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Expansion Update: Introducing Vertical Harvest Philadelphia
Along with the farm already under development in Westbrook Maine, this Philadelphia greenhouse is part of our initiative to co-locate vertical farms with affordable housing in underserved communities across the nation
We Are Thrilled To Announce The Third Farm
Location For Vertical Harvest — Philadelphia, Pennsylvania!
The farm, scheduled to break ground later this year, will be part of the new Tioga District™ development — a federally qualified opportunity zone located in a food, health, and wellness desert in the upper north area of the city.
Stationed adjacent to the Temple University Health Sciences Campus and Temple University Hospital, the 70,000 square foot Vertical Harvest greenhouse will be part of the development’s Preventative Health Hub™ a 168,000-sq-foot, state-of-the-art national model for healthcare, health, and wellness with social impact.
Along with the farm already under development in Westbrook Maine, this Philadelphia greenhouse is part of our initiative to co-locate vertical farms with affordable housing in underserved communities across the nation. Specifically, this Philadelphia project will include an accompanying 50 affordable housing units for farmworkers.
Exciting New Development Partners
Our partners in the project are Greg Day, principal and manager of TDB, LLC based in Westbrook, Maine. and TPP Capital Holdings (TPP), a Philadelphia-based, Black-led social impact private equity fund manager and healthcare real estate development firm. TPP is on a mission to change the face of Black health by investing in and transforming blighted and underserved black neighborhoods into integrated and scalable wellness-centric districts over the next 10 years. TPP’s principals Anthony B. Miles and Clinton Bush are co-architects of the Tioga District Preventative Health Hub™.
Within a five-city square block area, the full Tioga District™ development will create 1,407 residential units for rent or sale, the preventative health hub, 172,870 square feet of commercial/office space, 107,000 square feet of retail space, and 92,392 square feet of pedestrian, streetscape and stormwater improvements.
The goal is to uplift Philadelphia’s distressed neighborhood of Tioga with an 85.5% black population, 45% high blood pressure rate, 43.3% obesity rate, 19.3% diabetes rate, 42% of people in poverty, $17,052 median household income, and an unemployment rate of 18%.
We are very proud that Vertical Harvest will be part of this incredible and forward-thinking development, says Nona Yehia, Vertical Harvest CEO. “Partnering with the visionaries at TPP, we hope to help address systemic inequities and facilitate change in underserved neighborhoods. Vertical Harvest’s reimagined food systems and the jobs they create can help these communities be more nourishing, resilient, and sustainable.”
FEBRUARY 15, 2021/BY DAWN HAGIN
Staying On Track When The Path Keeps Zigzagging
On January 6, 2020, when I pulled the trigger to turn this dream of mine called “Second Chances Farm” into reality by hiring the first cohort of returning citizens who were formerly incarcerated, I had no idea how challenging 2020 would be
A Second Chances Farms Blog
by Ajit Mathew George
Sir Richard Branson is often credited with the saying, “If dreams don’t scare you, they are too small.” As the year 2020 draws to an end, I admit to you that my dreams for Second Chances Farm have scared me far more often than I want to admit. What a ride it has been.
On January 6, 2020, when I pulled the trigger to turn this dream of mine called “Second Chances Farm” into reality by hiring the first cohort of returning citizens who were formerly incarcerated, I had no idea how challenging 2020 would be. All startups are nerve-racking, but as a veteran entrepreneur, I thought I knew what I was getting into. But COVID scattered my best-laid plans like a tropical hurricane. We had to learn how to pivot to stay alive in these trying circumstances – to carve out a track when the path continued to zigzag.
It often seems that planning beyond the Coronavirus is an exercise in futility, especially in communities that are disparately devastated by the pandemic. Yet, our plans for Second Chances Farm in Opportunity Zones in Wilmington, North Philadelphia, Chicago and Las Vegas, all of which are in fresh-food deserts, will hopefully upend neighborhoods plagued by economic inequities and innovate in a way that transforms lives and social outcomes while addressing urban blight and economic decline.
Second Chances Farm hopes to jumpstart the lives of formerly incarcerated persons by providing a path of hope for the hopeless and by becoming a model for compassionate capitalism. We believe the best way to stop people from re-offending and returning to prison is to help them see a future worth working toward.
Fulfilling my dream depends upon that concept of “compassionate capitalism.” At Second Chances Farm, we’ve established a for-profit business model that is sustainable long-term because it is profitable. That’s the capitalism part.
But inextricably interwoven in the model is compassion – for our returning citizens, our disadvantaged neighbors, and local people living in food deserts. That’s why we’re located in an Opportunity Zone in the poorest area of Wilmington. That’s why we invest time developing partnerships that support the delivery food to Riverside, Wilmington, New Castle, and other forgotten neighborhoods. That’s why we’re investing in educating children and their parents on ways to eat healthy.
Of course, I strongly support non-profits in their mission and work to help people in crisis. But our business model is different: we want to give people the tools to become entrepreneurs in their own right – again, capitalists – to be successful in the future. And we hope, in turn, they may take on that mission to reach out to help nurture and train others going forward.
If there is any reason why we continue to be disrupters for good with our social impact project, please read this letter — published with permission — that I received this past weekend from someone I don’t know.
November 28, 2020
Dear Mr. George:
I am writing to you in hopes I can gather information regarding Second Chances Farm.
My nephew is presently in Pauling County Jail. His life’s story you most likely have heard and seen time and again. He got into a wrong group; trying to find acceptance by someone. Liam got himself in trouble with stealing, drugs took them) while he was dreaming for help inside... some direction... abusive home life starting at a very young age.
Liam is 19; had no childhood, as you and I may have known it. He is a good good soul. Just a rotten home life.
Liam almost graduated from high school but all the above was instrumental in why he didn’t. While in school he found agriculture very interesting and was going to further that education after graduation. He went from getting student of the month(s) to where he is... It’s a long painful life story.
His grandmother (my sister) he adores... he talks with her often (every day). I have been trying to help her deal with this crisis in her life mostly because she is battling breast cancer during all of Liam’s problems.
While looking for an agricultural future for him once released, my sister and I came across Second Chances Farm! We have been so excited about your wonderful program and I decided I’d write to you get more information on top of the very informative info on your site. Starting with the first step to completing what has to be done... I imagine an application to start. Would you be so kind as to provide me with this info and anything else to start the process of getting accepted into your stellar program.
Mr. George, this young man’s life. I know with the proper mentoring and guidance, can change and he can be a stellar human being if given the chance... he needs to know he belongs, self-worth and love.
I am hopeful with your help; giving Liam a second chance would be the beginning of a life yet to be lived. Thank you for any and all considerations. I will continue to pray that my prayers are being heard.
Sincerely, with thankfulness for your continued success in making this world a better place.
Susie Fricano
Greensboro, Georgia
This poignant letter embodies the compelling reasons why Second Chances Farm is needed in communities throughout the United States.
Today, less than a year after we opened our doors at 3030 Bowers Street, Second Chances Farm, LLC is the first commercial indoor hydroponic vertical farm in Delaware and one of the leading “smart farms” in the United States. More than 40 returning citizens have come to work, and some have come to stay. We’re a business, a support system, and a family. We are a public benefit corporation, certified minority business enterprise, a qualified opportunity fund and a Foreign Trade Zone. Our compassionate capitalism has created something entirely new: a for-profit solution to a non-profit problem.
For more information:
Second Chances Farm
www.secondchancesfarm.com
4 Dec 2020
Sustainable Agriculture Opportunity Zone Fund Closes Omaha Investment
The Harvest Returns Sustainable Agriculture Opportunity Zone Fund recently funded the first tranches of an investment in a vertical farm and restaurant business that will produce locally-consumed food year-round in Omaha, Nebraska
The Harvest Returns Sustainable Agriculture Opportunity Zone Fund recently funded the first tranches of an investment in a vertical farm and restaurant business that will produce locally-consumed food year-round in Omaha, Nebraska.
The Sustainable Agriculture Opportunity Zone Fund invests to create a positive impact to the agriculture industry across economically disadvantaged regions of the U.S. The fund seeks to provide investors with tax-favorable, risk-adjusted returns in assets uncorrelated with the stock and bond markets. The fund’s investment objective is to achieve tax-advantaged capital appreciation in production agriculture projects that are economically, socially, and environmentally sustainable.
“Gather Omaha represents exactly the type of project in which we designed this fund to deploy capital,” said Chris Rawley, fund manager of the Sustainable Agriculture Opportunity Zone Fund and CEO of Harvest Returns. “The track record of the Gather management team and Omaha’s local economy makes this an appealing opportunity for investors who seek to diversify their portfolios out of volatile stocks.”
Opportunity Zones were created as part of the 2017 Tax Cuts and Jobs Act to encourage investment in underfunded, low-income, and distressed communities. Opportunity Zones offer a chance for investors to earn significant returns and tax incentives, including delayed and potentially reduced taxes on capital gains.
“We are really excited to work with a fund like the Sustainable Agriculture Opportunity Zone Fund that aligns perfectly with our model of an Opportunity Zone and Urban Agrarian move,” said Graeme Swain, manager of Gather Omaha. “It isn’t too often that you find two companies aligning ideologically on such a specific agenda.”
Gather Omaha will produce locally sustainable food using a vertical hydroponic farming system. Hydroponic production uses fewer resources than traditional farming practices with 95 percent less water usage, zero pesticide use, and a carbon footprint reduction from shorter shipment distances due to local consumption. In addition, to use within their restaurant, the produce will be sold to local schools, hospitals, grocery stores, and farmers’ markets.
About Harvest Returns
Headquartered in Fort Worth, Texas, Harvest Returns, Inc. is a financial technology marketplace created in 2016 by two military veterans to bring agricultural producers together with investors. Through democratizing the agriculture investment process, the online platform provides curated, diversified offerings of farms, ranches, and timberland to qualified investors.
For more information, please visit harvestreturns.com.
Indoor Farming And Qualified Opportunity Funds
In a recent interview with OpportunityDB’s Jimmy Atkinson, Local Grown Salads Founder Zale Tabakman explained that Opportunity Zones and indoor vertical farming are a good combination because these operations can be set up in “food deserts,”
2020
Qualified Opportunity Funds have been set up to fund Qualified Opportunity Zones and Qualified Opportunity Zone Businesses. One such QOF, the LGS Opportunity Zone fund, focuses on the development and maintenance of indoor vertical urban neighborhood farms, grown and distributed by Local Grown Salads. The “farms” are being developed in older buildings, situated in Baltimore, MD Opportunity Zones. According to the company’s website, four properties have been identified, to date, with the farms set up in 15,000-square-foot increments.
The product coming out of these businesses are packaged salads consisting of lettuce, cucumbers, chard, kale, and others, which are sold to local restaurants and the community.
In a recent interview with OpportunityDB’s Jimmy Atkinson, Local Grown Salads Founder Zale Tabakman explained that Opportunity Zones and indoor vertical farming are a good combination because these operations can be set up in “food deserts,” lower-income areas where people have to drive or take a bus long distances to get food to eat. Additionally, they are environmentally sound because the food grown isn’t using pesticides or fungicide, and little runoff. Tabakman also cited a carbon footprint reduction, pointing out that the locally grown food has less distance to travel than, say, produce from California to the East Coast.
Finally, these farms are set up to create local jobs. Tabakman indicated that each farm can create 25 jobs, with pay averaging around $15 per hour. Additionally, the company is working with the bank to ensure financial literacy for employees.
From Tabakman’s point of view, LSG’s vertical farms tick off the many boxes of Opportunity Zone investments, being located in the federally-designated areas, and providing a positive impact on the community. “Indoor vertical farming, because it’s food, is great . . . but any other product being produced locally really makes sense in an Opportunity Zone . . . especially when you need to be close to your customers,” he told Atkinson.
CONNECT WITH LOCAL GROWN SALADS
Former Steel Site To See Aquaponics Facility
To the complex problems of the City of Duquesne and the Mon Valley, entrepreneur Glenn Ford offers a solution that is both down-to-earth and very fishy
RICH LORD
Pittsburgh Post-Gazette
NOV 11, 2019 rlord@post-gazette.com
To the complex problems of the City of Duquesne and the Mon Valley, entrepreneur Glenn Ford offers a solution that is both down-to-earth and very fishy.
Mr. Ford, of Minneapolis, is the founder of InCity Farms, and on Friday he revealed plans for a 180,000-square-foot aquaponics facility on 25 riverfront acres in Duquesne. Backed by the social impact investors Hollymead Capital, the nonprofit Food 21 and an opportunity zone fund, with Peoples Natural Gas as its chief cheerleader, freshly sprouted InCity Farms is in the process of finding a headquarters in Pittsburgh. Its planned $30 million Duquesne facility is expected to employ 130 — starting salaries around $35,000 — potentially expanding to 275.
“We will try to hire as many of these people as we can from Duquesne and the surrounding area,” Mr. Ford said. “We’re going to take 25 [acres] and we’re going to turn that into, if you will, a little metropolis of food businesses there.”
“I think it could be the starting point for the revitalization of the city of Duquesne and the [Mon Valley] region,” Duquesne Mayor Nickole Nesby said.
Grown-up solutions to combat child poverty
In aquaponics, edible fish are raised in clean, indoor pools, and sold commercially. The waste the fish produce is filtered and treated with beneficial bacteria, and the result is used to fertilize vegetable plants.
The plants are grown indoors in optimal temperature, humidity and light. The technique can support the rapid growth of some 800 vegetable varieties year-round, Mr. Ford said. Add the fish, and you’ve got an economically viable business that also cushions against the food shocks created by global warming.
Both technologically sophisticated and labor-intensive, the field “can be the very first job that someone has, and it can also be [an opportunity for] your Ph.D. with a whole lot of experience,” he said.
Raised in Chicago, Mr. Ford worked his way up to the executive level in Pepsico before leaving to create several food-related companies and to consult for many more. He created a pilot aquaponics site in Minneapolis.
Then he got a call from Pittsburgh.
Peoples spokesman Barry Kukovich had read about aquaponics in National Geographic magazine and introduced the concept to Peoples CEO Morgan O’Brien. They saw the indoor food industry as a potential customer for a natural gas system called Combined Heat and Power, or CHP, in which the fuel is converted to electricity on-site — and as a way to help the local economy.
“We’re interested in the ripple effect of creating more jobs, more employment,” Mr. Kukovich said.
They reached out to Hollymead Capital’s managing partner, Joseph Bute, who happened to know Mr. Ford.
“Morgan [O’Brien] said, ‘I want this here, and I don’t want to waste a lot of time looking for the perfect solution,’” Mr. Bute recounted.
That doesn’t mean Duquesne isn’t the perfect solution.
It has large amounts of vacant land, much owned by the nonprofit Regional Industrial Development Corp. The city has a population of 5,500, of which more than one-third (including around 750 kids) are in poverty.
The entry-level, living-wage jobs would be “outstanding, to a community where you have a large group of people, one, with a learning disability, and two, with a criminal background,” Duquesne Mayor Nikole Nesby said.
A child of a modest Chicago neighborhood, Mr. Ford understands that situation.
“In my DNA, I know that people need scenarios where they can work their way out of their circumstances,” he said. “That’s what I want my business to be known for.”
He said 75% of the initial jobs require only that the applicant be “reliable and trainable.”
Low-income communities, he said, often suffer from a negative “balance of trade” because they sell little to the wider world and buy goods and foods that are made far away.
“Until we can start to balance that out a little bit better, we create permanent dysfunction, permanent ghettos, permanent poverty,” he said.
He said aquaponics can restore some balance, letting those communities buy food grown nearby, and giving them a product to sell to the world.
A nonprofit called Food21, created last year will help to coordinate InCity Farms’ growing plans with those of local farmers. That way they won’t be competing to sell the same vegetables at the same time. Instead, they can coordinate to meet a buyer’s needs year-round — for instance, providing traditionally grown tomatoes in summer, and aquaponics product in the winter.
InCity Farms is scouting for other sites, likely including Erie, Pa. But Duquesne comes first.
Mr. Ford said he has an agreement with RIDC to purchase 25 acres of the former Duquesne Steel Works site. He is looking for a public subsidy only for an amphitheater that he hopes will make the site a riverfront destination.
“This is the start of something meaningful and beautiful,” Ms. Nesby said.
Rich Lord: rlord@post-gazette.com or 412-263-1542.
Crop One Holdings Announces Launch of Vertical Farm Opportunity Fund in Major Farm-to-Table Initiative
Crop One Holdings (Crop One) a leading vertical farm operator through its FreshBox Farms brand, today announced that it will sponsor its first “qualified opportunity fund (QOF)” in an Opportunity Zone
The Fund will build a vertical farm in Texas expected to produce
2 tons of fresh produce per day, create at least 75 new jobs, and reach
17 million potential customers
Oakland, Ca., May 8, 2019 – Crop One Holdings (Crop One) a leading vertical farm operator through its FreshBox Farms brand, today announced that it will sponsor its first “qualified opportunity fund (QOF)” in an Opportunity Zone.
The Vertical Farm Opportunity Fund #1 (the Fund) will invest in building and operating a new vertical farm in Texas (the Farm), to be located in a qualified Opportunity Zone in the Austin-San Antonio corridor. The Farm will primarily serve Austin (the #11 largest city in the U.S.), and will have easy access to San Antonio (#7), Houston (#4) and the Dallas-Fort Worth Metroplex (#9).
Vertical farming produces crops indoors, and ensures pesticide-free, optimal growing conditions. Crop One anticipates locating many of its future farms in Opportunity Zones that have potential for farm-to-table distribution, in locations that may range from rural to urban settings. These farms require that temperature, humidity, light, water and plant nutrients be provided in a controlled environment.
Crop One’s track record and its investment team’s more than 40 years of combined investing experience make it uniquely qualified to manage the building and operation of the Farm through the Fund. Its produce is already sold in over 35 grocery stores in the Northeast U.S through its FreshBox Farms brand. In 2018, Crop One entered into a JV with Emirates Flight Catering to build the world’s largest vertical farm in Dubai, which will begin production early 2020.
For this project, Crop One will be raising capital under a Regulation D 506(c) offering for the development of the Farm’s facilities and to fund business operations.
“With this Opportunity Zone Fund, we are bringing scalable, vertical farming technology to Texas,” said Sonia Lo, Chief Executive Officer of Crop One Holdings. “The new farm will be environmentally conscious and produce fresh, locally-grown food that is healthy and affordable. Our expert staff of farmers, resource conservation specialists, and ag-tech leaders are changing the way we grow and enjoy food, and we are looking forward to providing great, fresh produce to the Austin-San Antonio area."
“With the creation of at least 75 new jobs in its initial phase, the Farm will have a positive economic impact on the local economy,” added Deane Falcone, Crop One Chief Science Officer. “As with all of our farms, the Farm is expected to use 99 percent less water compared to conventional farming. Our products are pesticide-free, non-GMO, nutritious, and delicious, and because our produce can reach more than 17 million people within a 3.5-hour radius, we will be able to reduce food miles and food waste.”
Enacted as part of the 2017 Tax Cuts and Jobs Act, Opportunity Zones were created by Congress to encourage social advancement and private investment in low-income communities to aid job creation and new business formation.
Investors in QOFs such as the Fund are eligible for a range of tax benefits, including deferral of current capital gains, a tax reduction of up to 15 percent on current gains and no capital gains taxes on appreciation of the QOF interest if the interest is held for 10 years or more.
Through the Fund, investors will partner with Crop One and participate in the rapidly emerging vertical farming sector while being eligible for these generous tax benefits.
Qualified accredited investors seeking investment information related to this offering and Vertical Farm Opportunity Fund #1, are asked to contact Crop One at cropone.ag/investors or email investors@cropone.ag for more information.
About Crop One Holdings
California-based Crop One Holdings is a technology-driven vertical farming company that produces fresh, organic, produce in a sustainable manner for its customers. It operates two subsidiaries: FreshBox Farms in Millis, Mass., and a joint venture with Emirates Flight Catering in Dubai South, United Arab Emirates. Crop One has been in continuous commercial production longer than any other vertical farmer in North America. The company’s proprietary technology and plant science put it ahead of its competitors, producing crop yields among the highest of the industry, but at 25% to 50% of the capital cost of other vertical farming companies.
The information contained in this Press Release is not intended to be and should not be taken as investment, tax, legal of any other type of advice. It is not an offer to sell or a solicitation of an offer to buy an interest in the Fund, the Farm or any other entity. No investment shall be offered or sold to any person without such person first being provided with a confidential information memorandum or similar document setting forth the risks associated with any such investment. Investing in funds of this nature are inherently risky and illiquid and shall be limited to persons that are “qualified purchasers” under U.S. securities laws. No investment shall be sold to any person without the Fund taking reasonable steps to verify that such person is an “accredited investor” under the US Securities Act, which steps may include third-party verification by the investor’s financial adviser, broker, accountant, banker and/or counsel. Any such investment involves a high degree of risk and is suitable only for sophisticated and qualified investors.
Mandated Regulation D 506(c) Disclosure Legend
Any historical performance data represents past performance. Past performance does not guarantee future results;
Current performance may be different than the performance data presented;
The Fund and Crop One are not required by law to follow any standard methodology when calculating and representing performance data;
The performance of the Fund and Crop One may not be directly comparable to the performance of other private or registered funds or companies.
The securities are being offered in reliance on an exemption from the registration requirements, and therefore are not required to comply with certain specific disclosure requirements;
The Securities and Exchange Commission has not passed upon the merits of or approved the securities, the terms of the offering, or the accuracy of the materials relating to any offering of equity in the Fund.
Marla Kertzman | Senior Vice President
Financial Profiles, Inc.
Main 310.478.2700 | Direct 209-852-9027| Mobile 408 482-3546
mkertzman@finprofiles.com | www.finprofiles.com
Can Indoor Farming Fulfill The Dream Of Opportunity Zones?
Opportunity zones and indoor farms are both new frontiers for investment, and one company is seeking to combine them.
Zale Tabakman has developed a concept for an indoor farm that grows greens, herbs and vegetables using modular construction, called Local Grown Salads. One LGS farm would be 15K SF and fabricated off-site almost entirely — even the HVAC system, often one of the costliest elements of construction. All the site needs is for the walls, floor and ceiling to be sealed and the water and power to be connected to the grid.
“It’s like installing a giant washing machine into a building,” Tabakman, who is based in Ontario, Canada, told Bisnow.
Tabakman estimates that without any delays, an LGS unit can be installed in two weeks, with its first harvest possible in 30 days, and each subsequent one 30 days after. Each plant produced will be certified organic, non-GMO and kosher (in order for greens to be kosher, they must never come into contact with insects). Each farm is estimated to cost $2.2M, require 15 to 20 workers and start producing income after 150 days.
Several companies have already introduced urban farming, particularly near some of the most in-demand urban markets such as New York and San Francisco. But whereas many of those farms are in sizable, purpose-built new industrial buildings, LGS has a much smaller capital requirement and can take space in older warehouses that are otherwise obsolete for any industrial use.
Because each LGS unit only requires a 15K SF pad with 14-foot clearance heights, Tabakman believes it is actually better suited to older warehouses than newer buildings with higher ceilings, saying “all that extra space would be wasted.” The model is, in a way, ideally suited as an opportunity zone investment. To that end, Tabakman is working to launch a qualified opportunity fund called I95 OZF, focusing on the Northeast corridor, from Richmond, Virginia, up to Boston, where space is at a premium and the most dense population in the country has sky-high food needs.
Many of the opportunity zones in cities like Baltimore and Philadelphia that are in need of investment would consider fresh, local produce to be a godsend. Baltimore in particular is rolling out the welcome mat for opportunity zone investment.
“In community development, there is a lot of concern about food deserts, so something like [an urban farm] could meet community improvement needs,” Ballard Spahr Tax Credits Team Leader Molly Bryson said. “So [if a city had] any parameters about meeting goals of the program, that would potentially be within the spirit of the law.” Those areas also often contain functionally obsolete industrial buildings for which an urban farm could easily meet the significant improvement threshold required under the opportunity zone regulations, according to CBRE Philadelphia Senior Research Analyst Lisa DeNight.
Bowery Farming Bowery Farming, Kearny, N.J.
“[Philadelphia] is one of the oldest industrial stocks in the country, so its buildings are definitely on a smaller scale than other industrial hubs, even on the East Coast,” DeNight said.
“Baltimore is probably very similar.” Because the regulations are otherwise so open-ended, many cities are eager to welcome businesses like LGS with open arms. “We talk to a lot of cities and economic development corporations, and what we’re seeing is that they want stuff to happen in opportunity zones that will help the people that live there, that will generate economic activity, create jobs and fulfill the purpose of the zones,” Tabakman said. “A new condo building, cities aren’t very excited by that. They want businesses, with jobs and permanent economic activity.”
Though he has not signed deals for any locations, Tabakman said that his business’ proper launch is not delayed by any lack of enthusiasm. “One national investor told me, ‘Once you get past the first step, we’d like to [help you] be in 30 cities,’” Tabakman said. Taking that leap remains the biggest obstacle to any opportunity zone investment at this point in time. Investing in an operating business is much more of a gray area than a pure real estate deal, and Tabakman is upfront about the amount of help he would need to truly get LGS off the ground. “The kind of model we have in mind is [for] multiple buildings, and we do not have the skill for that,” Tabakman said.
“We’re looking for someone to come in who has a lot of warehouses and brings us in as a tenant, with someone else coming in [to provide] money.”
Google Maps
Tabakman said that he has talked to institutional investors, private equity sources and cities with public investment funds, and few are willing to take the risk as of yet. The combination of normal startup risks and the unsettled nature of opportunity zone investing may be too much to overcome as of yet. For example, LGS' business model requires that it sell to a distributor, grocery or restaurant chain of a big enough size, rather than to individuals. "An issue is if you use a distribution center outside the zone, or if you sell to customers outside of the zone, that’s still a gray area,”
Bryson said. The exact structure of I95 OZF will be determined by its initial investors, but Tabakman envisions some combination of property management-savvy real estate owners and private equity firms. Either way, he trusts that his model will produce sustainable returns that both satisfy local community groups and investment targets. “We’re attracting investors who either own [old industrial] buildings or are looking to own those buildings by putting opportunity zone funds in there, holding for 10 years and pursuing exit strategies,” Tabakman said. “My hope would be to buy the building for the farm after 10 years, but if after 10 years, gentrification happens, they may want to kick out the farm and redevelop the building or something like that.”
While many investors wait on final clarifications to deploy their capital, a significant number of institutions are seeking opportunities for their social impact funds. Tabakman told Bisnow that social impact investors are among the most interested parties with whom he has spoken, but he has been cautious with his dealmaking because he is hyper-aware of the public damage a failed deal can do to a company touting its social benefits.
“The impact investment market is huge, but there are people who just say they’re impact investors and don’t have standards, and others that have lots of restrictions,” Tabakman said. Nailing down a potential investor at this moment is highly difficult because of the uncertainty surrounding rules of opportunity zone investing.
The most recent hearing for regulation was Feb. 14, and the IRS and Treasury Department have yet to set a firm timeline for any further guidance or a final hearing. Though Tabakman is confident that his business fulfills the spirit of the opportunity zone legislation, he is acutely aware of the herd mentality of investors. “It’s just a matter of when, not if," Tabakman said. "The only challenge is risk tolerance for the people we’re dealing with.
The opportunity zone [legislation] is kick-starting everything; I’m getting three or four calls a day."