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
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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Snow, sleet and frozen rain damaged a year's worth of South Carolina's timber harvest last month, making it the most damaging storm in the region since 1989, officials reported.
About 11% of the forestland was significantly affected by the pre-Valentine’s Day storm, which left an inch of ice across half of the state. Though most of the $360 million in damage was considered “light” by the South Carolina Forestry Commission because some of it could be salvaged, the agency declared a disaster and called on timber companies Wednesday to save as much as they could.
The rest of the South also felt the wrath of the storm, which shut down schools and businesses and snarled traffic from Feb. 10-13.
The storm claimed about $65 million worth of timber in Georgia, the state's Forestry Commission said last week. Among casualties there was the famous Eisenhower Tree, a pine on the Augusta National golf course that was said to have repeatedly caught the former president's tee shots. Other states have yet to report forestry damage figures.
In South Carolina, the storm was the worst since 1989's Hurricane Hugo, which wrecked 2.5 years worth of timber in a night. Foresters ended up salvaging 15% of the timber and recovering about 10% of its value, South Carolina State Forester Gene Kodama said.
The following is a response to the Faculty Senate resolution on Cornell investment and divestment strategies for a sustainable future from President David Skorton on Feb. 11:
The Faculty Senate Resolution on Cornell Investment and Divestment Strategies for a Sustainable Future, passed in December 2013, as well as the Student Assembly Resolution 32, “Toward a Responsible Endowment” to which I responded last spring, have generated considerable discussion on our campus and a broad spectrum of opinion on the issues raised. In this response to the Faculty Senate’s resolution, I offer some general comments on the role of the university in environmental sustainability, address the specifics of the Faculty Senate’s resolution, and offer a way forward. *** In addition, we are currently in discussion with our timber portfolio manager about a possible transition for a portion of the acreage in our portfolio from a managed forest to a managed forest that would be set aside as a permanent natural habitat. Upwards of 200,000 acres could be set aside in this way, contributing to the carbon sequestration aspect of our timber investments.
Ohio Police & Fire Pension Fund, Columbus, returned 16% in 2013, confirmed spokesman David Graham.
The $14 billion pension fund’s top-performing asset class for the year ended Dec. 31 was master limited partnerships, which returned 32.3%, following by domestic equity at 30.7%.
Other double-digit returns came from international equity, 21%, private real estate, 15.1% and private markets, 11.9%. Also, high yield returned 6.2%; cash, 4.9%; timber, 3.4%; core fixed income, -0.9%; and global inflation-protected securities, -10.6%.
All returns are estimated, unaudited and gross of fees, according to Mr. Graham.
The forest-based economy of the states of Maine, New Hampshire, New York and Vermont is an important component of the region’s economic health, according to new research by the North East State Foresters Association and the Northern Forest Center. Forest-based economic activity annually contributes more than $33 billion and provides 178,000 jobs to the four-state region.
“These reports show how integral the forests of the region are to the economic health of the Northeast,” said Steve Sinclair, chair of the North East State Foresters Association and state forester of Vermont. “We hope that this new information can help people in the region gain a greater appreciation that, in addition to scenic beauty, a place to recreate, clean air, clean water and many other environmental benefits, our forests provide tens of thousands of jobs and are an important part of our economy.”
The four reports and a regional summary are available online at http://www.nefainfo.org/publications.htmland update data last compiled in 2011 for New Hampshire and 2007 for Vermont, New York and Maine. According to the reports, the annual value of sales from the region’s forest products industry totals more than $18.8 billion, while the forest-based recreation economy is worth $14.3 billion.
The ninety two year old 1031 exchange statute is once again the target for abolishment in current tax reform proposals. Congressman Dave Camp, Chair of the U.S. House of Representatives Committee on Ways and Means, has a bipartisan tax reform group tasked with identifying eleven subjects including real estate tax matters as potential revenue raisers. Senator Max Baucus, Chair of the Senate Finance Committee has targeted the elimination of the 1031 exchange as one of many means of tax reform.
Section 1031 “like-kind” exchanges is estimated to cost over $42 billion over the five year period 2012-2016 by the Joint Committee on Taxation (JCT). Estimates by the JCT in prior years estimated the tax deferral to be $16.2 billion over the five year period 2010 – 2014. The two fold difference is attributed to a change in accounting methodology.
The Treasury Department 1031 Regulation is enforced by the Internal Revenue Service in Section 1.1031 stating that “no gain or loss shall be recognized on the exchange of property held for productive use in trade or business, or investment, if such property is exchanged solely for property of like kind which is to be held for productive use in trade or business or for investment.” Individuals, marrieds, partnerships, trusts, corporations use 1031 exchanges when selling and replacing real and personal property to defer federal and state capital gain and recaptured depreciation taxes. The taxes are deferred until the replacement property is sold and not replaced, effectively cashing out. The economic position of the taxpayer does not change in a 1031 exchange; they have the same amount of cash and debt if not more. If the taxpayer receives cash or reduction in debt, then a tax is due.
The Duke Environmental Leadership (DEL) Executive Education program will offer a two-day course, “Timberland Investments for Professionals,” on March 27-28 at Duke University’s Nicholas School of the Environment.
The new course, which is part of a larger Forest Finance Initiative now being developed at the Nicholas School, is designed to provide financial professionals with the fundamental skills and knowledge needed to analyze potential timberland investments in the wake of sweeping changes taking place in private forest management in recent decades.
It will provide intensive instruction on a wide range of issues critical to making sound investment decisions. These include key forest-products sector trends; investment fund structuring; income opportunities through ecological services; international opportunities; structuring conservation easements; how to value timberland; risk management; financial reporting; and income-tax considerations.
The course will be led by F. Christian Zinkhan, managing director of The Forestland Group. Jeffrey R. Vincent, the Clarence F. Korstian Professor of Forest Economics and Management at Duke’s Nicholas School of the Environment, will serve as faculty advisor.
Forest farms and timber producers that have green certificates to trade internationally are having a difficult time selling their eco-friendly products on the domestic market.
Chen Qinglai, a manager at Paiyangshan Forest Farm in the Guangxi Zhuang autonomous region, said the economic benefits of responsible and sustainable forestry have not been recognized yet in China. The State-owned forest farm was certified by the Forest Stewardship Council in November 2010, becoming the first forestry center in Guangxi to win certification. The farm, set up in 1955, is 99,300 hectares and was once the biggest forestry in Southeast Asia.
Chen told China Daily the motivation to get certification came from buyers in Europe. "Our client, a timber manufacturer, who buys our wood and sells it to Germany, asked us to get certified as the Germans only buy certified forestry products," Chen said.
The costs, both direct and indirect, of getting certified were around 4 million yuan ($655,000). "Besides the certification fee, the strict standards on environmental aspects inevitably increases forest management costs," Chen said. *** Every year, the farm produces 150,000 to 200,000 cubic meters of timber with about half labeled environmentally friendly. That timber sells for about 30 yuan per cubic meter more than uncertified timber. *** Pan Zhenyue, a senior manager at Liheng Timber Manufacturer in Guangzhou, an FSC certified flooring company, said that using certified timber adds 25 percent to the product cost, but the market price in China is not much different as customers will not spend the extra.
Money managers are expanding their private equity secondary market investments to include infrastructure, real estate, energy and timber, ahead of what they expect to be a growing investment opportunity.
Industry insiders predict at least 2% of the assets committed to infrastructure, real estate, energy and timber funds could be sold on secondary markets. These newer markets could quickly blossom to an estimated $9 billion to $12 billion. Growth in these markets could add liquidity, making it easier for investors to manage their real asset portfolios. *** Last year, Hamilton Lane closed its third fund to invest in alternative investment secondary markets, at $900 million. The fund was one of the largest raised in the secondary markets last year, according to data from alternative investment research firm Preqin in London.
Managers had long believed it would make sense for large investors in alternative investments to use the secondary market to manage their portfolios and dispose of unwanted interests in funds. It did not become a potentially viable business until the Great Recession prompted sales of interests in alternative asset classes other than private equity. *** There is a great deal of money being raised on the primary side for funds in the asset class including real estate, infrastructure, energy and timber. Plus, there are a growing number of sellers but not as many buyers as in the private equity secondary market, he said.
“In private equity, if an agent is selling a limited partnership interest or a portfolio of limited partnership interests, it is easy to come up with 50 to 60 people to talk to,” Mr. Gordon said. “In infrastructure, energy, timber and real estate, there are fewer than a dozen credible buyers.” *** Laurence G. Allen [pictured], managing member of secondary market brokerage firm NYPPEX LLC., Rye Brook, N.Y., in an e-mail said: “We are seeing high secondary transaction volumes in real estate funds, followed by energy, infrastructure, then the lowest volumes in timber funds. *** So far, the secondary markets are small: Last year, there was $700 million in infrastructure, $200 million in timber and $5.1 billion in real estate traded on the secondary markets, according to the 2013 Setter Capital Volume Report. By comparison, total private equity secondary volume was $27.9 billion.
Much has been written about the challenges facing the paper industry in Maine. In most cases, however, all paper manufacturers are lumped together without regard for the specific types of paper they produce.
The majority of the paper produced in Maine is what’s known as coated paper, which is used to make magazines, catalogs and newspaper inserts. The market for coated paper has been in decline as digital media eats into demand for the printed page. However, there is a type of paper not under siege by digital technology: tissue. *** Demand for tissue — which includes toilet paper, paper towels, paper napkins and specialty tissue paper — has been increasing, albeit slowly, according to Gregory Rudder, editor of the trade publication PPI Pulp & Paper Week. In the past 19 years, total U.S. tissue capacity — meaning the amount of tissue that would be produced if all tissue machines operated at 100 percent all year — has grown on average 1.8 percent per year, from 6.55 million short tons to an estimated 8.92 million short tons in 2015, according to Rudder, who noted most U.S. mills operate on average at 95 percent to 97 percent capacity. *** While Maine may have a history of tissue production, only one mill currently produces the product. That mill, Lincoln Paper and Tissue, faces heightened competition from an aggressive build-up of Asian production — and from U.S. firms looking to tap the tissue market. *** In late 2012, Jakarta, Indonesia-based Asia Pulp and Paper made an announcement that rattled the global market for tissue. It announced plans to over the next few years build 42 new tissue machines at its paper mills in China and another 15 new tissue machines at its mills in Indonesia. Such an expansion, if successful, would add 2.9 million metric tons of capacity to the global market and vault the company past major tissue producers such as Kimberly-Clark and Georgia-Pacific to become the largest tissue manufacturer in the world.
While much of that new capacity would meet the growing demand for tissue in the Asian market, where more people are rising into the middle class, Van Scotter expects the company to ship a good portion of that new tissue across the Pacific Ocean to the United States, which is the largest market for tissue products in world. *** As the rest of the paper industry struggles with falling demand, the growing demand for tissue makes it an attractive market for U.S. paper manufacturers that are considering converting other types of paper machines to produce tissue. Just last year a paper mill in Virginia converted an uncoated freesheet machine to produce tissue, and another paper company is working to convert another uncoated freesheet machine to tissue production at a mill in Oregon, according to Rudder.
In Maine, John Williams at the Maine Pulp and Paper Association has heard that the Woodland mill in Baileyville may install a tissue machine at some point in the future. And just across the border in New Hampshire, Patriarch Partners invested $35 million to install a new tissue machine at its mill in Gorham, N.H. Patriarch also owns Old Town Fuel and Fiber, which supplies pulp to Gorham Paper and Tissue.
Well, now you can, through a fund for high-net-worth investors that makes factoring and bridge financing its business. Or you can buy a share of timberland (a hot topic at cocktail parties in recent months, wealth managers say), prime commercial buildings or farmland in the U.S. Midwest.
Last summer, Brookfield Asset Management flew right past its target of raising $750-million (U.S.) in a fund to buy timberland in the United States, Brazil and Australia. The company closed the Global Timberlands Fund at $1-billion. *** “We’re seeing a lot of interest in private assets,” says Sam Sivarajan, [pictured] head of investments and sales at Manulife Private Wealth in Toronto – “commercial real estate, agricultural land, timberland, private mortgages.” The appeal, Mr. Sivarajan says, is that these assets are not correlated to the stock market or interest rates. *** “One of the advantages of buying private assets is that when the market sneezes (or worse), private assets hold their value because they are not traded on a daily basis,” Mr. Sivarajan says.
You don’t have to be a sovereign wealth fund to participate in alternative investments – so called because they provide an alternative to marketable securities such as stocks and bonds – but you do have to be wealthy, or what is called an accredited investor.
In Ontario, for example, an accredited investor is a person who alone or with a spouse has financial assets of more than $1-million or net assets of at least $5-million, or whose net income before taxes surpasses $200,000 alone or $300,000 with a spouse. *** People of lesser means can invest in many alternative strategies but they have to plunk down at least $150,000, which would not be a sensible thing to do because they’d have too many eggs in one basket. Regulators set that minimum to protect smaller investors who may need their money back on short notice. As well, some fund managers would rather not deal with a flood of small investors.
Ideally, people who venture into alternative investments will have at least $3-million to invest, says Tony Maiorino, vice-president and head of RBC Wealth Management Services in Toronto. That’s because you don’t want any one investment to comprise too big a proportion of your portfolio. “Try to keep it below 10 per cent.”
In December, CatchMark Timber Trust, a REIT, held an IPO and is now listed on the New York Stock Exchange under the symbol CTT. CatchMark's market cap is around $310 million, making it a micro-cap. CTT joins WY, PCL, PCH, RYN, POPE, OTC:ACAZF, and DEL in the publicly traded timber sector.
CatchMark originally began life in 2007 as Wells Timber REIT, a private REIT formed by Wells REF, a private investment firm. CTT owns approximately 280,000 acres of timberlands in Georgia and Alabama. Of the 280,000 acres, 32,800 acres are long-term leases. The lands were purchased from MeadWestvaco (MWV), and are tributary to the MWV's mill near Columbus, Georgia.
Along with the purchase came a 20-year fiber supply agreement. The supply agreement covers a minimum of about 54% of CatchMark's timber harvest, although it could, and has gone higher. This puts CTT in a position of being heavily reliant on one customer, MWV. However, if the supply agreement is at market price, which I believe it is, it is not all bad. The pulpwood market in Alabama and Georgia is quite good and in a worst-case scenario, other pulpmills or some of the new pellet mills in the area would quickly absorb the wood now promised to MWV.
At the present time, CTT is suffering from the same problems faced by the other timber REITs who own Southern timberlands, that is mainly the low stumpage prices being paid for southern pine sawtimber. Even so CTT generated positive cash flow in 2012 and 2013 even through earnings were negative. Negative earnings are mainly the result of a high depletion rate due to the land being recently purchased. I have mentioned in previous articles how depletion makes earnings almost meaningless to a timber company. Free cash flow is much more meaningful. Depletion's only real relevance is in tax calculations, but since REITs do not pay taxes, it is even more irrelevant.
CTT is trading for around $13.50 per share and has seen a range of $12.50 to $14.40. They recently declared their first dividend of $0.11 per quarter yielding about 3.3%. This is in line with the other timber REITs. They also recently paid down $80 million of their long-term debt of $132 million with proceeds from the IPO. I estimate their timberlands to be worth $400 to $450 million so a debt load of $52 million should not be much of a problem.
The New Zealand Superannuation Fund (NZSF) has sold a 2.5% stake in Kaingaroa Timberlands, New Zealand’s largest forestry business, to six central North Island iwi. Effectively, the NZSF reduces its forest business stake from 41.25% to 38.75%. Other institutional investors in Kaingaroa Timberlands include Canada’s Public Sector Pension Investment Board and the Harvard Management Company, the manager of Harvard University’s endowment. The six iwi representative organizations, Ngati Rangitihi, Ngati Whakaue Assets and Te Arawa River Iwi Limited Partnership, Ngati Whare, Raukawa, Te Arawa Group Holdings Limited and Tuwharetoa, have formed Kakano Investment Limited Partnership to acquire and hold the stake.
An iwi is a social unit in Māori culture.
In 2008, in the biggest Treaty settlement to date, the Crown returned 176,000 hectares of land to the central North island iwi. 90% of Kaingaroa Timberlands tree crop is on returned land.
The CEO of the New Zealand Superannuation Fund (NZSF) mentioned in a press release that there is a strategic benefit for the landowners of the forest to have a stake in Kaingaroa Timberlands.
Apart from the political aspects of the tensions between Russia and Ukraine, there are some concerns over the stability of the European and global timber market.
Russia is the world’s largest log exporter and the fourth softwood lumber export country in the world. Moreover, Russia covers more than one fifth of the global forests and accounts for almost 5% of the worldwide timber trade.
What could worry most the timber industry in this case is a trade embargo Russia/Western countries that might dis-balance the entire global timber trade functionality.
There some tight connections between Russia and the EU concerning the wood industry. First of all, many major European timber companies have operations in Russia, especially the Northern European companies. Plus, Russia is the second extra-EU wood products exporter to the EU, after China. By November 2013, Russia exported wood products (under HS code 44) worth EUR 2,7 billion and has at the present a market share (excluding EU member states) of 15% on the EU market. The EU also exports wood products to Russia of nearly 1,2 billion per year.
Overall, the EU-Russia timber trade is over 4 billion annually. If the Crimean crisis deepens, a possible trade embargo (partial or total) scenario will become very feasible, which could have disastrous consequences for the European timber industry.
For sale: one township in Washington County. Actually, it’s not quite the entire township, but pretty near.
The property, listed for sale with Fountains Lands, consists of 21,948 acres. The Fountains Lands website describes the property: “An exceptional timberland investment located in Downeast Maine, offering a substantial timber base and established internal road network, enhanced by miles of accessible high quality frontage on several lakes, ponds and the East Machias River.”
The fact that the property contains a significant stretch of the East Machias River — five miles of frontage — as well as other natural resources has drawn the attention of the Downeast Salmon Federation and other conservation organizations that want to work with new owners when the property changes hands.
Several groups of investors have been interested in the property, said [Fountains manager Patrick] Hackley.
Besides containing more than five miles of frontage on the East Machias River, Township 19 contains numerous brooks, streams, ponds, and lakes, and a portion of Love Lake. The tract has abundant softwood timber with total timber value of about $11 million, according to Fountains.
The property, owned by Timbervest Partners Maine and Spectacular Six, is listed for sale for $12.8 million and has been on the market since September 2012. Timbervest is a timber investment management organization, said Hackley. Like similar organizations in Maine and elsewhere in New England, it manages investment funds for “people interested in investing in timberland.” The company owns “several thousand” acres in New England, he said, and Township 19, which Timbervest has owned since about 2005-06, is just one of its holdings.
The Society of Actuaries issued a report this week recommending a number of controversial changes in the way that public pension funds value their assets and liabilities and disclose their financial health.
The report, authored by an independent "blue ribbon" panel of experts, weighs into an ongoing debate over the financial reporting and resulting funding practices of public pensions. Politics, rather than economics, often drive that debate, though there is a broad consensus among financial experts that public pension systems – including, in some respects, Oregon's - systematically mis-measure their assets and liabilities. That's politically convenient, as it lowers annual pension obligations, but it results in chronic underfunding and encourages riskier investments, experts say.
The core of the accounting debate addressed in the report is the interest rate, or discount rate, that public funds use to calculate the cost of future benefits in today's dollars. Public pension funds use their assumed earnings rate on investments, and if they invest in a basket of risky assets, as Oregon does, they can assume they'll earn 7.5 to 8 percent annually. That high rate reduces the current value of those future benefits, allowing government employers to set aside less money today to meet them.
But that return is hardly guaranteed, and many experts argue for the use of a so-called risk-free rate, comparable to the yield on U.S. Treasuries. The impact would be huge, adding as much as $2 trillion to the liabilities public pension funds around the country, according to some studies.
The panel's report took a middle ground, suggesting that public pensions calculate and disclose their overall liabilities and annual costs using both rates. The difference between the two is a good measure of system risk, as it represents the additional liabilities and contributions governments would have to pay if they weren't taking investment risks.
For purposes of setting actual contribution rates, the panel made another middle-ground recommendation, suggesting the use of a forward-looking rate that recognizes both the potential for higher investment returns and the risk those investments entail. That number is currently about 6.4 percent.
A subsidiary of IKEA that supplies timber to the furniture maker has been stripped of its Forest Stewardship Council (FSC) accreditation following an audit.
Swedwood Karelia had its FSC certificate suspended after an audit in Russia found a number of problems, including harvesting of “key biotopes”, or important wildlife habitats; the lack of a proper environmental impact assessment; and lack of protective equipment for workers.
A report by the Rainforest Alliance, which carries out audits for the FSC, said: “During the field inspections, auditors found key biotopes had not been identified before harvest and harvested. Harvests of key biotopes were found also at the harvest areas of previous years. That confirmed non conformance to the standard was systematic and lasting over several years.”
The suspension affects 295,348 hectares in the Russian Karelia region.
China’s importation of softwood lumber was 19 percent higher in 2013 than in 2012, reaching a new record high. The unprecedented increase in lumber shipments to the Chinese market that began in 2008 is continuing. *** Canada and Russia are the two major suppliers of lumber to China, with Canada having overtaken Russia as the largest supplier in 2010. Together, these two countries supplied almost 80 percent of all imports. However, this year Europe, Russia, Chile and New Zealand have all increased their shipments to China at a higher pace than has Canada. *** This trend, where countries that just a few years ago were virtually non-existent in the Chinese market are now expanding is likely to continue in the coming years both because China’s continued hunger for more wood and because Canada is not likely to increase exports much more than the levels seen over the past few years. *** With record shipments of logs and lumber from North America to China during 2013, it will be very interesting to see if Chinese wood buyers can continue to increase their imports from the US and Canada in 2014 and 2015 when demand for lumber is likely to go up in the US market.
The Sustainable Forestry Initiative® (SFI®) Inc. is pleased to announce that over half a million acres of timberland owned by The St. Joe Company have recently been certified to the SFI Standard. The majority of the timberlands are located in Northwest Florida and have become a proof point for responsible forest management certification to the SFI Standard.
CalPERS approved Tuesday night a new three-year asset allocation that maintains the $282.5 billion pension fund’s expected rate of return at 7.5%.
The new target portfolio, which is scheduled to go into effect July 1, reduces the target allocation to global equities to 47% from 50% and private equity to 12% from 14%, while increasing fixed income to 19% from 17% and real estate to 11% from 9%.
The allocation for inflation-sensitive securities, including commodities and Treasury inflation-protected securities, will increase to 6% from 4%, while the combined infrastructure and forestland allocation will increase to 3% from 2%. The liquidity asset class, including cash and short-term securities, will decrease to 2% from 4%.
Polluters are paying two conservation organizations to manage forestlands the groups own in Maine in a way that increases the amount of carbon dioxide the trees remove from the atmosphere. The money the Downeast Lakes Land Trust and the Appalachian Mountain Club earn by selling so-called “carbon offsets” will be spent on managing forests they already own and buying additional forestland.
Some trees can still be harvested on these forests for products such as pulp, paper and timber. But deals require that ultimately, there will be more trees left standing than in the past. *** Downeast Lakes Land Trust in Washington County became the first organization in the country approved by the California Air Resources Board to sell $1 million worth of “forest carbon offsets” to industries there that need help meeting their legal obligation to reduce carbon emissions, said the trust’s executive director, Mark Berry. The carbon offsets are on 19,000 acres of Downeast Lakes Land Trust’s 34,000-acre Farm Cove Community Forest near Grand Lake Stream.
The Appalachian Mountain Club, the oldest outdoor recreation and conservation organization in the U.S., recently received final approval to sell carbon offsets on 10,000 of 37,000 preserved acres in its Katahdin Iron Works tract – more than half of the group’s 66,000 acres of land in Maine. *** Companies that exceed legal carbon dioxide limits are allowed to make up 8 percent of their total emissions through buying these “forest carbon offsets.” ***
The land trust must commit to maintain the forests under the more rigorous management standards for 100 years, Berry said. The forests can still be harvested, but the deal requires that long-term tree-cutting be reduced, Berry said.
*** For the moment, many potential offset investors – including large and small landowners, timber companies and state officials – don’t foresee enough financial return to warrant the expense of working a contract through to completion, said Maine State Forester Doug Denico. *** One deterrent is the degree of commitment. A hundred years is a long time to tie up the use of any land, even wild lands held for public use. That requirement limits the flexibility of land owners to either use their land or to sell it, because the 100-year commitment would continue under a new owner.
Also, the deals require that some additional land be set aside as “insurance” for the offset, in case trees on the original parcel are devastated by disease, pests or fire, for example. And reporting and verification requirements cost thousands of dollars per year, said Berry, the land trust director.
With claims still rolling in, the S.C. Insurance News Service estimated the insured damage from the storm will top $15 million in the state.
The biggest economic damage could be to timber, the state’s top cash crop bringing in $679 million annually. A 2004 ice storm that hit a similar swath of the state did $95 million in damage to timber farms. Typically, the worst damage is in pine plantations that have been thinned, leaving gaps for where pines can bend and snap.
Timber farmer John Spearman in the Williamsburg County community of Lane said he was having trouble assessing parts of his farm because so many trees were across roads. While damage didn’t appear to be devastating in the sections of his farm he could see, he did drive by one stand of pines that had been thinned recently by a neighbor. About 50 percent of the remaining trees appeared to have snapped in the ice.
Still, he didn’t agree with some on social media who are comparing the damage this week to the forest devastation from Hurricane Hugo. “I was here during Hugo,” he said. “This is not Hugo damage, but it’s bad.”
Harvard has put a large portion of its controversial forest holdings in Romania up for sale, according to documents filed in the country at the end of January. The documents advertising the sale were posted in Romanian provinces two days after Dragos Lipan Secu, a former contractor for a University subsidiary, was arrested on charges of bribery and money laundering.
Scolopax, a Romanian company owned by Phemus Corporation, a subsidiary of the Harvard Management Company, posted the fliers at the end of January in 21 Romanian provinces. *** Secu allegedly committed the crimes while purchasing timberland on behalf of the University between 2007 and 2009. University spokesperson Kevin Galvin wrote in a statement in late Januray that Secu’s relationship with Harvard ended in 2012. Romanian authorities say Secu conspired with sellers to artificially inflate the price the timberland in exchange for a series of bribes, including 4.45 million lei, or $1.3 million, a 2007 trip to the Canary Islands, and a Chrysler Sebring car. *** Scolopax is attempting to sell over 32,000 hectares, according to the documents. It is unclear what percentage of Scolopax total holdings this figure represents, but in 2010 Sven Rutgersson, a Scolopax official, said that the company owned “around 35,000 hectares of forest and 2,000 hectares of farming land.” According to data from Romania’s Environment Ministry sent to Ziarul Financiar, a Romanian financial newspaper, those holdings made Scolopax the second-largest owner of forestland in the country, behind the government. *** Scolopax’s assets totaled more than $126 million in 2011, according to University tax filings. It began purchasing timberland in Romania in 2005, a few years after the University first began investing in timberland in 1997.
New Zealand forest growers, long overshadowed by booming returns from the dairy industry, look set to cash in on record prices for logs as they prepare to harvest trees planted in a flurry of activity two decades ago.
Forestry plantation activity in New Zealand jumped between 1992 and 1998, as a surge in Asian log prices lured investment syndicates to the sector. Radiata pine, which makes up about 90 percent of the nation's plantations, are typically felled between 26 and 32 years, meaning the "wall of wood" will start being harvested from about 2018, according to government figures. *** China is underpinning New Zealand commodity price strength as Asia's largest economy undergoes urbanisation, growing incomes and demand for better housing, says ASB rural economist Nathan Penny.
Forestry exports to China rose more than 50 percent in 2013, putting New Zealand ahead of Russia as the biggest seller of logs into that market. Russia's log exports have dipped as a result of an export tax aimed at stimulating its domestic timber processing industry. At the same time, shipments from the US and Canada have dwindled as demand picked up in their home markets. *** While an increase in supply in coming years may put some pressure on prices, foresters have the ability to stagger harvests and continued Chinese demand is likely to underpin the sector, Penny said. *** Increased demand in New Zealand from the rebuilding of earthquake damaged Christchurch and a surging Auckland housing market are also adding to wood demand and supporting prices, Penny said. New Zealand exports of logs and wood surged 22 percent last year to $3.86 billion. In comparison, meat exports rose just 2.2 percent to $5.28 billion and dairy exports increased 17 percent to $13.4 billion. The Wood Council of New Zealand, which represents forestry and wood processors, aims to triple export earnings to $12 billion by 2022.
*** The New Zealand Superannuation Fund partnered with Harvard Management Company, the endowment fund of Harvard University, and the Public Sector Pension Investment Board, Canada's largest pension investment managers, for the harvesting rights to the 178,000 hectare Kaingaroa Forest, New Zealand's largest plantation forest and one of the largest contiguous plantation forests in the Southern Hemisphere.
The NZ Super Fund valued its 41.25 percent stake in Kaingaroa at $1 billion as at June 30, saying it has delivered an 18.05 percent return since it was purchased in 2006.
Other large plantations are owned by US-based Hancock Natural Resource Group, the world's largest timberland investment manager which bought 260,000 hectares of forests from Carter Holt Harvey, and Matariki Forests, a consortium managed by US-based Rayonier which owns 130,000 hectares of forests, according to Forest Owners Association records.
Demand for logs from China is hurting the local sawmilling industry as forest owners send their logs overseas rather than sell them to local processors, according to the New Zealand Timber Industry Federation.
Some 40 sawmills have closed since 2003, according to the New Zealand Forest Owners Association. In October, the Tachikawa Forest Products sawmill in Rotorua was put in receivership with the loss of 120 jobs.
The NCREIF Timberland index returned 9.69% in 2013, its highest return since 2007 when the index returned more than 18%. Last year’s return consisted of 2.8% income and 6.75% appreciation.
Timberland returned 7.75% and 1.58% in 2012 and 2011, respectively.
Mary Ellen Aronow, senior forest economist at Hancock Timber Resource Group and chair of the NCREIF timberland committee, noted in a news release that properties contributing 70% of the index’s market value were appraised during the fourth quarter. Appraisers “recognized a strengthening timberland market, with lower discount rates, citing timberland transaction evidence which indicates higher land values. In some cases, appraisers have also raised their outlook for timber prices.”