The OZ Fund With A $1,000 Minimum, with Don Harmer – OpportunityDb

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How can non-accredited investors with smaller capital gains participate in Opportunity Zone investing?

Don Harmer is the president and CEO of the GRASS QOZF. GRASS is focused on Lyon County, Nevada and owns multiple QOZBs in the aviation and software industries. The fund accepts investments of as little as $1,000 and allows for participation by non-accredited investors.

Click the play button above to listen to my conversation with Don.

Episode Highlights

  • An overview of the GRASS QOZF, including the fund’s investments in Nevada aviation and software businesses.
  • How GRASS pursued a Reg A+ filing route that allows the fund to accept non-accredited investors with as little as $1,000.
  • How a “hybrid” structure that incorporates Qualified Small Business Stock (QSBS) framework to potentially shorten the holding period required to realize tax advantages and expand the sources of capital than can be invested.
  • A deep dive into the securities laws that typically restrict Qualified Opportunity Funds (QOFs) to accredited investors, and how Reg A+ offers an alternative structure.
  • The requirements to become a QSBS under Section 1202, as well as the benefits available to investors.
  • A review of the GRASS pipeline and investment strategy, including a focus on high tech hangars.
  • How the Tahoe-Reno Industrial Center (TRIC) is stimulating the Lyon County economy.
  • The unique liquidity options for funds like GRASS, including tokenized security trading, as fundraising progresses and capital is deployed.

Featured on This Episode

Industry Spotlight: GRASS QOZF

GRASS is a Qualified Opportunity Zone Fund focused on applying cutting-edge technology to complex compliance processes. Based in Lyon County, Nevada, the fund invests in businesses in the aviation and software industries. GRASS launched a Regulation A+ offering aiming to raise $50 million, with an investment minimum of just $1,000 that is open to both accredited and non-accredited investors.

Learn More About GRASS:

About the Opportunity Zones Podcast

Hosted by OpportunityDb.com founder Jimmy Atkinson, the Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in opportunity zones.

Show Transcript

Jimmy: Welcome to the “Opportunity Zones Podcast.” I’m your host, Jimmy Atkinson. If you’re a smaller investor, you may have noticed that a big problem with most Opportunity Zone Funds is that they typically have high minimums, oftentimes, as large as $50,000, $100,000, $250,000 in some cases, or even more than that sometimes. The GRASS fund on the other hand is a relatively new Reg A+ offering, and not being governed by the accredited investor requirement has a low minimum of just $1,000. Joining me today to discuss this and more is Don Harmer, President and CEO of GRASS. He joins us today from Carson City, Nevada. Don, welcome to the podcast.

Don: Oh, thank you, Jimmy.

Jimmy: Thanks for coming on. Your fund is very unique in many ways, Don. The Reg A+ structure being one of several ways that makes your fund unique. And I wanna drill down into all of the unique aspects of your Opportunity Zone Fund offering in a minute. But before we do that, can we back up a little bit and give our listeners the general 30,000-foot overview of GRASS? Who are you guys and what do you do exactly?

Don: Well, GRASS is a Qualified Opportunity Zone Fund, and we’re located in the several different Opportunity Zone areas in Lyon County, Nevada. Directly beneath GRASS is our qualified business, RAGSS. And RAGSS has several subsidiary companies under it. SAMSARG, the aviation company, which focuses on government DoD contracts and general aviation. And we also have Sierra Software Systems, which is our software development company. And we’re developing a regulatory software package for government contractors to be able to stay in compliance with the regulations mandated by the government to be able to do these different government contracts.

Jimmy: Are these all different acronyms? By the way, I mentioned you’re the CEO and President of GRASS. And then you mentioned RAGSS underneath you, and also SAMSARG. What are those businesses exactly? Can you tell us what the acronyms are?

Don: Well, there’s not really per se acronyms. We just were trying to pick names for our companies that people would remember. SAMSARG has no acronym to it. GRASS is, we did create an acronym for it, because when we’re going through the Reg A qualification process, it was just recommended that we had something for it. So what we did was we came up with the acronym Growth, Resources, Assets, Safety, and Stability. And that was just kind of a brainstorming-type session that we came up with something that really didn’t stand for anything in the beginning. And then RAGSS is just a take-off on that to a Resources, Asset, Growth, Safety, and Stability. And then SAMSARG is just a catchy name.

Jimmy: It is.

Don: We want it to be something that somebody would remember when they heard it, and it’s been working out fairly well.

Jimmy: Good. And let’s drill down into your deal pipeline and the different businesses you invest in a little bit later. But I wanna get back to why you guys are unique. So tell me in your own words, Don, why are you guys unique? What makes your Opportunity Zone Fund offering unique?

Don: Well, I think we’re doing something different. I haven’t seen any other funds out there that’s done the same thing that we’ve done. We’ve done a Reg A+, so we could open ourselves up to the retail investor, man on the street investor with the $1,000 minimum investment because we didn’t wanna strictly focus on the accredited investor, broker-dealer network, so to say, because there’s plenty of opportunities out there for that demograph. So we wanted to be able to have a multitude of investors and make these tax-advantaged investments available to a group of people that it hasn’t really been available to before. I think everybody’s familiar with the Jobs and Tax Act and Internal Revenue Code 1400Z. And what created the Qualified Opportunity Zone Fund in the very beginning, because part of the 1400Z is to be able to take advantage of the tax benefits in the investments is we have to invest in a qualified fund. And the 1400Z focuses on people reinvesting their money, their gains, to get their tax benefits that way. And what we’ve done is we’ve hybrided our investment by declaring our stock as qualified small business stock under Internal Revenue Code 1202, which gives the ordinary investor reason or ability to invest in a tax-advantaged investment with non-gain money. Just fresh money investment, original money investment. And if they hold their investment for five years in a day, they can take out to 10 times their investment plus their investment tax-free up to $10 million. So it’s a pretty unique situation, we think, only because we haven’t been able to find anybody else that’s doing that. I know there’s at least one if not two other qualified funds out there that they’re doing Reg A+, but I don’t know if they’re offering it the same way we are.

Jimmy: All right. So let’s talk a little bit more about the securities law for a moment here. I’ve had one episode in particular with Clem Turner, many months ago. And I’ll link to it on the show notes page for today’s episode that we spent a significant amount of time talking all about different securities laws, and different ways that funds can be offered. The most common way that a Qualified Opportunity Zone Fund is offered is under Regulation D. And that’s typically under Rule 506(b), or 506(c). In both of those types of offerings, you are required to be an accredited investor in order to invest in the fund, which means you have to have a certain level of income or a certain level of net worth. And typically, those funds have very high minimums, as I mentioned in the intro, oftentimes, $50,000 or even much higher than that. Your fund is unique, as we’ve mentioned. It’s one of only maybe, you know, two or three other funds out there that it is offered under Reg A+, which is part of the Crowdfunding Act, I believe. Could you tell us a little bit more about the history of Reg A+ and what some of the pros and cons are?

Don: Yeah, I’m pretty sure Reg A+ was…

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