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Working Forest Conservation Easements: Doing Well While Doing Good

P&C's 3rd quarter newsletter reviews timber markets and prices in the Northeast, and contains an article on how working forest conservation easements can be a sound strategy for timberland investors. 

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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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MetLife Agricultural Finance Forecasts U.S. Housing Starts to be 16 Percent Below Consensus, Reaching Only 1.5 Million by 2020

MetLife Agricultural Finance Forecasts U.S. Housing Starts to be 16 Percent Below Consensus, Reaching Only 1.5 Million by 2020 | Timberland Investment | Scoop.it

The huge Millennial generation has not yet reached home-buying age and credit remains tight, causing MetLife to predict that housing starts will reach 1.5 million by 2020, 16 percent below consensus. The resulting weakened demand for lumber will continue to weigh on pricing and demand over the near term. However, emerging supply shortages will bolster U.S. timberland investments, according to Millennials, Housing, and the Timber Recovery, a new study by MetLife Agricultural Finance.
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The study also finds that:

  • Timberland values have been surprisingly resilient, despite low timber prices. More than a decade of low interest rates and the more than 30-year timberland investment time horizon explain the resilience in timberland values. Over thirty funds currently manage more than $57 billion of timberland assets for investors who cite the long term investment horizon, low correlation with the general economy, biological growth regardless of economic conditions, and a relatively stable stream of cash flows as appealing characteristics of the asset class.
  • Despite short-term headwinds, the long-term outlook for U.S. timberlands as an asset class is positive. A slowdown in the annual acreage growth of planted forests, supply issues in British Columbia, Canada, and new global demand drivers suggest the potential for a growing timber supply deficit. MetLife Agricultural Finance believes that the U.S. timberland asset class is particularly well positioned to meet the world’s increased demand for wood and wood fiber, making investments in this sector attractive for investors with long-term horizons.
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Brazilian Forest Service Launches Timber Tracking Application

Brazilian Forest Service Launches Timber Tracking Application | Timberland Investment | Scoop.it
The Brazilian Forest Service released an application for smartphones and tablets that uses QR codes to help verify the legality of traded timber, according to Fordaq.

An agent using the application will be able to scan QR codes placed onto bundles of wood that contain information about that specific shipment that was submitted to Brazil’s Chain of Custody System by logging companies operating within the country’s sustainable forest management regime.

The forest service told Fordaq, “The aim of this application is to provide transparency on forest concessions activities to improve the confidence of timber buyers that the material being offered for sale can be tracked through the system to demonstrate legality.”

The data can produce, among other things, geographic coordinates for the logs and sawn wood.

The app is the latest in a number of technological solutions to fighting the illegal timber trade. HF previously reported on a team of scientists at the United States Forest Products laboratory who have developed a device that can detect the species of logs in a matter of seconds. The scientists behind the project hope it will catch illegal timber smuggled under legal species names.
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Real Assets: The bigger picture

Real Assets: The bigger picture | Timberland Investment | Scoop.it

Get real. Real assets, that is. This is the mantra of institutional investors searching the globe for sources of long-term income. Investors want protection from market volatility and future inflation embedded in the economy through global quantitative easing programmes.

 

It is a tall order and real assets fit the bill. Institutional investors have given the asset class a big thumbs-up in the five years up to 2014, so much so that allocations to listed real assets have soared by 325% during that time, according to eVestment Alliance. That rapid pace includes a near-doubling of investment in commodities, a quadrupling of investment in US REITs, and surging growth in global listed infrastructure, master limited partnerships and multi-strategy real asset funds.

 

Real assets could boost long-term risk-adjusted returns. An analysis of the effect of a 20% real assets allocation on a 60/40 portfolio by Center Square Investment Management showed that over a 20-year period from 1995 to 2015 the portfolio with 10% in private real estate, 5% in listed real estate and 5% in listed infrastructure posted a return of 6.95% and risk of 7.01%, compared to 5.56% and 9.40%, respectively, for the 60/40 portfolio.

 

Major investment managers are moving fast to adapt their business models to stay ahead of client demand for expertise in all these sectors. This year kicked off with a series of announcements by leading investment managers forming real assets groups by combining their property, infrastructure, natural resources and commodities capabilities under one umbrella.
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The crux of the transformation is the application of a risk-bucket approach to asset allocation, says Jodie Gunzberg, global head of commodities and real assets at S&P Dow Jones Indices.
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The shift into real assets is spawning innovations in asset allocation, new thinking in index construction, and expansion of executive roles to lead new real assets groups. Then there is the technology required to implement new approaches with the transparency and customisation clients require today.

 

The creation of a new index (see Defining the universe) to track the sector holistically provides a benchmark for the new broader view of real assets, and may well lead to the next generation of real assets investing – by defining the universe, the index will establish a beta for real assets, a necessary precondition for managers to devise smart beta and enhanced indexing strategies.

 

Early this year, TIAA Global Asset Management, BlackRock and Morgan Stanley created new business units to focus on real assets investing. While the combinations of expertise varied, the goal was the same: to meet increasing client demand by better leveraging their respective capabilities. TIAA, for instance, counts property, agriculture, timber, infrastructure and energy, as well as subsidiaries investing in those sectors, as its real assets capability.

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NAFO Releases Forest2Market Report on Inventories, Removals on Privately-Owned Timberlands

NAFO Releases Forest2Market Report on Inventories, Removals on Privately-Owned Timberlands | Timberland Investment | Scoop.it

The National Alliance of Forest Owners (NAFO) recently contracted Forest2Market to study trends in inventories and removals on privately-owned[1] timberlands[2] in forested areas of the contiguous United States to determine whether more wood is growing on US timberlands than is harvested.

 

Forest2Market analyzed privately-owned timberlands in 32 states grouped into three regions: South, North and Pacific Coast/Northwest. By region, there were 13 states in the South, 14 in the North and 5 in the Pacific Coast/Northwest. The analysis covers the 2000-2014 time period in the US South and the 2008-2014 time period in all other regions.
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This analysis indicates that the Great Recession has caused several disruptions to harvest removal and inventory patterns on privately-owned timberlands in the study area. First, as demand for wood-based manufactured products has waned, the forest products industry in the United States is harvesting less wood than it did in 2008. Second, this reduction in harvest removals, especially sawtimber removals, has caused private forest inventories to increase above pre-Recession norms as unutilized sawtimber inventory accumulates. This trend is clearly evident in the South, where available FIA data make it possible to look at inventory trends both before and after the Great Recession, as shown in the figure below.

 

When demand for timber—especially high-value sawtimber—declines, private timberland owners feel pressure to optimize the return on their investment in one of two ways: the first is to delay sawtimber harvests, which increases inventories; the second is to seek alternate uses of their land that do not involve growing trees, such as converting it to agricultural land or selling it for development.

 

Robust, long-term demand for forest products promotes continued investment in forested lands and ensures that they remain forested. In the absence of that demand, as noted above, significant disruptions to forested land occur placing this land at risk for conversion to other uses. Converting these valuable lands to other uses negatively impacts America’s working forests and the industries that rely on them for raw material inputs, which are critical to local economies—especially in America’s rural areas.

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Real Assets: The bigger picture

Real Assets: The bigger picture | Timberland Investment | Scoop.it
Get real. Real assets, that is. This is the mantra of institutional investors searching the globe for sources of long-term income. Investors want protection from market volatility and future inflation embedded in the economy through global quantitative easing programmes.

It is a tall order and real assets fit the bill. Institutional investors have given the asset class a big thumbs-up in the five years up to 2014, so much so that allocations to listed real assets have soared by 325% during that time, according to eVestment Alliance. That rapid pace includes a near-doubling of investment in commodities, a quadrupling of investment in US REITs, and surging growth in global listed infrastructure, master limited partnerships and multi-strategy real asset funds.

Real assets could boost long-term risk-adjusted returns. An analysis of the effect of a 20% real assets allocation on a 60/40 portfolio by Center Square Investment Management showed that over a 20-year period from 1995 to 2015 the portfolio with 10% in private real estate, 5% in listed real estate and 5% in listed infrastructure posted a return of 6.95% and risk of 7.01%, compared to 5.56% and 9.40%, respectively, for the 60/40 portfolio.
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Global softwood lumber trade up 15%

Global softwood lumber trade up 15% | Timberland Investment | Scoop.it

Global softwood lumber trade reached an all-time high in 2015 when, according to estimates by the WRI, 118 million m3 was traded internationally. This year has started out with even higher volumes being traded around the world; the 1Q/16 shipments were approximately 20% higher than in the first quarter of 2015, according to the Wood Resource Quarterly (WRQ).

All countries on the “top-10 import list” increased their lumber importation during the first few months this year with the biggest changes in import volumes being in the US, China and Egypt. Some of the regions covered in the latest report from WRI include;

North America

There was mostly upbeat news about the US lumber market in the first few months of 2016; housing starts in March were the highest for that month since 2007, lumber consumption in early 2016 was 14% higher than the same period in 2015, lumber imports in January-April were up 42% as compared to early 2015, and lumber prices in May reached their highest levels in over a year. Despite increased domestic wood demand, lumber production on the US West coast actually fell about four percent during the first four months this year.

Canadian production was sharply higher during the first three months of 2016 as compared to the same period in 2015, with an increase of 19% in the Eastern provinces and eight percent in British Columbia.

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Prequin's Latest Issue of 'Real Assets Spotlight' Highlights Natural Resources Performance

Prequin's Latest Issue of 'Real Assets Spotlight' Highlights Natural Resources Performance | Timberland Investment | Scoop.it
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Weyerhaeuser: Not The Same Company Anymore

Weyerhaeuser: Not The Same Company Anymore | Timberland Investment | Scoop.it
At one point, WY competed for investor attention with Plum Creek Timber, Rayonier (NYSE:RYN), and Potlatch Corporation (NASDAQ:PCH). All at least reasonably large U.S. Timber owners, and over time, all four wound up as real estate investment trusts, or REITs. Each company had positives and negatives, including things like the location of their timberland and business diversification.

However, WY announced that it was acquiring Plum Creek in late 2015 in a deal that was completed in February. That not only took out a competitor, but it massively increased the size of WY's portfolio. It also augmented the REIT's timberland exposure in areas where it was a relatively smaller player. Potlach and Rayonier are now very distant competitors, with just 1.4 million and 2.7 million acres of timberland, respectively, compared to WY's roughly 13 million.

Weyerhaeuser's expanded portfolio does, indeed, provide more diversification on the timber front. It can serve just about any North American market and international ones. That's a big plus from the merger. But the Plum Creek acquisition isn't the only change that's taken shape in recent years.

Getting out of pulp

The other big change is that the company is selling its pulp business to International Paper (NYSE:IP). This follows along the same path as Potlatch, which spun off its pulp business in late 2008, and Rayonier, which spun its pulp business off in mid 2014. So, in some ways, WY's move to streamline shouldn't be a surprise.

But the pulp business is an interesting one because demand tends to be fairly steady. Pulp is used in everything from diapers to cigarette filters. During the financially led 2007 to 2009 recession that devastated the U.S. housing market, fibers was a bright spot. In fact, when Rayonier spun off its fibers assets, the company's CEO chose to head up the fibers business instead of the timberland business. That's an interesting statement to say the least.

And WY isn't done yet. It's still looking at alternatives for other non-timber businesses it owns.
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Years of drought causing tree die-off in Oregon forests

Years of drought causing tree die-off in Oregon forests | Timberland Investment | Scoop.it
Douglas firs and other trees are dying in Southern Oregon forests, where three years of drought have been taking their toll.

The Mail Tribune reports that experts say even more drought-tolerant trees like Ponderosa pines have lost out in the competition for water. The wet winter couldn’t prevent tree death after years of drought and beetle attacks.

The die-off in Applegate Velley, up the West Cascades and into the Willamette Valley appears to be even worse than those caused by drought in the mid-1990s and early 2000s. The scale of the die-off will be quantified during aerial mapping surveys next month.

Rogue River-Siskiyou National Forest plant pathologist Ellen Goheen says there seem to be more dead and dying conifers than at any point during the past 22 years.
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San Diego City Employees drops REITs

San Diego City Employees drops REITs | Timberland Investment | Scoop.it

San Diego City Employees' Retirement System will eliminate its real estate investment trust allocation, said Liza Crisafi, chief investment officer, in an e-mail.

Although the portfolio has performed well over the long term, “the current private real estate portfolio has a broad mix of strategies that provide many of the benefits of real estate securities with lower observed volatility,” said materials prepared by investment consultant Aon Hewitt Investment Consulting for last month's board meeting.

Sam Radcliffe's insight:

I would be really interested in seeing how SDCERS compared the volatility of an asset that trades in the financial markets with one that trades in private markets with a frequency of years or decades. Just because we cannot observe the volatility of private asset prices does not mean that volatility is absent.

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U.S. agents move against illegal timber imports from Amazon

U.S. agents move against illegal timber imports from Amazon | Timberland Investment | Scoop.it
U.S. agents searched the offices of a California-based wood importer this week as part of a broadening government crackdown on imports of illegally harvested timber, according to a previously unreported federal search warrant seen by Reuters.

The Department of Homeland Security agents are probing whether privately held Global Plywood & Lumber Inc violated U.S. and Peruvian law by importing wood that officials say was taken from the Amazon without proper permits, according to the warrant filed in U.S. District Court for the Southern District of California in San Diego on Monday and executed on Tuesday.

No charges have been brought against the company. A Homeland Security spokesman in Houston said the investigation was ongoing.

Kenneth Peabody, Global Plywood manager, declined to comment on the warrant, the latest sign of increased U.S. efforts to curb logging of rare forest species.

In February, wood flooring giant Lumber Liquidators Inc agreed to pay more than $13 million in criminal fines and forfeitures to resolve a U.S. Department of Justice investigation into the import of wood illegally logged in far eastern Russia, home to many endangered species.
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Softwood Pulpwood Demand Declines in the Northeast

Softwood Pulpwood Demand Declines in the Northeast | Timberland Investment | Scoop.it

When the Madison Paper mill in Maine closed this month, it marked the loss of the last major softwood pulpwood market in New England. Since early 2014, mill closures in Bucksport and East Millinocket, a capacity reduction at the mill in Jay, and the recent Madison closure have cut roughly 2.1 million tons of softwood pulpwood demand in the state. The closures have also have left loggers and landowners struggling to move softwood pulpwood to other regional mills that use some volume of softwood as part of their species mix.

 

To put this volume in perspective, 2.1 million tons equates to 192 truckloads of wood running 365 days per year—and that only represents the volume lost in the softwood markets. Maine has also lost a hardwood pulp mill in Old Town, two biomass electricity plants, as well as biomass markets at a number of the closed pulp mills.

 

While New England has vast forests of northern hardwoods, the region also has a significant softwood inventory as well. Spruce-fir, hemlock and white pine stands cover much of the territory, and these species face a challenging future as the regional markets for low-grade wood become increasingly limited. In 2014, the last year for which complete data exists, Maine timberlands produced 2.7 million tons of softwood pulpwood. This volume of wood simply couldn’t find a home on today’s market.
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Due to the decrease in demand, this price reduction we’re witnessing in the market is hitting landowners in the form of lower stumpage prices, or the prices they are paid for the harvested trees on their land. Some landowners—particularly those in Maine’s Penobscot River Valley, where so many markets have closed—have seen dramatic decreases in softwood stumpage prices. And that’s if they can find a market at all.

 

While the loss of softwood markets has affected the entire regional supply chain, it has also created opportunities for new market entrants. A number of existing paper mills are experimenting to see if they can increase their use of (now abundant) softwood while maintaining yield and quality. Entrepreneurs and developers are also looking at this resource for use in wood pellet and biofuels manufacturing, chip exports and a number of other wood raw materials markets as they are seeking to find new economic uses for low-grade softwood.

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Asset Class Battle: Timberland Vs. Farmland

Asset Class Battle: Timberland Vs. Farmland | Timberland Investment | Scoop.it

This is why I believe farmland is a better asset class than timberland for addition to a portfolio of traditional assets:

  • The long term fundamentals of farmland for future land value appreciation are stronger than timberland. The value of timberland is highly correlated with the housing industry, and building materials can be replaced with substitutes in case of high increases in wood prices. However, corn, soybeans or wheat can hardly be replaced and are indispensable. Simply put, farmland produce more of a vital necessity than timberland.
  • Farmland owners enjoy more stable cash flow than timberland owners. 
  • Expected demand growth for primary crops is stronger than for wood due to the rising incomes in the emerging economies that causes a change in people's diet. As income increases, people's diet tend to change as they increase their consumption of protein… As more livestock is needed to satisfy the increasing demand for protein, more feed grain especially corn and soybeans are required. 
  • The farmland universe is much larger than the timberland universe. It is an untapped market by institutional investors compared to timberland which is already a well represented asset class in institutions' portfolios. ... Since institutional investors are less active in the farmland market, there are likely to be more opportunities to purchase farmland from unsophisticated farmers at discount prices to market value. 
  • Farmland is less exposed to the risk of fire than timberland. 
  • Farmland is less sensitive to the general economy than timberland. Eating habits will not drastically change in a recession, however construction activity can completely stop.

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... in my opinion the best approach to gain exposure to the farmland asset class is through the purchase of REITs. This also applies for Timberland for the same following reasons:

REITs are able to mitigate the investment risk by being widely diversified.


An internally managed REIT possesses all the advantages of private partnership including professional management, but with less conflicts of interest and no management or incentive fee structure.


It is a liquid and cost efficient way of participating in the returns of a diversified portfolio of farmland or timberland assets with yearly dividend distributions and good long term capital appreciation potential. Shares can be sold anytime, in one click of a mouse, and with only minimal transaction cost.


From a return performance perspective, it could also be argued that REITs have the capacity to achieve higher returns thanks to their access to a wider range of potential deals and a broader access to capital at a lower cost than most individual investor. The historical performance proves this statement as on average REITs have returned 14% yearly from 1975 to 2010.

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GA Forester's comment, July 21, 10:02 AM
Where does the author get information supporting Farm cash flows being more consistent than timberland cash flows? That is not my experience. Farmland can be an effective asset class, but this seems like a sales pitch rather than a dispassionate analysis.
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Here's Why Calpers Suffered Worst Year Since Financial Crisis

Here's Why Calpers Suffered Worst Year Since Financial Crisis | Timberland Investment | Scoop.it

The California Public Employees’ Retirement System, the largest U.S. public pension fund, earned a return of 0.6 percent on its investments last fiscal year, trailing its long-term target as holdings in stocks and forestland lost money.

 

The pension’s public equity portfolio lost 3.4 percent in the year through June 30 and forestland assets declined 9.6 percent, Chief Investment Officer Ted Eliopoulos said Monday. Fixed-income holdings rose 9.3 percent and infrastructure investments gained 9 percent.
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The system had $295 billion as of June 30 and $302 billion on Monday, according to a Calpers statement. Stocks made up about 52 percent of the system’s assets as of last month, accounting for their large impact on returns. Fixed-income, such as bonds, totaled 20 percent. Real assets, including real estate, forestland and infrastructure, comprised 11 percent. Private equity was 9 percent. Investments with inflation protection, such as swaps and commodity futures, were 6 percent of the portfolio and had negative returns of 3.6 percent in the year.

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U.S. Timberland Ownership Over Time

U.S. Timberland Ownership Over Time | Timberland Investment | Scoop.it

We studied the concentration and conversion among the largest timberland owners and managers over the past five decades. The table below compares the top U.S. owners and managers, in order by acreage, from 1969 to 2016. What started as a sector dominated by integrated forest industry firms now features timberland specialists (in the form of REITs) and asset managers.

 

While the institutional timberland investment sector came of age in the 1980s, timber REITs hit the market in 1999 beginning with the conversion of Plum Creek from a master limited partnership (MLP) to a real estate investment trust (REIT). Between 1999 and 2006, four publicly-traded forest products firms converted over 12 million acres of industrial timberlands into REITs. In addition to Plum Creek, these firms included Rayonier, Potlatch, and, for less than one year, Longview Fiber. Weyerhaeuser made the conversion in 2010. In December 2013, CatchMark Timber Trust, formerly the private REIT known as Wells Timber, became the sixth public timber REIT.
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The presence of TIMOs and REITs as both buyers and sellers continues to speak to the relative maturity of the sector, as investors continue to grapple with the reality of a constrained “solution set” of opportunities. Moving forward, the world of timberland investing will continue to struggle with within-industry maturity and outside-of-industry demand for returns.

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Cameroon moves to curb forest loss linked to Chinese investment

Cameroon moves to curb forest loss linked to Chinese investment | Timberland Investment | Scoop.it

A rise in Chinese companies operating in Cameroon’s timber sector, combined with weak law enforcement, have fuelled a surge in illegal logging that is fast depleting the nation’s forests, experts warn. But the government is hoping a new association it has set up for Chinese firms exploiting forests will strengthen links with officials and enable those companies to work within the law.


Every night, trucks laden with logs negotiate hundreds of kilometres of bumpy earth roads, headed to the port in Douala, Cameroon’s commercial capital, where the wood – some of it logged illegally – is shipped to foreign markets.


“We have observed a surge in timber trade activities with the increased presence of Chinese business operators in the sector,” said Bernard Njonga, coordinator of Cameroon-based NGO Support Service for Local Development Initiatives (SAILD). “The illegal forest exploitation and logging business has been compounded by weak laws applied to some groups of persons and not others,” he added.

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Britain Flexed It with EU Exit; Forisk Checks Its Implications for Forest Markets and Bioenergy

Britain Flexed It with EU Exit; Forisk Checks Its Implications for Forest Markets and Bioenergy | Timberland Investment | Scoop.it

What does Brexit imply for U.S. timberland investors and forest industry firms? Probably not much. Brexit implications concentrate on markets with strong exposure to wood pellets. Since U.S. wood pellet producers represent a small portion of the U.S. forest products industry, any impacts would be felt locally in key pulpwood markets, if at all. Even here, the risks reside within the context of increased uncertainty in three key areas: EU/UK energy policy, trade, and currency valuation (FX).

 

The main policy driving wood pellet demand is the EU’s implementation of its 2020 climate and energy package. It remains unclear if further policy changes will ensue with the exit or new political leadership following the resignation of PM David Cameron. The 2009 EU Renewable Energy Directive (RED), which is part of the energy and climate package, sets binding renewable energy targets for each EU member state. The RED set a target of 15% energy consumption from renewables by 2020 for the United Kingdom. Efforts to meet this target pushed biomass-based electricity generation from 3.8% of the national total in 2010 to 8.6% in 2015, with forecasts of 11% by 2020.
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A UK departure from the EU would release the UK from the RED obligations, unless the UK maintains economic trade ties with the EU as part of the European Economic Area (EEA). An exit from the EU also releases the UK from compliance with EU State aid rules, which could simplify subsidy programs in the UK. The UK has developed its own climate change goals in the Climate Change Act of 2008 and has established programs to meet carbon reduction requirements, including the Contracts for Difference (CFD) program that provides subsidies for renewable energy technologies. Recent CFD budgets favor “less established technologies” such as offshore wind and biomass combined heat and power rather than biomass conversions, which have been driving the U.S. pellet export sector.
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Finally, Brexit could tighten financing for unfinished projects if capital markets step back. Projects that plan to source wood pellets, such as Lynemouth and MGT, may face increased delays. Technically, nothing will formally change until the UK invokes Article 50 of Lisbon Treaty and begins the withdrawal process (a process that could take two years). In sum, the future of subsidy programs and funding efforts for renewable energy rest with Britain’s government and commitment as a country to continue supporting renewable energy and low carbon technologies, regardless the recent vote.

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NC State Sells Long Term Timber Deed to RMS on Hoffman Forest

NC State Sells Long Term Timber Deed to RMS on Hoffman Forest | Timberland Investment | Scoop.it

The Board of Trustees of the Endowment Fund of NC State University and the Natural Resources Foundation today announced a new agreement for the timberland on Hofmann Forest, ensuring long-term sustainability for the land and consistent annual income for the College of Natural Resources.

 

The Endowment Fund Board and the Foundation signed a $78 million, 50-year timber deed with Hofmann Forest Timberlands LLC, an entity managed by Resource Management Service LLC (RMS), which is a privately held timber investment management organization known for its leadership in sustainable forest management practices. The timber deed gives RMS rights to sustainably grow, harvest and replant the timber on 54,334 acres of working forest with the NC State Endowment Fund maintaining ownership of the land.

 

The agreement also maintains access for students and faculty in the College of Natural Resources to teach and conduct research across the property, and it requires RMS to manage the forest to meet sustainable forest management certification requirements and return an improved age class distribution of trees at the end of the 50-year contract. As a working forest, the majority of the 79,000-acre forest will remain dark and undeveloped, providing clear benefits for the military and economic prosperity in eastern North Carolina.

 

The proceeds from the contract will be invested in the Endowment Fund of NC State University and will provide a consistent yearly income of about $3 million that will go exclusively to support the teaching, research and outreach programs of the College of Natural Resources. The consistent annual funds replace variable yearly income previously generated by the Foundation’s management of the forest, enabling the college to better plan for and utilize resources to benefit its educational mission. The agreement also reduces the Endowment Fund’s investment risks and gets the Natural Resources Foundation out of the business of managing a commercial forest and more focused on advancing the teaching and research mission of the college.

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Pope Resources Announces Timberland Acquisition

Pope Resources Announces Timberland Acquisition | Timberland Investment | Scoop.it
Pope Resources (NASDAQ: POPE) announced today that it has entered into a definitive agreement to acquire approximately 7,300 acres of timberland in western Washington for $31.9 million from a client of Hancock Timber Resource Group. The acquisition will be financed with a new credit facility and closing is expected to occur in the third quarter of 2016, contingent on obtaining such financing.

"We like what this transaction represents in terms of species mix, age class distribution, ease-of-operability, and accretive cash flow," said Tom Ringo, President and CEO.  "An added plus is how the property folds neatly into our existing timberland management infrastructure due to its proximity to other lands we already own and manage."
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U.S., Canada lumber talks stalled, litigation looms

U.S., Canada lumber talks stalled, litigation looms | Timberland Investment | Scoop.it

Talks between Canada and the United States to resolve a dispute over exports of softwood lumber are making little progress and the matter likely will return to the courts, sources familiar with the negotiations said on Friday.

 

U.S. producers complain that Canadian softwood lumber is subsidized, and have in the past launched trade challenges that resulted in the United States imposing billion of dollars in tariffs.

 

The most recent round of arguments ended with a 2006 deal that expired in October 2015. Both sides agreed to take no action for a year after that, but without a new agreement, U.S. firms look set to file new damage claims.
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As the U.S. economy recovers, Canadian firms could benefit from more home construction. Exports of softwood lumber totaled US$5.9 billion in 2015, up from US$5.5 billion in 2014, according to Statistics Canada data.

 

The 2006 agreement said that if prices fell below a certain level, Canadian firms could pay export taxes or agree to quota limits while paying lower tax rates.

 

One challenge for Canada is that domestic lumber producers are split over the best strategy, say officials in Ottawa. Firms on the west coast — who have diversified operations by boosting exports to Asia — are more likely to agree to a deal limiting exports, while those in central and eastern Canada want no restrictions.

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Timberland Transaction Trends in North America

Timberland Transaction Trends in North America | Timberland Investment | Scoop.it

The figure below highlights how timberland transaction volume over the past five years leading to 2016 rose to levels more in line with pre-Recession markets. From 2011 through 2015, large-acre, publicly announced deals averaged 2.2 million acres and 52 closings in the U.S. annually.

 

Each year seemed to have a “signature” transaction as the market probed its way forward. In 2012, Hancock Timber Resource Group and Molpus acquired 1.9 million acres from Forest Capital Partners, closing out Forest Capital’s work in transferring Boise Cascade’s timberlands to the institutional investment sector. In 2013, Weyerhaeuser acquired 645,000 acres from Longview Timber (Brookfield) in the Pacific Northwest, recapturing the acres within a public REIT that had once traded as a standalone public REIT (in 2006). In 2014, JWTR sold 600,000 acres in Oregon to Green Diamond. And 2015 opened and closed with a series of robust transactions starting with the Q1 197,000-acre sale in Oregon by Cascade Timberlands to Singapore-based Whitefish Cascades Forest Products and ending with four Q4 100,000+ acre transactions involving firms such as Lyme, Campbell Global, Hancock, and Molpus.

 

In conclusion, the primary changes since Q1 2015 center on the public REITs. Acquisitions, divestitures and statements by public firms highlight efforts to look forward and allocate capital in ways that optimize their portfolios and shareholders. Overall, the sector continues its efforts to optimize timberland portfolios in a mature, competitive and increasingly transparent North American market.

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Minnesota: Louisiana-Pacific Is Mystery Company Receiving $66M In Public Financing

Minnesota: Louisiana-Pacific Is Mystery Company Receiving $66M In Public Financing | Timberland Investment | Scoop.it
State lawmakers finally revealed the identity of the home siding company after securing a deal to have a $440 million plant constructed in Hoyt Lakes. The months-long mystery behind which home siding company would be receiving a $66 million subsidy package from the state has finally been made public.

Louisiana-Pacific will construct a $440 million plant in Hoyt Lakes. This is the Nashville-based company’s second operation in the state (the other being in Two Harbors).

The Hoyt Lakes site will employ 250 people, amounting to roughly $264,000 in state funding per job created. The Duluth News Tribune notes that many of those employees will be loggers and felled tree transporters, a group of workers that has struggled to find employment following years of board plant closures and layoffs at paper mills in the area.

The new plant will also source its wood products from Minnesota. LP is currently estimating its take to be 800,000 cords per year (one cord equals 128 cubic feet of wood) or about 200 logging trucks each day.
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J.P. Morgan says 75 percent of institutional investors boosting real asset allocation

J.P. Morgan says 75 percent of institutional investors boosting real asset allocation | Timberland Investment | Scoop.it
J.P. Morgan says 75% of institutional investors boosting real asset allocation A survey by J.P. Morgan Asset Management (JPAM) involving 155 institutional investors with more than $4tln in total plan/investable assets has found that a vast majority of 75% are planning to increase their allocation to real assets in the next five years.


The survey, conducted at JPAM’s annual 2016 Global Real Assets Conference in New York, also showed that at least 41% of attending investors view infrastructure as the most interesting real asset investment opportunity to add to a domestic core real estate allocation.

 

Some 51% of investors currently allocate 7% to 15% of their total portfolio to real assets with 18% of attending investors allocating more than 15%.

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Can Asset Management Disrupt Itself?

Can Asset Management Disrupt Itself? | Timberland Investment | Scoop.it

Several reports this year have highlighted the need for asset managers to adapt to survive—but Fitch Ratings Analysts Manuel Arrive and Alastair Sewell argued many firms had already made significant changes to their business models.

 

Groups have variously begun to adopt data and new technologies as “strategic assets,” the authors said, in response to competitive and regulatory pressures as well as a potential “inflection point” for industry asset growth in 2016. Such tools “have the potential to provide new sources of alpha and asset raising,” they added.

 

“Asset managers that shifted early their business positioning in anticipation of the next investment cycle or emergence of long-term, sustainable growth areas have developed a key competitive advantage,” Arrive and Sewell wrote.

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Booming timber trade boosts forestry returns

Booming timber trade boosts forestry returns | Timberland Investment | Scoop.it

Commercial forestry’s unique return characteristics have caught the attention of fund managers attempting to generate superior risk-adjusted performance. Over the 10 years to 31 December 2014, UK commercial forestry, as measured by the IPD Forestry index, has generated annualised returns of 18.8 per cent, with no years of negative returns. It has outperformed all other traditional and alternative asset classes. Furthermore, these returns have been achieved with an annual standard deviation of less than 10 per cent. Unsurprisingly, this kind of performance has piqued the interest of both institutional and private investors.
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While returns achieved from UK commercial forestry over the past decade are unlikely to be repeated over the next 10 years, we expect long-term annual nominal returns of circa 10 per cent based on predictable volume and value growth of the trees and anticipated modest appreciation in timber prices and land values. This positive outlook is shared by global investment management firm GMO Woolley, which forecasts that timber will outperform international large-cap equities by 3.2 per cent per annum in real terms over the next seven years.

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