More and more organizations are set on generating wealth and giving back to society. One of these companies with a mission to fulfill a greater purpose is the Legacy Group. Directed by one of its leaders, Josh Ziegelbaum, the Legacy Group generates value by catering to clients who invest in projects that produce favorable returns and have a positive social and environmental impact on all relevant stakeholders. Josh joins Jim Pfeifer and Left Field Investors to share his goal of targeting profitable investment opportunities for the benefit of everyone in society. Listen in as Josh explains how he and his team leverage the power of capitalism and business creation to serve others as a force for the greater good.
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Legacy Group: Leveraging Capitalism For A Purpose With Josh Ziegelbaum
I’m pleased to have Josh Ziegelbaum with us. He is the Director of Investor Relations at the Legacy Group, an alternative asset manager targeting profitable investment opportunities with high social and environmental impact in Latin America. I’m excited to understand what all that means. Josh, welcome to the show.
Jim, it’s a pleasure to be here. Thank you.
You’re welcome. The way we usually start here is we like to get your journey. Where did you come from? How did you get into finance? How did you get into Latin American assets?
I’d be happy to walk you through that. This is one of the questions I get pretty often with our investors. Let me start at the beginning. I’m from New Jersey. I was born and raised there. My folks are from New York City. They moved out to the suburbs to raise my sister and me. I studied Economics at Rutgers University and started working in more traditional financial services at a college. I was working at Northwestern Mutual and did a bit of a stint there. I moved on to Wells Fargo and climbed the corporate ranks in over about six years. I ended up as a private banker managing a book of high-net-worth clients in Central New Jersey. I had an opportunity to do a lateral come down to Miami Beach, did the same role but with a better investor or client base in terms of that line of business.
My wife and I, a few years ago, moved down pre-COVID, from the Northeast down to Florida. I moved into Broward County, not too far from Miami. I was going to Miami Beach, built up a nice book down here. I was working with the financial advisor in my office doing full balance sheet banking on credit and investments. I was working with public securities at the time. I have a Series 7 license, ETS and mutual funds. It’s like your black and white stuff that makes up most investors’ portfolios. I enjoyed it. While working at Wells Fargo, I started getting involved on the personal side in real estate investing. I turned the property in New Jersey took that, came down here and invested in another deal. I was doing that on the side.
I was always interested in passive investing even though I was working in my corporate life and alternative investments always appealed to me. Years ago, I had the chance to go down to Colombia and meet some guys doing some very interesting things down there. The two partners I work with are Cole Shepherd and Adam Jason. I had a chance first to be a vice-president of business development doing capital raising for different funds at the company I was working on.
That transitioned over into a Director role where I head up Investor Relations now at Legacy Group. We focus on alternative investments in Colombia, our flagship portfolio company, Green Coffee Company. We acquire farmland about 2 to 3 hours outside of Medellin. We were buying up farms, consolidating infrastructure and we sell farm-direct coffee down the value chain.
We’ve opened this project for investment for US investors. We have a US setup where investors are buying common equity in the holding company. We control all the operations and all of the management decisions on behalf of our passive LPs or our passive investors. It’s how I got there and what we’re doing at a higher level at Legacy Group.
You had financial services and all of a sudden you went into alternatives. Talk a little bit about what was the impetus for that? I’m a former financial advisor. Late in my career, I switched over to alternatives. I learned enough about finance. I thought I knew everything then I learned when I was investing in real estate there’s a whole new world out there. If you learn finance, buying assets makes more sense than buying paper, in my opinion. What was the thing that got you going and deciding, “Maybe I’m going to go into this alternative space?”
I noticed like guys working at competitor banks, my counterparts in different areas, we all had similar products and it’s all 60/40 balanced portfolios. We tell the clients things to make them feel comfortable but at the end of the day, we had limited control of the performance of the portfolios. You have conversations that put people at ease but I didn’t feel like I was doing anything special, groundbreaking or different from what the competitors were offering.
You could make money and also do right at the same time.
When I came across Legacy Group and Green Coffee Company, it stood out to me. One, looking at the returns being way higher than the averages. You see 7% to 10% in the US equity markets. In our latest round, we were forecasting a 48% IRR for our investors. First off, those returns made me excited. The impact that we’re leaving out in the community in which we operate that I get to see firsthand, going out to the farm, seeing the assets with my own two eyes, how we’re making a difference with the employees and the local community. It resonates a lot more than working with paper assets where you’re behind a screen. You wake up a day like this and there’s a geopolitical nightmare happening.
The portfolio is down. You don’t have control over that. You buy or sell with alternatives. I liked the fact that there is no daily liquidity for investors, in certain cases. It depends on private equity. In certain alternatives there is but I liked that. I gravitated to it. Being more active and providing truly unique, passive investment opportunities for people made me much more excited than the cut-and-dry portfolios that we were offering at the bank.
I completely get that. You can pick and invest in Apple and they could have the best year they’ve ever had but you have a day like this, where geopolitics gets in the way. Everybody’s asset prices are going down because you go with the market and that doesn’t happen in alternatives as much. I’d like to dig in a little bit on impact investing because that’s interesting to me. When you say the IRR numbers in the 40s, everyone’s ears are going to perk up and that’s cool. I also like having a positive environmental social impact and to make money at the same time. Can you talk about that? You’re investing in assets that have a social and positive environmental impact and make money. How do you do that? What does that look like?
We’re building soon to be the largest producer of coffee in the country of Colombia. We have a goal of taking it public in the United States. We have the target year of 2025 for that. The public markets look at companies with scrutiny and the way in which they operate and treat their employees. We’ve noticed in Colombia that we are absolutely disrupting the industry and the traditional way in which people are treated.
It’s informal employment. People are paid cash. They get hurt. They’re put on the side of the road. It’s the way that things have been done traditionally. When you tell people like, “We’re paying formal employee benefits and time off. We pay them into a bank account and help people build credit. We give them fair working conditions.” Those sound like normal things here in the US but in certain underdeveloped markets, that’s not the case.
As we pivot in the years to come, it would not look good if it arose that we weren’t treating people correctly and doing the right thing. That’s one thing. Doing the right thing is good because besides how markets reward you, I want to sleep easy at night. We want our investors to sleep easy at night knowing that you could make money and do right in the communities in which you operate. I mentioned a few of the things we’re doing in terms of employment. On the environmental side, we’re using planting mechanisms through an Ellepot System that uses biodegradable pods instead of plastic bags. We’re eliminating tons and tons of plastics that would become waste. We use limited pesticides. We spray the coffee trees at the base instead of crop dusting.
It’s certain things to help the environment. What resonates with me is the social impact on the people in the community. When you go there and you see the farms, they’re so grateful for the work they’re doing and excited for the trajectory of the business. It almost gives you goosebumps going out there and feeling the vibes and the impact firsthand. While it’s nice seeing it in a presentation like a deck or something or talking about it when you go out, you see people working and this is their livelihood, you want to do right by them.
Our investors get behind that. We all want to make money but we believe at Legacy Group that you could make money and do right at the same time. As you carry businesses forward, you could even be rewarded further for the work that you’re doing. We see a lot of that in the public market space.
I invested in a coffee farm in Panama. I don’t know if they’re doing it similarly but what they did is they’re buying farms from the operators and getting economies of scale, modernizing and using better equipment. That’s how they are impacting the returns because they’re buying up a bunch of small farms and you have economies of scale. Is that also how you are doing it? Are you buying land and putting the coffee farms on it? Are they already existing farms and you’re upgrading them?
We’re generally buying existing coffee farmland and doing value-add investing. We’re improving the efficiency of the farming operations, planting more trees, building out infrastructure in order to process the cherries and making a consolidated coffee farming operation. Generally, we do that by buying existing coffee farmland and further developing it.
You had said that the investment is in the company rather than in the plots of farms. I only have one thing to compare it to. That’s part of when we’re talking about these new types of asset classes. We’re normally investing in multifamily self-storage and all in the US. The only thing we can do is to compare to something we know. I would get title to a plot of land where they’re planting coffee. We’re getting the results from the entire farm, although I only own a little piece of it. Instead of the syndication, it’s you owning a part of the company.
Investors own common equity in Green Coffee Company Holdings. It’s a Delaware holding company. That holding company owns all of the assets in Colombia. All of the title ownership of the farmland in Colombia is owned by our operating subsidiaries, all the equipment, all the rights of the cashflows and the parent company here in the US, all those assets flow up to it.
As an investor in Green Coffee Company, you’re a shareholder in the entire operation, including the farmland. You don’t own one plot or have the right to the cashflow from that one plot. You have the upside from the entire business and indirectly own the real assets behind it. We believe that the title land deals you’re referring to have very limited upside. The only end buyer would be another retail investor.
It’s not something that you could scale an IPO. You can’t do a massive exit. I’m not saying it can’t produce cashflow, which shows what it’s meant for. We’re forecasting like 7X net returns at a 2025 exit, which is something that can’t be achieved with only a piece of land because you can’t scale it like you would a business. Owning the processing facilities and all the sales channels, we believe that our model is far superior to the title land ownership model that you’re mentioning.
It makes sense to me. This was one of my earlier investments. It’s not one of my best-performing investments. How are the returns during the whole? If I was to buy in now, am I getting cashflow? That’s the other thing. I’m only comparing it to the other plot of land thing because that’s the only other thing I know. They put the trees on there and now I’m sitting twiddling my thumbs waiting for the coffee to come. I compare that to a development deal in multifamily where you’ve got to start from scratch. Is that where we’re doing here? Are there monthly returns? Is there cashflow? Is this more like a development play?
There is cashflow. It would be in the form of annual dividends. As it’s an operating business, we would close the books at the end of the calendar year, determine net income and profitability and the distribution amount. Based on your ownership of the company, you would get a percentage of the overall distribution. It would be once annually. We’re forecasting, as of our investor presentation, the Series B Round, which ended, we’re forecasting 8% average dividends throughout the holding period. The bulk of the IRR or total return would be realized at exit through the sale of the business or more preferably, an IPO in US public markets.
My audience is typically passive investors who invest in mostly US real estate asset classes. You said Series B. This doesn’t like syndication to me, which doesn’t make it bad. It sounds like we’re investing in a company. Is it syndication? It’s not a 506(b) or 506(c). Is it something different?
It’s a Reg D 506(c) open for accredited investors. I would classify it as syndication but instead of syndicating the capital and buying an apartment building in the US, we’re syndicating the capital into the business, deploying it to buy farmland, infrastructure and grow an operating business. We’re giving passive LPs for passive investors direct access to real estate in another market, Colombia, which we believe is the best place to invest in Latin America.
It’s a tremendous upside through the cashflow from the coffee. There are real assets. Commodity prices have been through the roof lately. Our investors are benefiting from that but they also can benefit from the economies of scale as we carry the business forward. I would call it a syndicated model. Most of our guys that are invested are also invested in syndicated real estate projects. I have this conversation regularly on our investor calls.
We have 230 investors across several funding rounds. I think half of them invest in the syndicated real estate deals in the US that you’re mentioning from the chats that I’m having. Guys love what we’re doing because it diversifies them away from that. Not that I’m not a proponent of multifamily. I think it’s great. It’s obviously performed well over the years but it’s a relatively crowded trade if you look at it now.
Different doesn’t mean bad.
The returns and cap rates are getting compressed. There are still great operators out there that can deliver alpha but in our eyes, diversification makes sense into other asset classes and markets. Investors can easily wrap their heads around what we’re doing because it’s structured in a similar way to those syndicated investments that you mentioned.
When I say different, that doesn’t mean bad. It’s trying to understand when I get into something new like this, I want to understand and compare it to what I know. I completely agree with diversification. We like to think you diversify by asset class, sponsor, market and geography. This hits all three of those but you think Colombia is one of the best places to invest. Why Colombia? We had a guest who was talking about US farmland. Why is it better in Colombia than in the US? Why is it better in Colombia than in Panama or Nicaragua or anywhere else in Latin America?
We just did a webinar on the Top 10 Reasons Why Colombia is the #1 Place to Invest in Latin America. We have it on our YouTube channel. The highlights, one would be the human capital. The human capital is very sophisticated and highly qualified. There’s a diverse young, technologically savvy population which we think bodes well for a lot of industries. There’s a tremendous amount of capital flowing into Latin America as a whole. SoftBank has allocated $8 billion across two funds in the last several years to LATAM specifically. Colombia has had a big uptick itself in venture capital activity. We see a lot of guys, intelligent people in Medellin, where we operate out of. That’s more of the hub for technology, innovation and entrepreneurship.
The larger corporate multinationals would more so be in Bogota. We’re seeing what is becoming a birth of a venture capital hub in LATAM or even in Medellin more specifically. A lot of people are looking at the market. On the exchange rate, the dollar versus the Colombian peso. You see this with a lot of LATAM countries over the last decade but the dollar versus the Colombian peso has more than doubled to sub-2,000 to 1 to 4,000 to 1.
All else equal, investors could buy twice as many assets there per dollar than they were several years ago and coffee is sold in dollars. It’s a commodity that’s sold in dollars on a global basis unless we’re selling it in Colombia. It’s a greatly underserved market. We think that we’re early in the rush of capital to the region. We see money flowing to LATAM and Colombia. Colombia is also the longest-running democracy in Latin America. It’s very capitalistic and open for business. Those are the main points on why we’re bullish on Colombia.
How has COVID been over there? Are there supply chain issues like we’re having here? I know the vaccination rates are lower there. Is that going to be an issue, a problem? Are they coping with it?
As it relates to coffee and Green Coffee Company, coffee is the national product of the country. Operations did not stop at all due to COVID. While parts of the cities shut down with lockdowns and such, the coffee business moved on because it’s a necessity so to speak. There are definitely some tailwinds from COVID. There was a lower vaccination rate than you would say but a lot of herd immunity now that we see businesses back to normal.
I wouldn’t say that it’s more effective than the US as we stand in terms of COVID. There’s still uncertainty with that but we do not see our business affected. I would say in a positive way, it has been with the surging commodity prices after the COVID surge. There definitely could be some headwinds with COVID and we have our finger on the pulse.
I’m a passive investor. When I meet a new sponsor, typically, I like to know someone that is invested with them already but that doesn’t exclude someone from my analysis. How do I vet a sponsor like you? What questions should I ask? How do we confirm that you guys are an expert in this asset class? How do we figure all this out? It’s overseas, which I don’t do much of. It’s coffee, which I did poorly on one and I don’t do much of. It’s all these new things but it sounds exciting. I like the social and environmental impact. I like IRRs in the 40s and big upside. How do I figure out if this is a good sponsor for me to put some capital into?
If you look at the rest of our management team, I gave you my background. Our founding partner, Cole Shepherd, has a long career in M&A. He’s worked across Asia in different markets. He identified some great opportunities early on in Colombia, in coffee specifically. He’s done a great job of executing the mergers and all the acquisitions that we’ve been making. He was formerly a CPA before moving down originally from New York. Our other partner, Adam Jason, has had a full career as a corporate lawyer and was working for some of the largest law firms in the country here in the US, also from the Northeast. The guys have been operating down in Colombia for several years on the ground and know the market incredibly well. They’re locals.
We’re taking sophisticated developing world practices, applying them in the market there and disrupting industries. I would encourage someone that wants to vet us to look at our website, look at our bios and request our offering docs. We have more detailed bios on the rest of the management team there. One of our senior advisors, Chris Kelly is a partner at Jones Day. It’s one of the largest law firms here in the country. It’s been repeatedly named as one of the leading lawyers for business in the US. You want to look at the management team and take a dive into their career see things that they’ve done. In our case, I gave you a little bit of a highlight.
As far as asking questions, I would always look through all the docs and then ask them a bunch of questions because a lot of them are answered through the presentations in terms of the business strategy and stuff. I would ask for investor referrals. I know I can’t get them on this call but that’s a good one. We’re always happy to connect people with people who have participated in Legacy Group’s projects to let them know their experiences.
For people who are invested, we host investor trips. We bring you down to Medellin. We show you the farms firsthand. We do that a few times a year. There are different ways that you can do it. I would ask people about their background different things they’ve done, ask for referrals and look online. Definitely subscribe to our newsletter because it takes time to get comfortable with people. We keep you updated once or twice a week with fresh content through our newsletter. That’s a great way that people to get comfortable. I would encourage you to do that, ask us about us or subscribe to our newsletter.
To dig it a little bit deeper and this is a similar question. We do standard asset classes typically. Aside from vetting the sponsor and the people, how do I analyze the deal? How do I figure out if the coffee farm going to be successful? How old are the coffee trees? Is that important? What types of soil? All that stuff that I don’t know anything about, how do I get comfortable analyzing the farm aspect of it?
The president who we’ve appointed at Green Coffee Company is Boris Wullner. He has many years of Colombian agriculture experience in the flower industry, which is the most sophisticated in Colombia. The most sophisticated farming operations are in the flower industry and then also in coffee. He brings a tremendous amount of experience and expertise. If you see the videos of things or pictures of the infrastructure that we’re developing, the processing facilities, it’ll blow your mind.
We have the most advanced coffee processing facility in Colombia, arguably the world. We brought in a fully automated system from start to finish and inaugurated it in October 2021. We have plenty of videos and photos we could share on that as well as photos from the farm. You could see the plants and everything and what we’re doing. We’ve hired an agronomist. Our Chief Agronomist is Marino Restrepo. He was previously the Chief Agronomist for Starbucks, Colombia prior to joining us. He manages the health and life of the trees and oversees that component. We have detailed things in our presentations about the life of the plants, strategy, number of trees and all those things. Those are the main things in terms of evaluating.
Is most of the coffee exported to the US? Is it all around the world? Do some of it stay in Colombia? Where do you sell it?
We have two primary sales channels. One would be the domestic market in Colombia, where we sell to collective groups and unload unlimited amounts of coffee in Colombia domestically. There’s a bit more margin going outside of the country. We export to the United States to Europe, Asia and all over the world. Some of our buyers are the largest trading houses in the world such as Sucafina and SKN. We sell processed specialty coffee unroasted. That’s the business model. We do have some of our coffee that’s roasted on Amazon for our investors and such but the business model would be processed wholesale coffee globally, in and out of Colombia.
Looking at your website, it shows a portfolio of companies that you’ve purchased or operated in the past. Can you talk about Legacy Group because we’re not investing in Legacy Group? We’re investing in the green coffee part of it. I noticed you sold and bought some companies. Are there other investment opportunities outside of coffee?
A major focus of ours is bringing new, unique investment opportunities to the market and providing those to our investor base and giving them access through Legacy Group. They would be invested in the portfolio companies, not in Legacy Group, where the asset manager for those portfolio companies. We have another investment that we’ve made in the last several years, which our investors are excited about. It’s called the company whose name is PolygonUS. You can see it on our website.
You can start making an impact in your community and uplifting the people through education.
We haven’t opened it for outside investment. We placed capital with them several years ago. It’s grown massively. They’re doing $6 million a year in revenue. They do 3D art and design. It’s a tech company based in the city of Medellin, the financial district. They do 3D art and design, eLearning, design characters and things for digital productions and amongst other things. That company has grown massively. We’re looking to open that up for our investors at a point potentially. They’ve been self-sustainable on their own revenue and haven’t needed outside capital since the investment we may but it’s been a very successful one for us.
We’re continuing to have conversations with entrepreneurs and business owners who are looking to partner with Legacy Group and our investor base in order to grow their businesses. We either start something from the ground up, as we did with Green Coffee or we find people that we believe in and we think are disrupting industries. We invest in them as we did with PolygonUS. We’re seeing market-disrupting opportunities in agriculture, real estate technology, FinTech, to name a few. Our goal is to bring more of those opportunities to our investors.
We have a preferred list that we created where we are gathering indications from people in terms of what industries they might want to invest in over the next year or so. We’re tailoring our conversations with operators based on those indications. If any of you are reading this, if some of this resonates with you, definitely reach out to us and we’ll put you on our preferred list for any future opportunities.
I’m going back to what our community typically does. There’s a company that does multifamily and decides to get into self-storage or someone does single-family home turnkey and they decided to get into office. I’m always a little bit leery because your expertise might not transfer. I noticed when you guys started coffee, you hired someone who’d been doing it for many years. You bought the expertise. It seems like The Legacy Group is buying operating companies or wants to buy operating companies and offer those as investment opportunities for people like us. Is your plan to always hire also the experience with that? You guys are managing the operating companies but the operating companies are managing their own business. Is that how it operates?
We do hire the key management team at the portfolio company levels. I don’t work for Green Coffee Company but they all report up to us. We’re like the hierarchy. We sit on the board. Cole and Adam, who I mentioned, they’re both board members of Green Coffee Company. We’re heavily involved in the business. We do it full-time. We spend almost all of our time right now on the business but we do bring in key talent as needed in certain areas. Internally, we do things like accounting, legal and other asset management things that we can source on our own. If we’re not going to a point ourselves as a CEO of a FinTech company. We’re going to bring in the best talent, make sure it’s the best talent and carefully vet them. We manage them on behalf of our passive investors.
Your investment criteria talk about measurable impact. When you find a new investment or a new company, is it always a social or environmental impact? Is there always a sense of we’re going to do good for the environment or the community and make money? It seems that’s in your ethos a little bit.
Yes. If you look at the two companies that we’re talking about here, PolygonUS is making an impact in their community. They’re uplifting people through education. They have an academy to teach people how to do the digital art and design that I mentioned. They teach people all over Latin America how to do that type of work. They’re uplifting the community there. I already mentioned the things that Green Coffee Company does around the community in which we’re uplifting. That’s definitely something that’s important to our investors and us. As we diligence new opportunities, that will be one of the criteria.
I liked that approach. We’re in this to make money and build wealth but if you can do that and at the same time serve the community that you’re in and do positive things for the environment, that’s super important. The last question I always ask is, what is a great podcast you listen to? It can be real estate or coffee-related or however you want to do it. You can mention a couple of them if you’re into podcasts. Can you give us 1 or 2?
Those are two good ones. If readers want to get in touch with you, what’s the best way to do that?
I always liked to learn about new asset classes in different countries. That’s super interesting to me. Thank you so much for being on the show. We appreciate it.
Thank you so much, Jim. For your readers, get in touch with us, follow us on social or subscribe to our newsletter. I’m very much looking forward to hopefully having conversations with you all.
This is another journey on my quest for constant shiny objects to chase. I don’t mean that in a bad way. I think looking for new investment opportunities, asset classes and markets, as long as you do it carefully, you’re expanding your opportunities. I enjoy that conversation with Josh. It’s something different. It’s a different asset class and an approach. You’re buying a company rather than the land. In the coffee deal I’m in, I bought a plot of land. I get the returns from the entire farm, not my plot of land but I don’t get all of the benefits of owning the actual company. There’s not as much upside as Josh talked about. I like the upside on this. That’s pretty interesting. Going public, buy a real asset that produces cashflow. It goes public.
You can sell it and have made your money. That’s pretty good. Making money, I always loved that but I like the positive social and environmental impact. If you can do good in your investment and make money, that’s hitting both of the things that I like. I like that opportunity. I always get nervous when it’s a new asset class. They’re buying different companies. Now they’re into coffee but before, it was other things. You can’t have expertise in everything. What they’re doing is they’re basically a holding company and they’re buying operating companies. In this case, they hired a guy who’s had many years in Colombian coffee. He’s the president of their coffee company.
They don’t have to be the experts. They can learn about coffee. I’m sure they live down there. They know what they’re doing but the key is you have somebody who’s many years in. That gives me some comfort in thinking, “If I choose to invest in this, at least the show is being run by someone who knows what they’re doing, presumably. For me, as I talked to Josh about, the way I find sponsors now is to be referred to them by somebody that I know, like and trust who’s already invested with them. For me personally, with this group, that isn’t the case. That doesn’t mean I won’t invest with them. It means it’s going to be slow.
I talked to Josh after the call and I said, “I may end up investing but it’s not going to be this month. It might be a year from now. I need to get to know you. I’m going to read his newsletter when it comes out. I’m going to follow them, see what they’re doing and then get to know them better. I’ll make my investment decision after time has passed and I’ve seen some results and gotten to know them a little bit better. That’s my new approach.
On the first coffee farm I bought, I met a guy at a conference. He said, “I’m investing in coffee.” I said, “Here’s my money. I found better ways to do things now. I’m learning and that’s why I love doing this podcast because I certainly learned so much. That’s why I love talking to the people in our community because I learn a lot more from them than they learned from me. I’m appreciative of everybody in our community, from the person that’s getting into their first deal to the person that’s in 100 deals. Everyone has something to share and something to learn. I appreciate that. That’s all for now. We’ll see you next time in the left field.
- Legacy Group
- Green Coffee Company
- BiggerPockets Podcast
- Justin Donald Podcast
- Top 10 Reasons Why Colombia is the #1 Place to Invest in Latin America
- YouTube – Legacy Group