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Matt Morris discusses Hampton River Partners' opportunity zone-focused investment strategy
Key Takeaways
- Hampton River Partners primarily invests in opportunity zones, both in real estate and operating businesses, and raises capital from professional investors and individuals.
- Opportunity zone investing provides tax breaks for investing in specific census tracts in the United States, looking to stimulate growth and create jobs.
- Instead of forming a multi-asset fund, they invest in individual projects as SPVs, calling capital all at once and deploying capital for one specific project.
Transcript
My name is Matt Morris. I'm the managing member of Hampton River Partners and the managing member of Dry Line Partners LLC and based here in Austin, Texas.
Hampton River Partners was started in 2018. Our initial focus was actually opportunity zone investing opportunities. Ones were created as part of the Tax Cuts and Jobs Act. And it's about 700 census tracts United States, where as a taxable investor, you can invest either in real estate projects or in operating businesses in these specific census tracts in exchange for doing that. You get a pretty meaningful tax break while creating jobs and stimulating growth in these economies. The key tax break is, say, hypothetically, you sell $1,000,000 worth of stock, and you have a $500,000 gain. You can take that gain, put it into an opportunity zone fund and defer paying taxes on that investment until the end of 2026. And then your investment compounds tax-free in that QOF if held, you know, for more than ten years.
Everything has been on a deal-by-deal basis thus far through Hampton River. So for each individual project, we raise capital from primarily professional investors and high-end individuals and syndicate those investments. So for each real estate project, we had a distinct group of investors for our operating business investments. We had a different group of investors as well. And primarily, our investors are folks who are GPs at private equity funds, venture funds, and hedge funds.
We've done everything as SPVs, and we've elected to do that primarily because through the opportunities and structure, raising a multi-asset fund, I think, would have been very detrimental to LPs when we were making those investments. So we capitalized each of those as individual investments, and what we would do would be we would set up the investment and raise capital for those projects, and then call capital all at once. It wasn't like a typical drawdown private equity fund where you're allocating capital to call it 12 portfolio companies; you're investing $500 million and investing the capital evenly across those 12 and making capital calls, you know, over like a four or five-year period. We called capital all at once and invested specifically into one project.
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