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Show Summary
In this conversation, Morgan Salsman, founder of Liquid Assets, shares her unique journey at the intersection of bourbon and commercial real estate. She discusses her background in civil engineering, the business model of whiskey warehousing, and the investment opportunities in the whiskey market. Morgan also provides insights into the regional dynamics of distilleries, the valuation of whiskey assets, and the challenges of developing new distilleries. The conversation highlights the growing interest in bourbon as an investment and the importance of understanding the market.
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Investor Fuel Show Transcript:
Morgan Salsman (00:00)
So all of our investments are private investors. We do not have any institutional capital involved in my fund. Now there is a lot of institutional capital in this space, but for us, our investors will buy these barrels at new fill age. We’ll age them in our warehouse for three to eight years, ideally. The whiskey brands really determine how long we age them because they tell us, hey, we want to put a six-year-old product in the bottle, a four-year-old, an eight-year-old, whatever they want is when we’ll pull the barrels.And so the investors then receive the benefit of that when we sell those barrels. And, you know, to date we’ve seen well over 20 % annualized returns on investment.
Dylan Silver (02:10)
Hey folks, welcome back to the show. Today’s guest, Morgan Salsman is the founder of Liquid Assets, a multi vertical company operating at the intersection of bourbon, alternative investments and commercial real estate. She oversees barrel acquisition, bonded warehousing and brand advisory services that support emerging and established whiskey brands nationwide. She is known for her data-driven approach, long-term asset strategy and hands-on leadership withinthe spirits industry. Morgan, welcome to the show.
Morgan Salsman (02:43)
Thank you, thanks for having me, I’m happy to be here.Dylan Silver (02:46)
Great to have you on here. Bourbon and commercial real estate investing. Let’s talk about it. You’re the first person that I’ve had on the show who’s combined both of these spaces. Walk me through how you got into the bourbon space.Morgan Salsman (03:02)
Yeah. So, you know, for me, it’s kind of a basic story. I grew up in Bard Sound, Kentucky, which is the bourbon capital of the world and got the opportunity to start investing in whiskey barrels when I was in college, also pursuing my civil engineering degree. So it’s kind of where the overlap started, kind of two separate passions and they ended up merging into one. So at my engineering job, I got the opportunity to actually develop our whiskey warehouses where we storeabout 70,000 barrels right now. That was the last project that I did before I jumped over into the whiskey world full-time. And so, kind of got to dabble in both spaces and choose which one fit me the best. And luckily both skill sets have served me well.
Dylan Silver (03:44)
you grew up around real estate investors, your parents were investors, you were mentioning me before the show. So you grew up balancing checkbooks and tracking rents. And so this is this is a bigger scale. But you know, bourbon was the entryway. And so you thought, hey, if they’re doing this, I can do this too.Morgan Salsman (04:02)
Yes. So my dad owned a construction company for the majority of my life, which is also kind of what got me into the civil engineering world in the first place. And they had many rental properties when I was growing up. And so, I helped them manage, you know, invoicing and payroll. That was really what my job was, balancing checkbooks manually by hand. Didn’t have any of this digital stuff then. you know, it showed me almost that real estate investing is second nature and it’s part of yourinvestment portfolio. It doesn’t have to be, you know, a full time day job or this like you can do both. My uncle and my aunt are also very heavily invested. So you know, my family has always been very invested in that space. And so it exposed me to it and taught me about it really young and taught me about the lifestyle that you have to live of unclogging toilets at five p.m. on a Friday and mowing the grass on Saturday afternoons. Like you learn about that kind of stuff. And so
You know, I have my own personal rental properties and then the warehousing space that we have is my first experience with commercial real estate. ⁓ and so I’ve been able to kind of learn it’s treated basically like a storage facility, like a self storage almost, cause you put the barrels away and they stay there. So, you know, it’s renting space at the end of the day. ⁓ and there’s not a lot of movement. So once the barrels go in, they stay and you really just have to worry about maintaining.
compliance more than anything.
Dylan Silver (06:16)
Do you rent out the space to folks who need some space to house their barrels? Is that the business model there?Morgan Salsman (06:24)
Yes. So our warehouses are bonded. you know, we are registered with the KDA, or sorry, not the KDA. We are registered with the state and, you know, the federal government to be able to house whiskey barrels because it’s, you know, a regulated product. It’s alcohol. So we will rent the space out to brands, to distilleries, to investment groups that need a place to store their barrels legally so that, you know, they got a place to age becauseYou can’t put a whiskey barrel in your backyard, unfortunately, if it’s full of whiskey.
Dylan Silver (06:57)
Yeah, that would be an interesting way to hack a bourbon business. But I want to ask you about acquiring that warehouse. What was that deal like? And how do you go about looking for a whiskey warehouse?Morgan Salsman (07:04)
Yes.That’s a great question. So we actually built ours from scratch. That was one of the projects I got to help design at my engineering firm. As I mentioned earlier, I have two partners on the warehousing side. One of them is a mechanical engineer and the other one was my father who owned the construction company. so between the three of us, we were able to design this project from scratch and build it. And so, you know, it wasn’t really an acquisition. We acquired the land and built the warehouses and we actually have space to build two more on site.
⁓ But it is a really hard thing to convert an existing space into a compliant warehouse because there are so many stringent regulations about separation distances from the property line building to building. There’s a lot of separation differences. There are containment regulations that you have to have in terms of, you know, what happens if the building burns down and there’s hundreds of thousands of gallons of
flammable whiskey floating around. You really have to be able to take in those environmental considerations. And my engineering background taught me a lot about that. And honestly, it made the project so fun to design and develop because of that. I got to find my passion for the spirits industry and my hometown and my heritage with my day job. And it made it pretty exciting to go to work every day. I’ll tell you that.
Dylan Silver (08:27)
Yeah.Now, is it one main tenant that is renting out the warehouse or is it several tenants that use the space?
Morgan Salsman (08:45)
So I believe we’re around 12 to 15 customers that we have that fill up our warehouse. One of those is my fund itself. So my fund liquid assets has about 14,000 barrels that we have in our warehouse. And then the rest of the what? 56,000 barrels that we have on site or for other customers. And there’s a variety of, know, distilleries, brands, investment groups, similar to ours that also store on site.Dylan Silver (09:11)
Now imagining that there is maintenance involved in this and then you’ve got to keep things at a certain temperature and so forth. ⁓ What goes into maintaining a whiskey warehouse?Morgan Salsman (09:59)
Great question. So ours are not temperature controlled and that is because when you’re aging whiskey, you want it to be able to be exposed to the elements almost. So you want that freezing temperature at night in the middle of the winter to affect the barrels as much as you want the heat of the summer at noon, you know, to affect it. So you want that extreme hot and that extreme cold to environment to reach your barrels. So that way the wood will expand and contract.allowing the liquid to seep in and out of the barrel, which gives the liquid its color and flavor. So we don’t have conditioning, but we do have a ventilation system. And so what that does is you shut these gates and it literally acts as a convection oven to heat up the warehouse during the day. And then at night you flip those gates open, run the fans, and it will make the inside of the warehouse the same temperature as the outside. And so that’s what allows this heating and cooling cycle.
to help those barrels expand and contract and gather all of the flavor and color that we experience in the glass at the end of the day.
Dylan Silver (11:06)
What’s the size of whiskey warehouses in Kentucky? Are they all massive sprawling warehouses? Do you have some smaller ones? Is it a mix in between? How many whiskey warehouses are there in Kentucky?Morgan Salsman (11:20)
There are quite a few, if you drive around Kentucky or my hometown, Bardstown specifically, you’ll see them all over the place. And there are two different kinds. There is a rick house and a palletized warehouse facility. A rick house is specially designed with these interior wood structures to rack, it’s a racking system. So the barrels go into these racks and they lay on their side. We’re in a palletized facility. They go on, you know, traditional pallets and they’re standing kind of up on their head. And so you stack them on top of each other.Ours are palletized facilities. And so I believe the largest you can build is seven stories high when you’re stacking them up. Ours are, believe we have two sizes. have one that’s, believe around 24,000 square feet and the other two around 48,000 square feet. So double, the first one we built was a smaller one. Then we learned we could go higher and we could make them bigger. So we built the other ones to be a little bit more efficient with the space. And so, you know, we can hold
about 100,000 barrels on site with the three warehouses that we have today. And if we add our other two, we’ll be able to hold about 180,000 barrels on site. So it’s like 40,000 barrels a warehouse when we’re talking about that larger size of that 48,000 square foot footprint.
Dylan Silver (12:22)
Yeah.Being a whiskey investor has got to be interesting because it’s a whole new world I haven’t thought about before. But I’m thinking about like time to age a barrel and how that goes into play for the value of the barrel. But then also, you know, the rents and where am I renting and then where am I sending this to and the cost of transport? What’s the, you know, underwriting like on a barrel of whiskey?
Morgan Salsman (12:56)
So all of our investments are private investors. We do not have any institutional capital involved in my fund. Now there is a lot of institutional capital in this space, but for us, our investors will buy these barrels at new fill age. We’ll age them in our warehouse for three to eight years, ideally. The whiskey brands really determine how long we age them because they tell us, hey, we want to put a six-year-old product in the bottle, a four-year-old, an eight-year-old, whatever they want is when we’ll pull the barrels.And so the investors then receive the benefit of that when we sell those barrels. And, you know, to date we’ve seen well over 20 % annualized returns on investment.
And we anticipate to be able to see great returns. However, the industry has definitely seen more capital come in. And so obviously supply and demand plays a little bit of a role in that, but we’re still confident in the industry and the ability to grow because
Dylan Silver (13:45)
Yeah.Morgan Salsman (13:51)
The barrels will continue to appreciate in value over time until you dump them. So you can hold these for 20 years and they’re going to continue to appreciate in value. you know, whiskey gets rarer as it gets older, especially in American whiskey. You have something getting up to 20 years old. You know, it’s different when you go over to Scotland, Ireland, when they’ve been doing this for much longer than we have, but it’s rare to find that type of inventory nowadays in the US at least.Dylan Silver (14:10)
Pray.Now, when we talk about this space as a whole, I’m imagining that you have certain regions, like you mentioned, where you’re at in Kentucky, where this is a more common endeavor than in other markets. Are there you know warehouses in other regions of the country? And is this something that’s very specific to certain markets? Or are people looking at opening up warehouses in other regions as well?
Morgan Salsman (15:29)
So 95 % of the world’s bourbon comes from Kentucky and bourbon has to be made in the United States. cannot be made whiskey, different story, but bourbon specifically as a category has to be made in the United States. It can be made anywhere. It doesn’t have to be made in Kentucky. And there are other distilleries outside of Kentucky in Tennessee. I live in Tennessee, grew up in Kentucky, but that’s the densest region for whiskey and in bourbon to be produced. I really think it’s just like a settlers thing, you know.The people who settled in this area really were about the whiskey and, Kentucky will tell you it’s about the water and Tennessee will tell you it’s about the charcoal finish. And there’s a million reasons and a great marketing story behind all of them. But, you know, at the end of the day, it’s a culture and this is the densest, you know, population of distilleries in the U S. However, you go out to Colorado, Texas has a good, you know, culty population of Texas produced or Texas distilled.
inventory, California has a few, New York has a few, you can go all over the country and there are going to be other distilleries. They just may not be as well known as Kentucky and Tennessee are.
Dylan Silver (16:38)
Now, from a valuation perspective on the real estate, how do you go about valuing what a distillery is at any given point in time? I’m imagining, you know, in a place like Kentucky, you may have more buyers, right? But it’s not like distilleries are selling every day. So it’s probably not as easy to find comps, right?Morgan Salsman (17:00)
Right. Well, you know, I have not spent much time evaluating distilleries as a whole in my life. ⁓ But there are definitely opportunities to, you know, evaluate that on the market. You know, there’s warehouses that go up for sale. There are full plants and distilleries. There’s co packers. There are opportunities, I would say consult a business broker or consult a, you know, real estate ⁓ professional in that region to to kind ofreally get your details right on that. But for us, you know, we’re not doing a lot of trading, we just we’re just building from scratch.
Dylan Silver (17:36)
I spoke with someone recently who had got an airport under contract and I said, wow, that’s a tough deal. I’m thinking about selling a distillery now. thinking that’s an interesting market to be a part of. I’m licensed in Texas as a realtor and in San Antonio, there was ⁓Morgan Salsman (17:41)
Wow.There you go.
Dylan Silver (17:59)
this old and I believe it was a brand of of beer, the Pearl Company Pearl, I could I hope I’m not butchering this story. And they had transformed this whole whole plant into this beautiful multi use space that was a mix of commercial residential, I believe they have ⁓ quite a bit of retail as well restaurants. And I’m like, whoever did that deal Bravo to them.because seriously, you have to be creative in order to look at this. And you mentioned, going into it from the development perspective, do you know when other folks are looking at ⁓ creating a distillery or building a distillery, ⁓ are they looking more so into development? Are there advantages in development versus in acquiring a pre-established distillery?
Morgan Salsman (18:53)
I I definitely think there are, you you can think about like depreciation, you can think about, you know, costs to develop and in Kentucky land is still pretty cheap. So, you know, there’s definitely value in it. If I were coming into the space right now, I don’t know that I would start from scratch just because of the timelines. You know, when you got to think about it, there’s so many phases to developing a whiskey. So from like inception to finish product, you have distillation from a distillery.Dylan Silver (19:12)
Yeah.Morgan Salsman (19:22)
Then you can have, you know, somebody like us in the middle, we buy it at new fill agent for the brand. Then the brand buys it from us for say eight years later. And then, you know, they have to put it on the shelf. And so that, that life cycle from inception of a distillery. So say it takes two years to build. Probably, you know, best case scenario, you design and build it in two years. ⁓ you’ll, you know, add those two years and you have another eight before you put a.product in the bottle, that’s 10 years that you have before you can even start seeing a return on that investment. And so, you know, that’s where there’s value in the sourcing world that we live in. And so that’s where, you know, you’re buying from somebody like us who has bought barrels eight years ago and has product for you to put in the bottle today that meets your criteria. So, you know, there’s a lot of risk associated with developing a distillery because it’s so time intensive and capital intensive.
Dylan Silver (20:21)
Yeah.Morgan Salsman (20:21)
Andyou got to be able to predict that 10 years down the road, what’s going to happen, what’s production going to be like, and that’s a, it’s a risky game, but there’s a lot of reward in it too. You know, got to take big.
Dylan Silver (20:33)
I’m thinking about all the interesting conversations. There’s a whole real estate vernacular that has to exist out there that is very specific to Tennessee and Kentucky that I would love to be a part of that conversation. ⁓ And I think about Texas real estate where I’m licensed and farm and ranch and how you have to take into account it’s a whole other area of real estate and who owns the mineral rights andMorgan Salsman (20:44)
Absolutely.yeah.
Dylan Silver (21:00)
No one’s thinking about that in northern New Jersey where I was born and raised. And so I’m now thinking, okay, well, what are these conversations like in the whiskey and distillery world? But we are coming up on time here though, Morgan. Where can folks go? Where can our audience go if they’re interested in learning more about your company, Liquid Assets, or in reaching out to you and maybe getting your feedback on where they can store their barrels?Morgan Salsman (21:04)
Right.Absolutely. So I’m very active on LinkedIn. You can just look up my name, Morgan Salsman. And then I also have a website. I’ve got a ton of blogs, videos, articles and things on there too. It’s LQDassets.co. And so you can find me there. Reach out to me any way, or form. I’m pretty responsive. So would love to chat whiskey or real estate, either one.
Dylan Silver (21:49)
Morgan, thank you for coming on the show today.Morgan Salsman (21:51)
Of course, thanks for having me. This was great.
