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This Timber REIT is Alex Klabin’s ‘Pulp Friction’ Pick

This Timber REIT is Alex Klabin’s ‘Pulp Friction’ Pick | Timberland Investment | Scoop.it

At the 2012 Invest for Kids conference, Alex Klabin of Senator Investment Group pitched an idea he calls ‘Pulp Friction’. Klabin’s pick, Rayonier Inc. (NYSE:RYN), is a timber REIT with performance fiber operations. Klabin says about Rayonier, "it has sex appeal...with the fiber segment having high margins and high barriers to entry and the REIT segment being like an annuity and inflation hedge."

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For 3Q, the Rayonier posted EPS of $0.62, compared to $0.71 for the same quarter last year. Sales are expected to be up 5-7% in 2012, and up another 10% in 2013. Driving this increase will be elevated prices for cellulose products that are used in cigarette filters and a recovering housing market, as well as increased demand from China for lumber. Rayonier pays a solid timber REIT dividend that yields 3.6%, compared to the average dividend of the other three REITs' average yield of 3.3%.

***

Klabin's real catalyst for generating serious returns for Rayonier investors is the possible spin off of Rayonier's fiber business. The fiber business is generally a high margin-high barrier to entry industry and Klabin expects Rayonier’s fiber segment to grow EBITDA by 50% over the next couple years, from $400 million to $650 million. Driving a potential spinoff of its fiber business will be a ramp up in earnings in fiber segment. Consequently, Rayonier may blow its REIT test in a couple years, which is a test that REITs are required to pass to retain REIT status, and in its basic form states that only a certain portion of a REITs earnings can be derived from non-REIT operations.

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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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Data Centers Lead REIT Performance In 2017 Through April

Data Centers Lead REIT Performance In 2017 Through April | Timberland Investment | Scoop.it

Data Centers led the entire REIT market’s performance in the first four months of 2017 with an 18.03 percent total return, and Home Financing REITs led the Mortgage REIT market with a 16.82 percent return.

 

In addition to Data Centers, five other Equity REIT market segments delivered double digit total returns and seven segments outperformed the FTSE NAREIT All Equity REITs Index’s 2.99 percent gain. The top performing sectors and their returns for the first four months of the year were:

  • Infrastructure – 15.72%
  • Specialty – 14.28%
  • Single Family Homes – 13.71%
  • Timber – 12.44%
  • Manufactured Homes – 11.45%
  • Health Care – 7.50%
  • Industrial – 4.72%
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Canada musters military to fight wildfires, 39,000 evacuated

Canada musters military to fight wildfires, 39,000 evacuated | Timberland Investment | Scoop.it
Canada was deploying military aircraft and Australia was sending 50 firefighters to battle rapidly spreading wildfires in British Columbia that have forced 39,000 people from their homes, federal Public Safety Minister Ralph Goodale said on Monday.

Goodale told reporters that the provincial government had made two requests of the federal government for military assistance to fight the fires, which he said were expected to worsen.

The military has sent two planes and five helicopters to help with evacuations and transportation for first responders, according to the Department of National Defence.

Goodale's spokesman Scott Bardsley said the Australians were due to arrive on July 19.

Local governments issued more than a dozen evacuation notices over the weekend, increasing the number of evacuees to 39,000 from 14,000 last week, according to British Columbia's Ministry of Forests, Lands and Natural Resource Operations.

British Columbia has announced C$100 million ($78 million) in emergency funds. The Canadian Red Cross will hand out stipends of C$600 for displaced people and additional money for rebuilding.

Other jurisdictions have agreed to send some 260 personnel to the area.

The fires were burning across an area ranging from 150 km (95 miles) to 350 km northeast of Vancouver and have affected public utilities and industries including timer and mining.
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Heavy rains slow Wisconsin timber harvest

Heavy rains slow Wisconsin timber harvest | Timberland Investment | Scoop.it
Wisconsin's logging industry is struggling to harvest wood because of the wet summer, leaving loggers with less money while they wait for work during better weather.

The last three months are among the five wettest on record in the state, according to the National Centers for Environmental Information, Wisconsin Public Radio (http://bit.ly/2tj3ZPL ) reported.

Loggers are moving equipment around to look for drier places where they can work, said Henry Schienebeck, executive director of the Great Lakes Timber Professionals Association.

"When it rains, it doesn't just rain enough to settle the dust," he said. "We're getting an inch, inch-and-a-half, 2 inches at a time. That's really having an impact right now on the wood inventories."

Road closures or roads that are too wet to withstand heavy loads also slow down the harvesting process, he said.

"A lot of our members are self-employed, but there's also a lot of employees out there that depend on a weekly or biweekly income coming in," he said. "When it gets to the point where it's so wet that they can't get to work every day, that really disrupts that flow of not only the product, but also the income that those folks are able to bring in on a weekly basis."

Schienebeck expects that loggers should be able to find a steady stream of work in the fall when the state sees drier weather.
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Canadian Forest Fires Force Lumber Mills to Shut Down

Canadian Forest Fires Force Lumber Mills to Shut Down | Timberland Investment | Scoop.it

Raging forest fires across British Columbia have led three major lumber producers to suspend production across the western Canadian province, while more than 14,000 people have been ordered to evacuate from their homes for safety.

 

Norbord Inc.,  Tolko Industries Ltd. and West Fraser Timber Co. Ltd. have all suspended mill operations in central British Columbia, where approximately more than 200 wildfires are burning throughout the province, the largest of which is estimated to be more than 12,000 acres.

 

The province declared a state of emergency on Friday, while the government announced 100 million Canadian dollars ($77.6 million) in a relief fund for displaced communities.

 

Since April, wildfires have burned down more than 100,000 acres across the province, said Kevin Skrepnek, chief fire information official for the BC Wildfire Service, on Monday. There have been no accidents or injuries due to the fire, officials added.

 

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Southern Yellow Pine Lumber Prices Continue to Drop in June

Southern Yellow Pine Lumber Prices Continue to Drop in June | Timberland Investment | Scoop.it

The composite southern yellow pine lumber price has continued to drop since the late-April announcement of US tariffs on Canadian softwood lumber. Aside from the countervailing duties discussed in this announcement, the U.S. Department of Commerce (DOC) recently released an “affirmative preliminary determination” about separate anti-dumping duties that could also be imposed on imports of Canadian softwood lumber pending a final determination in early September.

Lumber prices are falling as US housing starts continue to struggle despite encouraging data from 1Q2017; starts were down 5.5 percent to a seasonally adjusted annual rate (SAAR) of 1,092,000 units in May. Single-family starts accounted for 794,000 units, which is 3.9 percent below the revised April figure of 826,000. Starts for the volatile multi-family housing segment also fell in May, declining 9.7 percent to a rate of 298,000 units, which now makes five straight months of declines for this segment.

The composite southern yellow pine lumber price for week 25 was at $379/mbf, which is down from week 24’s $385/mbf mark. Week 25’s price is just 0.3 percent above its January 2017 starting point of $378/mbf, and 1.8 percent below the 2016 week 25 price of $386/mbf.

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Private capital update: Plenty of dry powder, but few targets of opportunity

Private capital update: Plenty of dry powder, but few targets of opportunity | Timberland Investment | Scoop.it

If there were a few overarching themes of the first quarter of 2017 in the private capital community, they would be the following:

  1. The fundraising environment remains robust, but capital continues to flow disproportionately to established sponsors;
  2. While there is plenty of equity available for deals, sky high valuations, both of private companies and their public counterparts, has created a challenging environment in which to get quality deals completed at sponsor-friendly entry points; and
  3. Established markets are receiving a disproportionately high percentage of the attention and asset allocation, as investors shy away from currency and geopolitical risk.

 

So-called “dry powder” for private equity transactions is sitting in the trillions of dollars, not even taking account of co-investment and separate account vehicles. Continued interest in the space is driven, at least in part, by cash-rich but yield-starved institutional investors, as well as historically high valuations of public equities. While the projected rising-interest-rate environment has had the effect of tamping down enthusiasm across particular asset classes (e.g., real estate), in general, the overall low level of interest rates on an historical basis has led certain categories of investors to continue to chase the possibility of higher returns offered through private equity investing. Competition for deals however, both from other sponsors and from strategic investors with highly-valued stock to offer potential targets, are resulting in exceptionally high multiples on closed transactions, and hold out the possibility of longer holding periods and lower returns from the space, moving forward.

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Note that natural resources funds (which sometimes have significant overlap with infrastructure funds) continue to be dominated by energy-focused investments, although the first quarter of 2017 did see the closing of the first ever exclusively water-focused fund, as well as sizable funds focused on timber and agriculture. It is worth noting that natural resources funds are one of the few sectors of the private capital market that has seen a significant reduction in available dry powder.

 

So where does this panoply of data leave us? For sponsors, while the fundraising environment remains positive for the moment, there is increasing concern among their investors that the private equity market may already have crested, and that the combination of historically high levels of dry powder, coupled with exceptionally high comparable values for targeted companies in public markets, means a very competitive environment for quality assets going forward. This has multiple risks, both with respect to potential overpays for exceptional, or even worse, subpar assets (with an associated deterioration in returns), as well as longer holding periods, as sponsors may need more time to create value to assets purchased at higher multiples. Investors in private vehicles should survey their current holdings and asset allocations to the sector in light of current market conditions. For those investors seeking yield, an adjustment to a different risk / return profile (and hence, to potentially different asset classes and geographies) may need to be considered in light of prevailing market trends.

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Foreign owners invest in Georgia timber, kaolin, farmland

Foreign owners invest in Georgia timber, kaolin, farmland | Timberland Investment | Scoop.it
Georgia is among nine states where foreign interests own more than 1 million acres of land deemed agricultural, according to a recent report by The Midwest Center for Investigative Reporting.

The roster of foreign owners shows companies or individuals from at least 39 countries own Georgia crop, pasture, timberland or other land.

Companies from tiny Liechtenstein own 6,398 acres. Interests in Jordan, Lebanon and Saudi Arabia have 2,074 acres. German interests report owning about 225,000 acres. Georgia has also attracted investments from Japan, China, Sweden, Peru, Greece, Guyana, Canada, Australia and Cayman Islands, among the 39 countries listed in data obtained by the center.

Under a 1978 federal law, foreign interests must file reports with the U.S. Department of Agriculture on transactions involving agricultural land. The Midwest Center used a Freedom of Information Act request to obtain the information, which covers the years from 1900 to 2014.

Much of the foreign investment was in Georgia timberland, which accounted for 877,126 acres in the report.
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Private Advisors raises first natural resources fund

Private Advisors raises first natural resources fund | Timberland Investment | Scoop.it

Private Advisors LLC has raised the firm’s first Real Assets Fund to target private natural resources. The fund, which closed on May 31, received approximately $205 million in capital commitments.

 

The fund will back small specialist managers and natural resource co-investments. The Real Assets Fund received financial investments from old and new institutional investors, family offices and high net worth individuals. Private Advisors’ real assets investment strategy will be led by Zac McCarroll, a partner at the firm, who has more than two decades of experience in the natural resources sector.

 

“The natural resource private equity market has evolved dramatically over the last decade, generating new opportunities that are both diverse and increasingly complex,” states McCarroll. “We are deeply thankful for our investors’ support, and we believe this Fund has the potential to produce attractive total returns and inflation protection for them.”

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Surveyed Timberland Investors See Lower Discount Rates

Surveyed Timberland Investors See Lower Discount Rates | Timberland Investment | Scoop.it

Today, we’ll look at  KPMG’s effort to determine who exactly the investors in timberland are, what their underwriting assumptions are, and what are their expectations for the coming 12 months.

The firms surveyed included North America’s timberland investment market participants with five different structures: appraisal or consulting organizations; integrated forest products companies; investment fund managers; real estate investment trusts; timberland lender.

***

By way of a geographical analysis, the report stipulated that more than half of the participants were active in the coastal northwest and Alaska. The southeastern U.S. was the second more popular region for these respondents, and the northeast was third.

 

Observations from the survey include the following:

  • Compared to results from the year-before survey, discount rates shifted downward from the summer of 2015 to that of 2016;
  • Significant investment from outside of North America continues to trend downward;
  • A majority of participants expect that the price of logs will remain the same or increase slightly over the next 5 years;
  • The majority of respondents also say that they use no real growth rate for harvesting costs, since inflation is stagnant in the United States.

 

Respondents were asked “what discount rate do you use when evaluating new acquisitions of timberland assets?” Nobody uses a discount rate higher than 8%, or lower than 4%. The most frequently used discount rate range used is from 5% up to, but not including, 6%. The particulars are [see chart above].

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Would stumpage reform help end Canada’s interminable softwood lumber war with U.S.?

Would stumpage reform help end Canada’s interminable softwood lumber war with U.S.? | Timberland Investment | Scoop.it

Last week, as expected, the U.S. Department of Commerce levied preliminary anti-dumping duties, averaging 7%, on Canadian softwood lumber exports.

 

When combined with earlier countervailing duties, it increases the cost of exporting lumber to the U.S. by 27% to 31%, depending on the company and region. As Canada’s largest exporter of lumber to the U.S., B.C. producers will be hardest hit.

 

In a war that never seems to end, Canada is trying for the fifth time since 1982 to negotiate a temporary ceasefire in the form of a negotiated agreement.

 

Such negotiations have worked before. But a better, more permanent solution would be to address U.S. grievances by reforming B.C.’s stumpage system, said Benjamin Dachis, associate director of research at the C.D. Howe Institute think tank.

The central grievance against Canada’s forest industry is that it is subsidized through the stumpage rates charged to harvest Crown timber – rates that the U.S. argues are artificially below market values.

 

In a brief to federal and provincial ministers of forestry and trade, Dachis recommends moving from a flat stumpage fee to an auction system and a tax on profits.

 

“One of the things that the government can do is they get out of this claim of subsidization,” he said.

 

Most of the working forests in Canada are Crown-owned, whereas in the U.S. they are privately owned. Forestry companies there pay a market-based price through auctions for trees cut on private land.

 

Dachis said the reforms he is proposing not only would address the principal grievance Americans have against the Canadian industry, but also would raise more revenue for the government.

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Support grows for thinning trees to combat forest fires as wildfires scorch West

Support grows for thinning trees to combat forest fires as wildfires scorch West | Timberland Investment | Scoop.it
With wildfires already raging through the West, House Republicans took a chainsaw Tuesday to federal regulations that have created a fire-friendly environment on public lands by slowing forest-thinning and dead-tree removal.

The House Natural Resources Committee passed the Resilient Federal Forests Act of 2017, moving to combat the rise in catastrophic wildfires by reversing what sponsors described as the Forest Service and Bureau of Land Management’s “anemic forest management efforts.”

“As we debated this bill, dozens of wildfires continue to burn in the Southwest,” said Rep. Bruce Westerman, Arkansas Republican and the bill’s sponsor.

The Brian Head fire in southern Utah, the largest of 21 major wildfires currently burning in the West, has razed 21 buildings, 13 of them homes, across 50,000 acres and forced the evacuation of 1,500 residents.

“Our forest health crisis can no longer be neglected,” said chairman Rob Bishop, Utah Republican. “Active management is needed to reduce the risk of catastrophic wildfire and improve the health and resiliency of our forests and grasslands. More money alone is not the solution.”
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7 Reasons Why Virtual Reality Technology Will Totally Disrupt the Real Estate Industry [Infographic]

7 Reasons Why Virtual Reality Technology Will Totally Disrupt the Real Estate Industry [Infographic] | Timberland Investment | Scoop.it
Sam Radcliffe's insight:

This relates to residential real estate, but why not timberland offerings?

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Smelly wood will cost Weyerhaeuser lots of loot to fix homes

Smelly wood will cost Weyerhaeuser lots of loot to fix homes | Timberland Investment | Scoop.it

Seattle-based Weyerhaeuser has an expensive problem with smelly wood.

The company said it’s going to spend $50 million to $60 million to replace some framing in new homes and halt manufacturing of parts because customers have complained about an odor omitted by some wooden I-joists.

The problem began in December, when Weyerhaeuser started using a new formula to make its Flak Jacket coating, which covers the I-joists and helps prevent the wood — commonly used in floor and roof framing — from burning.

The new coating includes formaldehyde-based resin, and has been used in the basements of about 2,200 new homes that are under construction or have been recently completed. Most of the homes haven’t been lived in yet.

Videos posted by the company show the new coating can prevent wood from burning at 1,000-degree heat for 7 minutes. But formaldehyde has been linked to issues in other products, like laminate flooring made in China. Consumer Reports says the substance has a “pickle-like” smell.

In a statement, the company said it’s halted production of the new coating and will replace or fix any effected joists already in homes.

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Timber company agrees to pay $375,000 to resolve overharvesting claims

Timber company agrees to pay $375,000 to resolve overharvesting claims | Timberland Investment | Scoop.it

The State of Vermont has settled a major forestry case with Plum Creek Maine Timberlands, LLC (Plum Creek) for $375,000. This settlement resolves claims that Plum Creek overharvested trees in violation of its forest management plan. The settlement resolves a case that began in 2010 when Plum Creek was found to have overharvested trees from their property. Due to this violation, the State removed a parcel of Plum Creek’s forest land from Vermont’s Current Use Program. The Current Use Program allows lands producing timber or agricultural products to be appraised based on those uses rather than the commercial value of the property. Last fall, the Vermont Supreme Court upheld the Department of Forests, Parks and Recreations’ finding that Plum Creek had violated its forest management plan by overharvesting trees. The matter was remanded back to the Superior Court to determine the tax consequences of the violation.

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In addition to the $375,000 payment to the State, under the terms of the settlement, the State will re-enroll the property in the Current Use Program for 2017. The Department of Forests, Parks and Recreation visited the overharvested area in July 2017 and confirmed that it is presently in compliance with Plum Creek’s forest management plan. Under a recent corporate merger, the Weyerhaeuser Company has succeeded Plum Creek as the owner of the property.

Sam Radcliffe's insight:

Thanks to Andrew  L'Roe for bringing this to our attention.

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Sino-Forest Executives Committed Fraud in Overstating Value, Canadian Regulator Says

Sino-Forest Executives Committed Fraud in Overstating Value, Canadian Regulator Says | Timberland Investment | Scoop.it

Canada’s top securities watchdog ruled Friday that four executives of Sino-Forest Corp. committed fraud through fictitious transactions, using a web of suppliers to inflate the assets and revenues of the once-highflying Chinese timber company.

 

The Ontario Securities Commission’s 296-page ruling in its civil case, which comes five years after the company filed for bankruptcy, chronicles a murky world of shadowy businesses, a remote employee “ghost house,” and opaque Chinese documents that, the regulator said, prevented it from verifying how many trees the timber plantation company actually owned.

 

Toronto-listed Sino-Forest had been a darling of Western investors rushing to get a piece of China’s rapidly expanding economy, raising $3 billion before U.S. short selling firm Muddy Waters LLC publicly claimed in 2011 that the company was vastly overstating assets and revenue. After the short seller released its report, the company’s share price plunged, causing billions of dollars in investor losses. One was American billionaire John Paulson, whose hedge fund lost about $500 million on the bet.

 

The commission’s decision says the company’s founder, Allen Chan, was the guiding mind behind a series of schemes involving suppliers and other companies to engineer falsified revenue and asset statements. Three Sino-Forest executives—Albert Ip, Alfred Hung and George Ho—participated in the fraud, the regulator said.

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Credible rumours of Tentative Softwood Lumber deal: Canada-US

Credible rumours of Tentative Softwood Lumber deal: Canada-US | Timberland Investment | Scoop.it

A reliable source in Ottawa has conveyed that, although not signed, and subject to further negotiations, Canada’s Christina Freeland and the U.S.’ Wilbur Ross “shook hands” on a ten year Canada – U.S. Softwood Lumber Agreement. The SLA would terminate the present Canadian Softwood Lumber AD/CVD case, and be replaced with volume restrictions in the form of a quota, similar to the 2006 SLA, but without Export Surcharges. Instead of export surcharges, volume violations would involve significant penalties.

 

The exact volume restrictions are as yet unconfirmed, but are understood at this time to involve a 30% reduction in year one, 20% in year two, with the following eight at 10%. It is understood at this time that the 2017 SLA would follow the provisions of the 2006 SLA.

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Phaunos Timber Fund Manager Stafford Capital Partners Resigns

Phaunos Timber Fund Manager Stafford Capital Partners Resigns | Timberland Investment | Scoop.it
Timber investment company Phaunos Timber Fund Ltd said on Monday its manager, Stafford Capital Partners, has resigned.

The resignation will take place with effect from August, with a six month notice period commencing from that date.

During the notice period, Phaunos Timber said Stafford will focus on the ongoing management of the company's assets, the appointment of a sales agent to manage the realisation of assets, and the provision of fund information as part of the handover to a new manager.

This comes after shareholders voted in June against continuing Phaunos Timber's operations. On July 3, the company said it would propose to shareholders changing the composition of the board to reflect the needs of the company as it begins to wind down.
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Where Are Investment Dollars Going in the Forest Products Industry?

Where Are Investment Dollars Going in the Forest Products Industry? | Timberland Investment | Scoop.it

Tracking capital expenditures in the forest products industry gives insight into which sectors expect to be profitable in the future: higher investment levels imply greater expectations of profit. We track investments by wood products firms through multiple data sources.

***

For example, the U.S. Census tracks annual capital expenditures for structures and equipment at wood products (lumber, plywood, panels, etc.) and paper facilities. The U.S. Census shows that capital investments have continued to grow steadily since the Great Recession’s nadir in 2009 (Figure 1). Annual investments by manufacturers of wood products climbed from less than $2 billion in 2009 to nearly $5 billion in 2015. Investments by paper manufacturers grew from less than $5 billion in 2009 to $7 billion in 2015. Wood products manufacturers, heavily dependent on the housing market, fell harder than paper manufacturers.

***

Tracking public announcements from 2013-2018 reveals a dramatic change in expectations over time (Figure 2). Bioenergy projects, including pellets, combined heat and power, electricity, and liquid fuels, comprised the majority of investment announcements in 2013 but declined precipitously in recent years. Pulp and paper investments remained strong, with a spike in 2016 corresponding to International Paper’s $1.5 billion acquisition of Weyerhaeuser’s pulp business. OSB and panel investments look particularly strong in 2018, with $630 million in announced investments so far.

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Far from campus, universities put their money into farms, railroads, oil rigs

Far from campus, universities put their money into farms, railroads, oil rigs | Timberland Investment | Scoop.it

***
Stocks and bonds may do when you’re an everyday investor. But the country’s elite universities, sitting atop multibillion-dollar endowments, venture into far more exotic and potentially risky realms as they chase higher returns to fund day-to-day operations, from scholarships for students to salaries for superstar professors.
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For years, Harvard has invested about 10 percent of its $37 billion endowment in natural resources.
***
These large, wealthy universities are different from everybody else, said Lucie Lapovsky, the principal of Lapovsky Consulting, who works with colleges on financial issues.

 

They have more money, access to expert money managers, and an alumni network that can provide an in, she said.
***
Soon after some large universities began reporting hefty returns from their timber investments more than a decade ago, other universities were eager to match that performance. But the opportunity had already passed, he said.

 

“The first-mover advantage had happened 15 years before, when they first made the investment,” Jarvis said.

 

But alternative investments, even if financially lucrative, aren’t always winners politically.
***
Harvard sold 33,600 acres of Romanian forest to the furniture retailer Ikea Group in 2015 after a contractor the endowment had hired to purchase the land was convicted of bribery and money laundering.

 

To manage large properties, as Harvard does, university endowments have to hire local people to oversee the investments and fly their own teams to far-off locales to ensure they’re operating properly, said Charles Skorina, an executive recruiter in San Francisco who follows endowments and pensions.

 

That’s why some universities may be pulling back. “That’s a time suck,” Skorina said.

 

Some of these bets also lose money.
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Harvard’s natural resources portfolio, which includes timber and agricultural lands, performed particularly poorly — down 10 percent — hurt by conditions in South America, including a severe drought.

 

Harvard brought in former Columbia University endowment chief N.P. “Narv” Narvekar last year to shake up its strategy. Narvekar announced earlier this year his plans to streamline and simplify the endowment, cutting half of its 230-member staff and entrusting more money to outside firms to manage.

 

But its natural resources portfolio will remain in-house for the foreseeable future, Narvekar recently said in a letter to the Harvard community.

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Forisk 2017 Western Silviculture Survey

Forisk 2017 Western Silviculture Survey | Timberland Investment | Scoop.it

The Western United States is a major supplier of raw materials for the forest industry, producing over 40% of U.S. softwood lumber. Despite the abundance of federal land in the area, nearly 80% of the harvested volumes from Oregon and Washington are from privately-owned lands. Forest management practices on private timberland in the West enable the forest industry to remain highly competitive. A richer understanding of the diversity and intensity of silvicultural activities in the region is useful for benchmarking best practices, and understanding the investments necessary to intensively manage western timberlands. In the spring of 2017, Forisk performed our first survey of private timberland owners and managers in Idaho, Montana, Oregon, and Washington to gather this level of detail.

 

We collected data on 4.3 million acres of privately-owned forestland from 15 participating firms. TIMOs represented the largest proportion of managed lands (45%), followed by forest industry and REITs (38%), and independent private owners (17%). Douglas-fir is the predominant species planted west of the Cascades, while a mixture of other species including pines, larch, and fir were prevalent east of the Cascades. Chemical applications were the most common site prep method (81% of planted acres). Chemical treatments for site prep, herbaceous control, and woody competition control were less common in western Washington than the other two sub-regions. Only 40% of respondents applied fertilizer, and only on 0.5% of lands under management in 2016 (none east of the Cascades).

 

Precommercial thinning was reported by 93% of firms (1% of acres under management), and was performed at an average stand age of 15. Commercial thinning was less common. It was reported by 73% of respondents and was performed at an average age of 29 west of the Cascades and 33 east of the Cascades. Average final harvest age was between 50 and 52 years west of the Cascades and 72 years east of the Cascades. Respondents predicted that final harvest age of newly replanted stands would be much lower than the current harvest, with rotation lengths predicted to drop 7-8 years west of the Cascades and 25 years east of the Cascades. This was the clearest indication that silvicultural intensity was expected to yield measurable positive results in the future.

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OPINION: A Katahdin national park, courtesy of the Trump administration?

OPINION: A Katahdin national park, courtesy of the Trump administration? | Timberland Investment | Scoop.it

New England could finally get its second national park, courtesy of support from the unlikeliest source — the Trump administration.

Give credit where it’s due: Trump’s interior secretary, Ryan Zinke, said during a recent visit to Maine that he could support turning a beautiful new national monument in northern Maine, Katahdin Woods and Waters National Monument, into a full-fledged national park.

 

The statement was all the more surprising because it came amid talk that the Trump administration may shut or scale back other national monuments created by President Barack Obama, including the new Bear Ears National Monument in Utah, which Zinke has recommended shrinking.

 

At least in the case of Katahdin, though, Zinke seems to have no desire to retreat. He acknowledged during his Maine visit that the land was in federal hands to stay, and said that if the state’s congressional delegation supported turning it into a national park, he could back the idea.

 

Obama designated the area a national monument last year, after years of bickering over the land’s future. Once owned by timber companies, the rugged, 87,000-acre parcel abuts Baxter State Park, home of the iconic Mount Katahdin. It was purchased by a philanthropist, Roxanne Quimby, who donated the land to the federal government. The transfer rankled some Maine residents, though, who feared it would cut off access for snowmobilers and foreclose the possibility of a timber revival.

 

 

Although creating the monument was a great first step, a real national park has long been the dream of Quimby and her supporters — a vision that seems to be winning more support from skeptical Mainers. Creating the park would open up new recreational opportunities, spur tourism in a depressed region, and help even out the regional inequity in a parks system dominated by Western landmarks. The formal difference between a monument and a park is minimal, but visits often rise when monuments are converted into parks.

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Investor Profile: CALIFORNIA FUND SEEKS ‘SAFE’ RETURNS

Investor Profile: CALIFORNIA FUND SEEKS ‘SAFE’ RETURNS | Timberland Investment | Scoop.it

Donald Pierce, chief investment officer of the $9 billion San Bernardino County Employees’ Retirement Association (SBCERA), brings vision and a steady hand to investment strategy.

 

The portfolio he shapes is built around low equity exposure and diversification, with assets chosen according to their value, along with their contractual and income qualities.
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It means he hunts for assets that extract value through cash flows and don’t ultimately rely on market movements for a return. There is always a danger that the market won’t move. In that case, embedded contracts ensure payment of some kind, at some point, “if push comes to shove”.

 

These principles sit easily within alternative assets, where the fund has allocations to timber, infrastructure and private equity. Rather than focus on the individual assets, Pierce looks at their components.

 

“Is it equity or is it debt? Does it have leverage? When does the debt facility mature? Is there a significant amount of asset coverage? Each asset we have we would like to underwrite in some way,” he explains. “It is much more of an underwriting story than an alternative story. The income is the least volatile of those components. The price change is where the action is, but it is also where all the volatility is.”
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Here, the portfolio’s allocation is adjusted every month, according to asset prices, within a fixed range.

 

“It doesn’t change that much; we are a low-turnover portfolio. However, the main criticism I have of any strategic asset allocation [when] folks don’t change it, is that they are saying the price of the asset they are purchasing doesn’t matter. If your asset allocation doesn’t change when the stock price and value have increased by 200 per cent over the last seven or eight years, you are saying the price at which you buy assets isn’t [relevant] to your asset allocation and this doesn’t make sense.”

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Forests the new black for super funds: Stafford

Forests the new black for super funds: Stafford | Timberland Investment | Scoop.it
The $3 billion UK-based Stafford Timberland is calling on Australia's superannuation funds to change their thinking on investment in timber plantations and start investing in the alternative asset class that has huge environmental, social and governance benefits.

Stafford partner Daan Oranje, who has been visiting super funds to offer allocations in its numerous investments that control thousands of hectares of land and trees, said the mindset was starting to change with some groups such as UniSuper​ and the Future Fund taking up investments in Australia.

"About five years ago people were more interested in infrastructure but I think funds are a little more open to hearing the story," Mr Oranje said.

"Should an opportunity come up in this region though you typically see investors from overseas take it up. At this point we are seeing a lot of European and North American funds give a favourable view.
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U.S. slaps dumping duties on Canadian wood, Ottawa vows to fight

U.S. slaps dumping duties on Canadian wood, Ottawa vows to fight | Timberland Investment | Scoop.it
Escalating a trade dispute with Canada in the run-up to talks on renegotiating NAFTA, the U.S. Commerce Department on Monday imposed preliminary anti-dumping duties on Canadian softwood lumber of up to 7.72 percent.

When combined with preliminary anti-subsidy duties issued in April, the new measures will bring total duties on Canadian lumber to between 17.41 percent and 30.88 percent.

The announcement, which was largely expected, prompted an angry reaction from the Canadian government against what it called unfair and punitive duties.

"We will vigorously defend Canada's softwood lumber industry, including through litigation," the government said in a statement.

The bilateral dispute is the fifth over lumber in less than 40 years.
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Why biomass remains a challenge, even in timber-rich Georgia

Why biomass remains a challenge, even in timber-rich Georgia | Timberland Investment | Scoop.it

A new biomass plant under construction in Georgia highlights the challenging economics of the technology, even in a state so rich in forestry waste it exports it to other countries.

The 50 MW Albany Green plant – the largest renewable energy project in the state so far – is a unique collaboration among Georgia Power, private companies (including Procter & Gamble) and a nearby Marine base. While the cost for biomass generated electricity is too high to compete with wind and solar, the project also produces steam for industrial use, which improves its economics.
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Two thirds of Georgia is forested—25 million acres—and the state is ranked first in the nation for commercial timberland. More than a dozen plants in the state export wood pellets to supply renewable fuel to power plants in Europe – where electricity prices are high and the fuel is classified as “carbon neutral” by the European Union (even though many scientists reject biomass as a climate solution).
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Mary Booth, director of the Partnership for Policy Integrity, is a skeptic. “This plant has a 1,037 million BTU boiler that is capable of burning 100-110 tons of wood an hour,” she explains. She believes much of that wood will be harvested when green, and “a boiler that size burning green wood chips can end up being as dirty as coal.”
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Yet for Georgia, biomass is a lucrative industry—at least for exports. Georgia’s residues from timber harvesting (tops and branches) exceed five million dry tons annually, according to a 2008 report by the Georgia Forestry Commission. Georgia Biomass in Waycross is the world’s largest biomass pellet facility, and exports 750,000 tons of processed wood pellets a year. The Port of Brunswick has expanded in order to ship a million tons of pellets a year. But biomass generation for in-state use is an upward battle, largely because of the availability of cheaper locally available power from gas and solar.
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Even at 13 cents a kilowatt, says Echols, the project had trouble securing financing. Now, with 1,600 megawatts of new renewables approved by the PSC last summer, much of it likely to be solar, Echols expects the solar price to be “in the 6 cent per kilowatt ballpark, and obviously you can’t build a biomass plant for that.”

In addition, federal tax incentives for biomass are about 1/3 of solar and wind, according to Ron Melchior, Executive Director of Distributed Energy at Constellation, which had the winning bid to develop the plant from Georgia Power. “Biomass is an established technology, and incentives tend to be reduced as a technology ages.”

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