June 6, 2024

By Michelle Pelletier Marshall, Global AgInvesting Media, with John Brenard of Southview Timberland Investments

As the global economy becomes increasingly focused on sustainability and climate resilience, investing in timberland has emerged as a compelling option for investors seeking both financial returns and environmental impact. Southview Timberland Investments, operating in the Southeast United States, exemplifies this trend with a unique and disciplined approach to investing in this asset class. 

GAI News heard from John Brenard, managing director and founder of Southview, with his take on using a differentiated strategy in timberland investing, highlighting its potential for strong returns, sustainability, and long-term growth.

Q1). Southview Timberland Investments is a real assets manager specializing in timberland and agricultural assets that manages a portfolio of 10,000 acres in the Southeast U.S. How does your value-added approach maximize returns?

Capitalizing on favorable climate conditions and a growing population, as well as the natural tailwinds of the Southeast U.S. timberland market, we employ an opportunistic and value-added strategy. This strategy has helped us build a platform that combines regional expertise, a disciplined investment process, and a focus on sustainability. For example, in our region, we can take advantage of the increased demand for housing and infrastructure, which in turn drives demand for land and timber products. 

Q2). Relationships are key to moving the needle in a differentiated strategy. How does Southview manage this for sustained growth?

As with all timber and land businesses, a key competitive advantage is in establishing deep local knowledge and an extensive and diverse network of relationships with landowners and service providers. Our local presence in the Southeast United States allows us to identify and capitalize on unique investment opportunities that may not be accessible to other investors. This concerted effort on building close relationships in the area is crucial for staying informed about regional opportunities. It also allows us to discover deals that other timberland investment managers often overlook or can’t find, driving continued growth.

Q3). Sustainability is the buzzword of businesses – investing and otherwise. How does this fit into a differentiated strategy? 

Sustainability is at the core of a sound investment philosophy. Taking a holistic approach to timberland management and incorporating sustainable practices, such as selective logging and reforestation, not only ensure the health of the forest but also contribute to long-term profitability by maintaining a reliable supply of timber and enhancing land value. It also is key to satisfying the long-term goals of many of our clients.

Q4). What about enhancing overall return potential without taking on additional risk?

That would be solved by investing in diversified income streams. We do that by identifying non-timber value components to examine and invest in, while at the same time keeping watch that we maximize our traditional timberland returns. As an example, some diversified income streams include:

– Timber Harvesting: The most significant contributor to generating income when continuously monitoring timber prices to harvest at the most advantageous times, ensuring maximum profitability. By targeting the optimal harvest period, the company can sell timber when prices are highest, providing a significant and dependable income stream.

– Pre-Development and Highest and Best Use (HBU): Identifying and developing timberland properties for their highest and best use can significantly enhance property value and returns. This could involve rezoning land for residential or commercial development or improving and adding infrastructure to make the land more attractive to potential buyers.

– Pine Straw Harvesting: Pine straw (pine needles), used as mulch in landscaping, provides an income stream without impacting the long-term health of the forest. This product is in high demand for garden and landscaping use, providing a consistent revenue source.

– Aggregate Mining: Utilizing parts of the property for aggregate mining can generate additional revenue from resources like sand and gravel. These materials are essential for construction and infrastructure projects, making them a valuable commodity that can significantly boost income.

– Recreation and Hunting Leases: Leasing land for recreational purposes, such as hunting, provides another reliable, stable income stream. 

– Agricultural Leases: Portions of timberland can be leased for agricultural purposes, allowing crops to be grown that further diversify and stabilize income, thereby providing a cushion and reducing dependence on timber prices.

– Wetland Mitigation: Engaging in wetland mitigation projects not only contributes to environmental sustainability but also provides financial returns. Wetland mitigation involves restoring or creating wetlands to compensate for those lost to development. Developers often purchase credits from these projects to meet regulatory requirements, providing a profitable income stream.

– Conservation Easements: These are legal agreements that restrict land use to protect its conservation values. By selling conservation easements, timberland companies can generate income while preserving the ecological integrity of their land. Landowners receive financial compensation in exchange for agreeing to limit certain types of development, ensuring long-term conservation and a consistent revenue stream.

– Cell Towers: Leasing land for cell tower placement generates consistent rental income. As the demand for wireless communication infrastructure grows, leasing land for cell towers becomes an increasingly attractive opportunity for generating steady, long-term income.

Q5). Where there is reward, there is risk. What’s the best approach to mitigate that in timberland investing?

It’s important to have a rigorous selection process for acquiring timberland properties. Essential to this is a focus on factors such as the age and health of trees, soil types, and proximity to sawmills. A detailed approach reduces investment risk and maximizes positive outcomes for investors.

Also to remember is that timberland investments offer less volatility and more stability compared to traditional asset classes. Timberland has a proven track record of being highly correlated with inflation, making it an effective hedge against rising prices. This stability, combined with the diversification benefits of timberland, make it an attractive addition to investment portfolios.

ABOUT JOHN BRENARD

John Brenard is the managing director and founder of Southview Timberland Investments in Savannah, Georgia. He has a background in finance and operations, and started Southview in 2022. As an investor in timberland himself, Brenard has a deep understanding of various investment classes and financial markets.  

Southview Timberland Investments has three decades of experience in the Southeast U.S. timberland and agricultural land markets with a strong local presence, and an extensive network of landowners and service provider relationships to provide superior competitive advantages to its clients.