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World Bank's forestry investments failing to meet conservation, rights, and anti-poverty goals

World Bank's forestry investments failing to meet conservation, rights, and anti-poverty goals | Timberland Investment | Scoop.it
Mongabay: The World Bank's investments in forestry over the past decade have failed to meet key objectives of reducing poverty, preserving forests, slowing climate change, or benefitting local communities, according to a report developed by its...
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Timberland Investment
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Sponsored by...

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

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


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

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


About this magazine

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


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Some useful links


Stock quotes, news and financial metrics

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


Prentiss & Carlisle newsletters

Quarterly updates on conditions in our operating regions


Timber Mart North 

Lake States price reporting service published by P&C


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Muddy Waters goes after another Chinese timber company

Muddy Waters goes after another Chinese timber company | Timberland Investment | Scoop.it

Some of the world’s most prominent hedge-fund managers have gathered in London this week to exchange their best ideas.


The biggest market mover was Muddy Waters Research chief Carson Block. A noted short seller now mulling a hedge-fund launch, Block took aim at Chinese forestry company Superb Summit International Group, questioning its valuation of its timber assets.


“It seems there is really little to no forest,” Block alleged.


Block has made something of a cottage industry taking down North American-listed Chinese companies, and especially those in the timber industry; in 2011, he asked similar questions of Sino-Forest Corp., sending its shares plummeting and costing major Sino-Forest investor Paulson & Co. $100 million.

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Editorial: Timber will have a role in reinvented economies

Editorial: Timber will have a role in reinvented economies | Timberland Investment | Scoop.it
The New York Times ran a story in its Saturday editions about Sweet Home and the town’s attempts to redefine itself now that federal forests don’t produce nearly the level of timber that they have in the past.

The story likely was of interest to the paper’s readers, but it probably didn’t tell Sweet Home residents or citizens of Linn County anything they didn’t already know.

But it sometimes is worthwhile to take a look at the broader issues at play here, and the Times story offers an opportunity to do that again. And it’s particularly timely, considering that the lame-duck session of Congress is poised to take another whack at legislation that could increase the timber harvest on the state’s Oregon & California Railroad lands.

The notion of reinvention is at the heart of the Times story, and that’s another verse in a song we’ve heard many times before: Timber towns around the West need to reinvent themselves to accommodate an era with fewer jobs in the forests. We buy into some of that. But there needs to be a place for timber even in these reinvented Western communities, and it’s awfully easy to forget about that.
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Calpers Reviews Its Timber Holdings

Calpers Reviews Its Timber Holdings | Timberland Investment | Scoop.it
The California Public Employees Retirement System is reviewing its timber holdings following a period of poor performance and questions about whether the investments are large enough to impact overall returns for the nation’s largest public pension fund.

Top investment officers and consultants to the system known by its abbreviation Calpers discussed the $2.3 billion commitment at a board meeting Monday. One consultant, Wilshire Associates managing director Andrew Junkin, hinted at the review in an Oct. 22 letter to Calpers investment committee chair Henry Jones that cited the portfolio’s “structural weaknesses” and an evaluation of its “efficacy.”

A Calpers spokesman said no decisions have been made about the future of the timber portfolio. “This process has just begun,” he said via email.

Forests valued for their timber are Calpers’ worst-performing asset since the financial crisis, with returns down .8% over the last five years and 1% over the past three years. The portfolio gained 2.5% during the 2014 fiscal year but that was well below internal goals and industry averages.

Calpers is one of the largest holders of timber in the U.S. and owns 1.46 million acres, according to Forisk Consulting LLC. But one problem identified by Mr. Junkin is that these holdings are entirely concentrated in one part of the country — the U.S. Southeast. Outside the U.S. Calpers also owns properties in Brazil, Guatemala and Australia. The forests are also struggling due to the “timing of the original purchases,” according to the letter.

The size of the program presents another challenge. The holdings represent roughly 1% of total assets at Calpers, which were $296.4 billion as of Nov. 13.

“It could be argued” the current allocation “is not large enough to have a significant impact,” Mr. Junkin said in his letter. At the same time, “it would be massive challenge” to increase the size of the timberland holdings “to something more impactful, say 5%.”
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Analyst: Rayonier's Mea Culpa Creates Long Opportunity

Analyst: Rayonier's Mea Culpa Creates Long Opportunity | Timberland Investment | Scoop.it

On Monday, along with announcing its 3rd quarter results, Rayonier  also announced:

  • That it had erred in its inventory as stated on the 2013 10-K.
  • That it had been harvesting at a rate higher than the sustainable rate on its Pacific Northwest properties, and would henceforth lower the harvest rate in the Pacific Northwest.
  • That it would reduce its dependence on non-strategic timberland sales to generate cash.
  • That it would reduce its dividend from $.30 a quarter to $.25.
  • That because of the inventory error, it had under-reported its depletion expenses for the 1st and 2nd quarters of 2014, and would take an additional $2.6 million expense in the 3rd quarter to correct this.

For these grievous crimes, its market price dropped from $33.90 to $26.09 today, a 23% drop.
***

  • I'll sum up my view on Rayonier's mea culpa as follows:
  • The inventory issue is unfortunate but not that important in the big picture.
  • The harvest drop in Washington is unfortunate but not out of the ordinary in the world of forest inventories and forests with older age classes.
  • Reducing reliance on non-strategic timberland sales is a good thing.
  • Reducing the dividend is unfortunate but understandable.
  • Depletion, who cares.


Of all the things listed above, only numbers 4 and 5 were necessary from a legal standpoint. Issues 1, 2, and 3 could have been handled as internal management issues. It is only, in my opinion, because of Dave Nunes, the new CEO's strong belief in transparency that they were reported. Had that not been the case, I believe the 23% drop in unit price would not have been as bad. I think transparency is good but sometimes too much is not.


Let's look at Rayonier's land holdings. Counting Rayonier's 65% interest in 300,000 acres in New Zealand, Rayonier owns about 2.6 million acres of land. Using $1,800 per acre for southern timberlands, $3,000 per acre for northwest timberlands, and $2,000 per acre for New Zealand lands, Rayonier's timberlands are worth about $5 billion dollars, or about $39 per unit. Take away the $605 million long-term debt and you get about $34 per unit.


So, if Rayonier shuts down today and sells itself on the open market, it would be worth about $34 a unit. It is selling now for about $26. If I had a little cash lying around, and was a long-term investor, I might be tempted to pick up some RYN at $26 and get a 3.8% dividend to boot.

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Conservation group buys 165,000 acres of Plum Creek timberlands in effort to keep land wild

Conservation group buys 165,000 acres of Plum Creek timberlands in effort to keep land wild | Timberland Investment | Scoop.it

A decades-old effort to protect traditional wildlife corridors and public access to western forests is getting a huge boost in Washington and Montana by an international conservation group.

The Nature Conservancy is buying 48,000 acres of forest land from Plum Creek Timber on the east slope of Washington’s Cascade Mountains for long-term conservation along with 117,000 acres in the Blackfoot River Valley of Western Montana.

Announced last week, the $49 million purchase in Washington includes all of the timber company’s holdings from Snoqualmie Pass to Cle Elum – about 75 square miles scattered among state and national forest lands – along both sides of the Interstate 90 corridor.

As part of the same deal, the conservation nonprofit will pay $85 million for the private timberland in Montana.

Sam Radcliffe's insight:

The 48,000 acre addition is the news -- we scooped the 117,000 acre deal last week. The total package works out to $812 per acre, $726 per acre in Montana and $1,020 per acre in Washington.

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Molpus Woodlands Group Announces the Acquisition of 36,283 Acres in Virginia

Molpus Woodlands Group Announces the Acquisition of 36,283 Acres in Virginia | Timberland Investment | Scoop.it

The Molpus Woodlands Group, LLC (Molpus), a timberland investment management organization (TIMO) headquartered in Jackson, Mississippi, has announced today, on behalf of its clients, the successful purchase of approximately 36,283 acres in Virginia.


Located in twenty-three counties surrounding the Richmond, Virginia, area, the primarily southern pine plantation property has been in timber production for decades and is located in a stable timber market and a growing bioenergy market area. The property offers unique recreational opportunities due to its proximity to major metropolitan areas such as Richmond and Fredericksburg, Virginia, and Washington, D.C.

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The granddaddy of all Canadian-U.S. trade disputes is about to rear its ugly head again

The granddaddy of all Canadian-U.S. trade disputes is about to rear its ugly head again | Timberland Investment | Scoop.it

A recent dispute over “country of origin labelling” for meat products underscores the fact that Canada and the U.S. still have their share of trade disputes.


Yet lurking in the background is a massive trade issue that you haven’t heard about for a while: softwood lumber, the granddaddy of all Canadian-U.S. trade disputes. Canada exported $7.4-billion worth of lumber in 2013, the highest amount since 2006. The United States is the destination for the bulk of that wood, and U.S. lumber producers have for decades demanded the U.S. government collect tariffs on Canadian lumber. After decades of dispute, Canada and the U.S. agreed to a nine-year truce in 2006. Under the agreement, the U.S. agreed to return more than $5-billion in duties collected from Canadian lumber companies, and a ceasefire in trade litigation.


If you thought we’ve achieved lumber peace in our time, you might be premature. We’ve now entered the final year of that truce, which is set to expire on Oct. 12, 2015. There are signs this historic trade grievance is set to return with a vengeance. U.S. housing starts are heating up. As U.S. construction grows, demand for Canadian lumber increases, something that will inevitably antagonize U.S. lumber producers who have long argued that Canada’s industry is unfairly subsidized.

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CatchMark buys Louisiana timberlands from Hancock

CatchMark buys Louisiana timberlands from Hancock | Timberland Investment | Scoop.it

CatchMark Timber Trust Inc. bought 21,300 acres of timberland in southwest Louisiana from Hancock Natural Resource Group for $38.5 million.


With this purchase, the Atlanta-based real estate investment trust has acquired this year 121,500 acres of timberland throughout the South, expanding its timberland holdings by 44 percent and increasing its projected annual harvest volume in the range of 49 percent to 55 percent, or 540,000 to 590,000 tons.

Sam Radcliffe's insight:

$1,807 per acre

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Plum Creek Timber's (PCL) CEO Rick Holley on Q3 2014 Results

Plum Creek Timber's (PCL) CEO Rick Holley on Q3 2014 Results | Timberland Investment | Scoop.it

Excerpts from Plum Creek's recent earnings call:

***
David Lambert - Senior Vice President and Chief Financial Officer
Third quarter real estate segment sales were $69 million towards the upper end of our initial expectations for the quarter. Operating income was $34 million, as Rick mentioned, we closed on approximately $25 million of HBU sales from the former MeadWestvaco lands. These particular lands captured average prices of about $2,800 per acre. These sales help boost our average HBU sales price to more than $2,400 per acre this quarter.


In general, prices per rural lands have been stable. Prices in the Lake States and Gulf South continue to be attractive and offer premiums to underlying timberland values. Despite encouraging signs of increased buyer interest this summer. Prices in certain markets like Florida, Georgia and Montana remained below the levels, where we are willing to transact. As you saw in our separate press release this afternoon, we have signed a $134 million purchase and sale agreement with the Nature Conservancy for the sale of approximately 165,000 acres of timberlands in Montana and on the east side of the Cascades in Washington state.
***
Rick Holley - Chief Executive Officer
Our consistent investment in our timberlands has increased their productivity. This combining with portfolio moves, we've made over the past decade have served the company and our shareholders well. Through these actions, we've improved the quality and productivity of our timberland portfolio. For example, our portfolio of Southern lands is more productive today, than it was 10 years ago.


Their weighted average site index and objective measure of their productivity to-date is 75, a decade ago, it was 66. In Dollar terms, the side index improvement alone is worth more than $500 per acre. During the quarter, we continue to review our capital allocation alternatives including timberland acquisitions and share repurchases. It was clearer, by repurchasing company stock, now we could effectively acquire timberlands, lands that we know very well at a significant discount to their intrinsic value.
***
Let's return to the macroeconomics environment for a moment. The pace of economic recovery, since the end of the great recession has been uneven and difficult to predict. I want to update you on our current thinking. We believe the slow pace of growth, we've experience this year is likely to continue into the coming year. There hasn't been an uptick in residential construction that we and many experts thought, would have occurred by now.
***
The current competitive timberland market provides us a potential opportunity to create real shareholder value. We've witnessed a widening divergence between prices paid for timberland and private market transactions and timberland value implied by our stock price. This disparity has created the potential to conduct a value accretive arbitrage by selling timberland at full private market price and using the proceeds to repurchase shares and retire debt. [Editor note: thanks to Jack Bridges at http://www.scoop.it/t/risk-adjusted-returns for bringing this one to our attention]
***
Collin Mings - Raymond James
Thanks for that detailed updated on your outlook. Most of my questions have been answered, but just a couple of things I wanted to address. As I relates to the kind of the appetite you're seeing out there in the timberland value, that you see that might be beneficial for you take advantage of the arbitrage between what transactions are getting done out versus your share price. Who do you see being the logical buyer of a lot of the timberlands that you might look to market? Do you see kind of resurgence in interest from TIMO, did you see other timber REIT's out there, knock on your door looking for deals or how do you think about the seller to take advantage of that, market arbitrage?


Rick Holley - Chief Executive Officer
You know, Collin I think it's both. You know clearly the institutional market continues to be an active buyer, but they're also an active seller, but a very active buyer in the marketplace. You know timber REIT's have been active as we have from time-to-time in buying assets in the market place, so you know if we take something to market, it's likely to be more of an auction type situation and we will take it to anybody that we thinks has an interest and looking to grow their portfolio. So I mean, these would be good lands, they just maybe less attractive to us and hopefully more attractive to somebody else.

Sam Radcliffe's insight:

So Plum Creek is ready to sell into what it essentially thinks is an overheated institutional market, while Potlatch recently paid richly for 200,000 acres in the South. They can't both be right can they?

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Jack D Bridges's comment, October 30, 2:33 PM
Thanks for the tip-of-the-cap, Sam. It will be interesting to follow how Plum tries to capture the spread you so astutely pointed out months before bank analysts in the space. In particular, I'm curious to see which wood-basket holdings get trimmed, and how Plum packages the lands for sale (acreage size, fiber supply agreements, etc.). We know Mr. Richard Molpus is poised to write some overly large cheks ...maybe Mr. M. will help Plum divest in the Lake States in one fell swoop?
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Molpus Woodlands Group Announces the Final Closing of Fund IV with $662.5MM in Commitments

Molpus Woodlands Group Announces the Final Closing of Fund IV with $662.5MM in Commitments | Timberland Investment | Scoop.it

The Molpus Woodlands Group, LLC (Molpus), a timberland investment management organization (TIMO), headquartered in Jackson, Mississippi, has announced today, the final closing of Molpus Woodlands Fund IV, L.P., with commitments of $662.5 million, inclusive of commitments to parallel funds, (collectively, the "Fund").  The Fund was oversubscribed and exceeded its target of $500 million in twelve months from the first close.

The Fund received support from both new and existing investors.  A diverse, international group of limited partners made commitments to the Fund, including public and private pension plans, endowments, insurance companies, family offices and high net-worth individuals.

"With the closing of the Fund, we plan to deploy this capital by acquiring and actively managing a diversified portfolio of timberland properties," said Edgar Marshall, VP Business Development for Molpus.  "We look forward to evaluating new opportunities in North America that meet the Fund's objectives."

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Record volume of Southern Pine lumber exports to China

Record volume of Southern Pine lumber exports to China | Timberland Investment | Scoop.it

Exports of Southern Pine lumber to China are soaring, thanks to promotional efforts funded by the USDA’s Market Access Program (MAP).


Southern Pine lumber exports to China are expected to reach $54 million this year, a ten-fold increase since the U.S. wood products industry began promoting this species, grown in the southeastern United States. Meanwhile, Chinese demand for pressure-treated Southern Pine lumber, a key value-added item produced in the U.S., is forecasted to reach $15 million this year, an all-time sales record and 245% above levels five years ago.


The Southern Forest Products Association (SFPA), a nonprofit trade association representing Southern Pine lumber manufacturers, leverages USDA Foreign Agricultural Service (FAS)-administered Market Access Program (MAP) funds to promote Southern Pine lumber exports. This funding allows the U.S. forest products industry to expand sales in existing markets and enter new emerging markets. Over recent years, MAP funds have helped SFPA sponsor exhibits at trade fairs and to translate technical product literature into Chinese.


As a result, interest in Southern Pine lumber has grown sharply: U.S. companies participating in MAP-sponsored events last year reported immediate sales of nearly $2.2 million and estimate another $16.5 million in sales over the coming months, thanks to contacts made at the trade events.

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RISI Highlights Trucking Shortage

RISI Highlights Trucking Shortage | Timberland Investment | Scoop.it

RISI’s September International Woodfiber Report, while reiterating ongoing concerns about the logging capacity deficit, notes that “a trucker shortage now tops US timber capacity concerns,” citing—among other sources—published FRA surveys and reports.


Nationwide, for all trucking sectors, one trucking association estimates a current shortage of 35,000 “qualified” drivers, “with that number expected to surge five-fold in ten years,” in view of high turnover rates.


For forest product haulers specifically, the raft of burdensome regulations—CSA, above all—as well as other federal regulations and state and local restrictions pinch the driver pool, as do rising insurance rates, while volatile diesel prices and new engine standards add additional operational expenses.


RISI cites several recommendations that have emerged from FRA’s engagement with the issue: work to reform CSA; improve communications between mills, loggers, and truckers; make reducing truck turnaround time a priority; and enact gross vehicle weight reform.

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Real Assets Really Deliver Superior Returns

Real Assets Really Deliver Superior Returns | Timberland Investment | Scoop.it

***
[A] survey by Greenwich Associates released earlier this month reveals some lingering investor misperceptions about listed and private real asset investments.


We were surprised by one of the survey’s findings in particular: Institutions were more likely to count illiquid, private market strategies, rather than fully liquid real assets, as real assets. In our view, however, given the fundamental characteristics and attributes that listed and private categories have in common, the extent of institutional reliance on ownership structure to drive allocation decisions doesn’t seem justified.


First and foremost, backing every investment in private and listed real assets are hard, tangible assets. At the same time, the public and private market counterparts that make up each real asset category have many economic sensitivities in common that complement each other and serve as valuable portfolio diversifiers. Investors would be better served by focusing more on the fundamentals of real assets and less on their varied ownership structures.
***
Our research examined core real asset categories in the context of three commonsense investment criteria: meaningful diversification benefits to a portfolio concentrated in stocks and bonds, the potential to deliver attractive returns over a full market cycle and the expectation of showing higher sensitivity than stocks and bonds to unexpected inflation. For the most part, real assets scored favorably on each of the above criteria, both as stand-alone allocations and — more reliably — when combined in a diversified multiasset class framework.


By comparing the long-term performance of various asset classes during periods in which stocks and bonds have underperformed, the diversification potential of real assets becomes evident.
***
In contrast, listed real asset categories — real estate, commodities, natural resource equities and infrastructure — outperformed stocks and bonds while delivering positive real returns. The major categories of private real assets — private real estate, private infrastructure, timberland and farmland — similarly showed strong performance under these conditions.
***
Because private investments are not valued daily, a common perception is that they are not particularly risky. We need only to point to the dearth of liquidity in the aftermath of the 2008–’09 financial crisis to dispel this myth. Moreover, measurement biases are a well-known problem with private market investments. Such distortions should be considered carefully when building a long-term allocation strategy.


Overall, we see far more similarities than differences in the potential for both listed and private real assets to diversify a portfolio of stocks and bonds, improve overall portfolio efficiency and boost risk-adjusted returns.

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2014 KPMG Timberland Investor Survey

2014 KPMG Timberland Investor Survey | Timberland Investment | Scoop.it

Get it here

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Canada, U.S. at loggerheads again over lumber

Canada, U.S. at loggerheads again over lumber | Timberland Investment | Scoop.it
With less than a year to go until the Canada-U.S. Softwood Lumber Agreement expires, lines are being drawn on both sides of the border over the future of lumber trade between the two countries.
Canadian producers say they want to extend the agreement, which has brought an uneasy peace to the decades-long lumber war since it was signed in 2006, but their U.S. counterparts say they won’t sign on again.
The U.S. Lumber Coalition, a lobby group representing American lumber companies and timber owners, said last week it’s not going to renew the agreement when it expires next October. It has expressed its anti-deal position to the U.S. government but it has yet to say publicly what it intends to do.
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STATE FOREST BOARD APPROVES MORE SCRUTINY OF LANDSLIDE PRONE SITES BEFORE TIMBER HARVESTS

STATE FOREST BOARD APPROVES MORE SCRUTINY OF LANDSLIDE PRONE SITES BEFORE TIMBER HARVESTS | Timberland Investment | Scoop.it
Just under seven months from when the devastating Oso mudslide in Snohomish County claimed the lives of 43 people and buried a portion of State Route 530, the main roadway to communities like Darrington, the Washington State Forest Practices Board has voted unanimously to expand the authority of the State Department of Natural Resources (DNR) to require landowners to provide additional technical information when planning timber harvests near potentially unstable slopes that could affect public safety.

The board reached the decision at its regular quarterly meeting Wednesday.
 
“Current rules prohibit timber harvests and other forest practices where they are likely to influence the further movement of an unstable slope,” said Commissioner of Public Lands Peter Goldmark. “These new procedures will apply an additional level of scrutiny, based on the best science available, to further protect the safety of the public and its natural resources.”
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CatchMark Timber Trust's (CTT) CEO Jerry Barag on Q3 2014 Results - Earnings Call Transcript

CatchMark Timber Trust's (CTT) CEO Jerry Barag on Q3 2014 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

***
Collin Mings - Raymond James
Just a couple of quick questions here on your deal pipeline I know that you guys talked a little bit about the fact that you don’t have any pending acquisitions, but a couple of months ago you characterized it as being close to $500 million, where does that stand today and just maybe talk a little bit more about the deals you’re seeing and how that pipeline is shaping up going into 2015?

Jerry Barag - President, CEO and Director
The deal pipeline as you accurately categorized, have risen to a point of about $0.5 billion and that was through the summer and most of the third quarter. It has come down quite a bit at this point and we continue to have an active pipeline but the slate of offerings of marketed deals of publically marketed deals have slowed down significantly. And we think it’s a good time for us to take a breather as well given the fast pace of what’s going on at CatchMark during 2014 so far. And so our expectation is that there will be somewhat of a low for the next quarter possibly going into the first quarter of next year and we expect the pipeline to begin picking up again shortly after the beginning of the year and based on conversations we’ve had with potential sellers that seems fairly likely to occur.

***

Collin Mings - Raymond James
And then as a bigger picture question here some of your peers have shifted more to a focus of repurchasing shares versus buying timberland and just again recognizing particularly and given kind of your strategy and how important growth capital is right now but also recognizing your stock as we sit here right now is trading at a pretty meaningful discount to NAV, how do you even think about repurchasing shares is that something that would make sense to you and the Board at this point?

Brian Davis - CFO, Assistant Secretary and Treasurer

Clearly we have discussed it with our Board and we evaluated it and I’m not going to say that there isn’t a share price that we wouldn’t interested to a share purchase program, but at our current level we’re satisfied that the path that we’re on which is to use our capital for accretive acquisitions is really the best long-term use of that capital and we think that the relative fundamentals in the market the acquisition market today and how we’ve been able to deploy the capital will, excuse kind of we will pay dividends going forward into the future and we’re focused on that long-term strategy. And so for right now you haven’t seen us announced a share repurchase program and I wouldn’t expect it to happen in the future unless we start to see some kind of weakness in our share price.

***

Collin Mings - Raymond James
And then just on, maybe about the timberland acquisition environment and the prices that we’re seeing out there right now, kind of been trading [what] sort of ... real discount rate[s] [do] you sense are being used ... across the board as people don’t have acquisitions right now?

Jerry Barag - President, CEO and Director
It seems very acquisition-by-acquisition, I think from a market standpoint my categorization would probably tell you that there is the normal market and I would tell you that we’ve operated in that and which is in
smaller transactions or moderate size transactions and real discount rates there are probably in the 5% to 5.5% range. And then for the last several years you’ve had this market where on large transactions limited
number of large transactions which probably pushed those discount rates a little bit lower just from a supply and demand standpoint there has been a fewer number of those large transactions.

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Hundreds of loggers/truckers hold protest over pay at Boise Paper Mill

Hundreds of loggers/truckers hold protest over pay at Boise Paper Mill | Timberland Investment | Scoop.it

In protest of wages, the loggers behind close to 200 trucks chose to not deliver wood to Boise Paper Mill in International Falls, Minn., on Thursday.


The protest participants reflect about 95% of the semis that deliver timber to Boise, according to "Associated Contract Loggers and Truckers of Minnesota" spokespeople.


Loggers and Truckers Executive Director Scott Dane says the protest stems from Boise's refusal to negotiate adequate adjustments in the price paid to loggers for timber.

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Rayonier's CEO Dave Nunes on Q3 2014 Results - Earnings Call Transcript

Rayonier's CEO Dave Nunes on Q3 2014 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

Some excerpts:


Dave Nunes - President and CEO

***
The key focus of the call this morning will be to discuss the results of the internal review we initiated this quarter, our first full quarter since the spin-off of the Performance Fibers business and to provide detail on the immediate actions we have taken in response to this review.
***
Specifically, the company’s Form 10-K for 2013, Rayonier had included in its merchantable timber inventory, timber in specially designated parcels located in restricted, environmentally sensitive or economically inaccessible areas, which was incorrect in consistent with our historical definition of merchantable timber inventory and a significant change from prior years.

As a result of these findings, we determined that there was a material weakness in Rayonier’s internal controls related to merchantable timber inventory as of December 31, 2013.

As outlined in today's announcement, we have accordingly revised our merchantable timber inventory estimate as of December 31, 2013, which in aggregate is approximately 10% lower from the volumes we previously disclosed. This equates to a difference of approximately 8.4 million tons in aggregate.
***
In addition, we concluded that for roughly a decade, the average rate at which Rayonier harvested timber in our Pacific Northwest timberlands exceeded the rate those timberlands could support on a long-term basis. Going forward we intent to manage our timberlands on a sustainable yield basis and let me explain what we mean by sustainable yield.
***
Clearly, this realign strategy will impact harvest levels in our Pacific Northwest timberlands. We estimate the sustainable yield of our timberlands in the Pacific Northwest to be approximately 160 million board feet, as compared to our average annual harvest over the past 10 years of 228 million board feet.
***
And lastly, with regard to the internal review, as a result of the incorrect conclusion of certain timber in our merchantable timber inventory as of year-end 2013, we concluded that we understated depletion expense and cost of goods sold for each of the first two quarters of 2014, which led to a corresponding overstatement in our income from continuing operations for the same periods.
***
Paul Quinn - RBC
Yes. Thanks very much. Just want to understand the overstatement of the merchantable timber inventories. Is that a hard and fast calculation, or is that more of a gray zone, especially around economically inaccessible areas?

Dave Nunes - President and CEO
We recognize that timber inventory by itself involves estimates every year. You are doing statistical sampling. And in this case, there were stands that were -- that had been previously excluded for the various reasons described in our release that as of the end of '13 were included in those volumes. And so we went back and took a detailed look, we went literally item-by-item. And it was more a case of excluding things that had been added into as opposed to changing the methods that we were assessing particular stands of timber if that makes sense.
***
Paul Quinn - RBC
Okay. And just a question on overall U.S. timberland market. As you guys were active in the market buying and selling, how do you characterize that market right now in terms of potential for M&A going forward?

Dave Nunes - President and CEO
Well, I think it’s -- I think it's a -- we have certainly seen a pickup in the activity of timber transactions this year. And I think that's driven by a number of factors. One, from the TIMO side where you have a large supply of lands, you are starting to see turnover in fund life as funds near the end of their term length. You're starting to see managers putting those properties up for sale and not something that we anticipate going forward will continue to represent a large component of the supply of timber.

And so we've seen that in both the South as well as in the Pacific Northwest. And I think our activity level is indicative of that, the fact that we have been able to place or either purchase or have under contract, as Ed had mentioned, $152 million of timber through the year is a significant increase where it was last year and some of that certainly is a function of the greater activity level of transactions.
***
Collin Mings - Raymond James
Okay. I apologize, one last one maybe just broadly on the acquisition environment in the U.S. South. Can you talk about I know you may now want to reference specific what Rayonier uses but just talk about maybe the range of real discount rates that you think are being utilized on most of the acquisitions out there right now?

Dave Nunes - President and CEO
Well, I think that has -- I won’t speculate on what various folks are using for the specific real discount rates. I would say that as we've seen net inflows of capital into the market. And we've seen the impending recovery in housing, I think, you are seeing some compression of real discount rates. That’s my sense in the market both in the South and the West.

Sam Radcliffe's insight:

Rayonier clearly dropped a bombshell and its share price took a 15% hit yesterday, which is continuing today. What Wall Street doesn't really understand is that the inventory write-down is probably not too far outside of the statistical confidence interval for the company-wide inventory estimate. That is, from a statistical perspective, the volume write-down is insignificant. 


All of the timber REITs (as well as private timberland investments) have a similar level of inventory risk that, again, Wall Street doesn't have the first clue about and particularly does not understand how inventory uncertainty impacts valuation.


The share price drop has brought the per acre price of Rayonier to about $1,300, substantially below the prices of large private transactions in the past couple years.

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Jack D Bridges's curator insight, November 12, 10:39 AM

http://www.bloomberg.com/news/2014-11-10/rayonier-cuts-dividend-after-find-material-weakness-.html?cmpid=yhoo


I. Big Moves Afoot


Lots to talk about here: Asset write downs, significant forward harvest reductions (why was RYN cutting so much in the first place?), and Wall St. giving investors a gift.


First, please read Sam Radcliffe's insights on these issues. According to Sam,


"What Wall Street doesn't really understand is that the inventory write-down is probably not too far outside of the statistical confidence interval for the company-wide inventory estimate. That is, from a statistical perspective, the volume write-down is insignificant. 


All of the timber REITs (as well as private timberland investments) have a similar level of inventory risk that, again, Wall Street doesn't have the first clue about and particularly does not understand how inventory uncertainty impacts valuation.


The share price drop has brought the per acre price of Rayonier to about $1,300, substantially below the prices of large private transactions in the past couple years."


Excellent points. So, regarding the asset write down, the inventory re-statement is more red herring than red flag. Got it. 


II. Keeping more on the Stump


The second issue, reduced average annual harvests (from 228 MMBF tons, to 160 MMBF) is no small matter. For owners of RYN equity, this huge reduction in harvest levels will have short term consequences (hammered stock price & lower distributable income), and long-term benefits.


Rather than blaming Dave Nunes for making a very sound, very smart decision regarding sustainability, the real issue is this: How can an average harvest level be so far out-of-whack to see a 30% reduction? True, those heavier inventory reductions paid nice dividends--and captured several years of higher log prices. But, to pull back tonnage estimates so dramatically raises some questions...


Finally, taking in all of the above and factoring in Wall St's obsession with short-term thinking, what nets out? Is Rayonier worth looking at for long-term investors?


III. Analyst Downgrades = Time to buy


For this writer, who's watched and waited while RYN spun out another business, and brought in an excellent CEO in Dave Nunes, the answer is yes. Absolutely. Even if distributions get chopped going forward for the next few years--and they likely will by 25%+--Rayonier at $26.30 presents an attractive entry point for the shares. 


http://stockcharts.com/freecharts/gallery.html?s=ryn


Is this "the" bottom for shares of RYN? Probably not. The broader equity market still is expensive (marched right back to record highs, didn't we?), and the REITs have an uncomfortably high correlation to the SPY (they are equities, after all). But, given the current assumptions about Rayonier, the current wave of selling presents an opportunity for those with patience, and an understanding of the asset class.


When time allows, the Rayonier story is worth a much closer look. Count on more coverage of it. 


JDB




Sam Radcliffe's comment, November 12, 11:33 AM
Thanks for the re-scoop Jack. Re why would you cut so much timber in the West: if you had to cut somewhere in the past ten years (to meet dividends?), Washington/Oregon would be the place to do it with access to Chinese export markets and consequential favorable pricing relative to what could be obtained in the South.

I find no compelling reason why in the short term (10-20 years) a company or property should be on a strictly even-flow harvest schedule. Long term sustainability can be achieved on a very choppy course. Furthermore, why measure sustainability with respect to a single region when your company portfolio stretches across continents? Was the "overcutting" in the West offset by "undercutting" in the South? (Would have been a smart play.)

Final rant: what does sustainable mean? The acres that Rayonier (or any TIMO) harvests are immediately regenerated into new young forests, they are not turned into parking lots or brush fields. From an investment perspective, there is nothing magical about a portfolio that is evenly distributed across all age classes. In fact such a distribution may or may not make sense even from an ecological perspective. So I sort of scratch my head when I hear Mr. Nunes talk about the sustainability goals of the company. What is to be sustained, over what time period, and for what reason?
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Weyerhaeuser's (WY) CEO Doyle Simons on Q3 2014 Results - Earnings Call Transcript

Weyerhaeuser's (WY) CEO Doyle Simons on Q3 2014 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

***

Chip A. Dillon - Vertical Research Partners, LLC
Doyle and Patty, first question is, we've seen a pretty interesting divergence of opinion in the last few weeks. And one way you guys can, of course, buy timber is just by buying your own stock, and it looks like we've seen 2 of your competitors, one step up and pay pretty close to peak prices, I guess, for southern lands, and another of your competitors decided to focus more on, not only maybe being buying back stock, but actually selling land into The Street to buy back stock. And I didn't know if you had an opinion on what you thought of land values. And I'm really thinking of the South at this point, where there seems to be a divergence of opinion, and whether we would see you step up now or hang back?

Doyle R. Simons - Chief Executive Officer, President, Director, Member of Compensation Committee and Member of Finance Committee
So Chip, I think you can look at our actions in terms of the way we think about things. Clearly, as we've already highlighted, we are in the market actively repurchasing our shares. So we are convinced that we are creating value for our shareholders for doing that. In terms of actively buying timberland, there's no doubt that there are lots of opportunities out there to do that in today's market. There's also lots of money chasing those deals. We look at those deals, each and every one of them that comes along. And as we've said before, we're going to be very disciplined in what we actually acquire. And to date, we have not made any acquisitions in the South. The type of transactions we're looking for, again, actions, are the ones that are along the lines of what we did in the Longview acquisition. And you can look at the type of returns that we are generating from that acquisition that we made last year. That's not a South-versus-West statement, Chip. We'd look for -- if the right opportunities are there, that where we think we can grow value for shareholders, we would look at making acquisitions, both in the West and in the South. But we're just going to continue to be very disciplined in the way we look at those potential acquisition opportunities going forward.

***

Paul C. Quinn - RBC Capital Markets, LLC, Research Division
Yes, just following up on, I think, Chip's question on Timberland transactions and trying to get your viewpoint about your actions. If you could give us a little bit more color on your nonstrategic Timberland sales, where are those happening? Is it more West-based than South? And in terms of transaction values, are you seeing a steady increase over the last year?


Doyle R. Simons - Chief Executive Officer, President, Director, Member of Compensation Committee and Member of Finance Committee
Yes, so we have those in both the West and the South. I'll give you an example of one that was in the third quarter. It happened to be in Oklahoma. It was a tract that was roughly 760 acres, and it sold for $14,000-plus per acre. So that's an example of what we see occurring out in the marketplace right now. So some of it's truly nonstrategic, some of it's more HBU-type land, and that's what we've seen going on, and we think will continue to be opportunities for us going forward.

***

Collin Mings - Raymond James & Associates, Inc., Research Division
Okay, Patty. And then just one last big-picture question, Doyle, and kind of a follow-up to both Chip's and Paul's questions. Just given the strong bid for timberland right now, have you thought about just becoming more aggressive as far as capital recycling within the Timberland business? More specifically, are there certain wood baskets in the U.S. South that you want to try and get more aggressive in and have a bigger presence in, and maybe exit some of the regions you are in now? Because just looking at your footprint in the region, there are some areas in states where you have a pretty large concentration, and then some other areas where we're seeing arguably a little bit better signs of a price recovery in sawlogs that you're not in. So are you looking at kind of shifting some capital around within Timberland from that perspective?


Doyle R. Simons - Chief Executive Officer, President, Director, Member of Compensation Committee and Member of Finance Committee
Yes, that's a good question. And as you, I think, know, and as we've talked about before, we're always looking to improve through trading and buying and selling the overall quality of our timberlands. And some of that may include, as you alluded to, potentially getting in markets maybe that we're not in, although we're in most of the markets currently. So those are things that we are [Audio Gap] to consider going forward. With that said, we have, as you know, a pretty good footprint in terms of -- both in the South and in the West in terms of where our strategic timberland is located. And we're convinced that through growing and harvesting trees on that strategic timberland, we're going to be able to drive value for our shareholders going forward. But we're always looking to improve the overall quality of our timberland base, and I think we've had some success in doing that historically, and we'll continue to look at opportunities to do that going forward.

Sam Radcliffe's insight:

Weyerhaeuser's take on an issue we've been spotlighting recently.

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US timberland, unusually, outperforms farmland

US timberland, unusually, outperforms farmland | Timberland Investment | Scoop.it

Timberland has, for the first time in four years, proved a better investment than farmland, as the improved world economy drives demand for wood for both construction and energy.

US timberland returned 1.47% in the July-to-September quarter, the best performance for the period in seven years, according to the National Council of Real Estate Investment Fiduciaries (Ncreif).

It also, narrowly, outstripped the 1.45% returned by farmland – a rare occurrence.

In the past decade, only on two previous occasions– the first quarter of 2007 and the second quarter of 2010 – has timberland returned more than farmland, on Ncreif data.

The outperformance in the latest quarter was driven by value appreciation, which came in at 0.74% for timberland compared with 0.48% for farmland.

On income, the other factor incorporated in the Ncreif data, farmland fared better, returning 0.97%, compared with 0.73% for forestry.

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Asset owners to push for better alignment, value

Asset owners to push for better alignment, value | Timberland Investment | Scoop.it

Asset owners, which have long been relatively passive players in a financial system dominated by banks and money managers, are poised to play a more active role in shaping that system, predicts David Neal, managing director of the A$104.5 billion (US$91.5 billion) Future Fund. That's partly a function of the “professionalization" of big funds, which increasingly bring sufficient resources to the table to determine where the “rents are being taken out of their … cash flow, who's taking what cuts, and who's adding what value in the value chain,” Melbourne-based Mr. Neal said in a recent interview. In addition, technology that's leveled the playing field between agents and investors, as well as cheaper access to data, are providing asset owners with the ability “to systematize these things in such a way that we can do a lot of this ourselves, if we want to,” he said.
***
Fees are clearly at the center of that discussion, but lowering fees isn't necessarily the end game, said Mr. Neal. While “there's too much rent being extracted,” the issue is one of alignment and value for money rather than the absolute level of fees, he said. “It's fine to pay high fees where there's high value being added,” but high fees shouldn't be seen “as a matter of course,” Mr. Neal said.


Agents such as investment banks and money managers will increasingly face pressure to change their cultures and fee structures from two sources. The first is insourcing, which has been popular with the large Canadian funds, effectively saying “we don't need to pay fees to you guys; you're not aligned with us, so we're going to do it ourselves,” said Mr. Neal.
***
The second source of pressure will come from organizations such as the Future Fund, which are required to use external managers, pushing — mandate by mandate — for better alignment.
***
Eventually, he predicted, pressure from asset owners will push those agents to adopt a culture more in line with other professions, such as accountants and lawyers, where the first order of business is making sure “your client is benefiting from what you're doing.”

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Plum Creek to sell 117,000 acres at Placid Lake, Gold Creek to Nature Conservancy

Plum Creek to sell 117,000 acres at Placid Lake, Gold Creek to Nature Conservancy | Timberland Investment | Scoop.it

Plum Creek Timber Co. has agreed to sell about 117,000 acres around Placid Lake and the Gold Creek drainage northeast of Missoula to the Nature Conservancy for $134 million.

“They are among the most ecologically diverse and intact biological systems remaining in the United States,” Plum Creek spokeswoman Kate Tate said in a written release on Monday afternoon. The deal also includes 48,000 acres on both sides of Interstate 90 between Snoqualmie Pass and Ellensburg in western Washington, in the heart of the Cascades Mountain Range.

The land will be transferred in two phases. The first should close by the fourth quarter of 2014, while the second will close in the first quarter of 2015.

The Nature Conservancy partnered with Plum Creek to transfer 310,000 acres to public and conservation ownership in the Montana Legacy Project which finished in 2010.

Sam Radcliffe's insight:

$1,145 per acre

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Potlatch (PCH) Q3 2014 Results - Earnings Call Transcript

Potlatch (PCH) Q3 2014 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

Some excerpts re PCH's recent acquisition of 201,000 acres from RMS in Alabama and Mississippi:

***

Mike Roxland - Bank of America Merrill Lynch

Just two quick questions and I'll turn it over. On average, you know, you paid over, as Mike mentioned over $1,900 an acre. Is there any HBU potential associated with some of the new acreage you acquired?

Eric Cremers - President and COO
Yeah, absolutely. Like any large land purchase, you would expect there to be some acres that have got move value as HBU or real estate play than what the timberland is going to be worth just from a timber management value alone. And we estimate roughly 15,000 acres of HBU in total will get sold off of these properties over the coming years. It's not going to happen all at once, it will take time, but yes, there's very clearly an HBU opportunity here.

***

Gail Glazerman - UBS
Hi, good afternoon and congratulations on the deal. Just maybe a few more questions on the deal and then some on the markets. Is the average age class and mix, and I appreciate you'll give us more details next quarter, I mean, can you give a sense of how that compares to your Arkansas land?

Eric Cremers - President and COO
Yeah. What I would tell you is it's a very evenly split age class spread across the spectrum of zero to traditional maximum age in the South, might be 30 or 35 years. This is pretty even-aged timberland, so it's pretty straightforward from that standpoint.


As Mike indicated, it's fairly well-stocked. It's got over 10 million tons of timber on it. And it's, relatively speaking, it's traditional southern timberland. It's about 70% fine plantation, 25% hardwood. So, nothing unusual there. And it's been very well-managed, as Mike indicated, by RMS. They've chosen genetically improved seedlings and they've had a pretty aggressive fertilization program over the years. So it's good timberland.

***

Paul Quinn - RBC Capital Markets
Yeah, thanks very much, and congratulations on the acquisition. Just a couple of questions on that. I know that RMS property comes with some timber supply obligations. Maybe you could give us some background on what those are, the length and the percentage that's covered in terms of the harvest.

Eric Cremers - President and COO
Yeah, there are some supply agreements that come with those properties. I won't get into the details of the supply agreements, but it's roughly 350,000 tons per year of pulpwood and roughly 50,000 tons per year of saw logs.

***

Yeah, for the next few years. The pulpwood contract drags out farther than the saw log contract. And all of the mills that are under these contracts, you know, we spent a lot of time looking into them, they're all first and second quartile mills, so they're very competitive mills.

Paul Quinn - RBC Capital Markets
Okay. And my understanding, that's a volume commitment but pricing is off what?

Eric Cremers - President and COO
Yeah, it's off of local market data in the particular wood basket, and it's adjusted on a quarterly basis.

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Potlatch Corporation Signs Purchase Agreement for 201,000 Acres of Alabama & Mississippi Timberlands

Potlatch Corporation Signs Purchase Agreement for 201,000 Acres of Alabama & Mississippi Timberlands | Timberland Investment | Scoop.it

Potlatch Corporation (Nasdaq:PCH) announced today its third quarter 2014 results and that it has signed a purchase agreement to acquire 201,000 acres of timberlands in Alabama and Mississippi from affiliates of Resource Management Service, LLC for $384 million. The transaction is expected to close late in the fourth quarter of 2014 and is subject to the satisfaction of customary closing conditions.


"We are pleased to add these very productive timberlands to our southern portfolio," said Michael Covey, chairman and chief executive officer of Potlatch Corporation. "The timberlands have been managed intensively and are well stocked. This transaction will expand our southern ownership by almost 50% into two new states contiguous to our existing Arkansas holdings and will increase our total acreage under management to nearly 1.6 million acres," concluded Mr. Covey.

Sam Radcliffe's insight:

$1,910 per acre, about $200/acre more than Plum Creek paid  a year ago for 500,000 acres from MeadWestvaco

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