Seth Williams: Hey, everybody, how's it going? This is Seth Williams from retipster.com, and today I'm talking with John Brenard, co-founder of Southview Timber. This is episode 270. Be sure to check out the show notes at retipster.com forward slash 270. So John comes from a background in wealth management with experience at firms like J.P. Morgan and Wells Fargo, where he spent years helping clients think through long-term investment strategies and building real portfolios. But what's interesting is where he's focused now, because instead of stocks and bonds and even traditional real estate, he's gone deep into timberland. And this is one of those asset classes that a lot of people kind of heard about, but they don't really understand. Like, how do you make money from it? How do you value it? What does a deal even look like? And maybe more importantly, why would someone choose this over everything else that's out there? In this conversation, we're going to break all that down. We'll talk about how timberland investing actually works, how deals are sourced and monetized and the risks involved, and why this asset class has created a lot of wealth outside of the public markets. If you ever wondered how land can produce income in ways that most people don't think about, this is one of those really interesting episodes. So with that, let's get into it. John, welcome to the show. How's it going?

John Brenard: Seth, it's a pleasure to be here and happy to dive into all those things that you just touched on and how I got involved in the space and, you know, why land investing and timberland investing grabbed me. So excited to dive in. Thank you.

Seth Williams: Yeah, yeah, of course. So what is Southview Timber? How did this thing get started?

John Brenard: Yeah, Southview is a partnership. It's a business that we have where we've brought in partners to buy timberland and land properties, rural land properties in the southeast. And the way it got started, as you mentioned in the intro, I didn't come from investing in rural land, investing in timberland. My background was more in traditional finance, traditional wealth management. That's what I went to school for. That's what I did for the first decade of my career. But back in 2008, when really I was just getting into wealth management, my family bought a timberland property in Middle South Georgia. They live in Savannah, Georgia. They were looking for an investment, also a recreational property outside the city. They started asking around of who would be a good steward to help them buy some land. And they got introduced to my now business partner, Terry Myers, who I've known for 20 years. Terry helped them buy that tract of land in Middle South Georgia. It was land we had for a long time in our family.

And I would go out on the property for recreation. I had a house on it. So I really just enjoyed being out there. And Terry would come by, he'd have dinner with us. And I just started to learn about how he invested in land because he was very successful at it. I saw the wealth that he was able to create for himself and his family. And coming from my traditional wealth management background, I said, hey, this is pretty far from Wall Street and all the things that I offer to my clients, it seems like it generates pretty good returns. It's a tangible asset. Most of the things that I was offering were on a computer screen, right? Just didn't really have that tangible nature to it. And so I was really drawn to it. And over time, I started putting money into deals with Terry and saw the results for myself that were possible investing in land. And that's how this whole thing got started. It's been several years in the making. I've known Terry for almost 20 years. And just in the last several years, we got more serious about creating this partnership with Southview to bring investors from outside of our network to buy these properties.

Seth Williams: So is the idea, I guess you find a deal, do you get money from investors and then Southview Timber takes title to it while it's being harvested? Or like, how does a typical deal work? And where do you find these deals from in the first place?

John Brenard: Yeah. So in terms of structure, in the early days, it was friends and family. And so it would either be just a very simple LLC that we would all have shares in, we'd buy the property, we'd own it together, split the returns from the harvest. When we sell the land, split the returns. Now we have a fund structure. And so we're bringing investors from outside of our network. So we created a fund that has very spelled out terms. We have infrastructure in place, a fund administrator, fund attorneys. So it's a more formal offering that we're doing with the Southview Timberland Fund. And I can talk more about that later. But how we find the opportunities is through our personal network.

So as I mentioned, my partner has been doing this for a very long time, over 30 years. We have a team of other guys who have been investing in this asset class for over a decade. And so we just know who the players are. We know who the other investors are, the other landowners are. And we're seen as very active buyers. And so when someone wants to sell land, we get phone calls. So we have a lot of incoming in terms of finding these opportunities in our specific region. Now, if we went to somebody else's backyard in other parts of the country, it wouldn't be the same. But in our region, in the Southeast, and specifically Georgia and North Florida, South Carolina, Alabama, we have pretty good deal flow from our network. So that's how we find most of our opportunities.

Seth Williams: How do you develop this network exactly? Like, do you just go to networking events or do you like knock on doors or like, I assume it takes a while to become known as like the company that buys land. Right. So like, what's the process of like building out your network like that?

John Brenard: Let's talk about that for a little bit, because there are a lot of groups out there or individuals out there that they spend a lot of money and a lot of time finding opportunities, right? They do mailers, they have cold callers, you know, they're doing a lot of social media to find opportunities. And that's one way of doing it is just a lot of groundwork.

And ours just comes from years and years of just being in the business, especially just through my partners, my co-founder, our other acquisition team. I mean, they live and work in these rural parts of the Southeast. And so a lot of their personal network, their friends maybe went to school for forestry. Some of them work in the sawmill. Some of them are loggers. Right. So there's just this big infrastructure in place, this personal network that just, you know, happens organically from being in this business. And that would just be very hard for somebody to duplicate who's coming from outside of our region to just establish those relationships quick. It doesn't happen overnight.

Seth Williams: It might help to start with understanding, like, what does a typical deal look like here? Like, how many acres is it? What are you paying for it? How much do you make from the timber? And then what do you resell it for?

John Brenard: I can talk about what we look for in a deal. So where we're focused is more midsize properties. So we like to operate below the big institutions, these large timber REITs, these big TIMOs, they're doing a different game. They're buying packages of land that are typically 10,000 acres and above. Very large institutional money is supporting them. And so they have a lot of capital to put to work. And so they're buying very large packages of land.

Then you have the smaller retail investors who are maybe buying 20, 30, 50 acres at a time. And then there's us, Southview, a couple hundred acres to maybe a couple thousand acres below the institutional radar above what retail investors can afford. And so what we look for is a couple of things when we buy a tract of land. We like to have diverse age classes of timber on the property. The different age classes are different products, right? So you have pulpwood, which is timber that's maybe 15 years old, and that's used for cardboard boxes and paper products. That's what the pulpwood is for. And then you have the larger dimensional saw timber, which creates the two by fours and the two by sixes that we all build our homes with in this country. So we look to have diverse age classes because those different products, they bring different prices at different times. And that's something that we stay up on is understanding what these different product classes are. paying at the mills. And when those prices are advantageous, that's when we harvest the timber. So diverse age classes on the property. We also look for road frontage. We look for good access. We like upland properties, properties that are typically dry. If there's power that runs by it, that's great because it's not only just the timber that we're in it for, we're looking also for recreational leases.

Maybe we could do parcelization, break it up into smaller pieces to sell. So it's more than just harvesting timber that we're looking for in a deal.

Seth Williams: Yeah, that's actually really interesting. So you could have the best property in the world, but if there's no access, is it just a useless property? Or are there things you could do to get access to it? How would you handle that situation if it's a landlocked parcel with the best timber in the world on it?

John Brenard: Yeah, I mean, you could have some arrangement with a neighbor, you know, you have some type of access, some type of easement to get to it. But we just like to have that, you know, from the start, you know, have our own access. And we'll make improvements. I mean, we'll put road infrastructure in there to make sure the logging trucks can get back there to harvest the timber. That all improves the value of the property on the resale.

Seth Williams: So we kind of covered the size of the property. Like what is a typical acquisition price? Like what are you making from the timber? And then what are you reselling the thing for?

John Brenard: Internally, we have our own pricing that we look for. We'll sometimes buy property that's just bare dirt, and we'll go to develop the property. We'll plant the trees. We'll do that work to develop the timber on the property. So we have a pricing range of what we'll pay in our region for bare dirt. We have a pricing range of what we'll pay if there's some type of age class on there, mature age class on it. So those are internal numbers we work with. but just in terms of percentages, you know.

What you can expect from timber harvest, the long-term averages of a timber harvest is about 4% to 6% per year is what you can get from that.

Now, that's what the big timber REITs that I mentioned earlier, that's kind of what you get when you invest with them is about a 4% to 6% yield from their timber harvesting. But a lot of listeners may not know this. the timber prices that you get for the timber on your property is very hyper-local. So what we saw during COVID, for example, is timber prices went very high, right? We saw a huge price in lumber go up, but not everybody could take advantage of that. There's a lot of things that need to go right for you to take advantage of that spike in pricing quickly. You need to have relationships with the loggers, relationships with the sawmills.

And luckily, we have those relationships. So we can take advantage of those kind of spot market local pricing, but not everybody can. And so it's important for your listeners that if they buy a timber property, they that they establish those relationships early on. Meet the loggers in your area, get to know where the sawmills are, have these relationships. You have relationships with foresters. You may have a forester that's helping you manage your property. They may have those relationships as well, but it doesn't hurt to do that groundwork yourself. I mean, you can trust who you're working with, but you always want to trust but verify things that you're told and numbers that you're told.

Seth Williams: And when you say a forester, just like a professional forestry consultant, what exactly do they do? What's their purpose?

John Brenard: These people are trained professionals. They went to college for forestry. There's a number of reputable forest management companies because investors that buy a timberland property, they may not have the time or the skill to manage that property. So they'll hire a forestry consultant to manage their land. And there's fees that you pay to the consultant. They may participate in the returns from the timber harvests. It may just be some type of annual fee that you pay them to help manage your land. But in all major timber regions in this country, you can find these reputable forest management companies to help you.

Seth Williams: Is part of their usefulness, is it not only in understanding what the timber is worth, but also in protecting you from like a logging company that might take advantage of you or something? Kind of like your advocate to make sure you're extracting the most value from the timber? Is that the idea?

John Brenard: Yeah. I mean, that's why it's so important to just get with a group that you trust, get with an individual that you trust, because to your point.

That's going to be their role is to help get you the best pricing for your timber and hopefully gets you multiple bids for your timber as well. Not just a single bid from someone they went to school with or someone from their network. You want to see multiple bids because you typically only get with a tract of land, one or two harvests off of it. Over a pretty long period of time. And so you spend a lot of time growing that timber. You want to make sure you get the maximum profit from that. And you definitely be paying attention during those times.

Seth Williams: When you're finding these deals, are you like just paying full market value for them? Or are you making a discounted offer? And maybe a better question is like, how do you even know what the value is to begin with? Are you valuing it just on the value of the surface of the land or does the value of the timber go into the number that you base your offer on or just talk about the pricing valuation of it?

John Brenard: Yeah. So there's the dirt value, what the land value is worth. And in that specific county, and we all know, you know, location matters. What is close to that county? Is it developing? Is it growing? So what is that dirt worth?

And then you have the value of the timber. So if there's mature timber on it, with our team at Southview, we'll go out and assess what the value of that is. You'll get an estimate of what the total tons of timber is on the property. And based on what that product class is, there's a price per ton for whatever that product is. And so that's how you come up with the value for the timber. If you work with a forester, they can help you with that as well. But there's the dirt value and there's the timber value in many parts of the country. you know, these rural parts right on the outside of these metros.

It really doesn't maybe make sense to have timber on it anymore because the real estate value is just worth so much more and there's kind of developing, pushing into it. So there's two parts of the land value on there.

Seth Williams: Whenever you figure out what this value is, are you just offering that full value or is it like less than that? So you can build a margin and actually make money from it.

John Brenard: With the way that we make offers on properties is these deals are typically coming from our personal network. Most of the time have relationships with these sellers. And a lot of these sellers have been in this land for a very long time, for multiple generations. They typically have a pretty low basis. And having that relationship is just so powerful because they recognize that on the other end, when we buy a property from them, there needs to be enough margin for us to make money at some point from it. And so it's just like with traditional real estate, with a single family home, you may have a home that's worth half a million dollars and you go list it for $750.

That doesn't mean you're going to get $750 or if that really makes sense for the new buyer. So you need to kind of come to terms with the seller of a number that just makes sense for everybody to make money. And that's typically how we negotiate deals.

Seth Williams: And are you doing like any outbound marketing to find these deals or do you just trust the strength of your network and just kind of sit there and wait for the phone partnering? How do you actually make sure you're finding these deals?

John Brenard: Yeah. So right now, we don't do a whole lot of outbounds. We don't do any mailers. We don't do any cold calling. We don't do any Facebook or social media to find opportunities. It all comes from our personal network right now. And we have a healthy pipeline right now. So in partnering with us, we're eliminating the energy that it takes for individuals to find the deal. Because buying land is hard. I think everybody who's listening to this, listeners who are very experienced in investing in land... Buying land is the most difficult part. I mean, you can have $10 million to invest, but that doesn't mean you're going to be able to find the deals. There's a lot of energy that goes into finding those opportunities. And thankfully, right now, our pipeline, our relationships is what's bringing most of our opportunities.

Seth Williams: Well, I know when you're harvesting timber, a very important consideration is how close is the sawmill? Is there a sawmill nearby? That kind of thing? I think I heard you say in another interview, it's got to be within like 50 to 100 miles away from where the timber is being harvested. Is that accurate or how far could it be?

John Brenard: That's really where you want to be, that 50 to 100 miles. I mean, especially where you see diesel fuel going right now. I mean, that is a big factor in having the numbers work for everybody is being close to the mill infrastructure. And that's why we like investing in our region in the southeast and specifically Georgia is Georgia is the number one forestry state. It's had that status for the last couple of years, very strong timber markets. And so when we buy a property, there's typically 10 to 15 different sawmills surrounding us that take different product classes within 50 to 100 miles. That's a huge thing to pay attention to because you could have the best timber property in the world, but if it's a thousand miles from a sawmill, it's just a beautiful forest. And that's probably what its best purpose is for.

Seth Williams: So if you've got like multiple sawmills nearby and say they all will process the type of timber that you're harvesting, for example, do you just choose the one that's closest or is there some of the logic that goes into which sawmill you take it to?

John Brenard: Relationships are important, right? If you have relationships with certain mills like we do, you know, we have preference of those that we work with. Some sawmills during different parts of the year have higher or lower demands for their product. And so the pricing is very hyper-local from county to county, and it can be weather-dependent. So if you have a very heavy rain that comes in... And, you know, a lot of the properties are wet and you can't get the logging equipment onto it. In that particular county, that could create a problem where that mill is just not able to get enough product to keep that mill operational, to keep it moving. And so they'll pay more to get product in the door. And that's how you can take advantage of weather events. You know, wet seasons can also bring opportunities. And we've taken advantage of that in the past.

Seth Williams: So if I've got a property that I think I can harvest the timber from and I'm trying to figure out where are these sawmills nearby? Like I've never done this. I don't have relationships. I'm just trying to figure out what's out there. How do you find these? Do you just look on Google Maps and type in sawmills or is there some website that lists all of them nearby? Like what is the trick to finding them?

John Brenard: There are some online databases. Some of them are out of date. So just be careful. Do your own due diligence. The local forestry associations, like the GFA, Georgia Forestry Association, which we're members of, they can be helpful helping provide some of that data.

We pay for a service, and I'll just give them a plug right now. We use Acres.com. I think maybe some of your users would be familiar with them. Acres.com, it's a land platform. That's how we track our portfolio. But there's an add-on service that they have through another business called Forisk, F-O-R-I-S-K. And they are very up to date with the active timber mills, the amount of tons that they take in on an annual basis. And that's an add-on that you can add to the Acres platform that we pay for so we can just see visually on a map before we buy a property where all the timber mills are to make sure that, hey, this is something that we want to do. My co-founder is pretty open about.

Saying, hey, I have a pretty good sense of where the mills are, but I like using some technology and kind of having that tool to help us.

Seth Williams: So are there lots of properties out there that have plenty of timber, but it just doesn't make financial sense to harvest them because there's no sawmills nearby? There are a lot of these dead zones throughout the country where it's like, yeah, there's timber, but sorry, it just doesn't make sense. Or is there coverage everywhere?

John Brenard: The markets are fairly mature. And so in our region where we operate, it's a fairly efficient market and that's because the mills are close to where the properties are there are parts of this country that have beautiful timber and like i said that's probably better just to be a beautiful forest maybe for conservation that's how it should remain because if you think about it the way we've set up this infrastructure in the country with the mill infrastructure and where these timberland properties are, we've designated these zones to be for timber production.

And that protects all of those other forests, right? Because it just doesn't make economic sense for us to harvest those. And so conservationists will sometimes come out and say, hey, you shouldn't go and clear cut a forest, right? Right. Well, if you think about it, we need this material, right? We build 1.5 million homes in this country on average stick built with the timber that we grow in this country. And so if we want a home to live in, we need to harvest this product. We need this material. It's a necessary part of our economy. And so that argument doesn't really make sense is we have to be doing this somewhere. There's no other material that scales the way timber does. You can't build the number of homes in this country with concrete or steel. It just doesn't make sense. You have to have what we do. And so we have these designated areas and that protects these other forests. You know, we don't touch those. You know, we operate in our zone. It's just an efficient way to do it.

Seth Williams: Yeah, I saw this thing a couple of years ago, like one of these little Facebook reel videos talking about how whenever there's like forest fires and like houses burning down, And a lot of people in Europe are like surprised that, oh, really? They build their houses out of wood in America? Why would they do that? I guess in a lot of parts of the world, they don't use timber. They use like bricks and concrete and stuff like that.

I'm not the expert, but apparently the way this evolved in the US and Canada, it's like there was just so much timber. The material is everywhere. It just makes sense to do that. And now we have an entire industry built around that. So like this isn't going to change anytime soon. It's just kind of an interesting tidbit that like, I guess you don't have to do it that way. That's just how we sort of painted ourselves into a corner. We have to now.

John Brenard: I don't see that changing, not in our lifetimes. This is really just the most efficient way and the most sustainable way, right? I mean, to create steel, to create concrete.

I mean, it does create a lot of pollution to create those materials. When you grow a tree, what you are looking at when you're looking at a tree is sequestered carbon. That's what it is. It's holding that carbon and then you harvest it. You're still holding that carbon and then you go and put it into a home. Well, and then it's just storing that carbon indefinitely. And then you start the process over because we replant every property that we harvest within 12 months or less. And we start that whole cycle over again. So it's a very sustainable way for us to build the infrastructure in this country.

Seth Williams: Again, trying to get back to this idea of what a typical deal looks like. Let's say you bought a property, you harvest all the timber you're going to harvest from it. Do you then replant it and wait 20 years and harvest it again? Or do you sell it? What is the typical exit strategy? How long does it take? And like, when and why is it time to resell the property versus doing something else?

John Brenard: I'll talk about our strategy and then hopefully that's helpful. So if we use the 500-acre example, we buy a 500-acre property. We have a very advantageous entry point on the price per acre.

Maybe there's some timber on it that we can get some income off of it pretty quick. We'll pay attention to the pricing. We'll get some income from that timber harvest. But it's not just the timber harvest, like I mentioned, that we do to generate returns. We typically lease out 100% of our land for recreation. So we'll get a hunting lease on the property, which provides a little bit of cash flow. Maybe in this scenario, there's 100 acres on the property that's better suited to be farmland. We may clean up that property, either have it be a dry land farm or put some irrigation on it, and we'll lease that out to a farmer and get cash flow from that farmer.

A big thing that we do as well is land sales. So I know listeners of your podcast, they buy and split land. We're not afraid to do that either. I mean, we just did a deal in the fund. We bought 135 acres. We did a survey on it immediately to split it into two smaller parcels to expand the buyer pool because not many folks can afford or want to buy a $600,000 or $700,000 piece of land, but they can afford maybe 250 or 300,000. And so we split it in half.

And within a year, we sold both those parcels for a 15% return over what we paid for it. So we'll do those types of deals as well. But going back to the 500 acre opportunity, that's something that we could do as well. We could maybe sell 100 acres off of it to a recreational buyer, to a developer for a higher price per acre. So there's so many different ways that we generate returns in that 500 acres. It's not just the timber harvesting. We look for all these different avenues to create income.

Seth Williams: So you do deals sometimes where there's no timber harvesting involved? It's just a land deal?

John Brenard: That happens in our fund. And that's what we've done personally for a long time. Because some of these buyers, they like the way that the property looks with that timber, especially if they're using it for recreation, if they're buying 100 acres from us, and it has that mature timber on it, they like the way that that looks. And maybe they're just looking to buy it and build a home on it and have a urban escape, a place to get out of the city. And so they want those mature trees on there. So that happens. We'll buy properties with mature timber on it.

And flip it for a higher price per acre without ever having to harvest anything off of it.

Seth Williams: A few years back, I had bought this property that was about six and a half acres.

And it was probably half full of fairly mature trees. And so I called a local sawmill, had a guy come out and look at it. He was like, you know what, man, this isn't really worth our time at all. I mean, it's only six acres and it's a lot of red pines and stuff that apparently was not that viable to him. But it made me realize like, I guess just because you have trees doesn't really mean you have harvestable timber that's worth anybody's time. So it makes me wonder when you talk about these smaller investors who do this kind of timber stuff, how small is too small to even be worth doing this? And if I were to buy a property, is there a way that I can just, from a layperson's view, look at the trees, how big they are? I don't know if I can tell what kind they are, but just understand, is it even worth my time to pick up the phone and call a sawmill? Like, is there anything here or is it just, no, not worth it?

John Brenard: It depends on what the investor's use case of the property is. Some families, they buy a property and it's only 20 or 30 acres. They'll plant some pine on it.

And at some point, they will maybe get a little bit of income on it, but it's usually just to beautify the property. I would say if you're going to get into this and you were going to say, hey, I want to make some returns from this 50, 100, 150, 200 acres, if you can jump up and get up into that realm, then you have a property. You can get a forester to help you manage it. When it comes time to harvest it, a logging company, a mill will take you a little bit more serious because it takes a lot for them to get their equipment out there to start that whole process. I would look to get up into that acreage to get started. But for the person who's assessing a property and you say, hey, is this timber going to be worth something? The big species in our region is softwood pines. So you have loblolly, slash, and longleaf pine. And your listeners are smart people, if they came to our region and they saw the way that these timber tracts are laid out, I mean, they are planted in very straight rows. And that's what you want to be looking for.

You, If it's all volunteer stuff, if it's just kind of stuff that's wild and kind of came up organically, you can have some timber that's worth something. But the tracts of land that are professionally planted, you can tell them from a mile away. And I think your listeners could identify that.

Seth Williams: Well, on this whole subject of planting or replanting, you said it sounds like sometimes you'll buy just dirt and then plant it, which I'm assuming means you have to then wait 20 plus years before you can harvest anything, right? I guess maybe that's one question. how long does it take when you plant stuff? Is it 20 years or longer or shorter?

John Brenard: Yeah. And that's a question we get from investors a lot is, yeah, I don't want to wait 20 years for us to get any kind of returns on this. But if we do buy a property that is recently clear cut, it's just bare dirt, we're going to go and make the investment to replant it. There is an investment. You're going to be spending several hundred dollars per acre to clean it up, to replant it. But that's an investment in the property, right? You're going to hold onto it for a couple of years, you're going to get that nice stand of timber coming up. And so the next group coming along, the next investor coming along can see, hey, these guys made that investment in this, right? There's going to be some nice timber on this in the next 10 to 15 years. And I have that time horizon to wait to take advantage of that. And so we're building a portfolio.

We're not buying all clear cut land. That might be some part of it, but we'll make the investment to replant it and understand that that's an investment. And the next group will appreciate that. And they'll pay us more because we went and did that work.

Seth Williams: So like, if I have 100 acres, and I want to harvest timber from it, what specifically should I be planting it with? Is it, a certain kind of pine? Or do I just like call the local sawmill and say, hey, what do you want? Like, how do I figure out what to do with that?

John Brenard: Yeah, you got to do your homework, depending on what region you're in, in the country, because the Pacific Northwest than what we do in the South. Like I said, we're all softwood pines, for the most part, those three species that I mentioned, you know, you'd want to be planting one of those species in the Southeast, they just do really well in our climate, in our region. And that's what the mills are set up for. That's what their equipment is set up to process. And so you don't want to go and plant some different species that maybe wouldn't perform very well because of the climate. And also maybe the mill wouldn't take that because that's just not the product that their equipment is set up for. So you can find out pretty quickly from a forester, from just putting boots on the ground and just being in the region, talking to people, you know, I have this bare dirt, a hundred acres. I want to plant some timber on it. What's going to be the right species. And you can go down a whole rabbit hole with the different nurseries that are in your region. You know, they all do different things with different species that they offer. So that's something you'd have to look into too, is what nursery do you want to work with and what variety are they offering?

Seth Williams: And this might be like a forestry consultant question. I don't know if you know this, but like, what does the width of a tree need to be before it can be harvested? And I'll see if you're going to saw it into boards and that kind of thing. Like if I was just looking at my property and I wanted to measure the trees myself and determine, yep, these are big enough or nope, not even close. Do you know what that width is?

John Brenard: There's a measurement called DBH, diameter, breast height. I mean, that's when you're standing next to a tree and, you know, foresters have equipment that lets them measure what the width of that tree is. And as I mentioned to me, there's different product classes, you've been to Home Depot, you can see the width of a 2x4, 2x6, 2x10, and.

You can get a pretty good general idea of, hey, is this tree going to be able to be turned into that product class versus the much smaller diameter, you know, pulpwood, which has no chance of being turned into that type of product. But, you know, working with a professional forest or working with our team, you know, you would just get an understanding of what product class you have on the property.

Seth Williams: I'm pretty sure the answer to this next question is no. But do you or anybody you know do deals like this in Canada? I got to think Canada has millions of miles of timberland up there for this kind of thing, right?

John Brenard: They have a huge timber industry. They've been having a little bit of some struggles in the past several years.

Big pine beetle epidemic. A lot of their land is crown-owned land, so it's government-owned land. The government there has just put a lot of environmental restrictions on some of these companies, mills and big, you know, logging companies. So you actually see that a good portion of the mills, you know, 50% or more in our region are owned by Canadian companies. They've come down to the southeast because there's just freedom to operate. There just isn't the restrictions that they have in Canada. The other thing too, is the current administration is putting some pretty hefty tariffs on Canadian lumber coming up over the border, up to 45% tariffs right now. And so they're really struggling. I wouldn't want to be in the timber business in Canada right now. I love our region, not just for the timber, but also for the real estate. The real estate that we're buying, even if it's an hour or two, even three hours outside of some of these major metros where we like to buy land.

The real estate is doing well, but just the bare dirt is doing well, because so many people are looking for urban escapes. They're looking for a way to get out of these cities. And these are some of the last parts of our country that just don't have this population. Not everybody, but there's a good number of people who are just looking to get away from these big cities from time to time. They understand they have to be there for work, but they want these recreational properties. And that's part of our strategy is selling those tracts of land to them.

Seth Williams: Is it possible to harvest timber from land that you don't own? And if so, how would that work?

John Brenard: You can get a timber lease on a property. So you could go to a landowner, pay them a lease, you have a set number that you pay them on a per acre basis. And they still own the land, but you have a lease for 10 years, for example, to go and harvest the timber off of the property. We don't do that right now. We don't do that in our fund. We don't do that personally. But the bigger timber groups, the bigger timber REITs, you'll see them do that. They'll pay a landowner...

X amount of dollars per acre per year for the ability to harvest the timber off the property. And for some landowners, that works for them. And typically in that arrangement, the timber company, like that big timber, for example, turns the property back over to the landowner. They have to turn it over with the property replanted. So it's not as if they're just going and harvesting it bare and turning it back to the owner. They actually have to replant it, kind of put it back to its original state. I mean, of course, the trees won't be the same age, but they have to go back and replant it before they turn it back to them.

Seth Williams: You might have already answered this. Maybe I just missed it. But back to the subject of replanting it. So when you buy a property, you harvest the timber, and then you replant it.

Why replant it? Are you replanting it before you resell it? Or are you replanting it because you're going to hang out to it for 20 more years and then harvest it again? Or is it just a nice thing to do? Like, why are you doing that?

John Brenard: Yeah. So for our fund and our strategy, we replant it for the reason you mentioned, which is it enhances the value. It allows us to establish a new stand of timber. So, you know, the next investor can see that we made that investment and they'll pay us a higher price for it. That's not always the case. I mean, if we harvest a property, we typically replant it. But if it's recently harvested and and that real estate value has gone up, we may just sell the property to the next investor without replanting it. It's really case-specific. I mean, if it's family-owned land and they don't have any intention of selling it, they may harvest their 100 acres and then replant it for the next generation, right? The next family member who's gonna benefit from the returns on it in 20 years from now.

Seth Williams: And when you resell these things, who is it you're selling it to? Like, are you listing it for sale on land.com or something? or do you have some like back pocket list of buyers just lined up ready to buy them or tell me about that?

John Brenard: A lot of our buyers are other timberland investors, recreational buyers. I mean, that's a big one right now is in that scenario I gave you, we buy 500 acres at a lower price per acre because it's a larger tract of land.

And then we're able to break it up into some smaller parcels and resell it at a higher price per acre to a recreational buyer, that's a big part of our strategy. So other timber investors, recreational buyers, we've sold to developers before, other funds, family offices. It really is across the board of the different buyers that we work with. And we have a whole network of brokers. So we typically don't, list the properties on any site. But we have these brokers who are land brokers who are our friends, part of our network. And we have inventory of land and they'll come to us and we might show some of their interested buyers some of our tracts. And that just comes organically through our network of brokers.

Seth Williams: I thought you would mention somewhere a deal that produced a really outsized return in a short period. I think it was like a 65% return. Aaron, can you walk me through what happened there?

John Brenard: Yeah. So this was a deal we did in our fund. So our investors benefited from this. This was not a personal deal. And this was a 500-acre tract of land. We got a very advantageous entry point on a price-per-acre basis.

And fairly quickly, we were able to sell about 110 acres off the property for twice what we paid for it. So on that 110 acres, we made a double. And then on the other 390 acres, we sold to the adjacent landowner who had a very large blueberry operation. Growing blueberries in Georgia is a big thing. And he was looking to expand his blueberry growing operation. He also just didn't want neighbors moving in that maybe he didn't know. And so he was willing to pay us a very advantageous price per acre. So the blended return of that first sale and the sale to the adjacent landowner came out to a 65% return. And this all happened very quickly. It all happened within 60 days.

There was some groundwork that we did before to make that happen. We had some interested buyers that was looking for land in this county. So we pretty much had an exit strategy figured out for at least part of this land. And then the adjacent landowner, that always comes into play. I think your listeners will appreciate that is going to the adjacent landowners first and talking to them before you list it. That's huge. You can get deals done that way because they don't always want neighbors moving in that they don't know, or they're just looking to expand their family holdings.

Seth Williams: So what parts of that deal are repeatable? And what parts of that deal was just right place at the right time?

John Brenard: Yeah, so not all of them are going to be like that. I mean, they're not going to be 65% returns in 60 days.

But selling that 100 acre parcel pretty quickly, that's repeatable. I mean, that's something that we do quite often is if we go buy 500 acres, buy 1000 acres, we may sell 100 or 200 acres fairly quickly at a much higher price per acre to enhance the overall return of that project. In our fund, we have different assets across different counties. And so they're all different projects, but we're all trying to hit a certain target return, a blended target return for the fund. And so we're always looking to do some of those opportunistic short-term sales at a higher price per acre to enhance the returns.

Seth Williams: So if timber is such a strong asset class, why aren't more people doing this? Why isn't this more crowded than it is?

John Brenard: It's a great question. And a big reason of why we started Southview is there really is just such limited access to the asset class. So you have the publicly traded timber REITs, there's Rayonier and there's Weyerhaeuser. There was one called PotlatchDeltic, but just in the last year, they merged with Rayonier. So now the public only has two publicly traded timber REITs, Rayonier and Weyerhaeuser, those come with public market risk, you don't get all the tax advantages that owning it directly offer or even investing in our fund offer. Or you go and do it yourself, which I think it's coming through through this conversation that there is a pretty steep learning curve to figure it out. Or you go work with one of the big institutions, but you need pretty substantial assets to go work with a big TIMO or a big institution to have them build you a portfolio. It's an access issue. The problem is access. There just aren't a whole lot of vehicles for high net worth accredited investors, family offices, or RIAs that still have substantial wealth. There's just not a lot of good options. And so that's a problem that we're hoping to solve and, you know, kind of chip away at with Southview is just people recognize that this is something worth having in their portfolio. They see what it does for the returns, the lower risk in a portfolio.

And so with our fund, we're hoping to help solve that problem. It's an access issue. It's just difficult to just get exposure to it.

Seth Williams: How should someone think about doing this themselves versus investing through a fund like yours? Like who should not try to do this on their own?

John Brenard: I see a lot of things on social media that come through and there are individuals who are spending all of their time finding opportunities. They're doing mailers, cold calling, and they're also selling coaching, right? They're trying to get other people to come in to learn about land flipping and the money is so great and it's so easy to do. It's not as easy as it's made out to be and so if you're an attorney if you're a doctor if you're a builder focus on what you are good at which is your trade which is your livelihood and if you had the time.

It's worth investing and learning about and figuring it out. But there's a pretty steep learning curve. And so I would just caution that you're probably going to have to make some mistakes first. It's not insurmountable. But the advantage that I had, I don't come from a land investing background. I've gotten to know it pretty well over the last decade of doing it. But I had a partner who had a lot of experience to guide me and allow me to do deals with him before we did this thing with Southview. So I would just say, find a good partner. If you want to do this, make sure you find someone you trust who can help you, but make sure you have the time to pay attention.

Seth Williams: Well, I am wondering, what's the part of this business that sounds simple, but is actually a headache in real life? Anything come to mind?

John Brenard: There's a lot of things that need to go right. And I think your listeners can all appreciate this. I mean, negotiating the deals, finding the deals, getting to the closing table, There's so many things that need to line up for a deal to fall into place.

Buying land from an individual can be emotional, not necessarily for us, but for the individual selling the land. That could be land that has been in their family for three or four generations. You kind of have to have a soft touch sometimes when you're communicating with sellers. And I can totally appreciate that, right? There's an attachment. Some of their identity is tied to this land and you're asking them to sell that. Or you're working with them to buy that from them. So, you know, patience is necessary when you're in this business.

Seth Williams: I probably should have asked this question earlier on and I think you've kind of answered it here and there, but just in case people have not put it together yet, why do people invest in timberland specifically? Like what does this have to offer that other properties or investments don't?

John Brenard: Again, just because your listeners, I think, are pretty well-versed in investing in land, and we have similar attributes to just investing in land in general, is we don't unclog toilets, right? We're not changing light bulbs. We're not having to manage a multifamily property with 200 units and the turnover that comes with that, the higher property taxes that come with that, the upkeep that comes with owning a large multifamily property. And these days, the multifamily properties, the amenities that tenants are asking for come with costs. We just don't have any of those when we invest in land. We don't have the doorknobs to manage. And that's a huge advantage. That's why I'm drawn to it is it's a real asset. It's tangible.

There's a level of control with it that other investment asset classes just don't have. No one is ever going to force us to harvest our timber. We can wait for the most advantageous pricing, let that biological growth take over and let that timber keep maturing until it's the right time to harvest. Even with farmland, you can't do that. If you grow a crop, you have to harvest and sell it into the market that exists. With timberland, that's not the case. It's a factory and it's a warehouse. So it's growing this product, but it's also storing it on the stump and we can harvest it whenever it's most advantageous. So I just love that level of control. I haven't really found that with other investment asset classes.

Seth Williams: We've also talked about this as well, but just want to get it all on the table. What are all the different ways you can monetize a property when you're doing this strategy? You obviously have harvesting timber. I guess you could subdivide and resell part of the property. You could convert it to farmland. You could replant it. Is it adding road access a way to monetize it? Or what are the other things I'm missing in terms of how you can make money from properties like this?

John Brenard: You hit on some of the big ones. Yeah.

Parcelization, harvesting the timber. You could convert some of it to ag land, to farmland. Big thing in our region is recreational leases. It's not something that's going to make you rich, but it helps cover the property taxes and helps cover some of the expenses. Although operational expenses are fairly low for our asset class. We've done even creative things like cell phone tower leases on our property, mineral rights, you know, they harvest materials off of our property for building, you know, so we've done things like that. You know, you and I really kind of hit on the big ones there at the beginning.

Seth Williams: How easy is it to lose money on a deal doing this? Like, have you ever seen this happen? And if so, why did it happen? Like, what went wrong? What would it take to end up upside down in a deal like this?

John Brenard: Yeah, overpaying is the number one. You don't buy it right.

There's not a whole lot you can do to recover from that if you just overpay in any investment asset class. But overpaying is a big one. On the timber harvest side, you've spent all this time. Let's just say you've had this property, you've spent all this time growing this timber, managing it, taking care of it. Let's just say you don't have the right people in place, the right team in place. And maybe you just don't get the number that you should be getting for that timber. It might seem like a good number on paper of what they're willing to pay you for it. Unless you go out and get multiple bids and, you know, kind of pay attention to what timber should be worth, you know, you could get taken advantage of, you know, on the timber harvest, unless you have that team in place.

Seth Williams: I appreciate what you said about overpaying for property because pretty much every land investor knows this is one of the trickiest things in a land deal is like, what is the thing objectively worth? Because a lot of times, like, there might not be an objective value. Like even an appraiser might not know what they're doing. What makes timber different, I think, is that there is a more objective-ish way to value the timber just by looking at the timber and estimating how far it is from a sawmill and how much you could likely extract from that. So you have that side of it. But then you also have the value of the dirt itself, even if the trees were not there.

And I'm just wondering if the biggest risk is overpaying for a property, how do you make sure you don't overpay for the property? Which comes back to, how do you know for sure what that thing is worth? Like, what would you do to make sure we are not going to get burned based on the price we're paying for this thing because we know it's worth X?

John Brenard: We're not typically investing, in areas where we just don't have that knowledge, right? We have a pretty well designated zone in the Southeast.

And it's from doing a lot of deals. We're pretty active. I mean, we're buying and selling a lot of land. And so we have a pretty good sense of what comps are, right? You said, you know, how do you know what something is worth if you don't have the comps? Well, we have a network of brokers, we talk to them, we're seeing what comps they're able to get. that there's different data that you can find to do this. But having been in this business a long time, that helps of knowing what to pay. And so for anybody kind of just coming into this.

If you have that cash to invest, take your time just because you get on that first property and it's beautiful, right? Just take your time and look at a lot of different properties. Talk to a lot of different people because you're in control. You have the cash, right? Just take your time and do your homework and find some good partners to do this with.

Seth Williams: Yeah. Because I think part of understanding the value kind of goes into understanding what is its highest and best use or like, what are you going to use it for? But like what if the person you're selling to has a different use than what you're using it for so like it's worth x to you but the person you'd sell it to is worth something totally different because they have a different use in mind does that ever happen like do you have to like think that far ahead like okay we're gonna use it for this the next person might use it for that so based on that it's worth this to us if that makes sense

John Brenard: no that makes sense a big trend that's happening in our region is the Southeast is growing. There's a lot of people moving to the Southeast. Population is increasing. And so we have a pretty good sense of if we're buying these properties in bulk, call it, we're buying 500 or 1,000 acres. The use case for that 500 to 1,000 acres is timber production, recreational leases. But we feel pretty comfortable that we could sell 100 or 200 acres from that tract of land.

To a recreational buyer, somebody may be coming from a city, coming from Atlanta, coming up from Florida. To your point, they're in it for a different reason. They're in it to be in the nature. They're in it to have this beautiful property for recreation.

Their investment outlook is just different for that. They're in it for the enjoyment. They're in it for the recreation. And so they're willing to pay us a higher price per acre because they're going to own it for the next 10, 15, 20 years. And so we see that trend, And that's something that we take advantage of.

Seth Williams: So the way that your fund works, like if I invest money with you, what's the minimum I have to invest and what kind of return would I expect from that?

John Brenard: Yeah. So the minimum to invest with us is $100,000. That's the minimum to come into the fund. We only accept accredited investors. So you have to have certain income and net worth requirements. And the way that it works is your investment will immediately buy into our existing portfolio of land assets, of timberland assets that we have in the fund. So you'll get immediate diversification into multiple different assets. And that's a huge value because that spreads your risk out amongst many different properties instead of putting all of your eggs in one basket.

And also what that does is that gives you exposure to all the returns from that existing portfolio, but also all the future deals that we buy too. We have a very strong pipeline of deals that we're looking at right now. So if you're somebody listening and you say, I want to get into land investing, I see that it makes sense for my portfolio. I want to diversify out of stocks and bonds. Those have done quite well the last several years. Stocks have done very well. It makes sense to maybe sell some of that and diversify into something that's really not tied to corporate earnings, that's not tied to Wall Street.

And you're interested in this asset class, but you don't want to go and have to learn the hard way. You know, a fund like ours is an easy way to get exposure. We eliminate the learning curve. You know, you immediately get exposure to what we've been talking about in this conversation, you know, without having to go up that learning curve.

Seth Williams: And you might have said that maybe I missed it, but what is the anticipated return and like how long does it take to get that? Is it like paid out monthly or is it like, well, whenever the thing sells, then you get a return. How does that work?

John Brenard: Yeah, so we target a 12% to 15% net return for our investors on an annual basis.

The terms of our funds, we're committing to an 8% preferred return. So we owe at the end of the term of our fund, it's a five-year fund, so it's a five-year commitment. we owe an 8% preferred return per year before we participate in any of the profits with you. And then when there is profits above 8%, investors keep 80% of it. We only keep 20% of it. So the way that it works, it's a five-year commitment, 8% preferred return, anything above that, we split 80-20. And there will be some income along the way too, from timber harvest, recreational leases, there's tax advantages. When we sell a property, say we sell it in less than a year, like in that scenario I just shared with you, we're reinvesting that capital via a 1031 exchange into more land. We've already done that. So with that deal I went over, we've compounded our investor's capital.

Bought more land and repeated that cycle. So in a way, we get leverage that tax advantage using that 1031.

That's something that we take advantage of for our investors.

Seth Williams: And when you're buying these properties, doing all this work, is this funded 100% from investor dollars or is bank financing any portion of this? Or how does that work?

John Brenard: We use all equity. So all cash. We don't use financing. The way our fund documents are written.

If we need to get a loan for maybe a short-term opportunity, we can. But historically, even in our own personal deals, we've used cash. We've used all equity. And we just like that control. It goes back to just, we don't like being beholden to a financial institution. We like that freedom and not having a debt payment hanging over our head, which could influence our decision-making is just not the way that we've invested in this asset class historically. And that's the deals that we've done in the fund have been funded with all investor capital, no financing.

Seth Williams: So if I invest $100K with you guys, and if it's tied up for five years, what would cause that return to be lower than expected? Because I know we mentioned during the COVID years, there was this unexpected spike. Is there something that could happen in the market that would make it go down and make this just not perform the way that we all thought it would?

John Brenard: Inflation could continue to go up, and in turn, interest rates could shoot back up where home building grinds to a complete halt and the whole housing industry just falls flat. And at the same time, a big part of our market is the restoration and remodel market. When someone lists a home, what do they typically do? They go and fix the kitchens, they fix the bathrooms, they fix the floors so they can get more money when they resell. and that all uses our product. So there's a risk that the housing and restoration market grinds to a halt. I don't see that happening. That would be a pretty serious event for that to grind to a halt because population continues to grow. People continue to move. There's a whole industry around this that just continues to grind forward. We build about 1.5 million homes on average. But even if we're still doing $1.750 to $1 million, there's still a market, there's still an industry that supports us. But there's always risk with any investment. I just feel that if we're buying this hard asset, all of your cash is going into the hard asset. We have a level of control that if we buy it right...

There's no way ever forcing us to sell at a disadvantaged time.

Seth Williams: Do you know all the timber that's harvested? Is it typically sold within a relatively close proximity from where it's harvested? Or does it ever get shipped across the country? So I'm thinking in Michigan, for example, back in the Great Recession in 2009, 2010, that kind of thing, there was no building happening in Michigan at all. Now that things have picked up, a lot of the timber that is sold in stores around here is actually from Canada, I think. It just makes you wonder, like, say if the market in Georgia crashes for some reason, but it's still really hot in California, can the timber be shipped over there? Does that ever happen or does that work?

John Brenard: It gets shipped all over, but a lot of it does stay within our region.

Seth Williams: I mean, does that make it more expensive to where it gets shipped because of all the fuel costs to get it there?

John Brenard: That's what runs this whole economy, the energy, right? It all boils down to fuel costs. And so that would be increased pricing. That'd be a disadvantage for sure for our region if everything came to a halt here and that was something we had to do.

Seth Williams: I think about what you mentioned about how in the Pacific Northwest, like different kinds of timber grows up there versus in Southeast. Does it matter? Like, can all of the same timber be used for all the same things? Like if I'm trying to build a house, does it matter whether I'm using oak or pine or whatever?

John Brenard: I mean, most of the homes that we build in this country are built with softwood. Softwood yellow pine is what we grow here.

They're growing like Douglas fir in the Pacific Northwest, which is also another softwood. We say softwood. I mean, it's still a very robust material for building homes, but that is what they're set up to use. That's what...

Nail guns are able to work with. That's the most usable material for this purpose.

Seth Williams: You might correct that softwood is basically like fir, like trees with needles on them. Hardwood is more broadleaf, like maple, oak, that kind of thing. And is the reason that softwood is the preferred wood to grow is because it grows faster? Is that accurate?

John Brenard: Yes. The softwood pines that we grow, you can have that large dimensional saw timber in 20 years. I mean, I know 20 years is 20 years, but that's pretty remarkable that you can have a 2x4, 2x6, 2x10.

We're growing thousands of acres of this product, and that cycle is continuing over and over again. So it's a very sustainable process. The oaks and hardwoods, I mean, they're very slow growing. And that's why they're so hard is because they're a lot slower to grow.

You can look back, some of the old growth pine, that was some of the first pine here in this country that was harvested. The genetics were different, and it was harder. It was a tighter ring on those pines. And you can see older homes that are built with that quote unquote kind of stronger pine. I mean, the stuff today still far exceeds what the requirements are. But it's just interesting that the species have kind of evolved the genetics.

Seth Williams: Yeah, it's very true. The house I live in is surrounded by mostly hardwoods. And these trees are pretty substantial. But whenever we cut one down, because we have to, we look at the rings and they're like 80 to 100 years old. I mean, it takes a lot more time for these things to grow to the point where it would actually make sense to harvest them for that purpose.

John Brenard: It's incredible. I mean, if you had a substantial amount of that hardwood, like black walnut, I mean, if you have some of this very desirable hardwood on your property, you can get some good money for that. That stuff's in demand.

Seth Williams: Is that what they use to build like furniture?

John Brenard: Yeah. Some of the very well-made American-made furniture is all done with these hardwoods.

Seth Williams: Well, John, fascinating conversation. It's great to talk to you. People want to find out more about you or get involved with Southview in any way. Where should they go to do that?

John Brenard: Yeah, very easy to find us. Our website is southviewtimber.com. You can email us at info at southviewtimber.com. And I'm very easy to find on LinkedIn. If anybody just wants to connect, just search John Brenard and would love to keep the conversation going.

Seth Williams: Great. And I'll be sure to include links to all of that stuff and more in the show notes. Again, John, great to talk to you. Wish you all the best. And tell the listeners out there, we'll talk to you next time.

John Brenard: Thank you, Seth.