Feb 8, 2022
Mason Moreland is responsible for growth, process improvement, and finance/risk management at Texas Vineyard Country. His superpower is underwriting unique assets, and his passion is finding overlooked opportunities and seizing them.
Though he focuses on the Texas vineyard niche currently, throughout his career he has worked in residential real estate investing, oil and gas, and environmental consulting. He is a herpetologist and is an alumnus of Texas Tech University. He likes to spend his time with his growing family and do anything that is challenging!
[00:01 - 03:04] Opening Segment
- I introduce Mason Moreland
- His journey from selling geckos to underwriting vineyards
[03:05 - 08:00] Major Assets in Wine Real Estate
- How Mason found gaps in the vineyard space
- The biggest asset in the high plains of Texas
- Mason breaks down what a mid-price fruit means
[08:01 - 16:22] Exit Strategies in Wine Real Estate
- How to convince investors to invest in a wine business
- Don’t miss Mason’s discussions about their exit strategies
- Tax advantages from investing in wine real estate
[16:23 - 19:28] Final Four Segment
- A tool or resource you can’t live without
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- Google Earth
- onX Maps
- A real estate mistake investors should avoid
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- Not telling everyone about your business
- You should network whenever possible
- Your way to make the world a better place
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- Giving back to their community through their church
- Reach out to Mason
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- See links below
- Final words
Tweetable Quotes
“Thankfully, with what we do, it's so competitive, that we really are able to offer well over 20% yearly cash-on-cash stabilized.” - Mason Moreland
“If I see a business that I don't know much about, I go figure out how it works, figure out how they solve the problems in their business, and maybe I'll find something that I can apply to mine.” - Mason Moreland
“Don't listen to people that tell you that your idea or your business is so special and so secret, you can't talk about it.” - Mason Moreland
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Email masonjmoreland@gmail.com to reach out to Mason or follow him on LinkedIn. Check out Texas Vine Country to learn how to invest in wine real estate!
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I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
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Email me → sam@brickeninvestmentgroup.com
Want to read the complete show notes of today's episode? Check it out below:
Mason Moreland 00:00
The best one I think is probably to, don't listen to people that tell you that your idea or your business is so special and so secret you can't talk about it like you need to talk to other people like the worst advice I've ever gotten, basically, the biggest mistake I made was early on thinking like oh, this is some big secret like no you just got to go out and raise five and a half million dollars it planted a huge vineyard and you know do all this stuff like if I don't actively network and be talking to people about what I'm doing and if you don't you know, you're gonna miss out on opportunities big time.
Intro 00:35
Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we will teach you how to scale your real estate investing business into something big.
Sam Wilson 00:43
Mason Moreland is a vineyard syndicator raising capital for developing and operating wine grape vineyards in the high plains of Texas. His company Texas Vine Country focuses on large scalable and mechanized vendor development. And as an aside and just almost weird note, he bred and sold geckos is a kid. I've heard of kids selling candy, I've heard of like, you know, all sorts of stuff, man, but you definitely grew up I guess, in the high plains of Texas, if you're buying and selling geckos, Is that about right, Mason?
Mason Moreland 01:14
Well, yeah, I think I'm a weirdo anywhere you put me for that but doesn't matter the geography, but yeah, I actually ended up going to school for herpetology. So yeah, studied all the scaly, creepy Karalis that nobody else likes. And yeah, I've been handling venomous snakes since I was like 12
Sam Wilson 01:30
That’s fantastic, man. I love it. Absolutely love it. Mason, there's three questions I ask every guest you come from the show. In 90 seconds or less, can you tell me where you started where you are now, and how you got there?
Mason Moreland 01:42
Yeah, I started selling geckos apparently, started out right out of school doing just my two environmental consulting. And I immediately started investing in single-family homes with my dad, my brother, so started buying, you know, one home at a time, bought one and lived in it did the whole house hack thing. And then after we got up to about, you know, like $3 million worth of single-family homes and townhomes the staff were like, isn't very scalable, right. So where we went from there was to look towards multifamily, right, like most people do, when they're trying to scale and grow. And we failed at our first deal. It was, you know, without a contract in the due diligence phase, and I kind of went down a different road, ended up underwriting vineyards and found that, hey, there's a big gap in the market here for me to attack using the things that I've learned in real estate. So where we are now is really that we've taken all those skills that we've learned in real estate, found the right team brought everybody together to make scalable, large vineyards, a possibility to attack the market gap that we identified. And now where we're going is we're using those same methods from business and real estate like syndication, you know, more sophisticated financing, and things like that to actually grow and outpace any of the competition in the area.
Sam Wilson 02:55
Right, man, that's tremendous. I want to dig in a little bit more on that. Rewind a little bit. You said, your first multifamily deal? It was you failed at it. What did that mean?
Mason Moreland 03:05
Yeah. So, I say we failed. I think we succeeded. Because we did the right thing. I think that's the key takeaway there it was, we tried to buy it off all by ourselves. So just me and my brother, my dad, and we got to the physical due diligence phase of things and had an under contract, and you know, to pay down all our, you know, non-refundable portions of our monies, you know, six a bit expensive phase, right, and got in there and started looking at things and it's classy property, you know, just safety and morally, we couldn't find a way that we could make money off of this place, essentially, to get it up to snuff where we felt the tenants were safe in there, it would take too much money, and we would make anything. And if we left it as is and continue to make money, it would be immoral for us to do that. So we decided to back away from the deal.
Sam Wilson 03:47
Gotcha. And so from there, then you found a market gap in the vineyard space.
Mason Moreland 03:51
Exactly. Just using that, you know, networking, like so I knew, you know, one of my friends worked for our current director of and your management started pinging him like, “Hey, give me you know, what do you know, what are you doing?” And met Rusty, started getting numbers and underwriting what they were doing. In the same way that we do here? There's a lot less sophistication and in the ag world, at least on this scale, you know, with vineyards and alternative permanent crops. You know, most people do it on a napkin. They're like hey pencils out, let's go, you know, meanwhile, I'm over here with my 19 sheet spreadsheet that's modeling out 30 to 50 years of a vineyard life with like, different refinances and all these crazy variables. So it's a whole different level.
Sam Wilson 04:28
Right, that is a whole different level. So now you guys are buying raw land and developing vineyards. Is that right?
Mason Moreland 04:35
Yeah. So the 10-second version of our business plan essentially is we take, there's a big gap in production for mid price fruit for wineries in the state of Texas. What we do is we go raise money the same way a multifamily syndicate would, run investors, we go out and we buy pieces of raw land that are currently in row crop agriculture. So their irrigated pivot sprinkler system on it and we go in and we install vineyards. And then we run them. And we do it in a West Coast-style like mechanize, two or three people instead of 40 to 60 and a half section, so drastically reduce operating costs and boost the yields by a lot.
Sam Wilson 05:12
Now the high plains of Texas, what's the water situation like there?
Mason Moreland 05:16
It's definitely one of the better areas where we're at, but it's very contentious. So water here is your biggest asset by far only followed by soil, because there is no surface water here. That's a very unique thing about the high plains. There's basically no rivers, it's all groundwater. So what happens is, it rains it goes into these small depressions called Playa Lakes, percolates down into the water table in the Ogallala Aquifer, and slowly recharges. So we use groundwater here to irrigate during the season, we need a little bit usually in the fall. So we have to be very careful to preserve that now with cotton peanuts, traditional crops, you know, you're using up to three-acre feet of water a year, grapes, I mean, we're pushing huge crops and still, you know, maybe a one-acre foot. So we're actually able to operate in areas where other folks have pulled out of your data crop.
Sam Wilson 06:06
Yeah, right. Yeah, ‘cause if your water uses a third that of your row-crop competitor, you can go in and do things that other people are getting your Oh crap, guys, if they if they're pulling out, they just can't. You use the term mid-price fruit. That means absolutely nothing to me. And so you have this opportunity to fill a gap in the market by producing by mid-price. What does that, break that down? I have another question to ask.
Mason Moreland 06:26
So let me give you some like concept of scale, right? So in Texas, our average price per ton, so it's all the fruit sold by ton. Okay, average price per ton for like a nice decent red grape is maybe like 2,000 to 2,728 and $2,900 a ton. And for a similar quality fruit in areas of California, where it's mechanized production, you can buy fruit for maybe seven or $800 a ton, even less sometimes. An equivalent fruit that you can find it down to $350 a ton in some parts of California, equivalent fruit in Texas would cost still $1,700, you know, $1,800 a ton even sometimes. So where there's a big gap for us is Texas produces you know, only maybe half of the fruit that they use. So that stuff that's between say, so on the price range of fruit, you know, you're looking at, you know, half of our fruit is basically not producing states, trucked in as bulk wine from the West Coast, right. So if you can't push that price of fruit below that, you know, $1,700 a ton in taxes, we will never be able to offer the same bang for your buck on the bottle of wine as California can't because it's still, you know, equivalent eight or $10 bottle of wine in California, you're just not going to find that same quality at that same price from a Texas wine right now. And that's really where the biggest gap that we're attacking is.
Sam Wilson 07:43
Yeah, that's interesting. I mean, I don't know anything about wine. Okay, let's just start there. But I understand that geography plays a large part of what a wine could taste like. So I mean, you guys have figured out that there's a region in Texas that you can produce decent wine. I mean, how did you even figure all that out? Where did you start on that process?
Mason Moreland 08:01
Standing on the shoulders of giants. So lots of people have been messing with wine grapes in the state of Texas for a very long time, you know, some of the first ones to get planted where, gosh, potentially, as far back as the 1600s, with, you know, some of the Spaniards that were coming through here, potentially planting some European vines, but people have been messing with vines. For a long time, the state of Texas actually most of the rootstock that vine sit on across the world right now actually originated in the state of Texas. So as native grapes, but you know what way we really figured out where can we do this is Rusty, our Director of Vineyard Management. He's managed vineyards from Lubbock, all the way down to Houston, which is like a nine-hour drive to give you some context of how big of an area that is. It's from 80% humidity to 20. Big climate difference, right? So what he's saying is, you know, the price just to operate in, say Fredericksburg, the Hill Country area, everybody thinks up for Texas wine. Dirty little secret is 70 to 80% of the grapes is actually produce up here on the High Plains because the operational costs are half just from the lower humidity, you know better when things like that less disease pressure.
Sam Wilson 09:05
Yeah, that's absolutely amazing. What are some projects you guys have underway right now? And what are some challenges or just kind of unique things that you know, because this is commercial real estate syndication. It's all business but it's all commercial real estate syndication still like Like what are some projects you guys have underway? What are some challenges you're facing? How are you guys overcoming those? I mean, what's that look like?
Mason Moreland 09:26
So we've got really two main projects going on right now, got our 2022 planting happening right now so got, you know, land under contract, got depot's and vines all lined up. The biggest difficulty and challenge with that one was definitely that was our first true syndicated vineyard and really figuring out how do we present an opportunity like this to investors where, you know, they're used to seeing, you know, maybe a five year hold period, and it's starting to cashflow within, you know, maybe a month or two of them buying a property where it's taken us five years to get up to full production and they're not seeing anything till year four, you know, and it's gonna last for potentially 50 or 100 plus years. How do we model this out and present it that was difficult, and then the other by far the most challenging thing I've ever done in my life. And I have three going on four kids. So it says something is, this custom crash facility that we're building is basically a winery co-packer. And what it does is it offers, you know, winemaking services, food processing, things like that other wineries does a service and the financing on that, especially in an area where there's nothing like that, you know, there's very few custom crush facilities out here in Texas compared to the West Coast. That has been incredibly difficult learning how to do that and finding the right people and networking. Just incredible.
Sam Wilson 10:38
What was the range? Let's talk dollars and cents? Well, I mean, tell us the size of the vineyard you're building right now.
Mason Moreland 10:45
So the size we're building, we set it based on how much can we keep one set of people and equipment busy full time, right. So we maximize our efficiencies, our economies of scale, it's about 300 acres. So it's 290 acres. And we've got room to add maybe another 10, 15 acres on there and still use the same set of equipment. But the raise on our typical size is a half square mile, which comes out to about 290, 300 acres of vines is about $5.5 million dollar raise. So your total capital stack is actually pretty equity-heavy in this. So you're going in with a pretty strong position on the property just because ag loans, you can only get maybe 65% LTV. So you're going in with pretty good strength there.
Sam Wilson 11:24
What do you say 65? Who finances those?
Mason Moreland 11:28
Typically, for projects like this, and a lot of ag projects you're gonna use like it's called an FCS, Farm Credit Service, is basically like a bank that operates within the ag space.
Sam Wilson 11:39
Got it. That's really interesting. Now you said that, you know, 5 million is pretty equity-heavy, the total project at 60, that really a $20 million project then.
Mason Moreland 11:47
Yeah, well, actually, because so like I said, it takes like five years to get to full production levels. So you're actually having to operate that thing for you know, four and a half years before you're seeing major, major major production, right? So you've actually got to raise money on the front end to operate to so it's about 5050 equity, debt. Free clothes.
Sam Wilson 12:06
What's the pitch to investors? I mean, that seems like that would be a hard pitch. Hey, we're gonna go great. grow grapes. We're not sure if we'll ever get it off the ground. It's gonna be amazing, or the good old suck. So the magic here, but what's that, like?
Mason Moreland 12:20
100%. That was the hardest thing to learn is like, okay, there's people that this is definitely not for, right? If you're looking for like, super high velocity of money. Yeah, probably not your guy. But that's okay. That's not my jam. Right? So, you know, what we had to do is realize like, okay, right, now, we've got really good returns, right? Stupid returns, if you're looking at just doing it as a partnership, like a JV, right, everybody's just putting cash in and going out and getting a loan and doing it within two or three partners. Now, if you're syndicating it, you guys spread that out a little bit. But to get the IRR, the so the return over time to match what people are used to, you know, that like 10 to 20 IRR in that range, you've got to get a pretty good yield on it. So thankfully, with what we do, it's so competitive, that, you know, we really are able to offer, you know, well over 20% yearly cash on cash stabilized. So it's, you know, it's different in that it's gonna last more than five years. So it's really for those investors that want to put their money in something that is going cash flow is going to be a large value-add, you know, you're going from, you know, a few $1,000 an acre to you know, $50,000 an acre in value. So, got a big jump, and then we'll see cash flow for a really long time coming off of it that tracks with inflation, so it's good for that. It's good legacy investment.
Sam Wilson 13:31
Right. Is there the hope that someday you sell these off, just like a typical, hey, five to 10 year, we're gonna get this thing stabilized, good to start making money, and then we're gonna sell it off? Or is there like you said, the plan to hold it long term?
Mason Moreland 13:43
You know, like everybody else, we build it in with several exit strategies, one of them is definitely to sell, you know, we want to build it so that it's attractive, gives us another opportunity. So our main exit strategy, so to speak, is the holding cash flow, right? But our secondary exit strategies are, hey, we need to build this, like the wine majors do on the west coast so that they're familiar with what we're doing and our operations make sense to them. So you know, we're looking at like the wine group, E&J Gallo/Constellation, how do they run their vineyards? And we take those concepts and apply them here. So that, you know, it's a seamless transition, if they ever do get interest in the state of Texas. Now, the other exit strategy, of course, is to you know, hold it and refi, you know, that's also a really great option to get a good slug of tax advantage capital as well.
Sam Wilson 14:25
Yeah, let's talk about that for a second. What are the tax advantages? Meaning, you know, a lot of times we're looking at the depreciation of buildings, looking at bonus depreciation, stuff like that. I mean, raw land and development is there. Do you have the tax advantages you typically do in other asset classes?
Mason Moreland 14:38
Yeah, absolutely do so, you know, we do cost segregation studies literally, like, you know, I've got, you know, like Madison specs and stuff to the people you see everywhere on multifamily doing the same thing on the vineyards because we still have major capital improvements that are going on to the land. Of course, you can't depreciate the land, but you know, when you have 43 truckloads of T-posts at you know, 230,000 t-posts And, you know, 1,000s of tons of wire, and you know, hundreds and hundreds and hundreds of ripples, and you know, a building and an AC unit and a bunk room for the staff and all that stuff, you've got a lot of things that you can depreciate. A lot of it's on a seven-year scale. Now, as things are sort of changing, that could all change, of course. So whenever you're listening to this, this could all be different when you're listening to this. But yeah, there are good tax advantages. And we do cost segregation and bonus depreciation where we can just like everybody else.
Sam Wilson 15:27
Right, man, that's fantastic. I love learning about this is a lot of fun. I love what you're doing. I love the unique pivot. I mean, it. That's one of the things that a lot of people are afraid to do is when they say, “Okay, I'm in multifamily, I realized I wasn't for me, we quote-unquote, failed. But then we saw another opportunity.” And here you are developing hundreds of acres and vineyards and doing lots of cool stuff. I think that's…
Mason Moreland 15:49
It's scary. When you first decide to do you think, like, am I going to do this? You know, it's scary.
Sam Wilson 15:54
Right, absolutely. Yeah. But here you are and…
Mason Moreland 15:57
Yeah, survived, you can do it too. Everyone else can. Find your niche.
Sam Wilson 16:01
Absolutely. Anything else you want to share with our listeners here? Before we jump into the final four questions,
Mason Moreland 16:05
You know, really, I guess, to talk about that, just if you see something that's interesting to you don't underwrite it? Like, if it's a business, you know, just figure out how they work. It's so cool. Like, I love doing that. And I still do that to this day. If I see a business that I don't know much about, go figure out how it works. Figure out how they solve the problems in their business. And maybe I'll find something that I can apply to mine.
Sam Wilson 16:23
Right, man, that's fantastic. Mason, thank you for your time today. Here we go. Final Four Questions. What is one software or tool you find you can't live without?
Mason Moreland 16:31
Oh, gosh, probably Google Earth. I’m a Google Earth addict. And since we do so much land work, either, so you're using CAD tools all the time, but just being able to bring it all into one program. Close second would actually be a hunting software, it's onX Maps, like “on,” the letter X, “maps.” It has, you know, you can use GPS on your phone offline with or without service if you download the maps beforehand, and it gives you property owner data, property lines, you can drop points is awesome. It's really good for real estate as well, as you know, if you'd like to hunt.
Sam Wilson 17:01
Huh, that's fantastic. I love that. If you could up religions avoid one mistake in real estate, what would it be and how would you avoid it?
Mason Moreland 17:07
Oh, absolutely. That first one. So two, but the best one I think is probably to don't listen to people that tell you that your idea or your business is so special and so secret, you can't talk about it. Like you need to talk to other people. Like the worst advice I've ever gotten basically, biggest mistake I made was early on thinking like, “Oh, this is some big secret” like no who's gonna go out and raise five and a half million dollars planted huge vineyard and, you know, do all this stuff. Like if I don't actively network and be talking to people about what I'm doing. And if you don't, you know, you're gonna miss out on opportunities big time.
Sam Wilson 17:42
Yeah, absolutely. When it comes to investing in the world, what's one that you're doing right now to make the world a better place?
Mason Moreland 17:47
And right now, I'm really trying to focus on giving back especially through our church. So any of the money that I'm making, you know, hasn't been good in the past with actually putting capital back in, you know, I've just been going, going, going working now. It's like, okay, I'm actually making some money and like, things are going good. Let's get back and make sure that our community is seeing some of that.
Sam Wilson 18:08
Yeah, absolutely. That's really cool. And hey, look, you know, they've got the provider of the communion wine right there.
Mason Moreland 18:13
I know. We actually had, so this vineyard is out behind us. Not all of our partners, but a good chunk, maybe like half of us are Catholic, and we actually had the Western Vanda Bishop come out, and he actually did like a blessing of the vineyard out at Rusty's house, and it was great. It's pretty cool.
Sam Wilson 18:27
Awesome. That's awesome. Mason, if our listeners want to get in touch with you, learn how to invest with you, or learn more about you, what is the best way to do that?
Mason Moreland 18:35
So guilty habit, I'm a LinkedIn junkie. I'm on LinkedIn all the time. So if you want to get me like real fast, just message me on LinkedIn or send me a connection request with a little message on it. Happy to help out any way I can. I'm an open book. Also, you can find us on texasvinecountry.com, that's our website and kind of shows who we are, what do we do, and how do you get involved?
Sam Wilson 18:55
Fantastic. Yeah, we'll make sure we put those, both of those links there in the show notes. Mason, thank you for your time today. I do appreciate it.
Mason Moreland 19:01
Hey, man. Pleasure, Sam. Thanks for having me.
Sam Wilson 19:04
Hey, thanks for listening to the How to Scale Commercial Real Estate Podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen, if you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners, as well as rank higher on those directories. So I appreciate you listening. Thanks so much and hope to catch you on the next episode.