As the end of the year approaches, we wanted to take this opportunity to provide you with a few updates on the Fundrise Opportunity Fund, as well as new Opportunity Zone regulatory guidance.
Offering to Extend for Six Months
First, we have chosen to extend the offering of the Fundrise Opportunity Fund for an additional 180 days through June 28, 2020.
Although this may result in the effective end date for our target 10-year hold being pushed back by six months, we feel that doing so is in the best long-term interest of our investors for several reasons:
- Diversification: Our investors have consistently communicated to us that greater diversification has been one of the single most important reasons they’ve chosen to invest in the Fundrise Opportunity Fund. While many competitors opted to launch single-asset funds due to the challenges associated with managing a multi-asset Opportunity Fund, we’ve been able to leverage our technology platform and compliance expertise (as well as assemble an exceptional team of third-party advisors) to make a true multi-asset fund available, with the objective of reducing risk and strengthening return potential. By choosing to extend the offering for an additional six months, we believe that we’ll be able to acquire several additional assets, increasing overall diversification and further mitigation potential risk.
- Flexibility: From the outset, our multi-asset fund structure with its relatively low investment minimum of $25,000 (plus the option to invest smaller additional gains, as low as $2,000) has given our investors the ability to invest on their schedule, and opened up the benefits of the Opportunity Zone legislation to a much broader array of investors than would be true with almost any other fund. One of the biggest impacts from the recently proposed regulations released by the IRS was the guidance which states that some gains may only be invested on or after the last day of the applicable taxable year. By choosing to offer the Fundrise Opportunity Fund for an additional 180 days, our investors can fully examine tax and financial planning strategies for Section 1231 gains realized in 2019 as well as other capital gains recognized in 2019 or the first half of 2020. We understand that financial decisions can be big decisions, and we don’t want our investors to feel rushed into making a long-term investment.
- Lower costs: Part of our broader mission is to provide access to high-quality investments at a lower cost than previously possible. And as with most investment funds, while some costs associated with operating the Opportunity Fund are variable, many of the costs are fixed. By choosing to keep the offering open, we expect to materially increase the overall size of the fund, which will reduce the long-term impact of those fixed costs on net income, potentially boosting returns for all investors.
Again, while we acknowledge that the decision to extend the offering will likely result in a longer investment hold period for some of our existing investors, our belief (and the feedback we’ve received from many investors) is that the benefits from additional diversification, flexibility, and lower expected costs more than outweigh the relative increased hold period of up to six months, for an already 10+ year investment horizon.
Updates on Opportunity Zone Regulations
We wanted to share some recent updates in the Opportunity Zone legislation. As we continue to monitor for changes to regulatory guidance, we plan to keep our investors aware of meaningful changes as they happen:
- The Department of the Treasury submitted proposed final regulations to OIRA on December 6, 2019. We anticipate that Opportunity Zone regulations will be finalized by the end of January. We expect that these regulations will combine the first two proposed sets of regulations and make some additional clarifications or technical corrections. While we look forward to their finalization and will update you when they are released, we do not expect the final regulations to have a material impact on the Fundrise Opportunity Fund or its current operations, although such an outcome is not guaranteed. As well, we remain confident in our ability to continue leveraging our team of compliance experts and affiliate relationships in order to navigate the Opportunity Zone regulatory framework as it evolves.
- We are also aware of several proposed pieces of legislation in the House of Representatives and the Senate. While we are actively monitoring the progress of the proposed legislation, we again do not expect that any final legislation that is passed by Congress would have a material effect on the Fundrise Opportunity Fund’s operations, though we can make no guarantees about future legislative changes that may potentially come to bear. We believe that more robust reporting requirements may be implemented for all Qualified Opportunity Funds, and we are confident in our ability to comply with them. As always, here at Fundrise, we welcome new opportunities for transparency in the financial industry. We intend to keep our investors apprised of any changes from the legislative branch as well as the progress of the Fundrise Opportunity Fund.
We look forward to continuing to partner with you in the success of the Fundrise Opportunity Fund in 2020. If you have any questions or feedback, you can reach our Investments Team at email@example.com or schedule a time to talk with one of our Opportunity Fund Investments specialists.
The Fundrise Investments Team