The Overlooked Opportunity in Timberland: Playing the Long Game

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Speaker B: The sponsor of Liftoff with Keith is the one and Only Compass Strategic Advisors.com an experienced partner to help you navigate everything from cap tables to stock option and compensation plans and all types of back room marketing services. There is no better friend to the startup CEO than Compass. Check them out at Compass strategic advisors.com all right, we have a great show today on Liftoff. I'm really excited. I mean, I know we've been talking about all the hot stuff going on in the market today. How could you not get just, um, completely excited about what's happening in AI and data centers and the growth that's happening in the overall build out and how that's supporting the whole economy? Well, that is true and it's a very hot market. But sometimes the better opportunities hiding in a market that everyone else is overlooking. Today we're talking about an asset that's about as far away from Silicon Valley as you can get. And today we have the managing director and founder of South View Timberland. That's John Brenard. And John spent more than 15 years across the investing wealth management space working with startups, working with operations, spent time at J.P. morgan, Wells Fargo. He's also been investing in Timberland himself. And John, I can't wait to get into this because it's such an interesting idea. Disciplined underwriting, patient ownership, hands on execution. It sounds like a great counterbalance to what's going on in the rest of the market. So I'm glad to welcome you to Liftoff. Thanks for joining, Keith.

Speaker C: Great to be here and happy to jump into this topic. I mean, you're right. I'm sure a good number of your listeners probably aren't familiar with this asset class. So happy to go through it. How I got involved with it, because you know, my background is not, you know, you know, in timberland for, for most of my career. But uh, happy to talk about my involvement. So.

Speaker B: Yeah, well, let's get into it because I think again the, the, the way to tee this up is how do you find opportunity in overlooked market? Make better decisions faster, Build value by playing the long game. So kind of take us through the idea that got you into timberland.

Speaker C: Yeah. So, uh, m. You know, very short story is my family bought some timberland in 2008. So uh, I say, you know, I just mentioned, you know, having been in this business as a, as a my full time career. Um, you know, I've been in business for about 20 years, um, but my family bought some in 2008 and so that's how I got to know the asset class from a family investment. And that's where I met my now co founder who creative substantial wealth investing in land. I mean that's what we're buying. We're buying land, there's timber that's growing on it that we harvest for cash flow and we do other things with the land, you know, that we'll talk about. But my background was in wealth management. So a lot of the strategies that your listeners are probably familiar with, you know, stock and bond portfolios, um, you know, managed accounts, asset, ah, allocation, you know. Yeah, exactly, asset allocation. I mean I did that for the first decade of my career, had a successful business doing that, uh, but wanted to pursue more entrepreneurial endeavors. And so in 2017 I left that industry, uh, after about 10 years and did a startup in a completely different industry. Built a company, sold it. But all the while, you know, my family had this investment so I was learning about investing in timberland. I started to do some deals with my um, co founder. We'll talk about that. But um, if it's uh, you know, we can talk more about that.

Speaker B: Yeah, yeah, let's get right into it because I think it's fascinating. I love the, the story of a good grounding experience, then cutting your teeth on some your own startups and then falling back into something. But you, for you to fall back into that, you had to say, wait a second, I see something here. And it wasn't quite exactly swimming uh, with the tide.

Speaker C: Yeah, you, yeah, you nailed it. I mean it took, you know, it took a little bit of time for me to appreciate, you know, know, what we were doing with this land. But you know, fairly quickly, you know, with my investment background, I saw the wealth that was able to be created you mean very far from Wall Street. So uh, I said, what is this, what is this thing? I like that it was tangible. You put your fingers and toes into it. So, uh, I wanted to learn more and started doing friends and family deals, putting money, uh, into these partnerships with my co founder. And the results were good. So before I asked anybody to invest, you know, with us with our current fund in our current company, we did a lot of deals putting uh, my own money into this to, to uh, you know, see how this worked.

Speaker B: Okay, so give us some benchmarks. Where is this Timberland? Uh, practice. Now. What do you, uh, what do you, what are you seeing right now in the market?

Speaker C: Yeah, so the, really the, the, the main way that folks invested in timberland in the past was it was these big institutions. So you had the big endowments, the big pensions, they would raise hundreds of millions of dollars and they would buy tens of thousands of acres at a time. So very big timberland portfolios, it was used in those institutional asset, uh, allocation as an inflation hedge. A very low returning asset class. What we're doing is a little bit of a different approach. You know, more like the opposite approach is we're buying smaller tracks, mid sized tracks, couple hundred acres to maybe 2,000 acres. And we do different things with them. We harvest the timber, we do parcelization and sell to different types of buyers for higher than what we paid for it. And um, you know, you mentioned data centers and you know, kind of that whole, you know, industry that's, that's popping up. Uh, know we're, we're seeing some increase in our land that we're buying because of some of the development that's happening around us.

Speaker B: Wow, that's uh, not surprising, but crazy times again in real estate and commercial real estate. And you're, you've got a bit of the entrepreneurial brain also. So when you're um, you know, a startup founder, you kind of get intrigued by the story and the founder. Right. You like there's a little seduction process that goes with the fundraising. Is it the same in, in the pract? And how do you balance that whole patience versus speed when you're evaluating investment.

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Speaker C: yeah, so, you know, I, I really love what I'm doing. I mean, you know, it's, it's really such an interesting asset class compared, you know, those traditional investments. I mean, this is beautiful land that we're investing in. It's, you know, still typically pretty rural, you know, an hour or two outside of these, these southeast metros. That's where we invest is in the Southeast with a big focus on the state of Georgia. Um, but they're beautiful properties. And so selfishly, you know, being in this business allows me to get out onto this beautiful land and you know, more, you know, I'm spending more time in the office than I would like, you know, raising this fund and you know, having conversations with, with investors, uh, to raise our fund. Um, but I, but I'm loving it. You know, the, the very optimistic, very bullish on, on this space and uh, can talk about why, but um, yeah,

Speaker B: let's get into it. So why so bullish? And then again, going back to that patience versus speed thing, I mean it's a long term asset holding. Right. Um, but how do you make those fast decisions and, and focused decisions and, and what is the pitch in terms of the opportunity here?

Speaker C: Yeah, so as I mentioned, we're really focused on these small to mid size assets, you know, a couple hundred acres up to maybe 2,000 acres. And they're outside of these growing southeast metro. So there's a lot of capital and a lot of population moving to the Southeast and so that's putting upward pressure on the land prices. And so we're buying these tracts of land that have timber on it that we can harvest for cash flow. And I'll just talk about that aspect of the, of the business for a minute. You know, this, this industry doesn't exist, you know, everywhere in the country. It's, it's very big here in Georgia and in the Southeast because there's the mill infrastructure. That's who you sell the timber to after you harvest.

Speaker B: Okay.

Speaker C: So, uh, that's one aspect of it, but there's also the land aspect of it where, you know, we're able to sell with these smaller tracks to different types of buyers, developers, recreational buyers, home builders, you know, businesses looking to expand.

Speaker B: That's great. Um, I love the idea of, of working uh, in the Southeast. I know the demand is there for, for uh, uh, for, for more population. Uh, are you supporting that with commercial or is it, is it mostly strictly harvesting business?

Speaker C: Yeah, so it's, you know, our strategy is a total return approach. It's, you know, it's income from, from the timber harvest, but also there's that, that capital, those capital gains that are generated from, you know, from selling the land. So it's, it's a mix of, of those two. And then also, you know, recreational leases, we lease out the land, agricultural leases, we lease out the farmland, if there's some farmland on the property. Um, so it's not just, you know, buying land and waiting for the trees to grow. You know, 20 years. Right. It's a lot more dynamic and faster pace than that compared to the institutions which, you know, their average fund life for them is 10 years. You know, our fund is just a five year fund.

Speaker B: Right. And what are some of the other dynamics that you want to consider if you're an investor, uh, who's heavily weighted in other industries like the more popular categories and hasn't really looked at this as an asset class or an investment?

Speaker C: Yeah, and that was a big reason why we started Southview. And the Southview Timberland fund is for my 10 years decade in wealth management. There was never an opportunity to access this asset class directly. I mean, and you're seeing today, you know, JP Morgan for example, they just bought a timberland investment manager called Campbell Global just in the last couple of years. You can look it up. They're uh, recommending anywhere from 2 to 5% of an investor's portfolio to be in timberland. And so for the, the, the individuals who aren't with J.P. morgan Private bank, you know, where you need, you know, 10 million plus of assets, that's where Southview comes in, is we can help these high net worth accredited investors kind of below that threshold to get them that direct access, which really helps a portfolio with volatility. True diversification, it's uncorrelated from the stock market, not tied to corporate earnings. And that was a big reason why we launched Southview. And that's who we're helping today is financial advisors, uh, family offices. Get true diversification as a complement to these other things that ah, that are more commonly discussed.

Speaker B: That's great. Um, you have experience, uh, not just as an investor, but as an operator, including working with startups, Southview is built around this. How do you actually create value after the investment is made?

Speaker C: Right. So the entry point is so important. What you pay is crucial. Right. We're very discipline about, you know, how much we're willing to pay on a price per acre basis. Uh, we've passed and lost a lot of deals because, you know, we're just not willing to overpay, uh, maybe when some other individuals or groups are. So that's number one, you know, paying the right price for it.

Speaker B: Yep. Buy low.

Speaker C: Yeah.

Speaker B: Or buy right. Right.

Speaker C: Uh, and that comes from experience. My business partner has been doing this for over 30 years and getting on a track of land and quickly identifying if there's an opportunity there. Uh, that comes with a lot of experience. So buying it.

Speaker B: Right.

Speaker C: And then the next part is what are the ways. And this is before, you know, the, you know, we do the work before we buy it. What are some quick wins that we can have with that land? Is it, you know, parceling it out, you know, selling a couple hundred acres off of it for a lot more than what we paid for it, you know, doing a quick timber harvest, you know, looking at the different ways that we can, we can monetize it, make improvements to the property, improving the road system that goes through it, maybe adding some infrastructure. So that's, you know, that's the next step, uh, you know, and then monetizing it. Right. So actually, you know, moving through on those, you know, on those things we wanted to do and that's what we're doing today in our fund is we've already generated some nice real returns. I mean not, not markups on paper like you see with a lot of private equity funds. We've actually, we have realized returns or, or cash has changed hands.

Speaker B: That's nice. I should definitely take a deeper look into that. So uh, when you are looking at your fund or portfolio construction, there are some assets that are going to pay off faster. You're looking for some faster wins and then just like a VC fund, I guess, uh, some longer term investments that pay off over a longer period of time.

Speaker C: Yeah, and that's, that's the strategy is, you know, with these small to mid sized tracks, we, we have the flexibility to, you know, diversify across several, you know, many different counties. Whereas the bigger groups, they typically uh, buy, you know, all in one, you know, they place a lot of capital in one area. Yeah, we're buying in multiple different counties. So to your point, yeah, there might be some that have some quicker wins and Then we're holding some of them, you know, for several years to get some longer term timber, harvest some good cash flow coming off the properties.

Speaker B: John, I'm looking for a property down in Georgia, probably around Augusta. I'm thinking it might be a nice area to, to put in a golf course.

Speaker C: Okay. Yeah, I think you might have some competition down there.

Speaker B: I've heard there's another course or two down there.

Speaker C: Yes. Yeah.

Speaker B: But it is fascinating what's happening in Atlanta. And I know Alabama's cooking up too, down there.

Speaker C: Savannah. Savannah too. Um, Savannah's, you know, vying to become, you know, trying to become, you know, the number two container port on, on the East Coast. And they're getting there. You know, a lot of, lot of development happening there.

Speaker B: I love it. So we're talking to a broad group of uh, entrepreneurs, investors, founders here on the podcast. What can, what can you share with them that, that makes this uh, uh, something that they need to take a look at. What is. Some things, you know, um, maybe they're over overweighted, I guess, in, in tech. Right?

Speaker C: Yeah. Yeah, I think, you know, all of those other strategies, you know, uh, you know, other private market opportunities to maybe access some of the data center deals or other, you know, uh, you know, unique types of real estate or traditional real estate that's all part of a diversified portfolio. But I would, I would just encourage, you know, listeners to just take a closer look at Timberland, whether that's with us. You know, there are some publicly traded vehicles, some publicly traded REITs that, that invest in Timberland. It doesn't have, you know, quite the same returns or tax benefits that uh, some, you know, private strategies do. But you know, it's, it, it really is a, um, you know, great diversifier, you know, for a portfolio. And uh, historically just a quick, you know, statistic. Timberland has performed performance about the same as the S&P 500 with half the volatility, so about an 8% return on average with half of the risk of the S and P 500.

Speaker B: I got you. Well, that's a, that, that's a nice, uh, uh, fact, a nice safe investment and something that gives you certainly some, some balance when, when you're looking at investments, what are some things that you look for that maybe other people don't?

Speaker C: Yeah. When it, when it comes to our Timberland, you know, that we, that we buy with the land that we buy, uh, you know, we really focus on the fundamentals. I mean, you know, we got to have good soils. Right. Needs to be Productive for growing timberland. Uh, for growing timber. Excuse me. Uh, we have to be close to the mill infrastructure. So most of the properties that we buy are within 50 to 100 miles of a sawmill and typically multiple sawmills that we can sell our product to. That's so important. You know, if you're buying a property like this on your own, just do your homework and make sure that there is multiple mills because if one of them closes down, you know, you lose your market. Uh, some unique things that we look for is, you know, we love when there's a lot of road frontage because that allows us to do that parcelization strategy. We like when there's power running to the property. Maybe there's a, well, maybe some type of infrastructure. So, you know, some unique things, characteristics that we look for.

Speaker B: I love it. Hey John, we're going to go to a quick fire round because I just think that'll be fun. If you don't mind, I have a bunch of shorter questions for you. Um, I don't think, uh, uh, we'll overlook some things, but I do want to tag back to your time as an entrepreneur. Sure. And ask you what, you know, lessons you picked up, post your investment, uh, advice when you were working for the bigger banks and then before you started this fund. What was that experience as an entrepreneur that taught you maybe that, that you apply today?

Speaker C: Yeah, so, yeah, this is now my second, uh, business. You know, my second, you know, go around being an entrepreneur, building a company. My first go around, I was an employee, you know, an early employee at that startup, uh, that we built and sold. Now I'm a co founder of this business and I think most of the entrepreneurs listening to this can appreciate, you know, you, you wear so many hats. Right. We're taking out the garbage, we're sweeping the floors, you know, we're selling. Right. You know, we're going to conferences, we're traveling. And that's just something that you don't have to do as much or at all if you're working for, you know, a larger company. You have a role. Right. That you do on a day to day basis. And so for those who are looking to take that leap into the entrepreneurial world, I would just say be prepared to be taking on a lot of different tasks that you didn't expect. It's not going to be all, you know, fun. Podcast with, with Keith Newman. You know, talking about your business. There's a, there's a lot, uh, you know, a lot of um, you know, other work that goes, goes on behind the scenes to get to this as, as we talk.

Speaker B: John. Uh, and, and I really am having fun talking with you and I hope you are as well. The idea of your complement of experiences I think has led you to a great spot. Like, I'm sure the JP Morgan experience was fantastic too. And prepping you for what you're doing today.

Speaker C: Yeah, incredible company, you know. No, um, yeah, no major complaints working for any of the large companies that I worked for. It's just what suits your personality. And that's, that's what I, you know, tell people is who are considering going the entrepreneurial route is maybe you are better suited to be working for, uh, an established business, an established company. Maybe that just suits your personality.

Speaker B: Uh, right.

Speaker C: And so there's, you know, there's no, you know, it's not bad if you work for a company. It's not bad if you're an entrepreneur. It's just what suits you. I like some level of uncertainty. I like the ability to be creative and I think anybody listening to this call who's working for a company can appreciate. What I mean by creativity is, you know, you maybe bring some ideas, you know, to your higher ups and it's just not going to fit for the budget or what they're trying to get done with. When you have your own business, you have that freedom to be creative, which, which I really enjoy.

Speaker B: Yeah, that's great. Um, give me a piece of advice. Founders should, uh, be doing differently in today's capital constrained environment.

Speaker C: Um, I mean, a big one for me is, is you never get too far away from, uh, you know, the sales side of the business.

Speaker B: Right.

Speaker C: You know, you know, we're always, you know, I know sales can sometimes be like a four letter word for, for some people. But, you know, we're all always, always selling our ideas. Right. You know, selling our vision for the company. And so as a founder, you know, I, I do, you know, most of our, you know, new relationship, you know, phone calls, meetings, I'm attending the conferences because I want to be on the, on the front edge of, you know, the messaging for our company. Getting feedback directly from, you know, from the source. And I don't think I'll ever step away fully from doing that because you just, you got to keep your hand on the heartbeat of that business that way.

Speaker B: I love it. What's the metric you look at when you wake, uh, up and get going? What's the one thing that, uh, every founder should understand as well?

Speaker C: Um, yeah, I mean, not to be flippant, but just don't die. I mean, that's, that's, that's a pretty, pretty good, good metric.

Speaker B: Yes.

Speaker C: Uh, good advice. Yeah. Um, you know, just, I mean, what I mean, you know, in, in regards, regards to the business, I mean, you know, you're building a business, there's, uh, you know, there's a lot of rejection, there's a lot of no's. And so, uh, you know, if, if, um, you know, we're making a little bit of progress every single day. It's just, it's amazing how that compounds over time.

Speaker B: Got it, got it. And then in terms of investment advice, everybody has some. So what do you think is like the best advice or the worst advice?

Speaker A: Propel fitness water with Gatorade electrolytes, zero sugar and vitamins. Propel hydrates better than water to help you get the most out of your workout and get back to your best self. What propels you? Propel with Gatorade electrolytes. This episode is brought to you by Palmolive. Family time isn't just the big moments. It's weeknight dinners, sitting around the table, everyone talking all at once. So when the plates are empty and the sink is full, use Palmolive Ultra. Palmolive's most powerful formula removes up to 99.9% of grease, leaving your dishes sparkling clean. And the new convenient pump makes cleaning even easier so you can spend less time tackling dishes and more time together. Shop now@palmolive.com.

Speaker C: oh, yeah, I mean, um, yeah, I think, you know, I was drawn to what I'm doing in Timberland because I understand it, right? You know, I have an intimate understanding of it. You know, my family was involved in it, I'm involved in it. I've now done a lot of transactions. You know, I've been in this world for a long time, and so that to me, kind of de. Risks, you know, what, what we're doing. And so you, uh, know, I would encourage folks if, you know, there's, there's ways to get diversified through a financial advisor, which is a pretty safe way to go. But if you're going to go and explore and put something into like a private market investment, really get to know who you're dealing with, you know, what that, what that thing is. Because so many times, you know, those investments, you know, fail. And so you really have to be, um, you know, familiar with, with what you're doing.

Speaker B: Yeah. So what. I know it's a little bit cliche to ask, but I'll ask it anyway if you had $100,000 to invest today, where would you start? Uh, looking?

Speaker C: Yeah, I keep things pretty simple. I mean, I. I invest in land, and, uh, you know, I invest in land, like with what we're doing today and. And the S&P 500. So, you know, pretty. Pretty straight. Pretty straight. Yeah.

Speaker B: I'm looking for. I'm looking for insider trading info, and you're giving me the, uh. No. Just teasing.

Speaker C: Yeah. There's no. There's no shortcuts in this. In this game. Anybody who's been doing this long enough understands that, so.

Speaker B: Well, John, this has been a great conversation. I love the idea that sometimes the best opportunities aren't necessarily the ones everyone's talking about. They're the ones you, you know, good underwriting, patience, execution, buying it right, treating it right, you know, staying focused on the details. Those are the things you've shared with us and you've. You. You brought with you. I mean, it's fantastic. So, really, I appreciate it. And folks, John is the founder of Southview Timberland Investments. John, uh, thanks for joining us on Liftoff. And as always, uh, if you've enjoyed the conversation, please, uh, you know, subscribe, share with a founder, a friend, maybe an investor, maybe your investor. Give a look at, uh, what's going on in Southview. I think it's, uh, it's definitely worthy of, uh, of a. Of a deeper dive.

Speaker C: Thank you so much, Keith. It's a pleasure. And if, for those that want to find us, Southview timber.com is a contact page if you want to schedule some time, but I'd enjoy it. Keith, thanks so much for having us on.

Speaker B: Great view. And, uh, it looks like that fun backyard you have, you could really get lost in there and enjoy the rest of the day.

Speaker C: Yeah. This is one of our properties. So this is, you know, a drone. Drone shot of one of our Timberland properties in South Georgia. So just to give you some idea.

Speaker B: Fantastic. Well, John, thanks again. We'll talk soon.

Speaker C: Thanks, Keith.

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