Kyle Bass likes to bet big. So it’s fitting that the Dallas-based hedge fund manager, who shot to fame shorting mortgage debt in the lead up to the global financial crisis, is now fixated on the most abundant commodity in his home state: land.
The market for Texas dirt, Bass said, “is big, and it’s real.”
Bass, 53, is no stranger to bold macro wagers. In the past decade and a half he’s taken on Europe’s sovereign-debt market, China’s economy and the Hong Kong dollar, typically using esoteric financial instruments to make his high-risk investments.
Kyle Bass (Bloomberg)
These days, he’s snapping up swathes of largely undeveloped Texas land — a much more basic and tangible asset — as a way to attract some of the trillions of dollars earmarked for ESG-related investments.
Conservation Equity Management, an investment firm Bass started last year, has spent $90 million acquiring six properties totaling 37,000 acres. His haul includes a West Texas ranch featuring the ruins of a frontier fort, a heavily wooded timber tract in East Texas, a wildlife corridor near the Louisiana border, and a holding in the heart of a $240 million high-tech development outside Austin.
“I’m taking all of my expertise developed over decades of analyzing global macro situations and geopolitical situations and developing a thesis on Texas land as an asset class,” Bass said in an interview.
Land is attractive because of its almost limitless demand, Bass said, and it helps that Texas has plenty of it. There are 142 million acres of privately owned ranches, farms and forest in the state and values have skyrocketed. The median price per acre of rural land was $4,286 as of the second quarter, up 123% in the past decade, according to the Texas Real Estate Research Center at Texas A&M University. Based on recent average land values, the state’s raw land is worth more than $600 billion dollars, and that’s before factoring in potential revenue from sources such as renewable energy leases, conservation easements or selling carbon credits.
Demographics are key to the gains in the value of land — and Bass’s thesis. Texas’s population grew 42% to almost 30 million from the turn of the century through 2020. The Texas Demographic Center, a state-level entity affiliated with the US Census Bureau, projects it will have 47 million residents by 2050.
“We’re on the front end of a population migration that is going to last for at least a decade or more,” said Bass, who was born in Florida but raised in Texas. "People from the Northeast, people from the West Coast — they are going to constantly move to Texas, Tennessee and Florida.”