, Phoenix or Salt Lake City, for example. These metros offer comparatively stronger rent growth, faster project-approval periods, less ownership regulation risk, and we remain bullish on the housing and logistics sectors.”

And while StarPoint’s current portfolio is about 40% Los Angeles and 60% elsewhere, Daneshrad told the Business Journal in a previous interview that the company’s goal is to expand out of Los Angeles even more with hopes of bringing the percent of Los Angeles assets down to only 10% to 15%.

“While we still appreciate the high barriers to entry and diversity of the Los Angeles economy, we face unpredictable risks such as eviction moratoriums without explainable criteria here,” Schmid emphasized. “Housing economists across the spectrum have noted the problems of rent control. We recognize there are housing shortages and a need for logistics space across the country, and, as a result, we’ll look to invest where we see a supportive balance of growth and constraints to supply.”