SAN JOSE — Developers and a new crop of investors are eyeing projects in downtown San Jose and parts of Oakland, bolstered by opportunity zones enabled by President Donald Trump’s tax-cut initiative.

Potentially the first project in a local opportunity zone would be development of a brand-new office and retail complex on South First Street in downtown San Jose at the site of the old Lido night club, said Erik Hayden, president of Urban Catalyst, which has struck a deal to invest in the former Lido property.

San Jose-based Urban Catalyst was formed to create an opportunity fund that would provide development expertise and cash for selected properties in Bay Area districts that have been designated as opportunity zones. Large sections of downtown San Jose as well as parts of Oakland and San Francisco — although not the downtown areas of either city — are in opportunity zones.

“These opportunity zones are ways to create greater economic activity in lower-income areas,” Hayden said. “They were originally presented to the Obama administration but didn’t get a lot of traction. Then they became part of President Trump’s tax cuts and jobs act. San Jose Mayor Sam Liccardo very successfully lobbied Gov. Jerry Brown to get downtown San Jose included.”

Investors who plunk down cash for an opportunity fund can “defer or eliminate federal taxes on capital gains,” according to information on the state’s Department of Finance site.

The site of the now-closed Lido night club, a two-story building at 26 and 30 S. First St., is owned by a partnership led by Gary Dillabough, who has emerged as one of downtown San Jose’s most active realty investors and developers. Among the properties Dillabough-headed groups have bought is the nearby Bank of Italy building, a historic office tower at South First and East Santa Clara streets.

Hayden will team up with Dillabough in a new group to own the former site of the Lido night club.

“We are in contract with Urban Community, which is Gary Dillabough’s company, to do a 50,000-square-foot mixed-use development, office and retail, at the old Lido night club,” Hayden said.

Hayden and Dillabough have begun to fashion plans for a five-story building that would replace the existing two-story one-time night club. The Urban Catalyst opportunity fund led by Hayden would infuse cash into the upcoming redevelopment of the property.

“This is a great location for a new development,” Dillabough said. “Our goal is to activate and revitalize that entire block.”

The new development could contain 10,000 square feet of ground floor retail, restaurant or commercial space, and 40,000 square feet of offices, according to Hayden.

“There is a really big need for office space in downtown San Jose to serve small- to medium-sized businesses,” said Joshua Burroughs, chief operating officer with Urban Catalyst.

Opportunity funds are obliged to do more than purchase a new building and hold it as an investment. The projects in which the funds invest must undertake far-reaching changes on the property.

“We must substantially upgrade a property to get the opportunity fund tax benefits,” said Morgan Mackles, senior vice president of investor relations with Urban Catalyst.

Typically, opportunity funds would be required to maintain their investments in a property for at least 10 years to gain the tax benefits.

“San Jose is where we want to start and Oakland will be close behind,” Hayden said.

Realty investors also are encouraged by Google’s plans for a transit-oriented development where 25,000 could work in a project that would include office buildings, stores, restaurants, homes and open spaces.

“If you look at downtown San Jose, why wouldn’t you develop here,” Hayden said. “With Google, Gary Dillabough, Jay Paul being interested, downtown San Jose is poised to take the next leap forward. Oakland has emerged as a cool and diverse community where I see a lot of potential. There is a real renaissance going in in Oakland.”