Multifamily Investor Expo - Feb 15th
In this webinar, Wally Sullivan and Dr. Richard Rosen discuss the North Country Growers OZ Fund, a unique project that seeks to solve one of the country’s most pressing issues while also delivering strong returns to investors.
- Javelin’s role in promoting some of the most unique and compelling OZ investments in the country.
- The necessity for shorter supply chains to facilitate the delivery of food, and the potential for indoor greenhouse solutions to address these issues.
- The basics of CHP technology, including its potential to maximize crop yields.
- The unique characteristics of Berlin, New Hampshire that make it an ideal location for a CHP project.
- Expected timeline, IRR, and target returns for this project.
- ESG characteristics of this project, including the environmental and economic impact.
- The management team behind the North Country Growers project.
- The mechanics of the CHP technology and the potential to significantly reduce energy costs and usage.
- Q&A with webinar attendees.
Featured On This Webinar
- Wally Sullivan on LinkedIn
- The North Country Growers OZ Project
- What is CHP?
- Berlin, NH Opportunity Zones
- Pitch Deck [PDF Download]
Industry Spotlight: North Country Growers
This single asset QOZ Fund is a proposed 983,844 square foot hydroponic greenhouse facility integrated with combined heat and power engines (“CHP”) to grow fresh, healthy, safe, and year-round local produce in the northeastern United States. The facility will be constructed in the City of Berlin, New Hampshire. The facility will include two approximately 10-acre greenhouses that will be divided by a central work hall that will contain office space, processing, packaging and testing facilities, and employee locker and break rooms. The CHP engines will be located in a specialized, sound-proof enclosure in the work hall.
Learn More About North Country Growers
- Visit OzoneCapMarkets.com
Jimmy: Hey there, Richard, how are you doing?
Dr. Rosen: I’m very well. Thank you. How are you today?
Jimmy: Good. Well, nice to meet you. I don’t know if we’ve ever actually met face to face yet or not. Hey Wally, how are you doing?
Wally: I’m doing great.
Jimmy: Well, gentlemen, thanks for coming on. So, Wally, you’re with Ozone Capital Markets or Javelin Securities and you have brought a different one of your Qualified Opportunity Fund clients for me at now each of my four different OZ pitch day events. So I’m very, very pleased to have you on, you always bring an eclectic mix and you add a little bit of variety to the day. So tell us what you have going on today Wally and Richard, please take it away.
Wally: Okay. Thank you, Jimmy. I’ll start off here. And again, I represent Javelin Securities and my job today is to give a brief overview of North Country Growers. But for those who are not familiar, Javelin Securities is a FINRA registered broker-dealer that helps raise capital for Qualified Opportunity Zone projects. The Javelin team is constantly searching for what we feel are some of the best OZ projects in the country.
North Country Growers caught our attention from a financial and ESG perspective, but also because it represents what appears to be a necessity. I live in the Boston area and was shocked to learn that 95% of all produce consumed in the Northeast is trucked from far away locations like California and Mexico. When you consider the 20-year megadrought happening west of the Rockies, and then factor in ESG pressures to reduce carbon emissions, you can see the growing problem.
We can all debate the reasons behind the recent increase in food prices. But what is clear is that any solution involves shorter supply chains. Unless you are betting that climate change is going to immediately reverse, it seems obvious that major indoor greenhouse solutions are needed throughout the Northeast to ensure food security.
So the North Country Growers OZ project is a large-scale indoor produce growing operation starting with two 10-acre greenhouse facilities. These greenhouses will utilize combined heat and power technology, what I’ll refer to as CHP. This project should not be confused with various other vertical grow house methods. Many of those projects generate high-quality produce, but can never scale like North Country simply based on high costs.
Certain Northern European countries have used the same core CHP technology for over a decade and have proven that when your goal is to produce tens of millions of pounds of produce annually, it’s all about doing it in the most efficient manner possible. Maximizing efficiency begins with site selection. Berlin, New Hampshire was chosen specifically because it falls within the ideal zone three climate location helped by cool summer nights. It also happens to have an uninterrupted natural gas supply.
The core CHP technology starts with using natural light as much as possible. Next, it generates cheap electricity and waste heat important during the colder months. And finally, the CHP process involves introducing CO2 back into the greenhouses to significantly increase crop yields.
On top of this CHP technology, North Country Growers then layers its own proprietary methods to further improve revenue per square meter. Dr. Richard Rosen is the North Country Grower CEO and a true industry expert when it comes to building and operating these large scale grow facilities. His experience spans decades and includes building important projects all over the world. Before I pass this to Dr. Rosen, a few points about the fund.
This is a Reg D offering for accredited investors only. The 20 acres of greenhouse facilities and operations will require a 28 million equity raise of which approximately 3 million has already been raised. In addition, 33 million of debt is already in place and guaranteed by both the USDA and Dr. Rosen himself.
Due to the scale in efficiency of this project, the expected IRR is 26.8% and the MOIC is 4.76 times. In addition, there is significant bonus appreciation that should further benefit investors. Construction on the first building will begin when the first 12.5 million level is raised and expected to be completed within one year. LOIs from major supermarket chains and distributors reflect demand for over two times the total expected output. Investor distributions are expected to begin in year two, and the fund does not require using capital gains to invest.
This project has the full support of local government and the local mayor continues to promote Berlin, New Hampshire as the future greenhouse capital of the Northeast. North Country Growers has already begun site work on the 169 acres they currently own with plenty of room to expand after that. This Qualified Opportunity Zone project certainly keeps to the spirit of the OZ program. It checks all the ESG boxes and still represents a strong financial opportunity.
North Country Growers helps solve our country’s growing food supply and delivery problem all while driving stimulus in jobs into a community that solely needs it. With that, I will introduce Dr. Richard Rosen representing North Country Growers. Thank you.
Dr. Rosen: Thank you very much, Wally. Good morning to you all. We have a wonderful project that begins with an extraordinary management team. We have under our supervision and direction an MIT-trained chemical engineer who worked in our business for a number of years, who is the chief executive who directs a talented team of specialists and workers that will work in Berlin, New Hampshire during the construction and operation of this facility.
When you do a project like this, we need several ingredients to be sure that it works. The first is we need competent supervision and leadership. And we have that in our overall team and in the direction of our president. Secondly, we have the additional requirement that the growers who are responsible for day-to-day operation in the greenhouse have a minimum of five years of experience and have the experience of running and supervising facilities of exactly this type as we go forward.
Third, we need to be sure that we have a high-quality workforce. And to that end, we offer year-round employment in a good environment where the employees are treated properly in terms of compensation and in terms of benefits. And fourth, we have to have a population of workers available to us that is in the North Country area, i.e., the Berlin Coös County region that is sufficient for us to work. And we are lucky to have that because this area has suffered greatly in the past because of the loss of employment from closed paper mills.
Having said that, I want you to understand that the next most important thing to understand is why Berlin New Hampshire and how our technology functions to give this project the best possible opportunity for success. Berlin, New Hampshire is in climate zone three, which means it’s very cold. Because it’s in climate zone three, it means that we don’t have hot nighttime summer temperatures to deal with, which means we can operate the facility 12 months a year under our proper management. As a result, we can generate revenues every week of the year and provide an extraordinary rate of return for all of us.
Not only do we ask you all to participate in the equity opportunity here, but we want you to know that we are also participating in it and are also in my case, guaranteeing the bank liability for this project. We have in the project itself a number of advantages. We grow 10 acres of tomatoes and 10 acres of salad greens. The salad green facility is entirely automated with the result that we can produce 15 million units of salad greens with a workforce of three employees doing that because of extensive and highly qualified and experienced automation.
We take other advantages in the way we operate the facility in many respects and use technology to eliminate the use of pesticides and more importantly, to minimize the environmental consequences of this and water use. Our project uses 8% of the water that other outdoor agriculture would use for the same output and does it by collecting rainwater from the roofs of our greenhouses and processing it in a recycled method to facilitate optimal nutrient use and no discharge of pollutants into the nearby, you know, river basin that we abut.
Having said this about our project, I think it would be useful for you to understand something about the future. The future is very much hopeful to be even better than the returns that we currently provide now, because we have under development and believe we will implement successfully four things that are going to increase revenues per square meter and thus the return on employed capital.
The first is we have advanced hybridization technology that will give us the ability to have higher yields and better tastes from the vegetables that we grow on a continuing and increasing basis. Second, we have an engineered strategy to improve pollination, thus increasing the amount of actual product that we are going to get from the tomato facility, because currently a large amount of tomato flowers are unpollinated, and we have figured out a way to enhance that level.
Third, we have a specialized pest control strategy using passive insect control in early identification that facilitates much less use of pesticides and the ability to obviate their need in many cases, completely. And fourth, we have a very sophisticated control system where we measure the actual output and performance of the vegetable plants on a daily/weekly basis and related to all of the things that we know how to control so we can optimize and increase production.
Having said that, these things are likely to have further benefits for you as an investor, by increasing the returns on employed capital, which is one of my major jobs that I undertake as a part of what we’re doing. The other thing that I think you should know is that our company is under business and management supervision by a very accomplished chief financial officer, who is a graduate of the Harvard business school and has spent many years as a board member in large international organizations and a New York Stock exchange company. Thank you very much for giving me this chance to speak with you.
Jimmy: Okay. Well, thank you, Richard, and thank you, you Wally, AKA, Danny, I think Danny’s over there with you, right? So that may have been the source of the confusion. I saw him helping you out there. So does anybody have any questions for Dr. Rosen or for Wally? Please do use the Q&A tool in your Zoom toolbar? We’ve got a couple more minutes before I need to wrap them up. We do have one question here from an anonymous attendee. He or she asks, briefly, can you discuss how this greenhouse is different from vertical grow houses?
Dr. Rosen: Yes. The greenhouse is different from vertical grow houses in that, we have a much lower cost of production associated with combined heat and power. And we take advantage of natural light. Natural light is worth approximately $500,000 an acre. And when you do things indoors, you have to start off by paying for that for every vertical layer of growing activity that you use. So if you have six layers or eight layers in a vertical operation, you have to pay for the equivalent light that you would need to do the growing.
The second, you know, major advantage that we have in our facilities is that when you do indoor agriculture, you are crop limited. Currently, there’s only certain salad, green and urban crops that are actually possible within a vertical ag system. And we are able to grow many vine crops like tomatoes, eggplant, peppers, and other plants such as cucumbers in our facilities very easily.
I don’t think that people fully appreciate that when we grow tomatoes in our greenhouse, the plants end up in the course of a 12-month period being 60 to 80 feet long. And the ability to do this in a greenhouse is possible because our greenhouses are 30 feet high and have a system for extending length diagonally to facilitate this, whereas an indoor facility has none of these options. The third thing that I think you should be aware of is we are able to take advantage of complete automation and most indoor facilities that we have been exposed to have requirements for highly intense labor and thus have further cost burdens put upon them.
Jimmy: Great. We’ve got time for maybe one or two more questions. I don’t know. We’ve got a lot of great questions coming. I’m sorry. I know we’re not gonna get to all of them. One other anonymous person asks, wouldn’t it be better to be located in Boston or New York City so you’re closer to target markets. Why the location that you chose?
Dr. Rosen: Well, the location we have has many advantages. The first I mentioned earlier is the growing advantage. Most people think that when you operate greenhouses, the big problem is keeping them heated. In fact, the big problem in operating greenhouses is operating them 12 months a year. If you will get the greenhouse in New York metropolitan area, that zone seven, and you have hot conditions to deal with in the nighttime in June, July, August, and possibly September.
When you have temperatures in the nighttime that exceed 70 degrees, there are no flowers on tomatoes, and therefore you end up with much less output for four months of the year thus obviating our goal of maximizing revenues per square meter. That is one element. The second element is that we have uninterruptable natural gas, which we use in our combined heat and power operation.
If we operated in Boston or New York, we would not be able to get that because of a pipeline, natural gas shortage. And this is a very serious thing because it could cause us if we had to buy natural gas, when it was interrupted in a strong winter condition in January, we might have to pay 20 to 50 times as much for natural gas, thus destroying our economic returns. We get uninterruptable natural gas in Berlin, New Hampshire.
Jimmy: Well that leads me into my next question. This might be the last question we get to, we gotta wrap up in a minute, but Matthew asks, how much fossil fuels are being used by your operation and how does it compare to more traditional outdoor agriculture?
Dr. Rosen: Well, our system dramatically reduces the amount of fossil fuels utilized. For example, we derive several benefits from our location. We are very close to the market. We were then 12 hours of all of our customers, as opposed to receiving merchandise from California, Mexico, or foreign countries.
Wally mentioned that 90 odd percent of the vegetables that we eat in the Northeast are imported from long distances. And every time we send a vehicle from California to the east coast, we use 1,000 gallons of diesel oil most of which is obviated by our location. Additionally, the efficiencies that we get in combined heat and power further reduce our heating and other energy utilization by over 50%. So the net fossil fuel contribution compared to agriculture is very much minimized and really exceeds 20% of outdoor agriculture.
Jimmy: All right, well, fantastic. Well, Richard Rosen and Wally Sullivan, I kind of have to cut you loose here. Now, we gotta move on to our next presentation, but thank you today for sharing us this investment opportunity. Really quick, where should investors go if they’re interested in learning more or getting your offering documents?
Wally: They can reach right out to me with the email on the screen and we will follow up with all the information they need.
Jimmy: Okay, fantastic. So that’s [email protected] if you’re interested in learning more and getting the offering documents and ultimately placing an investment. Thanks again to both of you, gentlemen. I’m gonna escort you off the stage now and bring our next presenter on. Appreciate it.
Dr. Rosen: Thank you.