Growth Opportunities
Krannert alum Guillermo Pardillo and ArborAmerica take root in Indiana
By Eric Nelson

Bracing himself against the winter gusts swirling outside ArborAmerica’s modern, farmhouse-style offices near Purdue’s West Lafayette campus, Deputy CEO Guillermo Pardillo surveys an unlikely, seemingly dormant cash crop that won’t produce a significant yield for decades.

Both transplants from Spain, Pardillo (MBA ’08) and his company heed the lessons of fables and proverbs cautioning against missing the more bountiful, macro-level harvest by focusing only on the micro-level growing pains of something in constant change ­­— whether it’s agricultural, economic, scientific, or cultural.

Fertilized with a lifelong interest in his field, extensive education and experience from his native country, and now a degree from the Krannert School’s Executive MBA program, Pardillo truly does see the forest for its trees, figuratively as well as literally.

Changing landscapes

Operated by a staff of eight full-time and up to 40 seasonal workers, ArborAmerica is cultivating and selling investment parcels of some 60,000 black walnut trees spread across four plantations on a stretch of land in southwest Tippecanoe County near West Point, Indiana.

“Our offices, greenhouse, nurseries, and research plantings are on a 113-acre property located on top of a hill, which is not the ideal place for a tree farm,” admits Pardillo. “We’re exposed to every kind of wind in the world.”

The 450 acres of production properties, however, were carefully chosen to be protected from prevailing winds by either the topography, existing tree hedges, or new tree hedges that ArborAmerica plants with fast-growing hybrid willows.

The location offers numerous other benefits, including the unique soil quality, Indiana’s leadership in the hardwoods industry, and its proximity to Purdue’s top-ranked programs and research in agriculture and business.

“My ultimate motivation is conservation and preservation,” says Pardillo. “After more than 2,500 years of human civilization and exploitation of its natural resources, Spanish forests are rather exhausted. But wit grows out of scarcity, and we have developed advanced agronomic techniques to make trees grow faster.

“We combine these techniques with improved genetics and Indiana’s prime quality soil to reduce fine hardwoods rotations significantly.”

Trained in forest engineering and environmental management by the Universidad Politécnica de Madrid (UPM), Pardillo began his career as a student working in the government-sponsored Forestry Map of Spain project. In 1992, he transitioned to a Barcelona-based company, TALHER S.A., working on reforestation, environmental, and green-areas management projects throughout Spain. He was appointed as technical director for TALHER in 1995, which by then was a national leader in its field.

In 2000, Pardillo joined Grupo Foresta Capital, which was formed by two major Spanish firms as a joint venture to develop plantations of intensively cultivated trees as long-term investments.

“The idea was to find the genetics of a tree with a reliable breeding program behind it that produced fine-value timber in temperate climates,” says Pardillo. “When we began looking at what was available worldwide, Purdue and American Forestry Technologies (AFT) were the best match for our business plan.”

Going green, black, and gold

Launched in the 1980s, AFT obtained licenses to commercialize Purdue’s patents on trees developed through work by Professor of Forestry Emeritus Walter Beineke. These were the first trees ever patented for timber purposes.

Over the years, AFT had developed genetically superior black walnut trees that grew straighter and faster, in some cases showed resistance to diseases and pests, and would ultimately generate high-quality veneer for the hardwood products industry.

Grupo Foresta Capital acquired the assets of AFT — including its trees, clonal propagation technology, and some properties — to form the company that grew into Arbor-America. Pardillo initially planned to stay in Indiana for only one year before returning to Spain, but the relocation became permanent as the company expanded.

“We patented our own trees, sought licenses for others through the Purdue Research Foundation and the state, improved our technology through in-house research and development programs and the University’s world-class Hardwood Tree Improvement and Regeneration Center, and began purchasing land and planting both here and in Spain,” says Pardillo.

ArborAmerica’s offices, greenhouse, nurseries, and plantations are located near West Point, Indiana, in southwest Tippecanoe County.

Investors began sprouting as well, and the company sold its first forestry fund in 2004 for $50 million euros. As deputy CEO, Pardillo became responsible for the day-to-day and long-term operations of the company in the United States, including administration and financial management, plant production, land purchases, plantation establishment and maintenance, and research and intellectual property management.

“That’s why I decided to pursue my MBA through Krannert’s executive program,” says Pardillo. “I had a lot of management responsibilities, but approached them more from a technical perspective than from a business perspective. It was a great opportunity for me to enhance my education and skills.”

Unlike the 25-year investment cycle of forestry funds, however, Krannert’s Executive MBA (EMBA) program paid dividends much more quickly. “The program is very comprehensive and I was able to apply what I learned almost immediately,” says Pardillo. “The accounting and financial management courses were especially useful to me.”

Pardillo’s fellow students were a source of knowledge as well. “The teamwork focus is one of the keys of the program,” he says. “You do a lot of the work on your own, but forming groups allows you to stay in touch with your classmates and use their unique skills and experience. You learn not only from the faculty, but also from peers who have backgrounds in a variety of fields.”

Harvesting new business

Pardillo’s relationship with Purdue and the Krannert School continues to pay interest. ArborAmerica and Grupo Foresta Capital, which also maintains nearly 200,000 trees in Spain, sold a second $50 million euro forestry fund in 2008.

“We deal with only a limited number of large, sophisticated investors, mostly in the corporate sector, including pension funds, insurance companies, and savings banks,” says Pardillo. “Each fund is limited to about seven investors, plus at least a 10 percent stake from Foresta Capital.

“We’ve been growing at a steady pace of about 100 acres a year and are planning to offer additional forestry funds both to European and American investors,” he says. “We’ll continue to expand as more investors come in.”

The company’s next step will be the application of its technology to the development of genetically improved, intensively cultivated tree farms for biomass, says Pardillo. “We already have plans for a $350 million euro, 70-megawatt project of renewable energy in Spain, and when the technology is refined we’ll be ready to provide an efficient way to produce woody biomass in the United States.”

Pardillo shared his company’s story with students in this spring’s Krannert Executive Forum series. “They had probably never seen a business plan that looked like ours,” he says. “It’s unique for investors, too. They see negative cash flows for around 25 years, and then a year with a very large, positive cash flow.”

Like growing trees, the payoff requires patience. “In this time of financial crisis, it’s an investment model based on tangible assets that makes sense,” Pardillo says.

The logic extends to ArborAmerica’s long-term contributions to Indiana’s $17 billion hardwoods industry, which leads the nation in the production of wood office furniture, manufactured homes, wood stock-line kitchen cabinets, hardwood plywood products, and wooden caskets and coffins.

The company is also making a positive environmental impact, adds Pardillo. “Our growing process makes more efficient use of limited natural resources without encroaching on wildlife areas, which will help ease the pressure on natural hardwood populations,” he says.

In the meantime, Pardillo will continue to nurture both the trees and his family, which has also taken root near Purdue. He and his wife, Carmen, relocated to West Lafayette when their oldest daughter, Celia, was only a toddler. A new addition, Laura, arrived during Pardillo’s second year in Krannert’s EMBA program.

“This is a great environment for raising children,” Pardillo says. “It’s been a real joy.”