{"id":132280,"date":"2025-09-10T07:58:18","date_gmt":"2025-09-10T07:58:18","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/132280\/"},"modified":"2025-09-10T07:58:18","modified_gmt":"2025-09-10T07:58:18","slug":"scaramuccis-opportunity-zone-fund-struggles-to-profit","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/132280\/","title":{"rendered":"Scaramucci’s Opportunity Zone Fund Struggles to Profit"},"content":{"rendered":"

(Bloomberg) — Anthony Scaramucci is struggling to spin one of President Donald Trump\u2019s big tax breaks into a profit for his wealthy clients. Yet \u201cthe Mooch,\u201d as he\u2019s known on Wall Street, keeps getting paid his fees.<\/p>\n

The hedge fund manager known for his 10-day stint as White House communications director in 2017 promised wealthy investors that he could help them take advantage of Trump\u2019s signature program for spurring projects in low-income communities, dubbed opportunity zones.\u00a0<\/p>\n

His\u00a0list of ideas<\/a>\u00a0included a luxury hotel in Oakland, California, a warehouse in Savannah, Georgia, and middle-income housing.\u00a0<\/p>\n

But key targets that Scaramucci laid out in 2018 interviews haven\u2019t been realized. Instead of raising $3 billion for his SkyBridge Opportunity Zone Real Estate Investment Trust, he amassed less than $50 million and made a single investment: a Virgin Hotels property in the Warehouse District of New Orleans.\u00a0<\/p>\n

The vehicle has yet to distribute payouts to REIT shareholders \u2014 let alone generate the 8% to 10% annualized returns before tax benefits that he suggested would be possible over the fund\u2019s lifetime.<\/p>\n

SkyBridge Capital, meanwhile, continues getting paid 1.75% of the fund\u2019s net asset value, which was $43.2 million at the end of 2024.<\/p>\n

Executives for the hedge fund firm declined to comment.<\/p>\n

Related:Four Identity Theft Schemes for Tax Professionals to Avoid<\/a><\/p>\n

Trump\u2019s One Big Beautiful Bill Act recently made opportunity zones permanent, setting up another wave of investment funds that could start taking shape in January 2027. The SkyBridge experience may serve as a cautionary tale to investors: Tax benefits only matter if you make money.<\/p>\n

Trump championed these zones in his first term as a way to drive private capital to long-neglected parts of the US. Investments in the zones topped more than $80 billion, according to a\u00a0report<\/a>\u00a0from the Joint Committee on Taxation based on returns filed for 2019 through 2022.<\/p>\n

Boosters say the zone investments have helped build affordable housing and created jobs and new businesses.\u00a0<\/p>\n

Yet these dollars have not been evenly spread, with much of the money flowing to urban and suburban areas and wealthier states such as Florida and New York, the Joint Committee found. Louisiana, home to the SkyBridge fund\u2019s hotel, received less than $500 million, or $106 per person, one of the lowest amounts across the US even though it\u2019s among the poorest states.<\/p>\n

Most academic studies of the program show that, at least in its first few years, the opportunity zones had little or no economic impact, according to the Joint Committee\u2019s report.\u00a0<\/p>\n

Related:Shifting Estates from ‘Leave On’ to ‘Live On’<\/a><\/p>\n

Investors, though, potentially win big. If they take profits from stocks, bonds or other investments and put them into an opportunity zone fund, they\u2019ll reduce their capital gains on the initial sale and defer its payment until 2026. If they keep the fund for at least a decade, they\u2019ll pay no capital gains on its returns.\u00a0<\/p>\n

So far, it looks like SkyBridge clients could miss out on that tax-free benefit. From the firm\u2019s initial money raise in December 2018 through the end of last year, it has lost 1.4%, according to investors. Those who got into the fund the following year are down 5.6%, the investors said.\u00a0<\/p>\n

The\u00a0New Orleans hotel<\/a>\u00a0is a sleek building with a rooftop pool, nestled in a neighborhood full of galleries, restaurants and shops. It gets 4.7 stars out of 5 on TripAdvisor. Even so, some investors say they doubt the value of the hotel will rise sharply in coming years. It makes money, but its net operating income has been fairly stable \u2014 between $4.7 million and $5 million \u2014 in its first three full years of operation, according to investors.\u00a0<\/p>\n

The lack of growth is in line with other hotels in New Orleans, where revenue per available room was 11% lower in July than it was three years earlier, according to data from STR.<\/p>\n

Related:Building a Succession Plan for Diverse Collections<\/a><\/p>\n

While data on opportunity zone investment returns more broadly is scant, the pandemic hit the real estate market hard, meaning that some funds have had difficulty making money. A pool that backed downtown office buildings, for example, is probably underwater, while one that focused on multi-family units in the Sun Belt would more likely be profitable.<\/p>\n

\u201cThe program has been disappointing,\u201d SkyBridge President Brett Messing\u00a0said<\/a>\u00a0in a March 2020 interview with Yahoo Finance, pointing to the 10-year holding period and inherent risks of real estate development. \u201cWe\u2019ve been modestly successful, but it\u2019s been tougher to execute than we expected.\u201d<\/p>\n

No-Win Situation<\/p>\n

Because of strict loan covenants, the hotel\u2019s lender sweeps some profits into an escrow account, meaning investors in the REIT haven\u2019t received any cash distributions. The REIT itself has run out of money, so in July it sold new shares to existing holders. With the proceeds, it can continue to pay fees to SkyBridge.<\/p>\n

The fund offered more than $6 million of shares to existing holders at an 80% discount, amounting to 15% of shareholder equity, according to investors and a regulatory filing. \u00a0<\/p>\n

That move put clients in what some saw as a no-win situation. If they chose not to participate, they\u2019d dilute their holdings. If they chose to buy, they\u2019d get an immediate return on paper \u2014 but could risk having to pay taxes on that gain unless the fund owns the hotel for 10 more years. SkyBridge told some investors it expects to get out before then. \u00a0 \u00a0<\/p>\n

SkyBridge also charges investors a collective $150,000 a year for proxy fees and an annual meeting on video conference.\u00a0<\/p>\n

During last year\u2019s shareholder call, Messing told clients he couldn\u2019t answer their questions about the fund because he was sitting in his car in Los Angeles. Anyone wanting more information could set up a call in the coming weeks, he said.<\/p>\n

When investors groused about the lack of immediate responsiveness, he said he was adjourning the meeting, which caused even more complaints. Messing retorted with a threat: Keep up the insults, and we won\u2019t talk to you at all.\u00a0<\/p>\n

On this year\u2019s call held in May,\u00a0SkyBridge put its clients on mute. \u00a0\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) — Anthony Scaramucci is struggling to spin one of President Donald Trump\u2019s big tax breaks into a…\n","protected":false},"author":2,"featured_media":132281,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[64,63,99,186,184,185],"class_list":{"0":"post-132280","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-finance","12":"tag-personal-finance","13":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/132280","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=132280"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/132280\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/132281"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=132280"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=132280"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=132280"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}