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Throw a Log on the Refinery

Throw a Log on the Refinery | Timberland Investment | Scoop.it

A plant in Mississippi will start selling gasoline made from wood by the end of the month, said owner KiOR., putting the firm ahead in a race to be the first in the U.S. to make large quantities of renewable fuel from a source that isn't food.


But at the same time that backers of the fuel and other pioneers in the renewables sector say they are on the cusp of a breakthrough, opponents of the federal mandate that underpins their market are mounting an attack. That is adding to uncertainty at a time when investors are deciding whether to commit to the advanced-renewable-fuel industry.

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Timberland Investment
Timber Industry | Deals & Transactions | Investment Rationale | Financial Performance | Investors | Asset Managers
Curated by Sam Radcliffe
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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 1.5 million acres of timberland located in Maine, Vermont, New York, Michigan, Wisconsin 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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GMO - A Farmland Investment Primer

GMO - A Farmland Investment Primer | Timberland Investment | Scoop.it

Farmland is a real asset that combines solid investment fundamentals with the potential for attractive cash yields, inflation hedging, and consistent returns from biological growth. Furthermore, farmland total returns tend to be uncorrelated with financial asset returns, offering genuine portfolio diversification for institutional investors. While institutional ownership within the asset class has grown steadily over the past few years, it still accounts for less than 1%1 of total global agricultural land ownership, presenting significant opportunity for sustainable yield enhancement through targeted farmland investment in certain regions.


The pages that follow present an overview of the key characteristics and potential risks of farmland investing, consider the routes for implementation, and make the case for a diversified, cross-regional approach to the asset class.

Sam Radcliffe's insight:

Great read to become acquainted with the ag investment sector.

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Forestland Group aims to raise $350M

Forestland Group aims to raise $350M | Timberland Investment | Scoop.it

Heartwood Forestland REIT III LLC, formed in 2014, recently filed a transaction with the SEC after the company raised $85.5 million of the $350 million it is hoping to raise. Ten investors have signed on to the fundraiser, according to the SEC filing.


Heartwood Forestland REIT III LLC falls under Forestland Group LLC, which was formed in 1995, and manages 3.5 million acres of forestland in 24 states and Belize, Canada, Costa Rica and Panama. The company focuses on naturally regenerating hardwood and softwood forests.

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Some Nuggets from Potlatch's Q2 2014 Earnings Call Transcript

Some Nuggets from Potlatch's Q2 2014 Earnings Call Transcript | Timberland Investment | Scoop.it

Paul Quinn - RBC Capital Markets
Okay. And then Mike you mentioned a number of timber sales that you’re taking a look at right now, is that -- would you describe the current market as more sales out there and what’s the general flavor in terms of competitive pressures?


Mike Covey - Chairman and CEO
I think that especially the southern timberland market is as competitive as it’s ever been at least in the last five years or six years that I can remember. Certainly since the downturn, I think we are seeing higher prices and more competitors than we’ve ever seen both from the suite of weak competitors as well as (indiscernible). And there are only a handful of properties for sale. There is -- I don’t know by handful there is probably half a million acres on the market and half a dozen transactions. So they are small, there is not many of them and they are extremely competitive.


Paul Quinn - RBC Capital Markets
I think that increased competition has pushed up transactions values. I mean we really haven’t seen that many transactions. I mean there was one closed I guess the Catchmark sale in Q1 that was over 2000. Is 2000 an acre now sort of the new norm in the US now?


Eric Cremers - President and COO
Well, the price per acre heavily depends on stocking and quality of the timber and proximity to markets. So it’s hard to just pick one number, but certainly the large Plum Creek transaction with (indiscernible) and the Catchmark transaction that was completed in Q1, those were approximately $2000 an acre which have been higher than what we’ve seen in the past. But you could also see something trade for $1500 an acre which might be an extraordinary price if it was poorly stocked. So it’s hard to say that 2000 is new norm.


Mike Covey - Chairman and CEO
Paul, I think part of what’s driving those higher prices that we are seeing is there is more conviction that there is going to be a housing recovery in the U.S. If you look at forward demand for lumber going up 4, 5, 6 billion board feet a year. Almost everybody agrees that’s got to come from the U.S. south. So price curves for saw logs in southern yield pine continue to strengthen. And with more conviction of there being a housing recovery, it’s pushing discount rates down. Those two combined factors and what’s driving those higher values.


Paul Quinn - RBC Capital Markets
Okay. And we are seeing some price appreciation in different parts of the U.S. south on the pine saw log side, but you are not seeing any in Arkansas. Is it more to do with just the growth versus drain ratio in that -- in your jurisdiction?


Eric Cremers - President and COO
It’s probably that, the growth versus drain, as well as just the dynamics of the sawmill and plywood capacity, that’s installed in the area. Ad I think as you go to coastal and central Georgia, the Carolinas, North Florida, parts of Texas there is just a more robust market for lumber and plywood producers than is south central Arkansas where we’ve seen a fair amount of idle capacity.
***
Collin Mings - Raymond James
Okay. All right. And then just one other follow-up, just on the share repurchase. I’m just curious, I mean, some of your peers have gone as far as offered a specific trigger point on the share price that they see where they might get more aggressive. And I know that’s probably not something you guys would love to do but just can you talk a little bit more about maybe the dynamics where as you alluded to where that’s kind of the bottom of your capital allocation priorities. What might happen or what way you might see the move that up the stack a little bit?

Particularly just give me some of the challenges as Mike you alluded to with how competitive it remains for Timberland acquisition. And again as I look your stock trading at discount to NAV, it seems like there is some value there and repurchasing your own timber, if you will this type of discount?


Mike Covey - Chairman and CEO
Well, we don’t dispute. We certainly believe, we traded at a discount to NAV and certainly in this market, perhaps buying our own trees through our own stock is one of the more attractive alternatives that we have for the use of capital, but I also think the landscape related with people who do share buybacks that have not got that right in hindsight.

And our board has been very conscious about that. And I think it’s just as a matter of priority, kind of work through and said capital allocation to our wood products business, dividend increases and acquisitions are higher priorities in share back. That’s not that we’re going to rule them out but they are just at the bottom of the stack. Well, when moving to the top of the stack, obviously is a major retraction. I think in our share price for whatever reason -- for the below NAV than it is today and then certainly we do revisit with board.

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Jack D Bridges's curator insight, July 24, 9:03 PM

Considering the Potlatch discussion of the "competitive" timberland markets in the US Southeast, let's turn to a similar issue: Why are large investors ignoring or overlooking the Lake States timberland market? 

 

Sam Radcliffe of P&C (www.prentissandcarlisle.com) has addressed this before, but it's an interesting issue. For starters: 

 

1) The wood basket as a whole has nearly no export markets, unlike the PNW and SE, which give the regions a better margin of safety during recessions / times of lower domestic demand / pricing. S. Radcliffe could probably quantify this fact, but let's just say for those who do not defer harvests during recessions--or owners exposed to closing mills / poor pulp demand / or delivery economics--it matters.

 

2) Due to demographics, on aggregate, HBU values are typically lower in the Lake States (though, not always) Why? In the Lake States, almost 40% of timberland ownership is comprised of state, county, or federal agencies; in the SE wood basked, that number drops to 5.5%. (source: http://www.keweenaw.com/pdffiles/2nd-2014.pdf, page 2).

 

So, this complicates things for owners of timberland in the Lake States; it can weaken HBU potential for certain properties (timberland is abundant for recreation, due to the ample state / national forest lands open to the public); conservation easements become tougher to "sell;" since forested buffer zones are abundant; demographics precludes raw or recreational land values from reaching prices seen in other timber regions (Pope Resources land outside Seattle; Plum Creek's lands near Gainesville, etc.).

 

3) Despite no export markets, and lower average HBU potential, high-grade Northern Hardwood sawtimber (Hard Maple, Cherry, Walnut, etc.) is a valuable commodity. And yet, Northern Hardwood wood baskets are generally not as well understood by investors. This is S. Radcliffe's point from his excellent presentation, found here: 

 

http://www.myminnesotawoods.umn.edu/wp-content/uploads/2013/12/TIMOs-REITs-the-new-face-of-industrial-forestry-v2.pdf

 

(I think Sam is spot-on about this--and I suggest reading more of his writing on the subject.)

 

But I digress...so the industrial and institutional marketplace for Lake States timberland is smaller, while in the SE and PNW there are more players chasing fewer assets. This, in turn, impacts prices accordingly.

 

These are just 3 brief reasons why investors (and industrial owners, like Plum Creek, Rayonier, and others) overlook the Lake States. What could change this? 

 

Since I've invested in the Lake States region personally, and for others for quite a long time, this issue is something I kick around a lot. From my perch the answer is simple: A region wide effort by timberland stake holders, green power advocates, and policy makers, to develop infrastructure to support biomass for power generation. 

 

Now, this will draw cries from those who argue biomass is impractical or even uneconomical in many cases. Without subsidies or federal support, perhaps. But, many "new" industries with some tangible benefits for all (cleaner air) get a nudge from the public--as long as the 'support' has roots in economic reality, and doesn't completely pervert sound market principles. 

 

This is not a new idea, either. In the recent past, several projects proposed building $12M+ pellet plants (fed by wood waste, tree tops, etc.) which would then supply regional power generators. Unfortunately, the energy suppliers had no incentive to spend huge sums retrofitting their plants to support a more carbon-friendly raw fuel, without incentives from state & federal agencies. So, no tax breaks to help ease the blow of capital costs = no new revenue stream for timber companies / crews to use waste = no joint ventures to build scalable pellet plants.

 

My question is this: Where is the initiative among the timberland / forest products crowd to invest in making this a reality? It would create a few jobs, take waste products and turn them into fuel, and help reduce the amount of coal burned by Lake States power concerns. 

 

It's easy to see why this hasn't happened, though. The effort involved to create a modest economic impact--even for areas that could use ANY boost in jobs--would be great. And, while the forest industry in the Lake States punches at a decent weight ($32.9B in size), it tends to carry a very quiet stick on the federal level. In other words, states like California tend to lead the agenda in areas like this; Michigan & Wisconsin, not so much. 

 

Barring a big shift in investor perception and behavior, without more revenue streams (more, not less mills; more environmental market activity like mitigation banks or carbon credit sales), it's hard to see how the Lake States timber markets will attract more capital. For now, we will just have to be content with the returns that biology, sound management, and opportunistic purchases provide.

 

May Mr. Dangerfield RIP--the Lake States don't get no respect, either.

 

JDB

Further Reading:

 

http://www.prentissandcarlisle.com/assets/PCnwslttr_2QTR-14.pdf

 

http://bluesource.com/news/view/Blue-Source-and-The-Forestland-Group-Register-Largest-Carbon-Project-with-California-s-Cap-and-Trade-Program

 

A look at Lyme Timber III--and how Lyme generates returns for investors--

 

http://www.thegiin.org/cgi-bin/iowa/resources/profile/18.html

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Stocks, bonds...and farmland. Demand for land investments is up among the affluent.

Stocks, bonds...and farmland. Demand for land investments is up among the affluent. | Timberland Investment | Scoop.it

Some investors are trying to get more grounded—by dedicating a chunk of their investment portfolios to farmland or timberland. Interest in land from high-net-worth investors is up at a time when stocks hover near record highs and bonds could be hurt by rising interest rates.

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Farmland returned 20.9% in combined appreciation and income last year, and timberland returned 9.8%, according to an index compiled by the National Council of Real Estate Investment Fiduciaries in Chicago. Over 20 years, farmland has returned an average 12.5% a year and timberland has returned 8.3%, the group says.


U.S. Trust's Specialty Asset Management group, a part of Bank of America, BAC -0.03% is hiring to bulk up its farm and timberland investment groups to keep up with client demand. U.S. Trust currently has $170 million of investor money waiting to be invested in farmland and ranchland and another $215 million for timberland, on top of the $1 billion-plus in farmland it already manages and $300 million in timberland. Clients have at least $50 million in investible assets and invest a minimum of $5 million, says Dennis Moon, the head of the specialty asset group.
***
Tom Rowland, chief executive of American Timberlands, a Columbia, S.C., timberland-investing company, says the firm is looking to raise a fund of $100 million to $200 million. Many of its current individual investors are medical doctors who are looking at the run-up in their stock portfolios over the last two years and "want something that isn't in the stock market," he says.


The new fund will have a minimum investment of $1 million, and the money will be locked up for at least five years. American Timberlands' existing fund charges fees of 1.5% and 20%, and returned 24.2% last year, net of fees.


The recent strong returns and investor interest have some longtime investors sounding notes of caution. "The market is overheated," says William Ade, a 60-year-old geologist who grew up on an Indiana farm and has purchased 1,000 acres of Midwestern crop and forest land since the early 1980s.

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Oregon timber harvest tops 4 billion board feet

Oregon timber harvest tops 4 billion board feet | Timberland Investment | Scoop.it

Oregon's timber harvest topped 4 billion board feet last year, the first time it has reached that level since 2006, a state report released Tuesday shows.


The 4.2 billion board feet harvested in 2013 represents a 12 percent increase from the year before and marks the fourth consecutive year of increases since the recession low of 2.7 billion board feet in 2009.

The state Department of Forestry said in its annual harvest report that the increase can be chalked up to a strong export market and a domestic housing recovery.


However, the upward trend might not continue in 2014 because housing forecasts have been revised lower and the export market recently cooled, said Brandon Kaetzel, the top economist at the department.

***

Sixty percent of Oregon's forest land is federal. Industrial and family owned lands comprise another 34 percent and the rest is divided between entities such as the state, counties and tribes. Percentage-wise, the largest harvest spike in 2013 was on non-industrial private forestlands, where the harvest increased 61 percent to 511 million board feet.


"This is most likely due to small forestland owners taking advantage of higher prices as a result of a still strong export market in 2013," Kaetzel said in a statement.


The harvest on industrial forestlands increased 8 percent, from 2.56 billion board feet in 2012 to 2.75 billion board feet last year.

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iShares Global Timber & Forestry Breaks Below 200-Day Moving Average

iShares Global Timber & Forestry Breaks Below 200-Day Moving Average | Timberland Investment | Scoop.it

In trading on Thursday, shares of the iShares Global Timber & Forestry ETF (Symbol: WOOD) crossed below their 200 day moving average of $51.55, changing hands as low as $51.53 per share. iShares Global Timber & Forestry shares are currently trading down about 1.3% on the day. The chart below shows the one year performance of WOOD shares, versus its 200 day moving average.


Looking at the chart above, WOOD's low point in its 52 week range is $45.84 per share, with $54.32 as the 52 week high point - that compares with a last trade of $51.92.

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Will cities of the future be built of wood?

Will cities of the future be built of wood? | Timberland Investment | Scoop.it

Think of a modern cityscape and any number of materials come to mind: the glass and steel of an office tower, the stately brick and stone of a townhouse, the asphalt pavement and stark concrete canyons of 20th-century urban redevelopment.


All of these have, at some time, heralded visions of the city’s future. Now, if a growing chorus of architects have their way, the next generation of urban buildings will be crafted from an innovative, versatile structural material that’s key to sustainable large-scale development. You’d know it as wood.


In the quest to limit the energy and resource costs of construction, a number of global architects have begun designing and constructing modern buildings from a substance we now associate more with suburban homes. Thanks to novel composites, several multistory buildings have already been erected around the world with timber skeletons, and plans for taller buildings are in the works.

“We all are hard-wired to see the city as being steel, glass, and concrete,” says Yugon Kim, an architect at design firm IKD who curated a new exhibit on the benefits and possibilities of timber construction at the Boston Society of Architects’ BSA Space in Boston. “Our proposal is that we need timber to save us.”


They’ve been making a larger argument to the industry and to policy makers that to build cities with a lower environmental impact, wood is not just promising but necessary. It’s a plentiful resource that grows back relatively quickly, and even pulls carbon out of the atmosphere as it does.

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Baillie Lumber's curator insight, July 8, 12:11 PM

Could this be "back to the future"?  Could timber towers be part of the next generation of urban development.  This article provides insight into the timber panels and pillars that are able to be produced for modern construction.  It will be interesting to see how this evolves and impacts the hardwood lumber industry in the years to come.


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CatchMark to Acquire Prime U.S. South Timberlands for $106 Million in Two Separate Transactions

CatchMark to Acquire Prime U.S. South Timberlands for $106 Million in Two Separate Transactions | Timberland Investment | Scoop.it

CatchMark Timber Trust, Inc.  announced today agreements to acquire a total of 55,671 acres of prime timberlands in two separate transactions totaling $106 million. The properties are located primarily in Middle and South Georgia (approximately 95% of the acreage) as well as North Florida. If completed, these acquisitions are expected to add 2.5 million tons of timber to CatchMark's merchantable inventory, comprising 72% pine plantations by acreage and 48% sawtimber by tons, and are expected to increase the company's annual harvest volumes over the next decade by 230,000 to 250,000 tons.


The two transactions—known as Oglethorpe and Satilla River—are expected to close during the third quarter, subject to completion of CatchMark's due diligence and the satisfaction of closing conditions, including verification of inventory and title. The transactions will be financed through a combination of CatchMark's credit facility and cash on hand. During 2014, CatchMark has acquired or entered into agreements to acquire approximately 100,000 acres of timberlands, representing a 36% increase in its total acreage relative to year-end 2013. In aggregate, these acquisitions, assuming completion of the Oglethorpe and Satilla River transactions, are expected to increase CatchMark's annual harvest volumes over the next decade by approximately 440,000 to 480,000 tons.

Sam Radcliffe's insight:

Some arithmetic: $1,904 per acre; $42.40 per ton of inventory; $442 per ton of increased annual harvest

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Investment in Thermogen Industries’ wood pellet plant withdrawn

Investment in Thermogen Industries’ wood pellet plant withdrawn | Timberland Investment | Scoop.it

A local investment company has withdrawn its $20 million anticipated investment in Thermogen Industries, the startup planning to build a wood pellet plant at the site of the former Great Northern Paper mill in Millinocket.


CEI Capital Management, a for-profit subsidiary of Brunswick-based Coastal Enterprises Inc., confirmed Monday that it will withhold $20 million it planned to invest in Thermogen as part of the Maine New Markets Capital Investment tax credit program. The company also announced it would withhold an additional undisclosed amount of investment in Thermogen as part of the federal New Markets Tax Credit program.


The news is the latest blow for Thermogen’s efforts to finance its $140 million wood pellet project, which it claims could provide 55 direct jobs in Millinocket. In April, it lost $9 million in state-backed financing when the Finance Authority of Maine’s board voted to reduce the amount of a bond it would sell on Thermogen’s behalf from $25 million to $16 million. The board determined that a change in production technology was substantive enough to require a new vote.

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Pulpwood Trends in the Northern United States

Pulpwood Trends in the Northern United States | Timberland Investment | Scoop.it

While pulpwood prices across North America are driven by competition for fiber, we tend to see higher price volatility in pulpwood prices in the Northeast and Lake States due to availability factors that are unique to these markets. These factors include:


Seasonality – Wood production tends to be volatile in these regions from one quarter to the next. This is especially true when comparing a high production first quarter to a low production second quarter...Higher delivered prices are fairly common in April and/or May as wood production is limited by weather. This 2014 winter harvest season was also longer than average with March hardwood pulpwood deliveries remaining extremely strong.


Distance Hauled – As the overall supply of hardwood increases during these months, mills are able to purchase wood originating in forests closer to the mill...Lower haul distances coincide with lower delivered prices, such as those observed over the first quarter of this year despite the competitive fiber markets over the course of the winter.


Competition for Other Species and Other Types of Fiber – Logging capacity, particularly as it relates to the “surge capacity” needed to fill inventories during the winter or when unexpected events drive inventory shortfalls, has been a pervasive topic of conversation in the Northeast and Lake States. Capacity issues such as these often affect hardwood production. The overall supply of hardwood pulpwood, for instance, is affected by aspen and softwood demand and the availability of pulp quality chips. If softwood sawmills are running more hours, this will increase the supply of softwood chips, thereby freeing up constrained logging capacity for hardwood production. This interaction affected hardwood production this winter, and the additional supply lowered prices.


Supply Agreements – Supply agreements are frequently used in the pulp and paper industry with strict requirements for deliveries that affect the price of fiber on the open market...Depending on the calculation mechanism, this can create a delayed effect on market pricing.


While these factors come into play in all regions in the North American timber industry, they are typically more pronounced in the Northeast and Lake States regions. Price volatility is therefore higher in these regions as seasonality, haul distances, competition for other species and types of fiber and supply agreements put pressure on prices from opposite directions.

Sam Radcliffe's insight:

In addition, a large portion of the Lake States timber supply is from public lands, where sales are made by competitive auctions. Auction prices are often driven by the desperation of a particular contractor or mill, increasing price volatility.

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Harvard fund loses natural resources manager

Harvard fund loses natural resources manager | Timberland Investment | Scoop.it

Matt Ciaschini, who oversaw $700 million of natural resource investments at Harvard University's endowment, has resigned, bringing departures of money managers to at least four since May. 

Ciaschini, a vice president at Harvard Management Co., said Friday that he left last month for personal reasons to join Newark, N.J.-based Prudential Financial Inc.'s agricultural investments group. Harvard reassigned his responsibilities and doesn't plan to replace him, said Christine Heenan, a spokeswoman for the university. 

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Environmental group asks province for probe of NSP biomass supply

Environmental group asks province for probe of NSP biomass supply | Timberland Investment | Scoop.it

A Cape Breton environmental group is calling for an emergency review of harvesting practices at Nova Scotia Power’s biomass plant in Point Tupper.


On Friday, the Margaree Environmental Association issued a letter to Premier Stephen McNeil requesting a delay in harvesting to allow the province to examine the plant’s wood supply.


Association co-chair Neal Livingston said the plant has shown itself to be a “voracious” consumer of wood fibre. Not only is quality material being directed to the plant, there is also too much forest resource being cut, he added.

***

NSP has said up to 650,000 tonnes of wood waste will be needed to run the plant per year. The 60-megawatt power generating station, located in Richmond County, is part of Nova Scotia’s plan to source 25 per cent of the province’s electricity from renewable sources by 2020.


But in recent months, business owners who rely on the forest for a living have told The Chronicle Herald that high-quality hardwoods are making their way into the biomass plant.

***

On Friday, NSP spokeswoman Neera Ritcey denied that quality hardwoods are winding up that the plant.


“We require our suppliers to follow strict conditions on the biomass they supply for use at the plant,” Ritcey said in an email. “We have checks and balances in place to ensure rules are followed.”

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Manulife Turns to Agronomists and Foresters to Beat the Market

Manulife Turns to Agronomists and Foresters to Beat the Market | Timberland Investment | Scoop.it

Manulife, which has long invested in commercial real estate, farmland, oil and gas, private debt and timberland to support its insurance business, is now pouring resources into efforts to offer these asset vehicles to outside institutional investors and to develop new alternative products. All of its existing private markets businesses — representing about C$74 billion ($68.4 billion) in assets — have been brought under the remit of Kevin Adolphe, CEO of the new Manulife Asset Management Private Markets group.
***
The insurer is hoping to take advantage of investors’ increasing interest in alternatives and private assets that can potentially provide more diversification, plus a liquidity premium — the return for holding assets like a forest that are hard to buy and sell.
***
Daniel Christensen, CEO of Manulife’s Hancock Natural Resource Group, which includes timber, agriculture and renewable energy, stresses, however, that it takes time for investors to build quality portfolios out of specialized asset classes. “Investors need the patience because there are a finite number of opportunities out there,” he says. “We have to work hard to find ones that meet our criteria.”


Darien, Connecticut–based Casey Quirk & Associates expects that real assets such as real estate and infrastructure will see a big spike in search activity among institutional investors as they seek long-dated, unlisted investments that generate strong cash flows. Real assets already represent the most new searches for consultants this year — about 14 percent of what’s forecast, up from 6 percent in 2013.
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Boston-based Christensen joined John Hancock in 1992. Timber makes sense for insurance companies like Hancock, he explains, because its long duration can be matched against the liabilities of their life policies. Hancock got into the business in the mid-1980s as large-scale integrated forest companies — which had held the majority of timberland — started selling off property. Once that massive transformation took place, pension funds and others were able to invest.


Christensen says that timber is just one of many asset classes that were once off-limits to investors but have in recent years added significant returns to institutional portfolios. Trees, for instance, grow even during a recession. “We can grow our inventory in downturns and can wait for markets to return,” says Christensen, who worked as a forester for 15 years in Maine before joining Hancock. As the largest timberland holder in Australia and New Zealand, Hancock continued to market logs to China after the financial crisis, while in the U.S. it held on to its inventory and only now is releasing timber into the states where prices are high.


Hancock is also developing renewable-energy investments for Manulife’s general account from its farms and forests, including biofuels. Condensed wood pellets are burned like coal, for example, but are considered carbon-neutral. Christensen expects to offer these types of investments to third parties as well.


Christensen is a big believer in direct investments, even if they require specialized talent to run. He says that owning stakes in farms and forests provides a good balance to the mostly securitized assets in typical investor portfolios. “This doesn’t just happen by accident,” he adds. “You have to know how to farm, know how to grow forests.”

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Weyerhaeuser and DuPont Pioneer Enter Technology License Agreement

Weyerhaeuser and DuPont Pioneer Enter Technology License Agreement | Timberland Investment | Scoop.it

Weyerhaeuser Company  today announced a technology license agreement with DuPont Pioneer that will advance seed technologies to help meet growing global demands for food, feed and fiber.


The agreement brings together agricultural and forestry know-how to sustainably improve crop productivity for corn growers around the world. Based on scientific research behind years of Weyerhaeuser NR sustainable forestry, the manufactured seed technology allows for the storage, nourishment, planting and germination of cells capable of growing into a plant. This technology provides a means to cost-effectively regenerate valuable, limited or fragile plant material.

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Plum (PCL) Tones it Down-- CEO R. Holley says housing market still "anemic."

Plum (PCL) Tones it Down-- CEO R. Holley says housing market still "anemic." | Timberland Investment | Scoop.it

Via Jack D Bridges
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Jack D Bridges's curator insight, July 29, 12:58 AM

What follows is a quick look at Plum Creek's (PCL) Q2 Conference Call. 

 

On the housing market, Mr. Holley strikes quite different tone than he did in early 2014. To wit, we'll call this section humble pie.

 

Mr. Holley begins, "The economists have moderated their growth expectations for residential construction this year, in part due to the lackluster activity during the first six months of the year."

 

Holley continues, "As housing demand improves, we expect to see increased lumber demand and increased lumber production and log prices in the U.S. South. However, the overall pace of demand growth in 2014 is not as robust as originally expected and we have moderated our price growth expectations to Southern sawlogs in the second half of 2014.

 

This reduced view of demand / pricing in the US South is why PCL is deferring so much previously planned harvest (500K--1M tons deferred, in fact).


In Holley's own words, "With this in mind, we have chosen to defer a portion of our sawlog harvest to certain other southern micro-markets and as a result we now expect our harvest to be at the low end of our 20 million to 21 million tons harvest range we gave you at the beginning of the year. The great thing about timber is that we are not foregoing this income or cash flow; we are simply delaying its delivery."

 

And, while my thoughts on the SE cabal of optimists are well known, this isn't a bad move for Plum, given their views of the future. I just think we'll see more unscheduled deferrals when the Southern Sawlog revival keeps getting pushed out another year at a time.

 

So, what does Mr. Holley feel is ailing the housing market?

 

Steven Chercover- DA Davidson

Go it. And then finally, would be willing to hazard a guess as why the housing recovery in so anemic; is it lack of lots of labor jobs or policy?

 

Rick Holley - Chief Executive Officer

All the above. We want to learn that from your guys, but no, I think it’s all the above. I just think it’s a jobs thing, it’s a housing formations thing, it’s still tough for young couples to get a mortgage and then they are trying to improve some of that. The outlook for most people and job out don’t feel good to people, so I think it’s why I can come up with a better word; it’s anemic. It’s just kind of, it’s not there yet. So it’s a combination of all the above.

 

And, then Mr. Holley addresses the broader timberland marketplace in the US: 

 

Rick Holley - Chief Executive Officer

There is still at any point in time, two or three or four five transactions in the market place, generally kind of 40,000 to 60,000 acres. A lot of the TMOs are bringing some lands outs of the funds that they’ve had over time and bringing them back to market. So a lot these are in the U.S South and we look at all of them and as the question was asked earlier and the ones that have transacted generally been north of $2,000 an acre and I think it’s justifiable given the productivity, a lot of those properties that they have come to market.

 

I think one of the things that a lot of investors probably, or just even Plum Creek for a long time maybe we are behind on is how productive these lands are with some of the silvicultural treatments that we’ve all put in place over the last couple of decades, and how much cash flow they are going to generate off that productive and then you start to see a better pricing  environment. You can clearly justify our per acre number with a two in front of it.

 

But there’s always a few things in the market place and I think they seemed to get snapped up pretty quickly, so there’s still lot of capital looking at those.

 

Moving onto Rick Holley's thoughts on rural / raw land markets:

 

Rick Holley - Chief Executive Officer

Well, one of the comments that I made in my prepared remarks today was that some of the markets that have been pretty dormant the last several years like Montana have kind of lit up again, so we see a lot more interest in lands in some of those areas. A lot of the buyers are places from like Texas. Some of those market places are looking at Montana now.

 

Clearly we see a lot more recreational interest in the south. Values still aren’t where we expect them to be longer terms, so we’ll be pretty stingy about selling a lot of these higher various properties in the south, but we are starting to see some movement in the market place and prices are starting to recover a bit.

 

But we’re very pleased to see Montana, because it was a great market a number of years ago as you know and it just went to sleep for the last years. It’s awake now, so that’s a positive trend.

 

Wrapping it up:

 

Me again. In keeping with my recent post about the Rodney Dangerfield-like treatment of the Lake States region, the Plum conference call barely even mentioned the northern resources segment at all--excluding the planned Wisconsin divestiture which closed this summer. 

 

Looking at the equity market reaction to Plum's reduced harvest forecast (and lowered profit / revenue for the remainder of 2014), the stock was off about 3% after-hours. The damage should be mitigated by the accretive value of the 500K MWV acreage Plum diluted shareholders to buy.

 

But, it also bears mentioning how many shares of PCL are shorted--some Wall St. types think betting against Plum is a good way to short the housing market. There are better ways to execute this view--and whatever I think about management's housing forecast, I wouldn't want to bet against Plum Creek. Maybe if the equity market ever corrects, it does drop below $40 for a little while. We also know that's the magic number where Mr. Holley starts talking about buying back stock. 

 

Here is the full Plum CC transcript link:

 

http://seekingalpha.com/article/2350265-plum-creek-timber-company-pcl-ceo-rick-holley-discusses-q2-2014-results-earnings-call-transcript?part=single

 

And, what a 10-year chart of Plum Creek equity looks like--

 

http://screencast.com/t/7u9qwBibAbu

 

JDB

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Hancock to sell conservation easement on 9,000 acres near Klickitat River

Hancock to sell conservation easement on 9,000 acres near Klickitat River | Timberland Investment | Scoop.it

When a huge swath of forestland along the Klickitat River is formally secured for conservation by next year, it won't just be environmental advocates celebrating.


Protecting some 14 square miles of land — about 9,000 acres — also has the backing of local leaders and federal lawmakers from both parties. Spearheading the effort is the Columbia Land Trust, a nonprofit based in Vancouver.

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The land won't have to change hands to be protected. A nearly $4 million grant will allow the state Department of Natural Resources to secure the area by purchasing a conservation easement, Kearney said.


The move will extinguish development rights and assures that none of the landscape will be lost to second homes or resorts — a real threat in forestlands across the country, including Washington, according to the land trust. But it also keeps the area in working forestry, allowing timber harvests to continue. The land is privately owned by Hancock Natural Resource Group.


"It doesn't erode that economic resource," Kearney said, noting recreational assets are also preserved. "It keeps the traditional access for hunting and fishing."


Like many of the Columbia Land Trust's efforts, the Klickitat Canyon Working Forest project has been years in the making. The organization wrote a grant proposal in 2012, and learned earlier this year that it had netted $3.975 million from the Land and Water Conservation Fund, through its Forest Legacy Program.


DNR is just beginning the process of acquiring the easement that will conserve the land. The transaction will likely be complete in 2015, Kearney said.

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P&C Q2 Newsletter: Northeast market conditions and a report on carbon markets

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Sprott offers real asset fund

Sprott offers real asset fund | Timberland Investment | Scoop.it

Sprott Asset Management has launched the Sprott Real Asset Class, a mutual fund that offers exposure to infrastructure, timber and agriculture.


The fund will be sub-advised by Capital Innovations, with Michael Underhill and Susan Dambekaln serving as lead managers, and it will be available starting on July 16, 2014.


“Diversified allocation to real assets…has historically offered investors lower risk and the potential for enhanced returns,” says John Wilson, CEO of Sprott.
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As part of the company’s corporate class offerings, the new fund will allow investors to switch between share classes on a tax-deferred basis. It will invest in a portfolio of mutual funds, as well as directly invest in stocks, REITs and master limited partnerships.


Sprott offers three other real asset funds that are sub-advised by the same portfolio management team:

  • Sprott Global Infrastructure Fund
  • Sprott Timber Fund
  • Sprott Global Agriculture Fund
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CatchMark Upsizes and Prices Public Offering of Class A Common Stock

CatchMark Upsizes and Prices Public Offering of Class A Common Stock | Timberland Investment | Scoop.it

CatchMark Timber Trust, Inc. (NYSE: CTT) today has priced its underwritten offering of 12,500,000 shares of its Class A common stock at $11.75 per share.  The offering was upsized from the previously announced public offering of 10,000,000 Class A common stock shares. The underwriters have a 30-day option to purchase up to an additional 1,875,000 shares.  CatchMark expects to use the net proceeds from this offering, together with the available borrowing capacity under its multi-draw term credit facility, after giving effect to the application of the net proceeds from this offering, primarily for future timberland acquisitions, including previously announced pending acquisitions.

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Proposed development on Idaho timberland may get conservation easement instead

Proposed development on Idaho timberland may get conservation easement instead | Timberland Investment | Scoop.it

A few years ago, Bonner County’s largest contiguous tract of private forestland appeared headed for development.


Clagstone Meadows – 13,000 acres of timber, lakes and wetlands – had an approved development plan that included 1,100 homes, condos and RV lots, two 18-hole golf courses and an equestrian area. The plan would have created the equivalent of a new city between Coeur d’Alene and Sandpoint, with easy access from U.S. Highway 95.


Now, however, owner Stimson Lumber is entertaining the idea of selling the development rights, valued at $12.6 million, and keeping the land in timber production in perpetuity. Proponents say the deal would help protect the region’s drinking water, retain local timber jobs and unusual forested wetlands, and allow for nonmotorized recreational access to the private property.


The deal hinges on securing financing, but the Clagstone easement has ranked high on a short list for federal funding.

“Nothing’s for sure, but we feel pretty optimistic,” said Alex Diekmann, the Trust for Public Land’s senior project manager in Bozeman, who has been working with Stimson on the conservation easement.

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AFM: New Offerings in GA and WA

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Land ruling could impact lumber market as much as pine beetle

Land ruling could impact lumber market as much as pine beetle | Timberland Investment | Scoop.it

A Supreme Court of Canada ruling on aboriginal land could eventually have as severe an impact on North American lumber supply as the mountain pine beetle, RBC Capital Markets warned on Monday.


The court’s unanimous decision on June 26 relates to a 30-year-plus land dispute between the Tsilhqot’in Nation and the British Columbia and Canadian governments. It entitles the B.C. First Nation to dictate what logging and other activities take place on its newly recognized 1,700 square kilometres of land.


Now with an established precedent to title, the provincial/federal governments in Canada will have to consult, and gain the consent of the respective First Nation(s) when development projects/timber harvesting concern unceded land, RBC analyst Paul Quinn told clients.

He noted that B.C. has accounted for roughly 24% of North American lumber production during the past 10 years.


If the Supreme Court ruling leads to delays and limitations in harvesting sawlogs in B.C., Mr. Quinn expects a tighter lumber market and higher prices.

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County vote could pave the way for new Drax pellet plant in S.C.

County vote could pave the way for new Drax pellet plant in S.C. | Timberland Investment | Scoop.it

Drax Biomass, a wholly owned U.S. subsidiary of Drax Group plc, may elect to develop a new pellet plant in Abbeville County, South Carolina. The county recently passed an ordinance that would allow the company an option to purchase a 119 acre tract of land.


According to information released by the county, the proposed pellet manufacturing plant would be located approximately three miles from Calhoun Falls, a town on the western boarder of South Carolina roughly 60 miles northwest of Augusta, Georgia.

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In February, Dorothy Thompson, chief executive of Drax, indicated her company was pursuing options to develop up to 2 million tons of additional pellet capacity, primarily in the U.S. 

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Campbell Global parent files for IPO

Campbell Global parent files for IPO | Timberland Investment | Scoop.it

Old Mutual Asset Management — a well-heeled, multi-boutique asset manager with $203.1 billion in AUM, has filed for an IPO.

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Old Mutual Asset Management’s roots go back to 1980, which certainly was an ideal time to start an asset management firm given that was the start of America’s massive bull market. To build scale, the firm pulled off a variety of acquisitions of boutique operators.

***

Old Mutual currently has seven boutiques, and each has access to the parent company’s core infrastructure, such as compliance, distribution channels, talent management and risk management.

The boutiques include:

  • Acadian Asset Management ($65.9 billion)
  • Barrow, Hanley, Mewhinney & Strauss ($93.5 billion)
  • Campbell Global ($6.7 billion)
  • Copper Rock Capital Partners ($2.8 billion)
  • Heitman ($24 billion)
  • Investment Counselors of Maryland ($2.4 billion)
  • Thompson, Siegel & Walmsley ($7.8bn billion)


All in all, Old Mutual funds have chalked up competitive returns.

***

Financials have been solid, with revenues climbing from $435.7 million in 2011 to $528 million last year, while pre-tax income went from $124.3 million to $153 million.


As for the prospects for the Old Mutual IPO, it’s still tough to tell, as few asset managers have gone public recently, and the latest one — Ares Management (ARES) — was a disappointing deal. It was priced at $19, which was below the range of $21 to $23, and the stock hasn’t moved much from there.


Still, it might be hasty to think the Old Mutual IPO will fare just as poorly. After all, the firm has a strong brand and an enviable long-term track record, not to mention a broad platform of investments.

Old Mutual IPO Notes

  • Expected Listing: New York Stock Exchange, ticker OMAM
  • Lead Underwriters: BofA Merrill Lynch (BAC), Morgan Stanley (MS), Citi (C) and Credit Suisse (CS).
  • So far, there are no pricing terms on the Old Mutual IPO.
  • The offering will likely hit the markets some time during the fall.
Sam Radcliffe's insight:

Campbell Global, formerly The Campbell Group, has 3.1 million acres of timberland under management.

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Jemi Fibre Corp. Completes Tembec Timberlands Acquisition

Jemi Fibre Corp. Completes Tembec Timberlands Acquisition | Timberland Investment | Scoop.it

Jemi Fibre Corp. (TSXV: JFI) ("Jemi Fibre" or the "Company") is pleased to announce that it has completed the first of two timberlands acquisitions from Tembec Inc. ("Tembec"), previously announced on April 25, 2014.


The Company has closed on the acquisition of approximately 17,700 hectares, and timber rights for an additional approximately 1,900 hectares, for a purchase price of $15 million. The timberlands are located in the Regional District of East Kootenay, British Columbia and are the first phase of a two phase purchase of timberlands from Tembec. The second phase is for approximately 31,800 hectares, which the Company anticipates closing in September 2014 for a purchase price of $20 million. The closing of the second phase is subject to the Company obtaining adequate financing and other customary conditions. There can be no assurance that the second phase will be consummated in whole or in part.


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