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September 2020 - Part III: Chestnut OZ Fund - A Distinct Approach
Part III of a three-part Chestnut Funds’ Viewpoints series on the origin and distinct approach of the Chestnut Opportunity Zone Fund and how investments in Opportunity Zones can play a role in economic recovery.
Chestnut Opportunity Zone Fund, a Qualified Opportunity Fund (QOF), leverages the underwriting, asset management, and investor relationship capacity and systems Chestnut Funds has built and enhanced since 2012. Furthermore, Chestnut Fund’s familiarity and experience with the nuance and characteristics of development and redevelopment real estate projects is of vital importance because Opportunity Zone real estate investments are mandated to fall into these categories.
Chestnut Opportunity Zone Fund employs three distinct approaches to the identification of and investment in community-aligned real estate projects in Opportunity Zones:
1) Invest in Alignment with Community Priorities & Community Organizations’ Activity
In addition to local market research and trend analysis, we find evidence of a community’s momentum and potential can be found in the articulation of its strategic vision and actions –often documented in community strategic plans –and in the economic and community development activities undertaken by community-based organizations.
2) Invest with Partners to Stimulate Activity
A hallmark of Chestnut Funds’ investment strategy is to build long-term relationships with quality operating partners, which include real estate developers that have deep market intelligence and a heart for their communities, as well as asset type expertise.
3) Invest to Address Needs
Communities need access to a mix of commercial and community goods and services that are tailored to meet local needs. Chestnut Opportunity Zone Fund seeks real estate investment opportunities that fill local gaps as this approach aligns supply and demand forces.
Finally, as QOFs are required to make investments in a timely manner, Chestnut Funds’ work to maintain a robust pipeline of small and middle market-sized prospective investments, achieved through engagement with its existing and ever expanding network of operating partners embedded in communities, well positions the QOF to execute its strategy in alignment with IRS requirements and by investing in projects that authentically align with community need.
Chestnut Opportunity Zone Fund is actively pursuing several projects. An example of a project in our pipeline is the Briarwood Medical Office Building in Atlanta:
30,000 sf. medical office building development that Chestnut Funds is co-developing with Riddle Property Group, a minority-owned real estate development firm. The medical office building is located in an area of Atlanta that does not have adequate access to healthcare services and will be part of a larger master planned development that is anticipated to include affordable housing.
We hope you enjoyed this quarters Viewpoints series highlighting our strategic partnership with Chestnut Catalyst and our important work together on Chestnut Opportunity Zone Fund. Through this intentional approach and in alignment with the Opportunity Zone legislation, we hope to play a role in economic recovery and serve investors seeking to diversify with alternatives, manage tax liabilities, benefit from long-term investments, and make a difference.
The information contained in this newsletter is intended for informational purposes only and is not intended to provide personalized investment advice or to constitute an offer or solicitation to buy or sell securities or interests in any investment. The charts, graphs, and other information contained herein should not serve as the sole determining factor for making investment decisions.
This newsletter cannot be reproduced, shared, or published in any manner without the prior written consent of Chestnut Funds (“Chestnut”). Unless otherwise indicated, all statements and expressions in this paper are the sole opinion of Chestnut and are subject to change without notice. Predictions, forecasts, or outlooks described or implied are forward-looking statements based on certain assumptions, which may prove to be wrong, and/or other events, which were not taken into account, may occur. Any predictions, forecasts, outlooks, opinions, or assumptions should not be construed to be indicative of actual events, which will occur. The opinions and data in this newsletter have been obtained from sources believed to be reliable. Chestnut does not warrant the accuracy or completeness of such and accepts no liability for any direct or consequential losses arising from its use.
Investing in securities involves risk of loss and should not be based solely on marketing materials including the information provided herein. Further, depending on the different types of investments there are varying degrees of risk. Private Funds managed by Chestnut Real Estate Funds and their investors should be prepared to bear investment loss, including loss of original investment. There is no assurance that any specific investment or investment strategy utilized by Chestnut will be either suitable or profitable for your portfolio. Chestnut does not provide personalized or customized investment advice, therefor you are urged to discuss your personal investment situation with the financial professional of your choice before making or changing an investment in a Chestnut offering.
Because of the inherent risk of loss associated with investing in any type of securities, Chestnut Real Estate Funds is unable to represent, guarantee, or even imply that its services and methods of analysis can or will predict future results, successfully identify market tops or bottoms, or insulate you from losses due to market corrections or declines.
Chestnut Opportunity Zone Fund pursued its February 2020 investment in the redevelopment of Cycle Shop – a 29,250 square-foot building is located in Memphis, Tennessee’s Edge District, in part because the building’s redevelopment is in alignment with momentum of the recently reinvigorated, formerly industrial Edge District, the work of the Memphis Medical District Collaborative and the Downtown Memphis Commission, and pending public-private investments in a new, nearby park. Cycle Shop is anticipated to house a mix of creative office, retail, and/or community organizations.
Chestnut Opportunity Zone Fund’s April 2020 investment alongside Arts & Crafts Holdings in 601 Spring Garden, Philadelphia, Pennsylvania demonstrates this approach. Originally constructed in 1885–601 Spring Garden was previously the Philadelphia Belting Company. It is a five-story building, plus a basement, with 23,034 rentable square feet that is 80% pre-leased and will be redeveloped to reveal its industrial heritage while creating a modern building suitable for retail use at street level and various commercial uses on the upper floors. Arts & Crafts Holdings currently owns over 2 million square feet of commercial space in this community, demonstrating their commitment to revitalization.