MONTROSE — David Dragoo leans over a balcony of the new headquarters for his Mayfly Outdoors. Inside, workers are forging high-end fly-fishing equipment. Outside, earth movers crawl across a dusty tract near cyclists leisurely pedaling along the lush banks of the Uncompahgre River.
“Ten years ago, it just wasn’t cool to be here. It didn’t work to be here,” he said. “That’s changed.”
Thanks in no small part to Opportunity Zones, investors and developers are boosting Western Slope communities with big plans that are luring businesses, manufacturers and new housing.
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It’s been a little more than a year since Opportunity Zones — created in the 2017 federal tax reform bill to encourage investment in rural and low-income areas — were identified in Colorado. The zones across the country allow investors to avoid capital gains taxes if they park profits in projects for at least 10 years in one of the country’s 8,700 designated areas.
The Colorado Outdoors project in Montrose and the Riverfront Park at Las Colonias project in Grand Junction are the first communities to capitalize on Opportunity Zone designation on the West Slope. And more investment is coming as the state’s first Opportunity Zone projects flower.
The 150-acre Colorado Outdoors campus in Montrose plans to blend $83 million worth of live-work studios, townhomes and light manufacturing with a commercial village and open space on the banks of the Uncompahgre.
Dragoo’s Mayfly Outdoors is anchoring the project with its 41,000 square-foot factory and headquarters. Already the factory is hosting tours of its computerized facility, where three dozen workers use high-tech machines to sculpt premium Ross and Abel fly-fishing reels and equipment.
A South Dakota developer — Lamont Companies — has signed on to build a hotel for Colorado Outdoors. The Colorado Housing and Finance Authority awarded low-income housing tax credits to the project this spring, fast-tracking plans for a 72-unit rental complex.
Colorado Outdoors is preparing to build two 27,500 square-foot industrial buildings for six manufacturing tenants, said Dragoo, who serves as president of both Mayfly Outdoors and Colorado Outdoors and this spring was appointed to the Colorado Economic Development Commission.
“There is a bit of uncertainty”
While Opportunity Zone designation has yet to funnel a deluge of investment into Montrose, “investors are looking hard,” Dragoo said.
“Overall what we have seen the Opportunity Zone do is put places like Montrose and Grand Junction in a national spotlight,” he said as he strolled his factory floor. “There is a bit of uncertainty around the Opportunity Zone rules, but we are drawing a lot of eyeballs. These are professional investors who are coming to the West Slope who probably wouldn’t have come here without the Opportunity Zone.”
This summer, one of the first Opportunity Zone business investments in the country went to West Slope start-up Proximity Space, which has coworking locations in Grand Junction and Montrose and designs systems to help manage coworking spaces. While the first wave of Opportunity Zone investments have revolved around real estate, federal guidelines released in April outlined how businesses — not just real estate projects — could qualify for investment.
The Proximity Space investment “could be a model” for other businesses in Colorado, Jana Persky, the Opportunity Zone program director at the Colorado Office of Economic Development and International Trade, said in a press release.
The Grand Valley has several areas designated as Opportunity Zones, including Las Colonias Park on the Colorado River, most of the city’s downtown and a rural tract on the Grand Mesa near the Powderhorn ski area.
The City of Grand Junction opened the first phase of the 140-acre Las Colonias in 2015, after nearly 20 years of planning for the reclaimed uranium mill site. The city joined the owners of zipline builder and canopy course designer Bonsai Designs in 2018 to establish the 15-acre Riverfront at Las Colonias business campus on the east side of the community park, hoping to draw outdoor businesses using the appeal of the Opportunity Zone designation.
A month after Grand Junction announced the $30 million business park, Bobby Noyes said he was moving his bike rack and lock company RockyMounts from Boulder to the riverfront business park, which includes plans for multiple offices, a zipline course, a whitewater park, restaurants and stores.
More than a year later, the two businesses have yet to go vertical on their new headquarters, but the delay has nothing to do with the Opportunity Zone program or the public-private partnership with the city to build the business park.
Bonsai and RockyMounts have struggled to negotiate loans for constructing new facilities because Grand Junction’s city charter limits leases of city-owned property to only 25 years.
“Banks are a lot more comfortable with a 99-year lease because they have an asset,” Noyes said. “The 25-year lease doesn’t give them much if the borrower defaults.”
The businesses can’t buy the dirt because when the Department of Energy remediated the former uranium mill and its building-sized, radioactive tailings piles in the 1980s, the deal required that the land remain city-owned.
Grand Junction voters in April declined to change the city charter allowing 99-year leases on all city property. So next month city leaders will try again, but with a smaller ask, hoping voters will approve a 99-year lease on the 15-acre Riverfront at Las Colonias business park as well as 13 adjacent acres.
It’s a critical vote if the city wants businesses to invest inside Las Colonias, Noyes said.
“I don’t think they are going to have a lot of traction in that business park unless this gets solved,” said Noyes, who set RockyMounts up in a temporary warehouse in Grand Junction while he waits for the vote.
To add to the challenges of his move, Noyes learned a few months ago that he will not be able to transfer rail containers loaded with his products to trucks at the Grand Junction rail yard across town from Las Colonias, which was among the incentives when he weighed a move to the West Slope. Now he will have to truck the containers to Grand Junction from a rail yard in Salt Lake City.
“The Chamber of Commerce made an error and we cannot receive containers off the rail as planned,” Noyes said. “I am working with the city on some incentives to correct the problem.”
Noyes isn’t about to bail on Grand Junction though. In the 25 years he spent in Boulder, the city built “about five miles of mountain bike trails,” he said. Since he announced he was moving his business to Grand Junction, trail builders have begun work on about 32 miles of single track around the Grand Valley and even more miles are approved.
“Yes, we are sort of the guinea pig here. We are figuring it out and the city is figuring it out and there are rookies on both sides,” he said. “But the good news is that I’m dealing with people who are very transparent and have the best of intentions. I’m sort of putting it out to the universe that this will work out.”
“A much faster pace”
The Opportunity Zone designation for close to 100 commercial real estate properties around the Grand Valley is luring both interest and investment regardless of the lease issue at the Las Colonias, said Robin Brown, the head of the Grand Junction Economic Partnership.
The partnership estimates there are development opportunities worth about $80 million on parcels adjacent to Las Colonias and investors are circling the park, she said.
They are buying properties with plans to deliver what the city needs, which is nicer office space, more mixed-use commercial and higher quality residential rental properties, Brown said.
“And maybe this is development that would have come anyway,” Brown said. “But it’s all happening at a much faster pace with the Opportunity Zone.”
And the Opportunity Zone designation is allowing the city’s economic boosters to help influence development, she said.
“Like this Canadian developer who just came in. They want to build a sustainable living community and they asked where would be the best spot and I pointed to the map,” said Brown, who suggested land between Grand Junction’s downtown core and the river district. “They are under contract. We have been marketing the heck out of the Opportunity Zone, but when developers and investors and funds come to us and ask what will work, we have been able to guide some of that development.”
Stephanie Copeland served as the executive director of the Colorado Office of Economic Development and International Trade before joining Four Points Funding in Steamboat Springs earlier this year, helping the investment firm expand the first Opportunity Zone fund focused on rural Colorado.
Four Points, which expects to raise and invest about $20 million every six months over the next three to four years, has committed to four Opportunity Zone-designated projects so far this year.
The fund’s investors are supporting a glamping resort in Naturita, with tents, vans and campers along a stretch of the San Miguel River.
They are investing in a tiny-home hotel and RV park adjacent to miles of trails in Meeker.
And they are helping develop multifamily housing in Glenwood Springs and on a tract adjacent to Las Colonias Park in Grand Junction.
Copeland said the Four Points fund is looking at more Opportunity Zone investments in glamping resorts, which lure visitors while providing jobs in areas where tourism infrastructure is needed. “They can be such a natural fit in some of these areas.”
Across Colorado, there’s a growing gap of housing for middle-income workers who maybe aren’t ready to buy a single-family home, but don’t want to rent apartments built for transient workers. But developers tend to migrate toward remote luxury homes, where regulations are less rigid and the returns are more immediate than building higher-density, urban rental properties that take years to pay off.
“We are really trying to bring in investment that wouldn’t otherwise come and do something that provides benefits for the community,” Copeland said.
An Opportunity Zone investment is a long-term play, with investors required to keep their money in the region for at least 10 years to earn the tax exemptions. It’s not for spec-home builders or fix-and-flip investors.
The fund’s process involves getting to know the community’s needs before investing, Copeland said. Four Points also is corralling investors who want to support small businesses in communities that have received Opportunity Zone investments. Four Points’ West Slope Angels connects investors with entrepreneurs to help small companies and seed a start-up scene beyond the Front Range.
“It’s such a natural complement to the infrastructure investment, because we are investing in businesses that intend to create a stronger community,” she said. “So we help de-risk both sides of the investment.”
West Slope communities are celebrating their new appeal to investors, Copeland said, describing the cities where the Four Points fund is investing as “unbelievably friendly and welcoming.”
In Glenwood Springs, for example, the city is waiving improvement fees for developers who build multifamily rental housing that is affordable to households earning up to 120% of the area median income, which is about $85,000 for a family of four.
Four Points isn’t directing investors to specific projects. They are pooling funds to spread across an array of projects.
“We are doing small investments a number of times across multiple geographies,” Copeland said. “We would not be doing this unless these Opportunity Zones existed.”