Agriculture-focused online investment platform Harvest Returns has launched a vehicle targeting $25 million the firm intends to invest through the US Department of Treasury’s Qualified Opportunity Zones Program.
Fort Worth, Texas-headquartered Harvest Returns has teamed with food and ag focused accelerator FoodFutureCo to raise a fund dedicated to the program created by the Tax Cuts and Jobs Act of 2017, which offers incentives for investment within economically disadvantaged areas of the US.
Harvest Returns chief executive Chris Rawley told Agri Investor the Sustainable Agriculture Opportunity Zone Fund will accept minimum investments of $25,000 and focus initially on retail investors and family offices. The firm plans to raise the vehicle for the remainder of the year or however long it takes to reach $25 million, expanding its focus to pension funds and endowments as necessary.
Rawley added the fund will be listed alongside other offerings on the Harvest Returns platform and target annualized returns of between 10 and 12 percent, not including capital gains savings.
“We’re focusing on capital appreciation as the theme of the fund, because that is where you get most of your savings – by deferring that capital gains and actually eliminating the capital gains from the appreciation in the fund over a 10-year period,” said Rawley.
About 40 percent of identified Opportunity Zones are in rural areas, according to Rawley, who added consultations with producers alerted his firm to the program’s existence.
“We’ve seen a lot of farmers who wanted to put something like this together but did not necessarily have the financial acumen to do it, so those are the kind of folks were are talking to, to help them work through it,” said Rawley.
Investments have to be organized under a fund structure to take advantage of Opportunity Zone incentives, Rawley said. He added that a speculative run-up in prices for the urban commercial real estate that has been the focus of much Opportunity Zone investment to date has helped Harvest Returns differentiate its ag-focused strategy among potential investors.
Harvest Returns has investigated deals in all 50 US states, according to Rawley, who added the firm plans to narrow down a list of 35 deals potentially suitable for the Opportunity Zones Program to four or five. Hemp, timber, grass-fed livestock, controlled-environment agriculture, as well as more traditional fruit and vegetable operations, are among the subsectors Harvest Returns has investigated for inclusion in its Sustainable Agriculture Opportunity Zones Fund strategy, according to Rawley.
“The opportunity to make money is always in places where there is an opportunity for arbitrage – whether that is on land or pricing or anything else,” Rawley said. “We feel that the rural opportunity zones, because they are largely ignored, will be a place to see some significant gains.”