Property Details
Opportunity Zone  Ground-Up Development  NOI Growth  Repositioning Opportunity  Stabilized Income 
Asset Profile
Multiple

Chestnut Opportunity Zone Fund

Southeast, Mid Atlantic & Rocky Mountain States

Multi-Focus Fund
Chestnut Funds Chattanooga, TN
Chestnut Funds
  • IRR 12%
  • Equity Multiple 2.5x
  • Hold Period 10+Y
  • Minimum Investment $50K
  • Year 1 Cash on Cash 0%
  • Stabilized Cash on Cash 7%
  • First Distribution Dec 2020
  • Distribution Frequency Quarterly
  • Asset Profile Multiple
  • Loan-to-Value 75%
  • Current Occupancy N/R

About this Fund

Fund Type Opportunity Zone Fund
Investment Timing Equity called upfront
Market(s) Multiple
Target Fund Size $20MM
Amount Deployed $0
Date Opened for Investments June 2019
Est. Time to Next Investment 2 Months
Est. Time to Initial Distribution 1 Year

 

Why are you pursuing this fund strategy?

Chestnut Opportunity Zone Fund is an impact fund that invests in market-rate, transformative real estate projects. The fund provides a meaningful and efficient way for investors to realize portfolio diversification via alternative investments; receive significant tax benefits associated with the creation of long-term value in Opportunity Zones; and participate in socially responsible investments that align with community need. Chestnut Opportunity Zone Fund is one of five funds managed by Chestnut Funds, an experienced fund management firm with a track record of investing in real estate and delivering strong returns.

 

What is your investment strategy/business plan for the Fund?

Chestnut Funds has successfully executed a similar strategy in several prior funds; namely, making investments value-add and development projects alongside operating partners in smaller and middle-market size projects in primary and secondary markets. Our view is that the best opportunities to achieve strong returns and positive social impacts will be in the smaller and middle-market size projects where inefficiencies in the market exist. And because Opportunity Zone investments will require significant expertise in underwriting and in the execution of development and redevelopment strategies, Chestnut's operating partner model will leverage market and product type expertise.

 

What are the first 3 steps you will take to maximize cashflow and property value?

  1. Chestnut utilizes extensive due diligence and financial analysis models to underwrite investment opportunities.
  2. Chestnut pays careful attention to the potential downside risks associated with market fluctuations and debt financing. Because of our operating partner strategy, which provides both local market and product type expertise, coupled with Chestnut’s intensive oversight and asset management, the fund’s investments will be monitored and managed closely.
  3. The long-term value of the fund’s investments is enhanced because of the fund’s focus on environmental stewardship and alignment with expressed community need.

 

What are the 3 most important aspects of this investment opportunity for investors?

  1. Investors in Chestnut Opportunity Zone Fund benefit from a significant tax incentive that serves to substantially increase after-tax returns on investment.
  2. As an impact fund, the fund’s investments will address expressed community needs to benefit the communities in which the fund’s investments take place.
  3. Chestnut Funds is an experienced fund manager with a track record of success executing investments and managing funds with a similar strategy.

 

Are there any unique aspects to the fund or your investment strategy that will help to create value for investors?

  1. Chestnut Opportunity Zone Fund differentiates itself from many QOFs and other alternative investments in real estate in several ways. First, our team embeds impact objectives throughout the fund lifecycle, beginning with the sourcing of a project and through investment exit. We seek to understand how a project’s thesis aligns with community needs. This helps reduce the risk that a project is not welcomed by a community, and therefore, reduces leasing risk and helps to drive value by attracting other capital, including philanthropy and other aligned federal, state, and local financial incentives.
  2. We are positioned to have proprietary deal access to undiscovered and undervalued projects given the composition of our general partner team and our collaborative approach. In addition to having a strong Managing Partner with deep real estate and fund management acumen, two general partners bring impact analysis, diligence, and reporting expertise and broaden our deal pipeline network through experience in working in community finance and venture investing. Our team works alongside developers and community organizations to increase market knowledge of the opportunity zone incentive, resulting in increased access to deal-flow.
  3. Our focus on smaller project sizes is a sweet spot for Opportunity Zone projects as most QOFs are chasing larger deals in markets where real estate pricing is impacting basis. Chestnut Opportunity Zone Fund pursues projects that are typically too small for institutional investors and too large for friends and family capital. As such, our team is able to participate in value-investing opportunities that are underserved by the full range of capital providers and to execute these cost-effectively.
  4. We are proactive in the tracking and reporting of impact to our investors. The Opportunity Zone legislation has no required mandate for impact reporting; however, our team has made a commitment to provide an annual impact report to investors that leverages impact reporting best practices.
  5. Chestnut Opportunity Zone Fund is part of a larger organization built on expertise with the resources to support its success. Chestnut Opportunity Zone Fund is the fifth fund of Chestnut Funds and as such leverages the systems, technology, and resources of Chestnut Funds to deliver value, convenience, and security for investors. In addition to the general partners, the Chestnut Funds team adds expertise in underwriting, diligence, asset management, and marketing. The firm also utilizes the secure, cloud-based technology of Juniper Square to provide convenient investor access for real-time performance data as well as for a secure repository for investment documents, capital account statements, and tax documents.

 

How are risks being mitigated during the hold period?

Chestnut mitigates risk early on by ensuring that potential opportunity zone deals first align with a community’s needs. This is accomplished by looking for expressions of community priorities and both qualitative and quantitative research sources. Chestnut uses its underwriting and due diligence process to analyze market and property-specific risks, and due diligence includes intensive underwriting of the fund's operating partner. Additionally, Chestnut Opportunity Zone Fund's diversification, of both product type and geography, serve to manage risk through the benefits of the portfolio effect. Lastly, Chestnut Opportunity Zone Fund has strong governance and decision rights controls over the projects in which it invests.

About this Fund

Fund Type Opportunity Zone Fund
Investment Timing Equity called upfront
Market(s) Multiple
Target Fund Size $20MM
Amount Deployed $0
Date Opened for Investments June 2019
Est. Time to Next Investment 2 Months
Est. Time to Initial Distribution 1 Year

 

Why are you pursuing this fund strategy?

Chestnut Opportunity Zone Fund is an impact fund that invests in market-rate, transformative real estate projects. The fund provides a meaningful and efficient way for investors to realize portfolio diversification via alternative investments; receive significant tax benefits associated with the creation of long-term value in Opportunity Zones; and participate in socially responsible investments that align with community need. Chestnut Opportunity Zone Fund is one of five funds managed by Chestnut Funds, an experienced fund management firm with a track record of investing in real estate and delivering strong returns.

 

What is your investment strategy/business plan for the Fund?

Chestnut Funds has successfully executed a similar strategy in several prior funds; namely, making investments value-add and development projects alongside operating partners in smaller and middle-market size projects in primary and secondary markets. Our view is that the best opportunities to achieve strong returns and positive social impacts will be in the smaller and middle-market size projects where inefficiencies in the market exist. And because Opportunity Zone investments will require significant expertise in underwriting and in the execution of development and redevelopment strategies, Chestnut's operating partner model will leverage market and product type expertise.

 

What are the first 3 steps you will take to maximize cashflow and property value?

  1. Chestnut utilizes extensive due diligence and financial analysis models to underwrite investment opportunities.
  2. Chestnut pays careful attention to the potential downside risks associated with market fluctuations and debt financing. Because of our operating partner strategy, which provides both local market and product type expertise, coupled with Chestnut’s intensive oversight and asset management, the fund’s investments will be monitored and managed closely.
  3. The long-term value of the fund’s investments is enhanced because of the fund’s focus on environmental stewardship and alignment with expressed community need.

 

What are the 3 most important aspects of this investment opportunity for investors?

  1. Investors in Chestnut Opportunity Zone Fund benefit from a significant tax incentive that serves to substantially increase after-tax returns on investment.
  2. As an impact fund, the fund’s investments will address expressed community needs to benefit the communities in which the fund’s investments take place.
  3. Chestnut Funds is an experienced fund manager with a track record of success executing investments and managing funds with a similar strategy.

 

Are there any unique aspects to the fund or your investment strategy that will help to create value for investors?

  1. Chestnut Opportunity Zone Fund differentiates itself from many QOFs and other alternative investments in real estate in several ways. First, our team embeds impact objectives throughout the fund lifecycle, beginning with the sourcing of a project and through investment exit. We seek to understand how a project’s thesis aligns with community needs. This helps reduce the risk that a project is not welcomed by a community, and therefore, reduces leasing risk and helps to drive value by attracting other capital, including philanthropy and other aligned federal, state, and local financial incentives.
  2. We are positioned to have proprietary deal access to undiscovered and undervalued projects given the composition of our general partner team and our collaborative approach. In addition to having a strong Managing Partner with deep real estate and fund management acumen, two general partners bring impact analysis, diligence, and reporting expertise and broaden our deal pipeline network through experience in working in community finance and venture investing. Our team works alongside developers and community organizations to increase market knowledge of the opportunity zone incentive, resulting in increased access to deal-flow.
  3. Our focus on smaller project sizes is a sweet spot for Opportunity Zone projects as most QOFs are chasing larger deals in markets where real estate pricing is impacting basis. Chestnut Opportunity Zone Fund pursues projects that are typically too small for institutional investors and too large for friends and family capital. As such, our team is able to participate in value-investing opportunities that are underserved by the full range of capital providers and to execute these cost-effectively.
  4. We are proactive in the tracking and reporting of impact to our investors. The Opportunity Zone legislation has no required mandate for impact reporting; however, our team has made a commitment to provide an annual impact report to investors that leverages impact reporting best practices.
  5. Chestnut Opportunity Zone Fund is part of a larger organization built on expertise with the resources to support its success. Chestnut Opportunity Zone Fund is the fifth fund of Chestnut Funds and as such leverages the systems, technology, and resources of Chestnut Funds to deliver value, convenience, and security for investors. In addition to the general partners, the Chestnut Funds team adds expertise in underwriting, diligence, asset management, and marketing. The firm also utilizes the secure, cloud-based technology of Juniper Square to provide convenient investor access for real-time performance data as well as for a secure repository for investment documents, capital account statements, and tax documents.

 

How are risks being mitigated during the hold period?

Chestnut mitigates risk early on by ensuring that potential opportunity zone deals first align with a community’s needs. This is accomplished by looking for expressions of community priorities and both qualitative and quantitative research sources. Chestnut uses its underwriting and due diligence process to analyze market and property-specific risks, and due diligence includes intensive underwriting of the fund's operating partner. Additionally, Chestnut Opportunity Zone Fund's diversification, of both product type and geography, serve to manage risk through the benefits of the portfolio effect. Lastly, Chestnut Opportunity Zone Fund has strong governance and decision rights controls over the projects in which it invests.

Offered By

Chestnut Funds

Chestnut Funds

Chattanooga, TN

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Assets Under
Management

Currently
$1.22B 30+ assets
Exited
$171.48MM 10+ assets
Portfolio LTV
48%  
Historical
Realized Returns

Total IRR
47.2%  
Equity Multiple
2.23x  
Annual Cash
7.3%  
Years Of
Experience

As Principals
10+ years  
In Business
8 years  
Size
6 Staff * Dedicated investor relations
* All information is reported by Chestnut Funds as of 10/29/2019.
Assets Under
Management

Currently
$1.22B 30+ assets
Exited
$171.48MM 10+ assets
Portfolio LTV
48%  
Historical
Returns

Total IRR
47.2%  
Equity Multiple
2.23x  
Annual Cash
7.3%  
Years Of
Experience

As Principals
10+ years  
In Business
8 years  
Size
6 Staff * Dedicated investor relations
* All information is reported by Chestnut Funds as of 10/29/2019.

Financials

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Offering Financial

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Location Details

Southeast, Mid Atlantic & Rocky Mountain States

Chestnut Opportunity Zone Fund will invest in markets where Chestnut Funds has current investments, market knowledge, and relationships. These markets include a number in the Southeast, Mid Atlantic, and Rocky Mountain states and have been chosen due to strong economic demand drivers. Chestnut Opportunity Zone Fund invests in primary and secondary markets because of the stronger economic fundamentals of these markets. Furthermore, Chestnut Opportunity Zone Fund is engaging with communities within primary and secondary markets in which there is strong coordination of public and private organizations making project identification, partner development, community engagement, and coordination of additional financial incentives more efficient and effective.

Documents

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Offering Agreement Documents

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