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US-Based LPs Continue to Dominate Timber Investments

US-Based LPs Continue to Dominate Timber Investments | Timberland Investment | Scoop.it

LP interest in timber funds continues to increase, with a number of US-based investors including timber investments as part of their private equity portfolio. Preqin currently tracks 4,544 LPs active in the private equity asset class, 214 of which are interested in investing in timber funds. There has been an increase in the number of LPs with an interest in timber investments, with 4.7% of the LPs currently tracked by Preqin expressing an interest in the fund type, compared to 3.9% of LPs as at the end of Q1 2012.

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Timberland Investment
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Sponsored by...

Sponsored by... | Timberland Investment | Scoop.it

Prentiss & Carlisle  is one of the largest timberland asset managers in North America. P&C provides ongoing management services on approximately 1.75 million acres of timberland located in Maine, Michigan, New York, Vermont, Wisconsin, Ontario and Quebec. Nearly every acre under management is certified by the Forest Stewardship Council through either our clients or through P&C itself, which holds FSC certificates for both Forest Management and Chain-of-Custody.

 

P&C provides turnkey land management from long-range forest planning through on-ground forestry, marketing of forest products, harvesting, transportation, road construction and maintenance, stump-to-mill accounting and reporting, client cash management, administration of third-party relationships, public advocacy/representation and strategic asset planning. P&C also provides specialized consulting services in related areas of expertise:

  • Timber inventory design, execution and analysis
  • G&Y modeling and timber harvest scheduling
  • GIS mapping and data management services
  • Timberland valuations and appraisals
  • Acquisition and disposition due diligence
  • Market studies
  • Timber supply modeling

 

About this magazine

Our aim is to provide a gathering place for news and opinion about timberland investing. We cover both publicly traded issues including listed timber companies, real estate investment trusts (REIT's), and exchange traded funds (ETF's), and the more private world of institutional investing in timberland. Our focus is on: the rationale for investing in timberland; performance of publicly traded timber investments; timberland deals and transactions; timber supply, demand and prices, and; public policy issues that impact timberland investing. Not interested in all of these topics? You can easily filter the stories by using the Tags button above.

 

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Some useful links

 

Stock quotes, news and financial metrics

These links take you to customized Google Finance pages for timber REITS, indexes and other publicly traded companies of interest:

 

Prentiss & Carlisle newsletters

Quarterly updates on conditions in our operating regions

 

Timber Mart North 

Lake States price reporting service published by P&C

 

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Consistent performance from the outlands

Consistent performance from the outlands | Timberland Investment | Scoop.it
Both the NCREIF Timberland and Farmland indexes have historically provided investors with consistent positive returns with less downside risk than equities. The NCREIF Timberland index has produced positive quarterly returns 91% of the time since 1990 and the Farmland index 99% of the time. The only negative quarter for the NCREIF Farmland index was the fourth quarter of 2001 when it returned -0.01%.
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Harvard hires natural resources managing director

Harvard hires natural resources managing director | Timberland Investment | Scoop.it

Colin Butterfield was named managing director, head of natural resources at Harvard Management Co., the investment management arm of Harvard University, said spokesman Lex Suvanto in an e-mail.

Mr. Butterfield, who starts in early October, will lead the natural resources investment team and enhance manager relationships, said an HMC news release. He will report to Rene Canezin, managing director, head of public markets. Mr. Canezin has been filling in as interim head of natural resources.

Previously, Mr. Butterfield was CEO of Radar Propriedades Agricolas SA, a $2.2 billion joint venture between TIAA-CREF and Cosan SA focused on Brazilian farmland investing. A search is being conducted for Mr. Butterfield’s replacement, said TIAA spokesman Stewart Lewack in an e-mail.

HMC manages the Cambridge, Mass.-based university’s $37.6 billion endowment and related financial assets. The endowment’s target range for natural resources and commodities is between 6% and 16% of the total portfolio.

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Validation and enhancement of a spatial economic tool for assessing ecosystem services provided by planted forests

Validation and enhancement of a spatial economic tool for assessing ecosystem services provided by planted forests | Timberland Investment | Scoop.it
Abstract
Planted forests provide multiple benefits to society such as timber, carbon sequestration and avoided sedimentation, which are collectively called ecosystem services. Assessing the economic viability of timber production and the value of other ecosystem services of planted forests has become increasingly important for policy and investment decisions. A spatial economic tool called the Forest Investment Framework (FIF) has been developed to enable the assessment of key ecosystem services provided by planted forests in New Zealand. The FIF has a timber viability component that has been used to assess where in New Zealand new forest establishment is viable. The framework can also estimate indicative values of carbon sequestration credits and avoided sedimentation of waterways. In this paper, FIF's timber viability component is validated using data from seven case-study forests in New Zealand. Results of the validation exercise suggest that FIF is a very good viability assessment tool because it provides very accurate estimates of costs and revenues that case-study forests actually generated. The paper also discusses the new ecosystem services that have been identified for incorporation into this framework: water quality, water yield, recreation and biodiversity conservation.
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Investing in sustainable planted forests: Tools are available, but there’s room for improvement

Investing in sustainable planted forests: Tools are available, but there’s room for improvement | Timberland Investment | Scoop.it

Industrial-scale planted forests are broadening the scope of their products from a traditional focus on timber toward bioenergy, and even ecosystem services. This change is occurring in parallel with the rapid expansion of planted forest areas. A lesser known concurrent change is the growing interest in social and environmental responsibility expressed by institutional investors.
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These changes may very well signal a growing sense of responsibility among investors – but they could equally suggest that investors have understood something essential: more sustainable practices in planted investments means more secure, and sustained, profits. 
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But attractive business prospects can vanish rapidly if conflict breaks out on the ground, or surrounding water supplies become polluted, for example. Consideration of these and other risks has logically led to the elaboration of a number of Sustainable and Responsible Investment (SRI) tools in the forestry sector with possible applications for industrial-scale planted forests. The function of these tools is to help ascertain whether operations are “risk-free”, especially in emerging economies.
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For the sake of clarity, and to identify pressing areas for improvement, a team of researchers from the University of Padova and the Center for International Forestry Research (CIFOR) undertook a vast assessment of existing tools.
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In the end, analysis of 121 investments in emerging economies produced a solid database of 50 SRI tools. 
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The bad news is that very few of the SRI tools in the extensive sample specifically address planted forests. Instead, they tend to have a broad sectoral scope on forestry, with little attention paid to the specificities of the plantation business. 

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The research findings highlight a couple of clear messages and areas for improvement. Admittedly, a lot has been done to develop tools that aim to guide investments toward sustainable and responsible practices, and this movement should be encouraged. But we are not there yet, and we must be aware of the severe shortcomings of many of these attempts that might mislead investments and jeopardize sustainability.

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Trump Advisors Try To Head Off Possible 'Scam' Of His Tax Plan

Trump Advisors Try To Head Off Possible 'Scam' Of His Tax Plan | Timberland Investment | Scoop.it
Trump has proposed to tax individuals’ income from partnerships, limited liability companies and other so-called “pass-through” business entities at a 15 percent rate -- down from a current top rate of 39.6 percent. That provision may get some new restrictions, said economist Stephen Moore, who has been advising Trump on tax matters.

“We are absolutely dedicated to making sure the 15 percent is for legitimate businesses,” Moore said in an interview Thursday.

The campaign has become concerned that people with high wage and salary income could attempt to reclassify their earnings as investment income and route it through a pass-through entity -- cutting their tax rate, Moore said. Trump’s advisers plan to release more details about his tax proposals in two weeks, Moore said.
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CatchMark Timber Trust's (CTT) CEO Jerry Barag on Q2 2016 Results - Earnings Call Transcript

CatchMark Timber Trust's (CTT) CEO Jerry Barag on Q2 2016 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

Collin Mings, Raymond James

Okay. Helpful color. Thanks guys. Switching gears, Jerry, just maybe can you talk a little bit more about deal pipeline? Do you have anything else under LOI right now as far as pricing, maybe on an apples to apples to basis, recognizing it's tough to do in timberland but how do you think timberland values have trended over the last years over the type of properties that you have been to acquire in the U.S. south.

Jerry Barag, CEO Catchmark Timber Trust

So the pipeline remains very strong. It's punctuated by some very very large deals, the size of which we haven't seen in quite some time in the timberland sector and there is a queue of these large deals that seems to be lining up, waiting to go. And so as I said in my prepared comments, we are being very disciplined and very selective about what we want to do and quite frankly even though we have what most people would consider a large amount of capital available to us, it is small compared to the size of some of these deals and it is not our intention to just run out and deploy the capital that we have available.

 

So as I said, we are being selective about what's there. In terms of what's on the horizon, we have one smaller transaction that we have been working on that would be added as to our existing landholdings that we are looking at, and pricing is generally along the lines of what we have been doing -- where our pricing has been coming in for quite some time. With respect to the overall markets and pricing, I think what you are starting to see and I think that this is positive development for the timberland markets, but you are starting to see a divergence in pricing between really good properties in really good markets which those properties and those transactions have been able to maintain and hold existing level of pricing. And softer or weaker markets and less desirable properties, you are actually starting to see transactions come together at numbers that are lower than we have seen in quite some time in the timberland space.

 

So there seems to be an acknowledgement in the market today about quality and price for quality versus price for more average type of timberlands and I expect that that trend is going to continue.

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Private equity real estate managers cut target returns, study shows

Private equity real estate managers cut target returns, study shows | Timberland Investment | Scoop.it

Private equity real estate managers are reducing their targeted returns due to asset valuations, according to Preqin. Its survey of 191 private equity real estate fund managers found that asset valuations were their chief concern.

 

Around 49% saw valuations as the biggest challenge over the next year, Preqin said.

 

An equal proportion noted an increase in competition for assets compared with 12 months ago, while the majority of respondents (58%) think it has become harder to find attractive real estate assets over the past year.

 

As demand increasingly outstrips supply for attractive investment opportunities, 63% of real estate managers have seen an increase in asset pricing, and more than one-third (35%) believe they have risen significantly.

 

Andrew Moylan, head of real estate products at Preqin, said the private real estate market remained “highly competitive, both in terms of obtaining investor capital and securing attractive assets”.

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How credit stacking can grow money on trees

How credit stacking can grow money on trees | Timberland Investment | Scoop.it

There has been significant discussion about the merits of stacking conservation payments over the past few years.

A simple explanation for credit stacking is when landowners are paid for conservation practices on their property that provide multiple benefits to the environment.

 

For example, an acre of forest could earn revenue from both carbon credits (for maintaining carbon stored in the ground) and endangered species habitat credits (for managing land to benefit species that are endangered, threatened or otherwise at-risk) — this acre generates extra value and therefore can earn revenue from multiple credit types.

 

Credit types that might be stacked include: endangered species; water quality; wetlands; and carbon. Environmental credit stacking will be an important factor for forestland owners to consider as they attempt to generate adequate cash flow for their properties, and as the regulated carbon market grows.


One key issue that always seems to arise in the credit stacking debate is the potential for double-counting.

 

For instance, being required by law to do one thing, such as the creation of a wetland mitigation bank, but also receiving a second payment for another credit type, such a carbon. No one disputes that restoring a single property can deliver several ecosystem benefits; however, how these benefits are measured, and whether they can all be "counted" as ecosystem credits is often debated.

 

The Electric Power Research Institute’s (EPRI) most recent work on credit stacking (PDF) attempts to sort out these issues, and suggests multiple benefits can be quantified while still being scientifically legitimate. An example is that the same agricultural practice can generate a measurable nutrient credit from reduced fertilizer use as well as create a carbon offset without double-counting.

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Rayonier (RYN) David L. Nunes on Q2 2016 Results - Earnings Call Transcript

Rayonier (RYN) David L. Nunes on Q2 2016 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

Chip Dillon - Vertical Research Partners

Yes. Hi. I just had a general question about you gave a great slide on your M&A acquisition strategy or timberland acquisition strategy. When you look at today's like interest rate environment, if you were to debt finance timberland sort of at some of the asking prices you're seeing in areas that might be of interest to you, would you say the spread looks good to you, or it's not very favorable? How do you sort of compare the cap rates and the returns you're seeing with the financing costs?

Mark McHugh - Senior Vice President and Chief Financial Officer

Yeah. I mean we continue to think that in the M&A market sort of the going rate from a DCF, a discount rate standpoint, is in probably the 5% to 5.5% range. And that could swing on – 5% to 5.5% real, which would be net of inflation. And the deals I'd say that we're more focused on tend to be deals that are delivering the majority of that or vast majority of that in cash flow. And so we're frequently looking at deals that have relatively strong cash yields relative to that discount rate. Certainly with where we're able to finance in the debt markets today, there is a pretty healthy spread, call it, 200 basis points to 300 basis points to our debt financing rates.
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Mark William Wilde - BMO Capital Markets (United States)

Yeah. I think you might have answered a big part of my question when you answered Chip's. I was just curious with these very low interest rates whether you're seeing any kind of downward pressure on discount rates?

David L. Nunes - President, Chief Executive Officer & Director

I'd say that they've held relatively firm in the last – probably in the last 18 months. Again, what we've seen is differential discount rates for different quality transactions. Again, I think on average, across the U.S. South we think the going rate is in that 5% to 5.5% real, but we've seen people pay up for very high quality properties. Likewise, we've seen some no sales and some transactions that certainly traded above that just relative to the risk of the particular portfolio or the inventory mix and the maturity of the age class.

Mark William Wilde - BMO Capital Markets (United States)

Okay. Mark, I know over time there have been points where a lot of the activity with the TIMOs has come from kind of offshore money and with rates so low over in Europe right now, are you getting a sense that the TIMOs are seeing more offshore money coming in?

David L. Nunes - President, Chief Executive Officer & Director

I think that's probably true, Mark in both the private equity as well as some of the public equity. I mean I think you're seeing more of it as well in the context of investors into the timber REIT space, but I think that we're continuing to see fairly healthy demand for timber from offshore capital for all of the reasons that you would expect, sort of flight to quality, the low interest rates in Europe as an example. You're seeing yield, people coming here for safe yield, and so I don't think we've seen any dissipation of that type of capital flow.

Mark William Wilde - BMO Capital Markets (United States)

Okay. And then last question, kind of along the same lines. Dave a while back you mentioned to me that you thought that actually discount rates were still wider down in New Zealand. Have you seen any tightening there?

David L. Nunes - President, Chief Executive Officer & Director

New Zealand has less deal flow certainly than the U.S. And so you don't have as many data points. I think that there have been some recent transactions in New Zealand where we've seen lower discount rates than what you typically see in a lot of appraisals. So I think one of the things to keep in mind with New Zealand though is that a lot of the land in New Zealand is tied up in long-term leases or in forestry rights. And so those leases, I think, tend to contribute to a higher blended discount rate in New Zealand, relative to say, to the U.S.

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Potlatch Corporation's (PCH) CEO Michael Covey on Q2 2016 Results - Earnings Call Transcript

Potlatch Corporation's (PCH) CEO Michael Covey on Q2 2016 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

Paul Quinn (RBC Capital Markets)

Okay. And then taking a look at maybe you could comment on the overall U.S. timberland market itself, I mean, like Mike you said most of the large transactions out there are fully valued. But are you seeing the volume of transactions you expect that seems light my mind and what do you expect going forward?

Michael Covey (Potlatch Chairman and Chief Executive Officer)

I think there is a number of packages that are on the street being valued by parties. So then kind of quiet about the announcements on those I think when those come to closure it will seem like a normal level of deal activity by the end of the year that’s kind of our feeling. I agree that maybe it’s a little bit light so far, but I think there's still a number of TMOs and certainly REITs that are competitive on these things. Interest rates are low for the REITs that are borrowing money. I think we'll see the projects clear and I think they'll continue to be at prices that are quite strong.
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Paul Quinn

Okay. And last question I had just on the U.S. sawlog prices it seems if you follow timber mart so closely prices were down on the softwood side. Any indications I mean sounded like inventories are high on the sawmill side for logs, so it doesn't seem like a price recovery in the short-term, but do you see a point of inflection 2017, 2018?

Jerald Richards (Potlatch Vice President and Chief Financial Officer)

Yes. People have been talking Paul about a point of inflection for a number of years now and we have yet to see it. Although, some of the major consulting firms that are out there covering the industry. They believe that we're not too far from where that inflection point is it could be with an extra 100,000 or 200,000 housing starts. We could start to see prices move. One actually thought we that I spoke with recently said we’d see it move by the end of the year. So our fingers are crossed and at some point it will happen, but we haven't seen it yet.

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US Regional Roundwood Prices Trend Down in 1H2016

US Regional Roundwood Prices Trend Down in 1H2016 | Timberland Investment | Scoop.it

Despite some disparate regional data, delivered prices for roundwood followed a general downward trend based on Forest2Market’s 1H2016 data. Favorable weather conditions and low fuel costs during the last four months have freed up supply and nudged prices lower. With the exception of the Northeast/East Canada region, supply has not been an issue on a national basis. The following data compares 1H2016 price averages to the same period last year for our four primary operating regions: US South, Pacific Northwest (PNW), Lake States and Northeast/East Canada.
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Delivered prices for conifer pulpwood decreased in all regions, while supply results were mixed. The Northeast/East Canada market experienced the largest decline, primarily due to mill closures throughout the region.
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Hardwood pulpwood market performance generally mirrored conifer performance; delivered prices decreased in all regions while supply results were mixed. The largest price decreases occurred in the Northeast/East Canada and Lake States regions.
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US South sawtimber markets in 1H2016 declined compared to a year ago. Lumber prices were depressed by roughly $36/thousand board feet (MBF), equating to a 10 percent decrease during 1Q2016 that put further downward pressure on sawtimber prices.

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$220.8 million price tag put on Elliott State Forest

$220.8 million price tag put on Elliott State Forest | Timberland Investment | Scoop.it
Oregon has put a $220.8 million price tag on the Elliott State Forest.

That’s much less than the $300 million to $400 million value estimated in August, when the State Land Board decided to sell the 82,500-acre property near Coos Bay.

“We knew there was a range. We knew there was uncertainty,” said Jim Paul, director of the Oregon Department of State Lands. “It wasn’t anything close to the rigor of the appraisal and timber cruise we went through to get this price.”

This time, three independent firms provided appraisals. Mason, Bruce & Girard, an Oregon natural resources consulting firm, prepared the final report and valuation.

The forest was created in 1930 to provide funding for the Common School Fund, but has lost money as timber harvests have declined.

The state plans to sell the property to a single party as one piece at, but not above, full market value.

The buyer must be willing to maintain public benefits such as recreational access, preservation of older forest stands, protection of watersheds and maintaining jobs.

Four dozen entities – timber companies, conservation groups, local governments and tribes – have formally expressed interest in buying the property.

They have until Nov. 15 to submit bids.
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Lumber Trade War Brewing as Hope of New Canada-U.S. Deal Fades

Lumber Trade War Brewing as Hope of New Canada-U.S. Deal Fades | Timberland Investment | Scoop.it
A trade dispute between the U.S. and Canada over softwood lumber is escalating, raising the specter of higher tariffs as officials downplay the likelihood of reaching a deal before an October deadline.


President Barack Obama and Prime Minister Justin Trudeau directed their governments at a June meeting in Ottawa to push forward and reach accord on the issue, long a thorn in relations, while acknowledging “significant differences” remain. Officials began two days of talks in Washington on Wednesday, the fourth round of negotiations since the leaders met.


Optimism is fading. Canada’s Ambassador to the U.S., David MacNaughton, and the country’s chief softwood lumber negotiator, Martin Moen, have each said this month the sides remain far apart. Trade Minister Chrystia Freeland signaled the same, saying Canada would rather go past the October deadline than settle for a bad deal.


“We’re not going to be bound by any particular deadline,” Freeland said in an interview on Tuesday. “We’re going to try and reach an agreement, and we’re working hard now in the fall to do that.”

If the deadline is missed, the U.S. is expected to begin a process to enact new tariffs, which would be a barrier to Canadian producers including major players such as Canfor Corp., West Fraser Timber Co. and Interfor Corp. Exports from Canada accounted for most of the increased lumber demand from U.S. builders this year through April, Bloomberg Intelligence estimates.


The previous softwood lumber deal -- which included export quotas for Canadian producers -- expired in October, triggering a one-year standstill that includes a tariff freeze. Monthly softwood exports to the U.S. are up 23 percent on average, on a seasonally adjusted basis, since the pact expired, data compiled by Bloomberg show.


The value of softwood lumber exports to the U.S. is up 25 percent to C$3.6 billion ($2.8 billion) in the first six months of 2016, compared with C$2.9 billion in the same period last year, according to trade data compiled by statistics Canada. In 2015, Canada exported C$5.9 billion to the U.S.

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Maine land from Burt's Bees founder is new national monument

Maine land from Burt's Bees founder is new national monument | Timberland Investment | Scoop.it

President Barack Obama on Wednesday created a new national monument in Maine on 87,000 acres donated by the founder of Burt's Bees, fulfilling conservationist Roxanne Quimby's goal of gifting the land during the 100th anniversary of the National Park Service.

The Katahdin Woods and Waters monument includes the East Branch of the Penobscot River and stunning views of Maine's tallest mountain, Katahdin. The land is cherished by Native Americans, and its history includes visits by naturalist Henry David Thoreau and President Theodore Roosevelt.

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Supporters say the move will create hundreds of jobs in a region hurt by the closing of paper mills in Millinocket and East Millinocket. But critics fear that it will hinder efforts to rebuild a forest-based economy in Maine's North Woods.

 

This spring, Maine's legislature passed a symbolic bill saying it didn't consent to federal ownership of the land. Republican Gov. Paul LePage also opposed the ownership, calling it an "ego play."

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Quimby began buying the timberland in the 1990s with earnings from the Burt's Bees line of natural care products. She initially aimed for a national park designation, but that would have required an act of Congress. The national monument designation required only executive action by the president. Many national parks like Maine's Acadia National Park and the Grand Canyon National Park started with monument status.

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Ecostrat releases white paper on woody biomass procurement

Ecostrat releases white paper on woody biomass procurement | Timberland Investment | Scoop.it

Ecostrat Inc. recently released a white paper for current and prospective owners and operators of small- to medium-scale woody biomass energy plants. This particular publication provides an overview of five common mistakes in wood procurement and how to fix them and is part of the company’s supply chain risk series for small- and medium-sized biomass systems.

 

The first mistake discussed in Ecostrat’s paper is bioenergy project developers who come to the understanding that their wood fiber feedstock is “typical” and don’t necessarily prepare for the potential problems wide variances in woody biomass feedstock can create with the fuel handling system they choose, if not properly tested.
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Mistake number two is paying a higher premium than necessary for tighter specification. According to Ecostrat, it is always better to use the same specification for wood fiber as the large buyers in the woodshed.
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Paying flat fees for truckloads of wood fiber is the third mistake discussed in the white paper. Ecostrat said that in its analysis of hundreds of project over the past 20 years, it shows “in over 20 percent of these cases, customers are charged full rate for loads that are, on average, only 85 percent full.”
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The fourth mistake is bad request for quotes (RFQs) for wood fiber procurement. “Bad RFQs result in underperforming projects, feedstock quality issues, costly repairs and shutdowns, shortages/outages, and higher than necessary feedstock cost,” Ecostrat shared in the white paper.
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The fifth and final mistake included in the publication is when there is a lack of a disruption plan for when things go awry. According to Ecostrat, when it comes to woody biomass, supply disruptions are the highest source of additional cost to bioenergy plants. Disruptions can occur for a variety of reasons such as weather, equipment breakdown, competitive demand for scare fiber by large local buyers, etc.

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Here is the link to the full white paper: https://gallery.mailchimp.com/62355e8261b896b61aa3bed4b/files/5_Common_Mistakes.pdf

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Lawsuit over fireline seeks to curb forest firefighting tactics

Lawsuit over fireline seeks to curb forest firefighting tactics | Timberland Investment | Scoop.it
The rush by the U.S. Forest Service to cut a fireline through critical fish and wildlife habitat to fight a fire that never came anywhere near has spurred a lawsuit in federal court.

Forest Service Employees for Environmental Ethics (FSEEE), a Eugene, Ore.-based nonprofit, filed the lawsuit last week in U.S. District Court in Spokane. It seeks to rescind a 2008 regulation that allows the Forest Service to suspend all environmental laws when it fights fire, if fire managers declare a state of emergency.


The suit also would require a review of the agency’s firefighting program to assess the effectiveness of its tactics and their effect on people and the environment.

Firefighting would continue as usual during the course of the review but could be subject to new restrictions as a result of it.
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Timber Mart-South developing investment journal

Timber Mart-South developing investment journal | Timberland Investment | Scoop.it

Forest Investment Science Journal is the name of a new refereed journal under development by Timber Mart South and the University of Georgia Warnell School of Forest Resources. A call for manuscripts is expected in the next 30-90 days.

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U.S. Aims to Clamp Down on Tactic to Avoid Estate Tax

U.S. Aims to Clamp Down on Tactic to Avoid Estate Tax | Timberland Investment | Scoop.it

The U.S. government on Tuesday proposed making it harder for wealthy business owners to transfer assets to heirs without paying estate and gift taxes. The plan from the Treasury Department and Internal Revenue Service would place new limits on a common technique used to transfer interests in family businesses.

 

The regulations address the practice of discounting the value of ownership stakes in closely held businesses or land. The discounts are permitted because some stakes are worth less since they are harder to sell or represent a minority interest. The reduced values allow wealthy families to pack assets inside the $10.9 million lifetime exclusion from estate and gift taxes for married couples.

 

A typical strategy would place, say, $14 million worth of assets—stock, a business, real estate or even cash—into a company with restrictions on some of the owners’ ability to sell their pieces, said David Scott Sloan, a partner at Holland & Knight LLP in Boston who advises high-net-worth families. Those restrictions could allow the owners to get an appraisal saying that the actual value of those assets was about $10 million.
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The government’s proposal would make it harder for taxpayers to claim valuation discounts that taxpayers typically have used to reflect the diminished value of minority interests, said Richard Dees, a partner at McDermott Will and Emery in Chicago. “This is going to be a major problem for all family-owned businesses,” Mr. Dees said. “This all boils down to the question of whether a family business should be valued as if it’s owned by one person.”

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Real Estate Is Going Higher. Just Ask Lumber.

Real Estate Is Going Higher. Just Ask Lumber. | Timberland Investment | Scoop.it

When it comes at the cost of lumber, one can glean a lot of useful information about the state of the home building market, particularly in the United States. It turns out that market for wood provides robust confirmation of trends or at times can signal a market top or bottom or pending reversal of fortune in particular sectors of the housing market.
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Lumber has traded in a range between $214.40 and $338.70 per 1,000 board feet since the beginning of 2015. It closed last week around $325. As the weekly chart of lumber futures that trade on the Chicago Mercantile Exchange highlights, the price of lumber has appreciated since September 2015. The move in lumber has been slow and steady with the commodity making higher highs and higher lows. The weekly historical volatility, a measure of the variance of the lumber market, currently stands at 17.44%. Considering this metric was at almost 38% in February 2016, and was at over 40% in October 2015 and June 2015, the current level price volatility in lumber is comparatively low. Lumber is now trading at close to the highest price since 2014, but the price of wood has crawled higher. Higher lumber prices are a confirmation of a trend that we see in the housing markets across the United States.
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The price of wood peaked in 2004 at $464 per 1,000 board feet and began a multi-year slump. While the housing market crashed in 2008, lumber had already been falling for four years by the time the mortgage-backed securities issues caused massive headaches for homeowners and banks alike. Lumber futures had dropped to under $300 by 2007 while the buying and lending merry-go-round continued to send home prices to astronomical heights Lumber was screaming at markets that the housing bubble was about to burst. While markets were reeling from the aftereffects of the financial crisis of 2008, the price of lumber bottomed in early 2009 amidst a flurry of mortgage defaults as property prices dropped below loan values. The lumber price has appreciated steadily since, even as foreclosures and the aftermath of the crisis played itself out.

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Nuveen Investments expands access to alternatives for financial advisers' wealthy clients

Nuveen Investments expands access to alternatives for financial advisers' wealthy clients | Timberland Investment | Scoop.it

Nuveen Investments has rolled out a new platform that will expand access of its alternative investment lineup to wealthy individuals working with financial advisers.

 

Nuveen, an operating division of TIAA Global Asset Management, already manages $140 billion worth of alternative investments for institutional investors in products including real estate, agriculture, timber, agribusiness, and private equity.

 

But the addition of a technology-driven platform is designed to expand that access to qualified clients of financial advisers and family offices.
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The Nuveen platform, which provides advisers access to alternative products at TIAA Global, deals with the kinds of private investment products and partnerships that require investors meet certain net-worth minimums.

 

But, as Mr. Perry explained, technology is making it easier for advisers to gain access to a variety of unregistered products. Nuveen has engaged technology provider Artivest to create a white-label platform to provide access to private alternative investments from Nuveen/TIAA. The products had previously not been available to individual investors.

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Webinar: Natural resource applications of unmanned aerial systems

Webinar: Natural resource applications of unmanned aerial systems | Timberland Investment | Scoop.it
Unmanned aerial systems (also referred to as UAVs or drones) have a variety of natural resources applications including forest mapping, inventory, photography, disturbance assessment, wildlife assessment, and perhaps even timber sale administration. This brief presentation will introduce common UAS formats, their capabilities and limitations, and the status of rapidly changing regulations and licensing requirements.

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Speaker: Bill Anderson, UMN Dept. of Forest Resources

Date: Tuesday, August 16, 2016 12:00 PM - 1:00 PM (Central Time)
Price: $20.00
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MassPRIM returns 2.3% for fiscal year, timber only 0.4%

MassPRIM returns 2.3% for fiscal year, timber only 0.4% | Timberland Investment | Scoop.it

Massachusetts Pension Reserves Investment Management Board returned 2.3% in the fiscal year ended June 30, confirmed spokeswoman Nicole Giambusso. 

 

The return drove the value of the Boston-based MassPRIM to $60.6 billion. It also outperformed the pension fund's benchmark by 84 basis points, equating to $514 million in added value above the benchmark.

 

Core fixed income returned 14.7% in fiscal 2016; real estate and private equity, 12.2% each; portfolio completion strategies, 8.7%; value-added fixed income, 1%; and timber: 0.4%.

 

Meanwhile, global equities returned -3.93%, while hedge funds (net of fees) returned -5.37%.

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Oregon’s timber harvest dropped in 2015

Oregon’s timber harvest dropped in 2015 | Timberland Investment | Scoop.it
A slowdown in log exports to Asia, the end of a trade deal between the United States and Canada, and a busy fire season all contributed to a roughly 8 percent decline in Oregon’s timber harvest last year.

Loggers cut 3.79 billion board feet of timber last year from public and private forests, according to data released Monday by the Oregon Department of Forestry. Harvests in 2013 and 2014 were more than 4 billion board feet each.

Wet, warm weather during the winter also made logging and hauling difficult, adding to the 2015 drop in harvest, according to the Department of Forestry’s annual timber harvest report.

Oregon had a steady increase in annual timber harvest from 2009 to 2013. The harvest amounts declined in 2014 and last year.
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UPM discussing development of logistics infrastructure in Uruguay

UPM discussing development of logistics infrastructure in Uruguay | Timberland Investment | Scoop.it

UPM commenced discussions with the Government of Uruguay on the development of logistics infrastructure. Discussions will include railroad and roads, which currently are a critical challenge to establish large scale industrial operation in the Uruguayan inland and to connect it to a deep sea port.


"Uruguay could accommodate a third state-of-art pulp mill with proven environmental performance, if the logistics infrastructure would be rebuilt to support large scale export-oriented businesses. If these challenges can be solved in the coming few years, Uruguay could be a competitive alternative for addressing UPM's pulp market opportunities in the 2020's," says Jaakko Sarantola, UPM's Senior Vice President, Uruguay Development.


UPM estimates that healthy fibre demand growth will continue in the long term. By end of 2020's the world demand for chemical pulp is expected to grow by approximately 20 million tonnes. Some 24 million tonnes of capacity has been closed during the last 15 years and UPM expects the closures to continue at similar pace creating opportunity for new, more competitive capacity.


"In a short period of time Uruguay has created necessary conditions and successfully developed its pulp industry into an export business that has generated positive impacts to the country in many ways. UPM has been part of Uruguayan development for 25 years. We have consistently increased our plantation base in Uruguay and we are well-prepared to supply the wood for the third pulp mill in Uruguay”, Sarantola concludes.

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Home ownership slump to take ax to timber returns

Home ownership slump to take ax to timber returns | Timberland Investment | Scoop.it

The younger generations are not in a big hurry to own a home, which means timber investors should expect low returns through 2020, found a new study by MetLife Agricultural Finance, a subsidiary of MetLife Inc. MetLife has $2.5 billion in timberland, less than 20% of the insurance company's total $13 billion global agriculture portfolio.

 

MetLife expects housing starts to reach 1.5 million by 2020, below the earlier consensus forecast of 1.78 million housing starts, the report noted. “It's fair to say ... we expect returns to be below consensus until 2020 and then after that they will accelerate,” said Hugues Rinfret, director of research for agricultural finance, in the Morristown, N.J., office of MetLife.

 

New homes and home remodeling are the main drivers of demand for lumber, accounting for about 70% of demand, Mr. Rinfret said. Not only are millennials delaying buying a home, but individuals who are 35 to 44 years old likewise are not rushing into homeownership. Also, credit for new mortgages remains tight. MetLife executives predict homeownership rates will remain below the historical average of 65% through 2020 and then return back to the average, Mr. Rinfret said.

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