Episode #432: Robert Keith, Beartooth Group – Investing for Financial & Environmental Returns Through Ranch Restoration in The American West

Episode #432: Robert Keith, Beartooth Group – Investing for Financial & Environmental Returns Through Ranch Restoration in The American West


Guest: Robert Keith is the co-founder of Beartooth Capital Partners. Bearthooth’s goal is to use lessons learned from both Wall Street and rural ranches, to create innovative solutions for their partners that positively impact the land and its wild inhabitants.

Date Recorded: 7/20/2022     |     Run-Time: 1:07:07

Summary: In today’s episode, we’re talking about something every investor looks for – an inefficient market with little information or competitors. Robert buys distressed properties in the ranch real estate market in the greater Yellowstone area, restores them, and provides his investors with both a financial and environmental return.

Robert shares the ins and outs of the process, the attraction to investors focused on sustainable investing, and what it’s been like to have tailwinds like COVID and even the TV hit Yellowstone.

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Links from the Episode:

  • 0:38 – Intro
  • 1:33 – Welcome to our guest, Robert Keith
  • 3:24 – Overview of Beartooth Group
  • 7:03 – The inspiration that pushed Robert towards land restoration
  • 8:21 – Investing for financial and environmental returns
  • 16:02 – The inefficiency of the market
  • 23:15 – Example of a property Robert’s restored
  • 27:19 – Typical ranch size ranges and geography variance
  • 29:02 – Sourcing properties
  • 38:10 – Painful and fond stories from his time spent working in this sector
  • 45:20 – Insights navigating the pandemic and the popularity of the Yellowstone series
  • 52:30 – Challenges and reasons behind deciding to be a B Corp
  • 56:44 – The most memorable ranch Robert’s been involved with
  • 1:03:26 – Learn more about Robert; beartoothgroup.com; robert@beartoothgroup.com



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Disclaimer: Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.

Meb: What is up, everybody? A really fun and different show for you today. Our guest is Robert Keith, co-founder of the Beartooth group, a firm offering meaningful high-value ways for conservation-minded ranch investors, buyers, brokers, and owners to invest in, restore, and sell ranch lands in the American West. Today’s episode, we’re talking about something every investor looks for, an inefficient market with not a lot of information or competitors. Robert buys distressed properties in the ranch real estate market in the Greater Yellowstone Area, restores them, and provides investors with both a financial and environmental return. Robert shares the ins and outs of the process, the attraction to investors focused on sustainable investing, and what it’s like to have the tailwinds like COVID, and even the hit TV show, “Yellowstone.” Please enjoy this episode with Beartooth Group’s Robert Keith.

Meb: Robert, welcome to the show.

Robert: Meb, nice to be chatting with you.

Meb: Good to see you, man. Tell our listeners where you are today.

Robert: I’m in Bozeman, Montana.

Meb: You know, when the zombie apocalypse happened, we cut bait, got out of the city, did a little drive about, and spent some time in Bozeman. This would have been spring or summer, probably summer of 2020, so, deep in it. And I remember spending some time in Bozeman. And I’m kind of from the west, so I’m familiar but was just thinking, “Man, what a beautiful place. This is so nice. Maybe we should look into, I don’t know, like moving here, a vacation house here.” And we started chatting with some locals and they said, already, it was getting smashed, and this was two years ago, with influx. So what’s the vibe? How are things in Montana right now?

Robert: Oh, it got smashed, continued to get smashed. I mean, Bozeman was kind of unique with the university and bought up perks from “home.” So it’s a pretty easy move from wherever folks are coming from. And so, yeah, residential real estate has continued to go up, up, up.

Meb: All those damn Californians. I remember, like, one of our most stressful moments was we wanted to take my son to the planetarium there and the museum. And we were really struggling if we wanted to be inside and, like, risk it for the pandemic to be in the planetarium. Anyway, we did. But then they ended up doing like…the program was like string theory or something. I think he was like three at the time, so it was not…

Robert: How did you enjoy that?

Meb: It was not… I mean, it’s a bunch of pretty pictures. That’s all that mattered. And there’s a guy next to me to cough the whole time. So, I thought that was good for us. Anyway, Montana is a special place. So, this is going to be a little bit different today. This is a fun one. We’ve definitely never… We’ve done a lot of natural resources, farming, and investing, never anything quite in your wheelhouse. So, tell us real briefly what it is you guys do. And then we’ll kind of walk you back, and go through an origin story, and really get deep in all things your world.

Robert: Yeah, you bet. I mean, the brief summary version is we’re in the ranch real estate market, and we buy distressed properties, partner with owners who are in a matter of distress, bring the tools of lower middle market, private-equity-type funds, and add value, add growth to these properties, and exit. So it’s ultimately a buy, fix up, resell, or exit kind of scenario. And the really cool thing that I love about it is that doing that growth work, that adding value work is really all about environmental attributes. So it’s restoring creeks, and restoring wetlands, and cleaning up degraded structures, and doing all sorts of work like that, that’s making the land more valuable from not just a real estate standpoint, but also from an environmental standpoint. And so really, that’s, I think the primary reason investors invest with us is you get both, you get the financial returns and you get the environmental returns. And that’s not easily done. And usually, there’s some sort of trade-off there. In our case, the financial returns are driving the environmental returns.

Meb: It sounds like it would be a great Netflix show, you know. Like, we get like a…we’ve got all the…I mean, there’s like 1,000 of residential house flipper style, I’m not saying you guys are a ranch flipper, but this style where people love that kind of concept. And to me, man, talk about a good plotline. And you guys are… I’m in LA, you want to talk to some producers, let me know, and we’ll connect you.

Robert: Right now “Yellowstone’s” stealing the limelight. And that’s not exactly reality in my world, but nonetheless, it does drive a lot of people out here.

Meb: Well, see, that’s a perfect segue, you’re getting all the people that are, you know, interested. There’s clearly a market for it. We’ll start at the beginning. So, you originally were P Equity Research in the beginning, right, like, your background pre-starting Beartooth?

Robert: “Wall Street” was, you know, original. I worked for Morgan Stanley in the kind of dot-com boom and bust and then did business school on the West Coast. And after that, then did the PE thing, yeah, in Silicon Valley. Really, I think that the origin story probably starts, A, with a highly supportive wife, and, B, with a class in business school that was called Environmental Entrepreneurship. And there was the way.

Meb: Oh a series of…

Robert: Yeah, yeah. It’s crazy to believe that at Stanford Business School they, 20-something years ago, taught environmental entrepreneurship, but they did, really a formative class for me, because it presented a whole series of case studies. You know, the case studies were all about companies that were doing a good thing for the world, and as a result, doing better financially.

So, I had always thought there was this trade-off, you’re going to do something well, socially, environmentally, you’re going to make less money. If you’re willing to make less money, you can do something good for the world or no money. But it kind of blew that idea up for me and said, “These companies are using the environment, in this case, as a competitive advantage.” This is like Trex, the decking maker who takes, you know, recycled plastic and turns it into decking, park benches, etc. A whole series of other studies like that, and like I said, kind of blew my world. And I said, “Well, if you can do something that does both i.e. makes more money than you would otherwise and does a positive thing for the world, why wouldn’t you do it?

Meb: Where was the kernel of inspiration for this idea? Where did that start to germinate?

Robert: Probably my former partner, Carl Palmer. He, at business school, had come from the conservation world and had really seen the fact that there’s just not enough dollars going into land restoration and land protection, particularly in the Western U.S., Greater Yellowstone Area, in particular, is what we were focused on. So, where can one find additional dollars for that restoration and protection of these degraded lands, these important lands? Well, the really obvious answer is investment markets. And so if you could take a very small drop out of all the dollars that go into the public equity markets, or go into the traditional private equity markets, and put that towards conservation and restoration work, you’d have just an amazing flood of capital going in towards rehabbing lands.

And so, I think that was really his thought process. So the two of us…he started doing that on his own post-business school. And after my little stint in private equity, traditional private equity, we joined together to form Beartooth. And at that point in time, really, the thesis, as I described, was to find degraded ranch properties that are ecologically important, but needed some TLC, and apply that TLC, and then resell them in fixed-up form.

Meb: So prospective investor thinking about this, you know, they’ve got a portfolio, stocks, bonds, and they’re looking for something not correlated, what’s the end return stream for these types of investors? How should they think about it?

Robert: Yeah, that is a great question, and one I’d love to talk about because it’s many-faceted, meaning there’s a traditional financial return. And that’s our core fund product. We’re trying to put up a good solid market-level financial return. But we got a whole bunch of people in that vehicle, who love other types of return, right? Like, they care about that elk migration corridor, or they care about the fact that grizzly habitats getting protected. They care about that a ranch next to Yellowstone is never going to have massive development on it. They care about cold water and the restoration thereof, etc. So there are all these environmental types of returns. And what we see, Meb, and this has kind of been almost a COVID event, although I think these people are thinking about it beforehand, is some of them are pushing us to do other types of deal, where they’ll approach me and say, “Look, I don’t need a financial return. Just get me my money back. But what I want to see done with that money is, you know, again, protect that elk migration corridor, let’s make sure that the path of the pronghorn antelope never gets developed.” Those are the types of returns that they want to see.

And so we’ve done a number of deals now, in which folks have said, you know, I’ve got a $10-million portfolio and I want to get zero financial return on it. I want all these intangible, all these environmental types of returns, and put my money to work that way. So the beautiful thing with that is, we can do deals that don’t work for the funds, you know, there of course, because financially, we don’t have the same high bar. And we can use some of those dollars to help leverage the funds’ returns. And so I think it’s the way we as those who have been incredibly blessed and lucky in this country need to think about investing.

Like, Jed Emerson is a fellow who I used to…still know. He talks about a blended value proposition, in which some portion, you take the traditional portfolio diversification, you need some stocks, some bonds, some international, some, you know, non-correlated stuff like real estate or minimally correlated stuff. Well, let’s think about that from a social standpoint. And folks who have the means should be thinking about, not just how can I maximize my financial returns but also, how can I maximize these other returns. If our government is giving me excellent tax benefits here, and I’m not covering the cost of such and such thing, or I don’t feel there’s enough dollars going towards conservation, well, what if I simply did a low financial return a 1% or 2% or 3% or 4% kind of financial return? And at the same time, I know that my family and I are protecting grizzly habitat. I’m keeping the grizzly from going extinct. And this is a real-world example. I mean, this is an investor of ours. Like, that’s what they care about. And I think that’s an amazing thing. And frankly, more people should be thinking that way.

Meb: So, when you guys got started, give me a little on the timeline, what year might have this been?

Robert: 2004, I think, is when we started working together. It was at the proverbial Silicon Valley. Literally, I had two dogs and effectively was more or less living in-law unit garage. And so, we go over there every day and sweat it out in the garage for about a year.

Meb: So this is sort of pre-financial crisis. Walk me through kind of like the beginnings of, all right, this is our thesis, how does one start to go about finding… I mean, there’s, like, to my knowledge, you can’t…I mean, I get some of these catalogues in the mail now, but these are also probably the ones that are not a value arbitrage. But this is like, “Hey, here’s this premiere ranch.” It’s kind of like ranch porn. “Here’s like a $20-million property, Meb, you can never afford, but it’s beautiful.” So you can just flip through this picture book. But there’s no Zillow, to my knowledge, of ranches. Maybe there is now today. But particularly back then, like, how does one even begin to research in that world?

Robert: Well, it really became my night and weekend job. So the background, prior to what I told you, is I grew up in Minnesota, but my family bought a place in Cody, Wyoming, when I was in middle school or something like that. So that became really my home as I grew up. And I saw this work on our own property, right? If you take a creek that’s been degraded, a wetland that’s been degraded, the creek, let’s say, had been put in a ditch, the wetlands been drained, if you spend a little money and restore that creek, restore that wetland, it truly is an arbitrage. You’re making that land far more valuable than the dollars you put in.

So, I saw that, again, segue to Morgan Stanley, Wall Street private equity world, you know, didn’t see how that would ever impact my life until then. As I was doing the traditional private equity thing, I met with the guy who would become my partner, Carl, who I mentioned earlier, and learned, and understood more what he was doing, and yet I still had my traditional private equity job. And I started trying to create a ranch index. My nights and weekend job became, like, well, is this an investable asset class effectively? Nobody else is investing in this asset class. You’ve got timber, TIMOs, etc., that seems to be working. There’s even some conservation-oriented ones, Lyme Timber, Conservation Forestry, etc. They’re doing great work. This is back in 2003, 2004, etc.

But you couldn’t turn to a fund and say, “Well, here’s what your returns could be.” Frankly, you couldn’t even turn to any kind of index because, particularly the areas we focus on, Montana, Idaho, and Wyoming, and they’re all non-disclosure states. What that means is that the public recording, the public records, the tax records are not done based on market values. And so, if we go and sell a ranch or buy a ranch, there’s no requirement that we disclose the purchase price, sale price, anything like that. And so what you end up with is information being put in a whole bunch of silos. An appraiser worked on a particular deal, they know what the value is there, banker worked on a particular deal, they know what happened there, broker, etc.

And so everybody kind of has their own little silo of information. But there’s not kind of an aggregator of all that. There is no Zillow. MLS exists in Montana, but people don’t put ranches on it. And so I started trying to construct that and eventually came to the conclusion that there really was something there. And frankly, if you compared it to traditional asset classes, there was a lot there. The highest correlation to any other asset class was to timber and farmland, as you might expect, that has only a 0.4 correlation. It’s way different. And frankly, when you looked at like international equities and small caps and stuff like that, it was inversely correlated. So more or less, the riskier the traditional asset class, the less correlation with ranch land.

And so that, frankly, kind of gave me the push I needed to say this was an investable asset class, left the private equity job, joined the guy who became my partner, Carl, and we started this thing up. And probably by that time, it was ’05, kind of toyed with, are we doing one deal at a time? Are we going to create a fund? Ended up going down the route of a fund. And, you know, you mentioned the financial crash earlier, well, thankfully, we got out in front of that, raised money in front of that, you know, and thankfully, we started investing it ahead of that, too. So, we had some tough sledging there early on but lived to tell about it.

Meb: Anyone that kind of survives the main recessions, bear markets, crisis, bubbles, certainly has the scars, but also the fortitude and the resilience, you know, to make it through. We sympathize with that experience because we got started about the same time. All right. So inefficient market, not a lot of information, this is like a classic, you know, investing potential for value-add opportunity, right? Like, we talk about this all the time, like, you know, what value are most investors going to have being the thousandth analyst focused on Apple, right? Probably not a lot. But what chance are you going to have, you know, on doing something like this, where information not only is hard to come by, but you know, and in some cases, like, it’s not even disclosed, as you mentioned, in some states? It’d be fun to hear a little bit about how kind of you guys actually pulled the trigger and/or started acquiring properties.

Robert: Just touching back on the inefficient market comments, because that’s literally why I’m here. When I was ready for Morgan Stanley, I was that probably 100,000th analyst looking at blank. And in my case, this is telecoms, and then internet marketing companies. And I took that public equity experience and just said, “I’m not smart enough to do this consistently well. I’m not going to be able to do that.” So, hence, the shift to business school, and then private equity. And frankly, the private equity was a much more efficient market than I had expected. So, again, hence, the search for the inefficient market, and ranch land popped on, obviously, the list. You know, the other interesting piece about it, Meb, is that we’re one of the very, very few institutional actors in this market. Most folks we work with sellers, buyers, etc., they do one transaction in their lifetimes.

And they’re not doing, you know, several a year. And so, not only is information siloed, but they’re just not particularly sophisticated. It’s a retail market, we’re an institutional investor. And so that certainly helps as we’re thinking about valuation. On that note, the valuation note, this is really not only…because it’s a retail asset class, it’s highly emotional. It’s like, you go and see that house and your wife falls in love with it. It’s pretty hard to get yourself out of that situation, right? You’re going to buy that house. This is very, very similar. You get that ranch porn catalogue you mentioned earlier, you go and visit it, whether it be you, your wife, your family, your kids, you know, you have an excellent day out there, you catch a bunch of fish, and you see the bald eagle flying overhead. You know, you’ve got the elk herd in the distance, it’s like, wow, what is that worth?

Well, I don’t have a pile of information to know what that’s worth. The seller’s, you know, done one transaction before, they’re telling me, “This is what it’s worth.” Broker says, “That’s a pretty good number. Sounds about fair to me.” You know, frankly, we’re also talking about ultra-high net worth individuals buying these places, you know, sometimes high-net-worth as well. And so, half a million dollars, a million dollars, sometimes becomes a rounding error. And it’s what they want. And so that also helps to make this an inefficient market. So, getting back to your question now, you know, how do we first pull that trigger? Really, the first deal came to us thanks to what’s been a fantastic source of deals for us, is conservation organizations.

I mentioned to you that we focus on working on ecologically important properties. Well, we do that because there’s a bunch of advantages to that, the foremost of which is, of course, it’s worth it, right? Like, if you’re going to improve a property, you might as well improve a property that’s important to improve. By improve, of course, again, I mean, we’re going to restore wetlands, creeks, get rid of nasty structures, get rid of wildlife-unfriendly fencing, do things that are going to bring more wildlife here, which by the way, again, that’s why someone’s going to spend a few million dollars because they want to see a pile of wildlife on their place. They don’t want to see it on their neighbor’s place while they’ve got a junk pile going on theirs.

So, again, you’re doing exactly what that end buyer’s going to want, but you’re also improving it. You’re making it more valuable from a conservation, from a standpoint that the environmental world cares about. And so, we get a lot of deal flow from conservation groups. And that first one came from The Nature Conservancy of Idaho, who said, “Hey, there’s a really important property, we would love to see protected. We’re not in a position to be able to buy it. It’s got a spring creek on it that needs some restoration work.” We came to the table and said, “Well, we’ve got the money, but we’ve got to figure out whether this fits the investment thesis, the mandate, we’ve been given.” Worked through all that, we solved an access problem, we restored a creek, meaning a legal access problem. Probably worked on our physical access problem too with a new bridge, put a cute little cabin on the place, and turned what was kind of, I’m going to say, junk, and no offence to the prior owner, they just have different priorities. They wanted to graze as many cattle as they could.

We wanted to create a family retreat, very different priorities. And that’s, again, where that arbitrage is. Cattle property is only worth X, you care about how much water’s flowing through the place, how much grass has grown, how many cattle you can put on there, as opposed to, you know, the value we’re after, which is how much is that highly emotional buyer going to pay for the wonderful retreat in Central Idaho, not far from Sun Valley. So that’s what got us over the hump, and that was the first deal we did.

Meb: And you guys still hold that or have you sold it?

Robert: No, this is probably back in 2006, or so. And so, that was long gone.

Meb: Do you have a target holding period? Is it kind of fix it up and just turn it around, or is it something where that depends?

Robert: Well, it depends. We really focus on a multiple of invested capital. Most of our investors are driven by cash-on-cash returns as opposed to IRR. That was one of these learning experiences for me. We initially targeted an IRR. And frankly, by the time we buy a property, let’s say, you’re in time zero, we go through the process of getting all the permits we need to do the creek restoration, wetland restoration, anything that’s going to involve the state approval process, probably Army Corps of Engineers, you know, we may be another six or nine months out from purchase to be able to figure out what we want to do to that actually getting permits. So, maybe by that time, we’re all the way out to a year post-acquisition. Then we go in there and we make a freakin mess, Meb.

I mean, we’re literally tearing up stuff everywhere. We’re putting a creek back in a channel it inhabited 100 years ago. So there’s a lot of dirt flying around. And it doesn’t look very pretty, frankly. Then we come back in and plant a bunch of trees, reseed the grass, etc. And this is just an example of, like, one type of restoration that’s occurring on a ranch that probably has four or five of these projects going on at one time. But you bring a potential buyer out the moment you finish, and they just see a sloppy mud pile. And, frankly, the wildlife and, talking about creek restoration, the fish haven’t started to re-inhabit the place that they didn’t know wasn’t inhabitable for the last 100 years in this example.

So, it takes time. Probably two or three years from that point in time, you’ve got the grass coming up the knee high. You’re never going to know any work was done there, the fishings excellent, etc., that’s then when you want to start selling the property. So, we’re now at year, kind of, three to five since our purchase, that’s tough to generate a strong IRR at that point in time. So we shifted to multiple on invested capital and, you know, made the choice, then, not to try and sell these things fast for a high IRR, but a low multiple, and instead said, “We’re going to maximize for the multiple, thus we’re not going to list it until we’re at that point where it’s really at its best.”

Meb: There’s a lot of different ways we could go. But maybe tell us about just like another property you sourced and kind of…because I imagine they’re all different, right? And I imagine it’s just an endless pit of due diligence, like, looking at some of these because, you know, you buy a house, and I feel like that world is, you know, pretty structured, and the value add of the improvements is pretty well-known. I mean, even Zillow and others now talk about, like, what color the doors are, and what has the most, you know, impact on a very quantitative factor-based sort of model. But, you know, I imagine this is a lot more inefficient and varied, and by state too. Maybe walk us through another property and kind of we’ll talk a little bit about kind of what y’all did.

Robert: Yeah. There are a lot of fun examples there.

Meb: How many of y’all been through at this point or in process, as well?

Robert: Oh, I think we’re in the 30s, now, Meb.

Meb: Oh, wow. Okay.

Robert: Yeah, high 20s, low 30s, somewhere in that range. Maybe one that I’ll pick for its interesting nature. This is South of Jackson, Wyoming, you know, recreational hotspot, right? So, we went to an auction for a different property. Meb, literally sat next to a woman who was at the property, sort of talking to her. She calls a couple days later and says, “We’re not buying that property.” She says, “Hey, I’ve got a friend who manages the ranch and she’d like to talk to you.” I said, “Okay, kind of mysterious but let’s do it.” So we talked to the ranch manager, 30-plus years ago, a group had developed about 12 miles of Creek and South of Jackson. This is on North Cottonwood Creek and has to are to put together home sites.

And they had put home sites in, they’d placed roads in, they’d put in power, you know, they’d done it all. But the pitch was that everybody was going to stay in one location and actually just share a common space to use. So the rest of the ranch had never been developed except for one spot, but she ended up having nine different owners. And she saw the writing on the wall that they were going to be sellers in the next few years. They weren’t there yet, but they’d kind of been starving the ranch resources. And many of them had moved on in life and didn’t spend any time there, and yet they are footing a quarter-million-dollar-plus bill every year to be part of what effectively was a club.

It’s kind of like the country club or the gym you sign up for, right? And then you just don’t end up using it, and you wonder why you’re spending money on it. So, we started talking to her and really borrowing the tools of lower middle market investing said, “Well, how about we partner with you, and we partner with you to give you an ownership stake in this thing because you see a whole bunch of ways this place could be improved? You help us work with the nine different owners to kind of get them all on the same page,” because they had divergent views of what the place was worth, whether they wanted to sell or not, if they sold, what they want to do afterwards, all this kind of stuff, “and then we do this thing together.”

She didn’t have the funds to do it. We did. But she had the expertise and the connections. And so, we did precisely that. We worked with her to get each individual owner what they needed, signed nine different purchase and sale agreements, rolled what literally was a subdivision all back together into one big, almost 3,000-acre ranch. That’s about almost four square miles, three to four square miles, 12 miles of creek on the property, beautiful meandering creek, but it really needed some love. So, we bought it, worked with her as a part owner, and restored about 10 of those miles a creek. And several years later, then roughly two years later, we’re approached by a broker for a buyer who said, “I don’t know where else I’m ever going to find…” At that point, we had 11 miles, “…of creek that’s perfect for wade fishing, you know, just outside Jackson Hole, my clients have a place there. Can we talk about you selling this to us?”

And it was, frankly, ahead of schedule for us. We were not ready to sell, but you don’t look a gift horse in the mouth, of course. And so we engaged with them, and we’re able to sell it to them. They’re now happy owners in that place.

Meb: Just for perspective, when the listeners listen to this, when they hear ranch, like, is there a typical size range that you’re willing to consider, as well as value range, as far as…? What’s your wheelhouse?

Robert: Well, it varies dramatically by geography. So we did a different deal not far from Jackson, Wyoming, to South a Wilson, in which we bought a small property, smallest thing we’ve ever touched by far, 160 acres. Now, this is 160 acres completely surrounded by national forests. So your backyard is, you know, a million acres. It’s not 160 acres really. And for Jackson, Wyoming, 160 acres is enormous. And we’re talking, you know, typically we’re maybe 10 acres, that’s a big place. So, given that market, this was a very large property, despite it being the smallest thing we’ve ever worked on. The largest thing we’ve ever worked on is probably 5,000-plus acres, although we nearly closed on a 27,000 deeded acre place, which would have been just enormous.

And yet, interestingly enough, this smallest acreage we’ve ever bought was the most expensive on a per-acre basis, not surprisingly. You know, we’re talking $30,000 an acre just to get access to that. And this was many years ago, by the way, you’re not going to find that anymore, nor would you find that when we resold it. And yet, we’ve also spent $300 an acre on, you know, thousands of acres in more rural parts of the world. So, I’m trying to bookend it, you know, we love deals that are kind of in the $2 to $5-million acquisition range, we ended up usually putting 25% to 30%, 40% more of that purchase price into it for the restoration work. And then we’re kind of targeting things that are typically maybe 640 to a couple 1,000 acres in size.

Meb: So, how do you find these at this point? You know, you mentioned in the early days, the real estate index or the ranch index. And as you kind of went through the process at this point, I’m sure it’s a well-established kind of your process, and we’d love to hear it. But, like, is it a network of brokers? Are there now websites? Is it just auctions? Is it what… Like, how do you go about finding all these ranches?

Robert: Well, every time I think I’ve got a system for finding things, I realize I don’t yet, or I need to add another category to that system. Everything you said and more, Meb. I mean, the most recent transactions we’ve done have come from conservation groups, I talked about that earlier. There are all sorts of groups from The Nature Conservancy to Trout Unlimited, those being two fantastic partners locally here in Bozeman, Gallatin Valley Land Trust. We’ve got all sorts of different partners. And you know what, they have an, effectively, acquisitions force for us, meaning The Nature Conservancy of Montana has something like 30 employees dedicated to landowner stewardship, conservation easement stewardship, and really effectively knowing landowners.

We don’t have that big a team, period, much less dedicated to finding the next acquisition. So, if we can partner up with that organization, and, again, pick your different one, Trout Unlimited or The Nature Conservancy, you name it, in a particular geographic area, and have them pitch us leads when they hear that, “Well, you know, I was chatting with such and such person, and it turns out the neighbor is likely to be a seller because, you know, some patriarch passed away,” that kind of thing, like, that’s the scuttlebutt we love. We love that because then we’re able to engage directly with the landowner, figure out what they’re after. Frankly, right now, we’re working on a deal in which the owners don’t want to sell.

They own a giant piece of property, and they’ve got some challenges that they need to meet financially. And we’re going to help them meet that. And my firm belief is they get the hold on to, you know, the home core place, that is what they’re after. They might have to sell some outline parcels or something like that, but let’s get creative. I mean, we’ve done all sorts of different creative deals, whether it be options to the right to purchase us out in the future, whether it be a profits interest in the future value we create, you know, the obvious stuff like seller financing, you name it, we get creative, which really is not something I’m aware that anybody else is offering out there.

Every other actor in this market is either a buyer or a seller, and that’s a buyer or a seller of 100% ownership of a particular ranch. I mean, things as simple as, why don’t you keep the back 40 where your house is? I don’t need to buy that. We’ll take the, you know, thousands of acres that’s on the other side of the road. That usually does not even come up in a conversation with the seller. So we just try to offer a whole bunch of solutions, you know, to the sourcing channels, kind of, conversation, conservation groups, you know, occasionally appraisers. The contractors we work with, they’re wonderful partners. Brokers absolutely we’ve worked with brokers approaching 20 years now, and paid them a very large amount or cost to be paid them a very large amount in commissions. I mean, we’re, again, that repeat actor in a very retail environment.

Meb: My brother is a good example. I don’t think I’ve told this on the podcast, but my brother and I had some little piece of land on the Colorado River, and kind of remote, hard to get to, couldn’t use in the winter, undeveloped, and, you know, I thought for a long time, you know, “Hey, maybe it’s time to sell this.” So we had put up a for-sale sign so that all the rafters going by could see it and, you know, got some inquiries. But speaking to the inefficiency of this market, the property butted up against a newly purchased, very large ranch that was growing like wagyu cattle or something, and high-end, you know, beef. And they obviously need more land as well as access to water. And so, in which point, we were like, this is like game theory with my brother. I was like, “Well, this buyer seems like they’re probably cost-insensitive because they just purchased this plot for…” It was like a wealthy Kansas City, you know, businessman, for, I don’t know, it was like 30 million or something.

I said, “Let’s just name, like, I don’t know triple what we think it’s worth, like, just to see, like, anchoring.” And they just wrote back, they were like, “Okay.” You know, like, not even negotiation, they were like, “Okay.” And we were both like, “Oh, we should have said…” But however in the final contract I wrote in when they sent back for edits, I said, you have to include one cow, you know, the products of one cow, I forget how much a cow weighs, but what the eventual steak and, you know, output would be, and they kind of laughed, and they’re like, “That’s funny.” I was like, “No, I’m serious. Like, you guys have to include like…” And they’re like, “We’re not going to be in production for, like, you know, six years or something.” So they’re like, “Here, you can afford to go buy a few steaks with this.”

But it just goes to show, it’s a real-world example of, like, how…and I actually got a text yesterday, apparently the for-sale sign is still on the land for some reason. People keep texting me about it, but so it’s sold, listeners. But I think that’s a…like, it goes to show this asset class is just notoriously inefficient. You couldn’t have found it on Zillow, I don’t think.

Robert: Now, Meb, we’ve done some crazy things. We’ve offered to purchase land in a price fixed to gold. We’ve taken on, effectively, wild bison herd that the seller didn’t want to have to deal with. We’ve taken on all sorts of weird things and had all sorts of odd occurrences. It is an inefficient market. There’s a lot of oddities to it. Having said that, I’ll be the first to acknowledge it’s way harder to do this and make money than I would like, honestly. I thought this would be a little bit easier than it is. It’s hard. It’s a hard road.

Meb: And so, the word ranch can mean a lot of different things, I think, to people. It could be raw, undeveloped land. It could be, a big one for me, but I also think probably a big post-COVID one, is just space, and fly fishermen is a big one, hunting, cattle, even mineral rights. Is there a common thread or do you guys kind of do any and all?

Robert: Any and all, oftentimes overlapping in the same property. So, yeah, we’ll graze cattle or our neighbor, we’ll lease to the neighbor. At the same time, we’ve got a beautiful fly fishing creek flowing by. At the same time, you know, we’re worried about mineral rights, and water rights, and everything else. So, yeah, there’s a lot of… People in real estate, of course, talking about the bundle of sticks. And those get really interesting when we start talking about mineral rights, and water rights, and things like that.

Meb: So how many states are y’all in currently? Or, sorry, how many states have y’all operated in today? Is there, like, just two or three or is there a wheelhouse of specific states?

Robert: Yeah, I mean, we really focus on the Greater Yellowstone Area. So for those… You know, Yellowstone is about 20 million acres, you know, first national park. And really, it is the largest area in the lower 48 states that still has the flora and fauna that existed when white folks first showed up. So, there’s a reason why people go there to vacation, you know, not surprisingly. You’ve got bears, and you’ve got bison, you’ve got everything. And what’s interesting about the park is, of course, it’s not fenced, although wildlife moves in and out of the park, seasonally, daily, you name it. And so ranches about the park get bison walking through, they get grizzly bears moving through. And as you get further and further out that, that diminishes, of course.

But really, in this part of the world, the conservation groups are concerned about making sure that those wildlife have the opportunity to move, and move freely, especially in a changing climate. They got to be able to move North-South, they got to be able to move up and down in elevation, etc. And so, really, that’s really why we focus on this region of the world that I’m standing in, the Greater Yellowstone Area. It’s the most important area, I believe, in the lower 48 states. And so, there’s so much history here, too, of course. So, we focus there. We do expand beyond that. Most of the deals we’ve done have been in Montana, probably about 50% of them have been in Montana. We’ve certainly done Idaho and Wyoming, kind of outside that tight little Greater Yellowstone Area. We’ve done deals in New Mexico, Colorado, and California. I think that’s the entire list. But, again, we tend to focus on what we know well, which is that Idaho, Montana, Wyoming area.

Meb: I was going to say, I don’t think it’s going to be inefficient. But is Kanye putting his ranch up for sale now in Cody? I think I saw, post-divorce, that thing was…

Robert: Yeah, that’s for sale.

Meb: Oh, man, I guarantee that’s not probably an undiscovered gem, is it?

Robert: I looked at it before he bought it. Actually, I didn’t see what he saw in it, but that’s okay.

Meb: Okay. Well, if you are going to use it for a spaceport, or whatever he was building, I’m not sure, maybe it’s undervalued. Tell me a couple of stories, you know, as you kind of bought some of these properties, either some painful or fond memories.

Robert: Well, in the more humorous end, and then I’ll get serious with you. But the more humorous end, we’d gotten back a report on the quality of the structure on the place, the ranch manager’s house, this is as we’re considering buying a property. And it said that we had a termite issue. So I called the ranch manager to say, “Hey, we need to call an inspector here. Who would you recommend? Let’s figure out how to deal with this.” And upon sharing that information, she said, “Well, that’s great. I was going to call the lawyer anyways.” This is a very small town, by the way. And I said, “Oh, what’s this non sequitur, here? I’m not following the termite infestation to calling a lawyer.” She’s, “Oh, the lawyer’s also the exterminator in town.” I say, “Oh, well, okay. A, that’s interesting. B, why is it that you were going to call the lawyer?” And she said, “All because, you know, my dad used to matter as a place before me. And he remembered why it is that the title has this funny clause in it and wasn’t transferred correctly.” I said, “Why was that? That sounds, like, actually pretty important.” She said, “Well, yeah, that’s because that owner had been flying in prostitutes.” And so they’d literally, like, kind of taken back the land from him. So in one conversation, I had the lawyer who is also the exterminator, who was going to solve an issue regarding prostitutes for us. And…

Meb: It was just Monday morning.

Robert: Yeah, exactly. Quickly became Friday afternoon, but yeah. So that’s my fun one. I mean, I guess from the story standpoint, I think I love complexity and trying to get people what they want, right? Like, these are all… We tend to at least find focus, sometimes I wish we didn’t, on the big, hairy, complex stuff. Now, it’s got to be solvable, right? Like, I think early on you referenced, you know, what’s changed, that kind of thing. Like, early on, I feel like we used to focus on complexity, but not necessarily complexity that had a very high probability of success of solving. Like, now, we’ve gotten much better focusing on complexity that it’s a knockdown, easy thing to solve, but it’s still complex. And it may not be easy for everybody to solve, but we can do it.

So, my most recent kind of fun story is, I’m going to keep the names of the innocent by not involving them. But a situation in which a patriarch of a family passed away, kids don’t want the property, so they become sellers. Problem is, they don’t have the ability to have legal deeded access to their property. They’re cut off by a neighbor. Second, they find out later, after they actually get the title report, that they didn’t even own all their property, undivided interest. It was owned by a neighbor. So, all of a sudden, they’re trying to sell a property that doesn’t have legal access and has an undivided interest attached to it. And so, you know, there are about five other problems I won’t go into. But, you know, what are you going to do? Like, they’re stuck.

Frankly, they’re wealthy and don’t want to concern themselves with this. They just want to pay the state tax and move on. Hired a broker, broker, wonderful guy, I had a blast in the transaction with him, but he didn’t want to solve the problem either. I mean, he’s busy. He actually tried to solve it with a neighbor, the neighbor wasn’t too keen on giving away value that would help this be sold to a potential developer or something like that. They wanted to stay nice and wide open, so they didn’t really want to help. So, we came in. We were fortunate enough to be brought in by a conservation group, the conservation group connected us directly with the family, with the broker, with the neighbor, two different neighbors, by the way, we’re involved in.

Frankly, Meb, we just walk in and put all the cards on the table and said, “Here’s who we are. Here’s what we’ve done. Oh, we know you from such and such place. We don’t know you yet. But, you know, here’s some past work we’ve done that you might enjoy. Just who are we is really what we’re trying to share. And then what issues do you have? How can we help you solve a problem?” Well, it turns out the one who was holding all the cards and access wasn’t holding all the cards, they needed access from the same family. Turns out, we could find a creative solution for the undivided interest situation and get that individual exactly what he needed. And so, it was a long process, six-plus months, but at the end, everybody walks away happy. And that feels really good.

You know, we end up owning a place. Frankly, we’ve already solved all the problems with the property. So, the day we buy it, we’ve already put a multiple on our investment. Now, it comes at a cost of a lot of brain damage on my part and our team’s part, but we’re happy to do that. Neighbor ends up with what he wants, the other neighbor ends up with what they want, sellers end up with what they want. And, you know, it’s a win-win for everybody. What we often do is figure out who is going to value this property, or this portion, or this right, most? And so we did a deal in Colorado, not too far from Denver there, property that had been mined, and you still had mining tailings piles, 16 feet tall, lining the banks of the creek. Local broker, just doesn’t have a big network with which to sell the thing, probably followed your strategy, let’s put a sign by the side of the road and see what happens here. Not much happened.

We learned about it from a wonderful partner, broker, who said, “Hey, I think this could be something you’re interested in because there’s clearly some cleanup to do.” So, we got involved. Turns out that during our due diligence, we learned that the sellers of the property, the owners of the property, owned 500 more acres than they realized. This is one of these multi-generational things. And it’s just a fence that has been where it’s been and they never ran a title report to know what they actually own. So, anyway, we fixed the price in terms of absolute value, not in terms of a per acre number, of course. So that’s nice. Second thing, we were able to come in and clean up all of these gold mining tailing piles along the side of the creek, and podcast, hard to share pictures, but you see the before and after of this thing, it’s amazing, replanted, revegetated the whole area, got rid of the hazardous materials, got the state of Colorado, in this case, to sign off on no liability, etc.

And this was a big place, over 5,000 deeded acres, couple of leases, etc., and it was naturally split by a highway and another county road I think, etc. And so, really what we ended up doing is first aggregating, like, we bought some property from neighbors, and then we actually took it apart and effectively said, “Well, who values this most highly?” And I don’t mean in a subdivision way or anything like that, but the county wanted a piece of the land. The state wanted to create a hunting and fishing publicly-accessible area. So we did those two transactions. Some of the neighbors had a lease on public lands nearby, they wanted some additional deeded lands to run their cows on, and we sold to them. Then we ended up selling to a wealthy individual who wanted, you know, the rest for fly fishing with he and his son, and the rest of his family.

So, really kind of another beautiful story and lots of stuff to come to clean up, but once you’re done with all that hard work, you end up making some people really, really happy. And not just the usual suspects. I mean, right now, especially post-COVID, most buyers are wealthy individuals. You know, in this case, the state of Colorado and every member of the public who wants to stop and hunt, fish, hike on that land is a beneficiary, same with the county. Those are fun ones, Meb.

Meb: You’ve existed through a financial crisis, and then now, this pandemic, and who knows what the future holds. But presumably, and this is obviously good and bad, you know, that you’ve had a tailwind from this trend of, I assume, a lot of interest in the last few years in sort of the properties that you would acquire and sell. But also, I imagine it also pushes up the potential cost of acquisition as well. Talk to us a little bit about the last couple years through COVID, and kind of how that experience was for you guys, and then the insights there. And Yellowstone too, you guys got a double whammy, “Yellowstone” show, and then also COVID happened at the same time.

Robert: Yeah. I mean, the “Yellowstone” one’s funny, because I’ve been interviewed by reporters, and, frankly, one of the first questions that they tend to ask is, do I look like John Dutton and do I wear a big hat, and, you know, whatever shirt he wears? And I say, “No, I’m kind of more of a Patagonia vest and baseball cap kind of guy.” But that crushes most stories because they want that tie. But yeah, the first thing to know is I am no market prognosticator and, you know, when COVID first hit, I wrote our investors and said, “You know, hang on here. It’s going to be a tough sledding ahead here, I think we’re going to enter a period of illiquidity.” About a month later, I wrote our investors and said, you know, “Terrible to say, but this is probably one of the better things that’s ever happened to us.”

And so, now, with the benefit of couple of years hindsight on, unfortunately, of COVID, I think, what we’ve had occur, and frankly, it’s not just COVID, it is COVID plus really ties to COVID, things tied to COVID like that desire for open space you mentioned, like, really, the speeding up of technological adoption. I mean, we’re doing this over Zoom. And I don’t think I’d ever done a Zoom meeting pre-COVID. Now, it’s practically all I do. I never get on a plane anymore. And so, what that’s done for folks is allowed them to work from anywhere. And that is part of that housing boom and Bozeman, but that spills over to the ranch outside Bozeman, to the ranch outside Jackson, Wyoming, the ranch outside Sun Valley, especially for those folks who don’t really want to go back to the trenches. Why would they take that subway ride into Manhattan, or within Manhattan every morning if they don’t have to, work from home, do the Zoom thing?

So, all of the knock-on effects associated with COVID, I would say, have also driven things, things being increases in the pool of buyers for ranch properties, protests, frankly, in the summer of 2021, etc. You’re living in Chicago, and there’s protests nightly outside your apartment building, this is a real story from someone, of course, that guy wants to buy a ranch and just get the heck out of there, get that open space you’re talking about. Same thing, frankly, with politics. And I prefer not to go into politics, but whether you’re red or blue, people seem to think that they’re going to escape it by coming to a place where you get a lot more elbow room, and free space, and people aren’t going to either tell them what to do, or they’re not going to have to be around a bunch of people who aren’t behaving the way they were behaving.

So, you almost could lose, given all those different things, if you were involved in the rural real estate market. But I would say that’s accentuated by those areas, the Sun Valleys, Aspen’s, Bozemans, etc., that have all the creature comforts. And so, those areas have experienced excess pressure above and beyond just the general, kind of, I want something rural, “Hey, it’d be great if I get something rural and still be able to drive in town for a great dinner, and then drive, you know, 20, 30 minutes back to my home, my ranch.” So, we’ve seen a lot of that… You know, our investment model is really designed to work no matter what the market’s doing. I mean, sometimes we’ll get a nice discount on a property because of something funky going on in the seller’s situation, but oftentimes, we’re paying market value given what that property is. And that’s the key, what that property is. Because if that property is a degraded, I just described a minute ago, formerly gold-mined property with hazardous materials on it, who wants to buy that? No one wants to buy that, at least not at a reasonable price.

So, you know, we’ll pay a reasonable price for it, baking in the amount it’s going to cost to clean it up. And then once we’re done with it, that’s where that kind of arbitrage comes in. Because I’ll tell you what, the cost of cleaning up was a small fraction of the increase in value that was added to that property. It looked like a horrible liability. Frankly, it had physical piles like it was a horrible liability, a horrible mess, a horrible thing to have to clean up, but it’s not when you get down to it. And if you’ve got the right contractors and you’ve got the right relationships, and you know how to deal with risk, and things like that, which, by the way, I don’t claim to be an expert at all this, we’re always learning, we make more than our fair share of mistakes, but your typical buyer in this market doesn’t want those problems. And they perceive a lot of liability and a lot of risk, whereas we’re not afraid to spend the time and due diligence to understand whether there is real risk there, in which case, we’re not going to touch it, or we can overcome this, and preferably we can overcome it before we even put a dollar into the purchase of that ranch.

Meb: Do you ever consider owning and operating a ranch? So, like you say, you buy it, and then you take a look at it, and you’re like, “Wait, just kidding, this could actually be a pretty nice income-producing property. And we’ll just hold on to it,” and, you know, whatever that means. There’s a lot of different ways for it to be income-producing. But is that something you guys would ever consider or just not part of the thesis?

Robert: Well, yes, in that we’re trying to create as much cash flow of the property as we can while we own it. Having said that, usually, the first thing I disabuse potential investors of is the fact that we’re going to be writing them a dividend every year. Not going to happen. First of all, even if you stacked up all sorts of different revenues, from hunting, from fishing, from agricultural leases, from a VRBO lease, you’re still going to get yourself a 1% or 2% kind of annual return. It’s not what a typical investor is going to want.

Meb: Not material relative to what…

Robert: It’s not material compared to what you paid for the place. Exactly. It helps stem your losses, etc. We did a bit of timber operation, a sustainable timber operation in which the harvest and sale of the timber associated with the property fully paid for all the restoration work we were trying to do. That was kind of cool. So, in a sense, it can keep money in your pocket, as opposed to actually putting more money into your pocket. So, that’s the first thing I’d say is we’re not farmlands, we’re not timber. But the difference here is, on the negative, we’re not generating that kind of cash flow. The positive is we’re really buying distressed assets and fundamentally adding value. So, a timber fund isn’t saying, “Well, there’s some distressed timber here, and we can add value to it by restoring it somehow.” That doesn’t happen, really farmland, maybe a little bit more distressed farm, we’re going to pile a bunch of money into it, make it more valuable, change the irrigation regimen, etc. There’s some of that, but that’s just way more efficient. And the value creation, I believe, is far lower than what we’re dealing with.

Meb: Decision to be a B Corp, how hard, challenging is that? And kind of what was the thinking behind it?

Robert: There wasn’t a lot of thought behind it, I’ll tell you that. And this is X many years ago now. And really, my partner at the time drove the process, really, with the right intention, I think, which is, why wouldn’t we? Why isn’t everybody a B Corp? If we can do this, we should. It’s kind of an obligation, especially given we want to treat our people well, we want to treat the planet well. We’re improving the environment here anyways, like, it seems like a no-brainer. It has gotten harder to stay a B Corp for us because we’re not a corporation making widgets. We’re not focused…as much as I’d love to be, I’m not focused on, you know, hiring more people of different backgrounds. I’d love to. And we do when we try to make a hire, but, Meb, we’re a five-person team. You know, we’re just not adding people left and right.

And so, I don’t want to give ourselves a pass because of that, but we’re really a B Corp in, like, the environmental sense and how-we-treat-our-people sense. And so, why? Because it felt like the right thing to do, and I think it is. Honestly, if we didn’t get the certification, it’s not going to change how we operate. We’re going to operate how we operate. Now, I’ll go on a small tangent here for you, and hopefully not make too many enemies. But the impact investing world is big on surveys, kind of like B Corp, certification, etc., so that you get on their platform or so that they can tell their clients, you know, what you’re all about, and really the end result being, what’s the impact, you know.

What are they going to tell the client, like, “Hey, climate change has been reduced by X many tons of carbon or something like that, or we fired X many more people that are from a different sector.” And the challenge I have with that, really, is that we just don’t fit in a bucket. We’re so different. We’re so unique. We’re fundamentally altering properties. And as a part of doing that, restoring wetlands and creeks, etc., that’s sequestering carbon. Can I tell you exactly how much? No. I can’t put up a score for that. We’re doing things, we’re hiring people locally on a rural level, you know, all sorts of things like that, but it’s having a huge impact, like, from a touch and feel and even size standpoint, but it’s not something you can very easily quantify. And so I, you know, put our stats up against almost anybody from a how much carbon sequestering standpoint, piles and piles and piles of piles. How many wildlife are you, you know, preserving their migratory corridor, you know, put us up against anybody in that.

But it’s just those are the items that aren’t necessarily tracked, nor can we quantify them for a B Corp or an impact-investing-type survey. I mean, one of my favorite examples, Meb, is…we do keep track of kind of our own metrics on how we’re doing, but they’re the ones that make sense for us. One of my favorites that we added to the list after we worked on a property that had, I’m going to call it, wildlife-unfriendly fencing. And it’s just North of Yellowstone. And way back in, you know, 40 years ago, the former owner had, supposedly, I don’t know this to be fact, but had supposedly built a super-high fence, it’s called page wire, meaning it’s about four inches in diameter, you know, from floor to ceiling, i.e. you’ve got a 9-foot tall fence. And then it closed it in when you had a herd of Yellowstone elk in there at one point. And they locked the door on the Publix elk. Eventually, that was outlawed. You can’t farm elk in Montana. And then they started farming bison. We dealt with bison when we bought it.

But point is, we bought a property that had this impenetrable barrier for elk, antelope, other wildlife trying to move on this corridor North of Yellowstone National Park. Well, prior to that year, you know, a couple of would slip through. Prior to our taking down the fence, we’d see three somehow slip through this fence. We took it down next year, 30, year after that, 300. So those are cool metrics. Not to beat a dead horse, we don’t get credit for it in B Corp or an impact investing survey, but I don’t really care. Like, that feels good. And that is an amazing benefit for the wildlife and, frankly, for the public because they’re flowing off of public land onto more public land through private, etc. Those are cool metrics.

Meb: Yeah, as you kind of look back on all the deals and investments y’all have done, what’s been sort of the most memorable ranch you’ve been involved with? It can be good, it can be bad, anywhere in between. Is there one that comes to mind?

Robert: Probably that first big river restoration project we did. It was on the North Fork of the Musselshell River. This is one of those, as you asked earlier in the interview, like, why did you pull the trigger kind of things? It’s scary, because if you’re going to, in this case, spend $4 million, and then another million to do the restoration work, are the fish going to come back? Like, they’re wild animals. You can’t control if the fish actually show up. We were a year or so into our Beartooth existence. We literally had a river that had been ditched on the property. And so the thesis was, work with experts who can help us pull it out of that ditch, put it back in its natural meandering path, you know, plant a pile of willows and cottonwoods and Aspen’s etc., along the banks. I’m simplifying things, obviously. But you end up doing that, creating the right habitat in stream, outside of stream, and you’re going to bring back fish, and all sorts of other wildlife. So what we bit the bullet, bought it, and went in, and got after it. I mean, so many things did and could have gone wrong from massive flooding events that first year to all sorts of things that kind of threw a wrench in our plans. In fact, I even had an investor come and fish it just as we’re starting to do the restoration work. And I think he was testing us out and effectively, I think he must have been thinking, he didn’t say this out loud, but must be thinking, “What have I done with my money?”

Like, this place is a you-know-what hole and left in kind of a hurry. Well, two, three years later, we had them back. The restoration work had taken hold, it looked better, it fished better, etc. You know, I met him after he fished all morning. And he was sitting down for an early lunch. And I said, “Why are you back early?” He said, “My arms are tired. Got so many fish, so many big fish, my arm is physically tired, and I think I’m done for the day.” And I thought, you know, that’s, like, the best praise I can get. We did it. It worked. And, by the way, it almost always works. Because if you do the job, right, and that really requires the right partners, not everybody can do great creek restoration work, like the folks did on this one. But the fish will find it. It might take a year or two, but they’ll be there. And so, in this case, you know, it worked from his standpoint. What I find shocking on that deal also is that, on the banks of that, what used to be ditch, you know, now Creek, is basically bare land.

They just grazed the thing into oblivion, just too many cattle, that had been a focus before us. And so…too many cattle, I should say, in an uncontrolled manner. Cattle can be a great restorative tool, happy to get into that if you like. But in this case, they were not, they were a destructive tool. And all the planting we did and the rest that we gave it in the fencing to keep cattle out of the bottom land, etc. And I walked through it with my, at the time, I don’t know what they were probably as old as your kids, kind of three and five or so, in my case, 9-year-old daughter’s in the birdlife was just incredible. There was all the sounds you could hear. They were different from just kind of a moonscape before. And the kids were like, “Daddy, you know, it’s so different. There’s so much wildlife here. We jumped a little deer. We saw the fish, etc.” And, I mean, to me, that’s a memory, right? Like, what else can we do that’s better than leave the world a better place for our kids, right? Like, that was that moment for me.

Meb: Yeah. Let’s talk about investors for a second. You mentioned one of them got to go fish on the property. Is that like a benefit? You’re like, “Hey, you guys can come visit these while they’re in the portfolio?” Do you have to, like, subscribe a certain amount to get access. How does that work?”

Robert: Heck, yeah. Well, I encourage any of our investors, anybody who thinks about being an investor, to come and fish. There’s no better way to see our work than to be able to… This year we held our annual meeting, actually, it’s kind of in the midst of restoration. We try, and if people are willing, to get them there before, get them there after. Now, the before usually is kind of glum and, “I don’t know what these Yahoo’s are doing” kind of feeling. And then the after is like, “Oh my, gosh. Don’t sell it. I want to keep using it.” We had that conversation with an investor recently. And, you know, we’re not a country club, we’re not a club, we’re not some group thing for folks to come and join, and get to fish. It’s a side benefit. We’re here to bring more dollars to conservation, improve the world, and make a good financial return in the process. And that really doesn’t involve your usage of the property.

Having said that, we’re happy to get people on the property. And they absolutely love it when they come. And it could be fishing. It could be alchemy. It could just be a horseback ride or a hike. I mean, it’s a neat way, actually. I’ve talked to a number of folks who have said, “I think I want to buy a ranch someday. A, I’m smart enough to know I don’t know what I’m doing. B, I don’t really want to deal with managing it yet. So maybe I can try a few out via your fund and pack.” If that’s why you want to invest, that’s great. We’re happy to have you involved.

Meb: Investors interested in you guys, is your fund open? And if so, is it rolling open? How does it work?

Robert: We are not open at the moment. We’re currently investing in our third fund. I’m sure we’ll start the race for the fourth fund in the next half a year or so. Love to have a nice overlap there between funds three and four. We, early on, made the decision not to go down the like, “Hey, you’re an investor only in this ranch. Only in this particular property, only this investment category.” Instead, we said you’re an investor in everything we’re going to do with this pool of capital. So it’s a 10-year fund life and we’ve got a five-year investment period. If we make investments during that period, you’re going to be part of it. And frankly, most people enjoy that risk, obviously, risk mitigation, diversification within the fund. You can kind of get a series of vintages within the fund, if you will, meaning, we’re investing across a five-year span. If you look at the numbers and invest across a five-year span and, you know, sell five years later, it’s almost impossible to lose money, just because generally the market is increasing it in inflation plus a couple of points.

That gives us a nice ability to get in, some at the top of the market, some of the bottom of market, you know, and everything else kind of in between. Again, I talked earlier about our investment model is somewhat…what the market is doing is somewhat irrelevant to us. Again, we’re kind of paying market-ish values, albeit sometimes a lot better because of the lack of information in the market, the inefficiency, but most of the time, really, the value is coming from the work we’re doing, the value we’re adding, those million dollars we spend that adds, you know, $4 million to the value of the property at the end of the day. I’m not implying we’re putting up 4Xs, I’m saying the dollars we put into the ranch, you know, those dollars are coming out as multiples of themselves.

Meb: So, if investors want to reach out, sign up for the waitlist, if somebody has a ranch to sell you, if somebody has a ranch they want to buy, what’s the best place to find more information on you guys and to get in touch?

Robert: On our website is great, beartoothgroup.com and Beartooth like the bear. Beartooth mountain range is a famous mountain range in Montana. So beartoothgroup.com. My email, you can email me directly. I do get plenty of emails, but I don’t get so many that I wouldn’t be happy to correspond with somebody. It’s simply robert@beartoothgroup.com.

Meb: Well, next time I’m in Bozeman, we’ll host a meet-up. We’ll do a happy hour meet-up, hopefully, sooner than later. I need to get back. It’s a special place. Robert, it’s been a blast. Thanks so much for joining us today.

Robert: Meb, thanks for the time. It’s a treat.

Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback at themebfabershow.com. We love to read the reviews. Please review us on iTunes and subscribe to the show anywhere good podcasts are found. Thanks for listening friends, and good investing.