Proterra AcreTrader Farmland Fund LP
STATUS
STATUS
Description
The Proterra AcreTrader Farmland Fund LP is designed to merge the institutional discipline of Proterra with the innovative sourcing and underwriting of AcreTrader in a diversified, tax-efficient vehicle. The Fund is designed to provide access to professionally managed investment-grade farmland in a passive manner for accredited and institutional investors.
Farmland historically benefits from the continual shrinking supply base of cropland in the United States, coupled with rising global food and protein demand. Farmland has demonstrated a high historical correlation with inflation, and negative or minimal correlation with financial assets such as stocks and bonds, providing investors portfolios with genuine potential diversification.
Fund Structure
Proterra AcreTrader Farmland Fund LP, a Delaware limited partnership, seeks to provide attractive returns to investors through purchasing investment-grade farmland in core farming regions of the United States. Proterra AcreTrader Farmland GP LLC acts as general partner of the Fund. AcreTrader LLC serves as investment manager to the Fund. The Fund generally expects to conduct substantially all of its investment activity through Proterra AcreTrader REIT LLC, a Delaware limited liability company that has been established to qualify as a real estate investment trust (REIT) for U.S. federal income tax purposes.
The purpose of qualifying as a REIT is that generally REITs are entitled to a deduction for the dividends the REIT pays to its shareholders. A REIT is required by law to distribute at least 90% of its taxable income annually, and is generally not subject to U.S. federal corporate income tax on the net income it currently distributes. As a result, the income generated by farmland, such as lease payments, passes through and is taxed only once at the individual shareholder level.
In addition, non-corporate investors such as individuals, trusts, and estates may utilize the Section 199A Qualified Business Income (QBI) deduction. The Section 199A QBI deduction allows individual taxpayers who qualify to deduct up to 20% of their “qualified business income” earned through pass-through entities, which includes qualified REIT dividends.
Investment Objective and Return Strategy
The Fund will seek to generate targeted returns through farmland appreciation during the hold period by purchasing and selling farms at attractive levels relative to prevailing market values, and through ongoing lease income and potential bonus rent.
AcreTrader intends to target row crop farms in geographically diversified regions across the United States with an objective to realize both current income through lease revenue and long-term capital appreciation. By leveraging its direct relationships with professional operators, the Fund’s strategy targets attractive risk-adjusted returns derived from the shrinking and limited supply base of quality cropland and through lease income. AcreTrader believes that the farmland market is highly inefficient, creating opportunities to capitalize with better sourcing and better data.
AcreTrader targets core farming regions with a significant amount of cropland in production, broad crop optionality, abundant infrastructure to support high-value crops, and a tenant-dense operator base. AcreTrader’s farmland strategy specializes in acquiring and managing investment-grade row crop farmland at attractive entry prices by partnering with local operators and farm managers in these core farming regions. When applicable, AcreTrader will raise additional capital for value-add improvements, such as the installation of tile drainage to remove excess moisture from cropland or implementing irrigation improvements to increase irrigated acreage and maximize the value of potential water rights.
Additional Details
Risk Factors
Please refer to the PPM for the full list of risk factors.
Difficulty in Locating Suitable Investments. The Fund may be unable to find a sufficient number of attractive opportunities to meet its investment objectives or fully invest its subscription. While the Fund’s strategy emphasizes sourcing investment-grade row crop farmland in core U.S. farming regions and leveraging local expertise to identify off-market and smaller-scale opportunities, the available supply of private land suitable for investment in the target markets is limited.
Row Crop Farmland is Subject to Market Risks. The economic performance and value of row crop farmland acquired by the Fund will be subject to all of the risks associated with investing in real estate, including: changes in the national, regional and local economic climate; local conditions, including fluctuations in the supply of properties with similar characteristics, or a reduction in demand for similar farmland properties targeted by the Fund; changes in operating costs, including costs for maintenance, insurance and real estate taxes; changes in laws and governmental regulations, including those governing usage, zoning, immigration, the environment and taxes; and difficulty in obtaining reliable data and assessing value.
Natural Disasters, Pests and Other Risks Related to Farmland. Row crop farmland investments are exposed to a range of unpredictable events that can materially and adversely affect both land value and agricultural production. These risks include fire, flood, drought, wind, earthquake, mold, climate change caused by global warming and outbreaks of pests that may impair productivity or crop quality. There can be no assurance that techniques historically used to mitigate the impact of pests will continue to be effective or acceptable under applicable environmental regulations. Additional risks include changes in property taxes, increase in crop insurance rates, random accidents (e.g., plane fuel drops) and epidemics of diseases that affect the labor force can all affect the demand for certain agricultural products and the land on which it is grown. In addition, terrorist attacks, or the fear of or the precautions taken in anticipation of such attacks, could, directly or indirectly, materially and adversely affect the industries in which the Fund invests or could affect the industries and sectors where the Fund, the Investment Manager or the Fund’s tenant’s business. Other acts of war (e.g., war, invasion, acts of foreign enemies, hostilities and insurrection, regardless of whether war is declared) and political turmoil could also have a material adverse impact on the financial condition of industries and markets in which the Fund invests.
Limited Liquidity of Investments. The market value of the Fund’s investments may fluctuate with, among other things, changes in prevailing interest rates, general economic conditions, the condition of the financial markets and developments or trends in the real estate industry. During periods of limited liquidity and higher price volatility, the Fund’s ability to acquire or dispose of its investments at a price and time that the Fund deems advantageous may be impaired. As a result, in periods of rising market prices, the Fund may be unable to participate in price increases fully to the extent that it is unable to acquire the desired positions quickly; the Fund’s inability to dispose fully and promptly of positions in declining markets will conversely cause its net asset value to decline as the value of unsold positions is marked to lower prices.
Valuation of Investments and Due Diligence Process. The properties or other assets that the Fund will purchase will not be actively traded, which means there is no readily available market price and liquidity will be limited. Before making an investment in a tract of land or other asset, the Investment Manager will conduct due diligence that it deems reasonable and appropriate based on the facts and circumstances. When conducting due diligence, the Investment Manager may be required to evaluate important and complex business, financial, tax, accounting and legal issues. The Investment Manager may have limited time to perform analysis on the tract of land prior to closing, and they may also rely on third parties to conduct reviews on its behalf, which could result in their failure to identify risks or liabilities associated with the Investment. When conducting due diligence and making an assessment regarding an investment, the Investment Manager will rely on the resources reasonably available to it, which in some circumstances, whether or not known to the Investment Manager at the time, may not be sufficient, accurate, complete or reliable. Due diligence may not reveal, or highlight matters that could have a material adverse effect on the value of an investment. The Fund will value its investments at its acquisition cost, unless there are indicators of impairment. Upon any indication of impairment, the General Partner may retain an independent appraiser to perform a valuation of the applicable investment. Following such appraisal, the position will be marked at the lower cost or appraised value. A valuation is only an estimate of value and is not a precise measure of realizable value. Ultimate realization of the market value of a real estate asset depends to a great extent on economic and other conditions beyond the control of the Fund and the General Partner and its affiliates. Further, valuations do not necessarily represent the price at which a real estate investment would sell since market prices of real estate investments can only be determined by negotiation between a willing buyer and seller. If the Fund was to liquidate a particular real estate investment, the realized value may be more than or less than the valuation of such asset and in any event may be materially different from the interim valuations derived from the valuation methods described in the PPM.
Uncertainty and Complexity of Tax Treatment. The tax aspects of an investment in a partnership are complicated and complex and, in many cases, uncertain. Statutory provisions and administrative regulations have been interpreted inconsistently by the courts. Additionally, some statutory provisions remain to be interpreted by administrative regulations. Investors will be subject to the risk that changes to the tax law may adversely affect the U.S. federal, state, local and/or non-U.S. income tax consequences of their investment in the Fund. Changes in existing tax laws or regulations and their interpretation may be enacted after the date of this Memorandum, possibly with retroactive effect, and could alter the U.S. federal, state, local and/or non-U.S. income tax consequences of an investment in the Fund. Investors will thus be subject to the risk caused by the uncertainty of the tax consequences with respect to an investment in the Fund. Each prospective investor should have the tax aspects of an investment in the Fund reviewed by professional advisors familiar with such investor’s personal tax situation and with the tax laws and regulations applicable to the investor and private investment vehicles.
Investment through REIT Subsidiaries. The Fund generally expects to make substantially all investments through the REIT Subsidiary, but is permitted to make investments outside the REIT Subsidiary where appropriate, as determined by the General Partner. The REIT Subsidiary is required to meet a number of organizational and operational tests to qualify for special tax rules applicable to REITs. Although the Fund intends to operate the REIT Subsidiary in such a way as to meet these requirements, there can be no assurance that the REIT Subsidiary will so qualify. In the event that the REIT Subsidiary fails to qualify as a REIT for U.S. federal income tax purposes, there could be a significant adverse effect on the amounts available for distribution to the investors.
Disclosures
Please note, because individual tax situations vary widely based on total taxable income, filing status, and state of residence, you should consult with a CPA or tax advisor to determine exactly how these REIT benefits apply to your specific portfolio.
Securities offered by North Capital Private Securities Corporation (“NCPS”), a broker-dealer registered with the SEC and a member of FINRA | SIPC. Their Form CRS can be viewed here.
Alternative asset investing is speculative, involves a high degree of risk, including complete loss of principal, and is not suitable for all investors. Alternative investments are illiquid, not listed on an exchange, and not a short-term investment. Distributions are not guaranteed. Changes in tax law may adversely affect offerings. This offering is a private offering and is not registered under the Securities Act or under any state securities laws or the securities laws of any other jurisdiction. There is no assurance any investment will achieve its objective.
Note that Investors are purchasing shares in a newly formed entity that will purchase this farm but are not purchasing actual acreage of the farm directly. The entity will directly own the farmland. Farmland investments are also subject to additional risks including volatility in commodity prices, water accessibility, weather events or disease that could damage crops and many other operational factors. Economic implications include potential increased production costs and reduced crop yields.
The PPM contains a complete list of all Risk Factors and should be read carefully before investing. The above presentation is based upon information supplied by the seller and others, and some images shown may be used for representative purposes and may not have been taken on location at the subject property. While AcreTrader performs extensive due diligence on the offerings on our Site, certain of the information presented in each offering may have been provided by third party sources. Therefore, AcreTrader Platform, LLC, and its respective affiliates, officers, directors or representatives (the "AT Parties") hereby advise you that while all such third party information contained herein has been provided to us from sources deemed reliable, we cannot guarantee or make representations as to its accuracy or completeness. The AT Parties undertake no obligation now or in the future to update or correct this presentation or any information contained herein.
Please be advised that certain registered representatives of NCPS who are performing sales activities on behalf of NCPS in connection with offerings on the AcreTrader Platform may also be providing services to other entities affiliated with the offerings, including but not limited to the issuer of this or other investment offerings on the AcreTrader Platform. Such services might include, but are not limited to, sourcing real estate, conducting land due diligence, negotiating real estate purchases, preparing marketing and other investor-facing materials, land management-related administrative services and authorizing investments. The registered status of such personnel creates inherent conflicts of interest for a number of reasons, including but not limited to the fact that they may gain financially from your investment, directly through commission payments or indirectly by receiving compensation from the issuer or an affiliate of the issuer. Registered representatives are not presently anticipated to receive commissions in connection with their sales activities for AcreTrader Platform offerings.
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