REUTERS/Brendan McDermid
- Kyle Bass is investing in Texas, Florida, and Tennessee, he said in a recent interview with the Investor's Podcast Network.
- These states should benefit from migration to lower-cost states, a trend that's already happening.
- Bass has been buying rural land to capitalize on demand for environmental credits.
Billionaire investor Kyle Bass is scooping up land in Florida, Tennessee, and Texas, touting the states' upside potential as both workers and companies shift to more affordable markets.
"When you think about the US, you look at the coastal region, the West Coast and the Northeast being very high cost, very high tax — one could say mismanaged — jurisdictions," he said in a recent interview with Investor's Podcast Network. "They're moving to pro-business, lower costs, lower, or no-tax jurisdictions."
Bass' success in real estate is well established. His winning bet against the 2008 housing market was immortalized in the classic book "The Big Short." And his focus on property in lower-cost states is a strategy he's pursued for years now, offering a similar explanation in 2022.
Between then and last year, Florida's population jumped over 365,000, while Texas grew by more than 473,000, census data shows. Tennessee's population climbed 77,513.
Meanwhile, the exodus of large firms from states such as California and New York has weighed heavily on those markets, with $1 trillion worth of assets having moved away over the past three years, Bloomberg found.
"You have to move real companies where there's affordability, where there's expansive activity, where there are natural resources to accommodate that movement, so I want to buy real estate in front of that macro movement," the Hayman Capital founder said.
But Bass' attention on land doesn't stop there. By expanding his holdings, he's also looking to capitalize on environmental mitigation, a market that sells credit to firms that want to offset the ecological impact of their operations.
To that end, Bass established Conservation Equity Management in 2021, a private equity firm that sells federal credits in exchange for services such as wetland repair on owned property.
"As more companies and people move to Texas and other pro-business, low-tax states, there will be devastating environmental consequences, forcing firms to consider their physical environmental impacts, carbon footprints and mitigation options," he said in 2022.
By September of that year, the firm had snapped up $90 million worth of properties in Texas alone, Bloomberg reported. By then, the price-per-acre of rural land had appreciated 123% over the decade, the outlet cited.
But price appreciation isn't Bass' only reason for buying so much land. He also touted property investments as a significant hedge against macroeconomic uncertainties. He previously noted a preference for land over gold as a safe haven.
"When I think about gold versus rural land again, I have the population demographic in my tailwind," he said in 2022. "I also have something that I can drive to."
As to forthcoming risks, Bass' main concern is China. He says economic turmoil in the country, as well as the threat of geopolitical fallout with the US, offers little room for market positivity.
This story was originally published in March 2024.