August 10, 2018
Founded in 2005, Beartooth Capital is a real assets investment firm that has acquired nearly 25,000 acres in the Western United States with the intent to restore and rehabilitate degraded wildlife habitats, waterways, and ranchlands.
Founded in 2005, Beartooth Capital is a real assets investment firm that has acquired nearly 25,000 acres in the Western United States with the intent to restore and rehabilitate degraded wildlife habitats, waterways, and ranchlands. The firm has managed nearly USD 70 million in assets and targets marketrate returns alongside conservation benefits, believing that financial and ecological value are naturally aligned. Beartooth Capital’s work creates positive environmental impact through biodiversity and wildlife protection and downstream water-quality improvements. After restoring its properties, the firm leverages its network of brokers, partners, and community members to find appropriate buyers, often likeminded conservationists who share its same values of ecological and wildlife preservation.
In 2010, for USD 4.1 million, Beartooth Capital purchased a 1,050-acre ranch near Bozeman, Montana, that had degraded water systems and wetlands. Degradation of one of the streams, a straight irrigation ditch installed generations ago, led to a fast water stream that supported little fish life. Another creek on the property had become full of silt, which leads to poor water quality and disrupts the natural food chain and vegetation.20 These two main streams needed significant work to improve fish habitats.
Beartooth Capital acquired the ranch because it saw an opportunity to generate both a good financial return and positive environmental outcomes, even considering the amount of work needed to rehabilitate the property. This suited the firm’s aim to target undervalued land and raise its property value by increasing its agricultural or recreational productivity.
The firm restored the ranch’s streams by deepening its main creek, re-meandering the irrigation ditch, adding gravel to the creek bed, and planting trees and bushes to provide shade. Though it was the only investor in this project, Beartooth Capital worked with Montana Fish, Wildlife, and Parks and Montana Trout Unlimited to assess the streams and river areas, engaged contractors to restore the streams to pristine conditions, and consulted with legal teams on issues regarding property rights. The firm planned for the work to take two to three years, after which the search for a buyer would begin.
Before acquiring a property, Beartooth Capital typically considers the expected profile of a potential buyer, which depends on the property’s intended use (e.g., agriculture, recreation). The firm knew that their conservation goals for the Bozeman property would be sustained by a buyer that intended to use the ranch for recreational purposes, such as game hunting, fishing, horseback riding, and hiking. Sten Anderson, Finance Director at Beartooth Capital, noted, “We knew that because of the ranch’s size and characteristics, it didn’t fully support a 100% agricultural buyer. We did some stream and habitat restoration on the ranch, so we knew that we were going to be focusing on a recreational buyer and trying to ultimately sell it to them.”
By 2012, having completed the property’s rehabilitation, Beartooth Capital and its partners began to search for a buyer. As with any ranch real estate transaction, Beartooth Capital lists its properties with well-known ranch brokers. Yet the firms’ brokers understand its mission and what they seek in a buyer. Beartooth Capital received multiple offers, ultimately selling the property to a mission-aligned family who wanted to continue the wetland reservation and preserve the land in posterity for future generations. As Sten Anderson noted, “It was exciting to see that they wanted to maintain and carry on the conservation work that had been done.”
Through sale of the property, Beartooth Capital achieved a positive financial return while also meeting its conservation goals. A broad range of wildlife returned to use the property, including deer, waterfowl, game, and songbirds. According to Anderson, the restoration work “brought back fish into the system that people had not seen in generations.” The ranch increased its recreational value for activities such as fishing, hunting, and wildlife observation, while also achieving its objectives in terms of biodiversity preservation and water-quality enhancement.
Though Beartooth Capital secures conservation easements on some of its properties, they decided not to do so in this case, which facilitated the sale of the ranch. A conservation easement is a legal agreement that permanently protects a property from development, particularly for land perceived susceptible to risks such as deforestation or commercial development. Beartooth Capital and its partners assess each investment to determine whether a conservation easement will provide both financial and ecological value to all parties involved in the deal. Although easements have demonstrated successful financial and conservation results, Beartooth Capital also considers that restrictions on how future property owners may use the land can discourage bids. In this case, the ranch near Bozeman had only a small amount of land where a structure or structures could conceivably be built, so the firm determined that a conservation easement would not have provided significant value.
Beartooth Capital ultimately held the land for six years, longer than it had initially planned. The length of time was due in part to the nature of the ranch market in the Western United States, where buyers are somewhat rare and the real estate crash of the late 2000s still affects buyers and sellers. Beartooth Capital was also willing to hold the property until they found the right buyer, one whose planned use of the property met their expectations. The firm has found it useful to plan for scenarios where they may need to hold a property for longer than expected to ensure they meet both their financial goals and their intended continuity of conservation benefits.
Lasting Impact: The Need for Responsible Exits demonstrates why and how investors attempt to safeguard the continuity of their investments’ impact beyond exit. The report draws on insights from interviews with over 30 investors and entrepreneurs and outlines practical approaches to achieving responsible exits. Four case studies provide in-depth examples of responsible exits from impact investments.
The report reveals investors’ strategies to strengthen their ability to meet liquidity objectives and ensure the long-term impact of their investments. These approaches span the lifecycle of the investment, including: pre-investment, at the time of investment, during the investment, and at the time of exit.
This report is made possible by the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of The Global Impact Investing Network and do not necessarily reflect the views of USAID or the United States Government.
| Investor Description | Real assets investment firm targeting conservation and market-rate financial returns |
| Sector | Real Estate (Ranchland) |
| Geography | Western United States |
| Investment | 1,050-acre ranch near Bozeman, Montana |
| Instrument | Real assets |
| Holding Period | Five years |
| Exit mechanism and scope | Full exit |