Opportunity Zones are about to matter again, says GTIS Partners’ head of capital markets

As Opportunity Zones approach a pivotal transition period, institutional investors are reassessing where the strategy fits alongside other tax-advantaged structures.

One such investor is GTIS Partners, a global real estate investment firm managing approximately $4.7 billion including around $1.5 billion in OZs. According to Peter Ciganik, partner and head of capital markets, the enduring appeal of Opportunity Zones lies in how the program combines tax efficiency with flexibility and a defined investment horizon.

“Opportunity Zone investing remains compelling because it uniquely aligns tax efficiency, flexibility of capital sources, and a defined investment horizon,” Ciganik told InvestmentNews. “Unlike 1031 exchanges, which are limited to real estate proceeds and function primarily as a tax-deferral mechanism that often extends across generations, Opportunity Zones are available to capital gains generated from any asset class—including equities, businesses, or real estate.”

Ciganik emphasized that the structure differs meaningfully from legacy-oriented tax strategies.

“Opportunity Zones allow investors to defer current capital gains taxes and, if the investment is held for at least ten years, eliminate capital gains tax on the appreciation of the Opportunity Zone investment itself,” he said. “This creates a clearly defined planning horizon… For investors seeking tax efficiency within a finite holding period, rather than indefinite deferral, Opportunity Zones remain structurally differentiated from other tax-advantaged strategies.”

From a return perspective, Opportunity Zones are often cited as providing a modest but meaningful uplift to investor outcomes. Ciganik noted that this benefit is not driven by different real estate fundamentals, but by the tax mechanics embedded in the structure.

“The incremental IRR uplift associated with Opportunity Zone investing – typically in the 2%-3% range, depending on an investor’s tax profile – is generated by two factors,” Ciganik said. “The time value of money associated with the deferral of the original capital gains tax” and “tax-free appreciation on the Opportunity Zone investment when held for at least ten years.”

He stressed that the benefit varies by investor and should not distort underwriting discipline.

“The magnitude of the benefit varies by investor, primarily based on their combined federal and state capital gains tax exposure and tax bracket,” Ciganik said. “The real estate itself should be underwritten no differently than comparable non-OZ investments.”

Common misconceptions

Despite being in place since 2017, Opportunity Zones remain subject to several misconceptions, particularly as tax season approaches. One of the most common, according to Ciganik, is the assumption that Opportunity Zone assets are inherently inferior.

“One of the most persistent misconceptions is that Opportunity Zone investments are inherently inferior to non-OZ investments,” he said. “In reality, investments made today continue to access OZ 1.0 census tracts, many of which were designated using economic data from the 2010 Census.”

He added that the investable universe is broader than many investors realize.

“Many locations have become investable since then, some through the application of Opportunity Zone capital,” Ciganik said. “There are also so-called Contiguous Zones that did not have to be under the 80% median area income threshold. These criteria have resulted in a broad and diverse opportunity set that has proven investable since the program’s inception in 2017.”

Another misconception is that the tax benefits have diminished.

“While investors entering the program today receive a shorter deferral period than earlier vintages, they still retain the most valuable feature of the program: tax-free appreciation on the Opportunity Zone investment if held for ten years or longer,” he said. “That benefit remains fully intact under current law.”

Ciganik addressed confusion around gains and losses.

“The qualified gain for Opportunity Zone deferral, however, is the gross gain – it does not need to be netted out with any losses,” he said. “In other words, if an investor had a $100 gain and a $100 loss in the past 180 days, they have $100 of usable proceeds to invest.”

With a new framework set to take effect in 2027, investors are increasingly focused on timing considerations. Ciganik cautioned that the transition, while important, is not yet actionable for current gains.

“The transition from OZ 1.0 to OZ 2.0 could alter investor timing considerations, but it is not actionable today,” he said. “Investors who generate capital gains in 2025 only have the option to invest those gains into a Qualified Opportunity Zone fund in 2025 or 2026 and remain under the existing OZ 1.0 framework.”

New program differences

Ciganik outlined how the new program will differ once it becomes effective.

“The new program introduces a rolling five-year capital gains deferral, along with a baseline 10% reduction in the deferred gain when the tax becomes due, and the continued benefit of tax-free appreciation on the Opportunity Zone investment held for at least ten years,” Ciganik said.

GTIS Partners, he noted, is already preparing.

“GTIS Partners intends to have an Opportunity Zone fund available for commitments on January 2, 2027, with soft commitments beginning in 2026,” Ciganik said.

Ciganik underscored that tax benefits accrue at the investor level and do not influence GTIS’ underwriting process.

“The tax benefits accrue to individual investors and do not factor into our underwriting,” he said. “GTIS underwrites Opportunity Zone investments very similarly to non-OZ investments, applying the same return thresholds, risk parameters, and investment committee approval process.”

This philosophy extends to how GTIS selects markets and assets.

“If an investment meets our underwriting standards, passes through our investment committee process, and is located within a designated Opportunity Zone census tract, it is allocated to a Qualified Opportunity Zone fund,” Ciganik said. “The Opportunity Zone designation is additive, not determinative, in our investment selection process.”

While Opportunity Zones are often associated with community development goals, Ciganik made clear that impact does not come at the expense of institutional discipline.

“While positive community impact is important to us, it does not supersede our primary objectives of capital preservation and risk-adjusted return generation,” he said. “Our investment discipline and underwriting standards are consistent across all strategies.”

He noted that measurable impact has followed disciplined execution.

“Through the commitment of over $1.5 billion in total project cost within Opportunity Zones, our investments have contributed to increased housing supply and job creation in historically underinvested areas,” Ciganik said.

Long term allocation for opportunity

Finally, Ciganik emphasized that Opportunity Zones should be approached as a long-term allocation.

“Opportunity Zone investments are best viewed as a long-term, illiquid allocation, similar in concept to a Roth-style structure, where the primary benefit is achieved through tax-free appreciation if held for at least ten years,” he said.

Looking ahead, he expects the strategy to regain prominence.

“As the program transitions from OZ 1.0 to OZ 2.0, we expect renewed investor interest, particularly given that Opportunity Zones are now a permanent feature of the tax code,” Ciganik said. “Over time, we believe Opportunity Zones may represent a core component of opportunistic real asset exposure for high-net-worth and sophisticated investors.”