Natural Capital launches 2nd fund; $80M committed

by Paul Gatling ([email protected]) 918 views 

Natural Capital, a Little Rock-based private investment firm with a heavy Northwest Arkansas influence, is leaning into those connections.

According to a Form D filing with the U.S. Securities & Exchange Commission, Natural Capital Fund II launched in early November 2022 and has raised approximately $80 million in commitments. That’s double the private investment firm’s first fund, which closed in late 2020 with about $41 million in commitments.

Brad Henry, Natural Capital’s managing partner, said the firm’s second fund would focus heavily on Northwest Arkansas investments.

“As we have grown, the region has continued to grow, and we believe it’s at another inflection point of growth,” he told the Northwest Arkansas Business Journal. “We see a lot of exciting opportunities right here in our backyard.”

Henry, a former vice president at the Arkansas Development Finance Authority (ADFA), the state’s venture capital and loan portfolio, is one of four co-founders who put Natural Capital together in the fall of 2019. A trio of Northwest Arkansas business leaders joined him:

  • Brock Gearhart is the president and owner of Fayetteville-based investment advisory firm Greenwood Gearhart Inc., one of the state’s largest independent investment advisory firms.
  • Marshall Saviers is CEO of the commercial real estate investment firm Cushman & Wakefield/Sage Partners in Rogers.
  • Todd Simmons is the CEO and vice chairman of Siloam Springs-based Simmons Foods Inc. & Affiliates, a third-generation, family-owned company that has called Arkansas home since 1949.

The co-founders are Arkansas natives — Henry and Saviers from Little Rock, Gearhart from Fayetteville and Simmons from Siloam Springs. Henry said they formed Natural Capital — which invests in companies and real estate — to respond to the growing interest in Arkansas investments by other U.S. funds, specifically from the coasts.

“The concept for the firm developed over several conversations between the four of us over the past four years,” Henry said. “Just casually discussing [investment] opportunities in Arkansas and the heartland. The more we talked, the more it was clear that our investment strategies matched up.”

Henry said Natural Capital Fund I made the last of 14 portfolio company investments this past fall. They were in companies and real estate assets throughout the heartland, ranging from Minneapolis to Austin, Texas.

“We feel good about how the fund is performing from a return standpoint, but also, we feel like we are meeting the mission of supporting the region,” he said.

Specific to Northwest Arkansas, Henry said the first fund’s focus was on workforce and affordable housing investments. Natural Capital is the lead equity investor in a $28 million redevelopment project that will add more than 100 apartment units in downtown Rogers.

First Street Flats will have 121 studio, one-bedroom, and two-bedroom options at 401 N. First St, most recently the site of the former Traders Market retail store. Fayetteville firm Specialized Real Estate Group (SREG) is the developer, and construction on the project has started.

“What truly impresses us about the Natural Capital team is their deep understanding of the Northwest Arkansas market and their alignment with our company’s values,” SREG CEO Jeremy Hudson said. “The fact that the vast majority of their investors are local showcases their strong connection to the community and their ability to represent local capital effectively.”

Natural Capital is backing another multifamily project in Lowell, a 152-unit project called Pure Lowell. The 7.7-acre site is just off northbound Interstate 49 at the Lowell exit on Commerce Creek Drive, just north of the corporate headquarters of J.B. Hunt Transport Services.

Mia Rose Holdings of St. Louis is the developer, and construction is ongoing. President Tom Kaiman said a mutual friend connected his firm with Natural Capital in 2021.

“It has been great getting to know the team there, especially Brad,” Kaiman said. “We appreciate their trust in the team at Mia Rose and their investment in us.”

Kaiman said he appreciates Natural Capital’s “passion and commitment” to Northwest Arkansas, where he has multiple apartment projects in various development stages.

“They are also very knowledgeable about the market, and we enjoy sharing a lot of information back and forth between our groups,” he said.

Henry said the capital raise for the second private equity fund is expected to continue into the fall. He said the first fund’s strong performance is bolstering those efforts.

Brad Henry

“Four years ago, we [the four co-founders] had our track records from our business backgrounds, and many of the limited partners were betting on us individually,” he said. “There was a relationship there, [but] the firm itself did not have a track record since it was a new company.

“Fast-forward four years, Natural Capital has a track record. If we weren’t performing, we couldn’t raise more capital.”

The second fund’s Northwest Arkansas focus is also attracting investment. Low unemployment, population growth, stable companies and the University of Arkansas are all prominent growth drivers for the region. On the horizon, Henry said Natural Capital is bullish about the region’s healthcare investments.

“With the number of investments already announced and planned over the next five to 10 years, that can be a game changer for the region,” he said. “And that becomes a diversifying industry [alongside] the ‘Big Three’ [Walmart, J.B. Hunt Transport Services, Tyson Foods] to further allow the region to grow.”

Henry said about 80% of the second fund’s investor base is from Arkansas.

“We are very proud to be able to say that,” Henry said.

Natural Capital has been in high-growth mode since its launch, and that pace continues. The second private equity fund has already made three investments in Northwest Arkansas this year and is expected to close two more investments in May.

Natural Capital is also investing in its growth. The firm has put together an advisory board and, in the past two years, has hired vice president Ben Hearnsberger to help with portfolio management and analysis, financial analyst Brennan Anderson and director of operations and administration Rachel Pendergraft.

Natural Capital’s goals for the rest of the year are solidifying the operations team, completing the capital raise for the second fund and analyzing investment opportunities.

“We feel like with our focus on Northwest Arkansas, we have the opportunity to plant our flag as one of the go-to capital providers in the region,” Henry said. “Which is what we wanted to do four years ago when we started the firm. Now is a great time to lean into everything that’s going on [in Northwest Arkansas].”