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Brookfield Infrastructure Reports Year-End 2012 Results; timber income down; $85 million deal completed

Brookfield Infrastructure Reports Year-End 2012 Results; timber income down; $85 million deal completed | Timberland Investment | Scoop.it

Brookfield Infrastructure posted solid results for the year ended December 31, 2012 with funds from operations ("FFO") totalling $462 million ($2.41 per unit) compared to FFO of $392 million ($2.41 per unit) in 2011. This 18% increase in year-over-year FFO was primarily driven by significant expansion projects that were successfully commissioned during the year and to a lesser extent, new investments. FFO per unit of $2.41 was flat compared to the prior year as investments made with proceeds from recent equity offerings did not fully contribute to cash flows during the year. Brookfield Infrastructure's payout ratio was 62%, which is well within its target range of 60%-70%, and it earned a solid AFFO yield of 10%.

***

Brookfield Infrastructure's timber platform reported FFO of $22 million in 2012, compared to $33 million in the prior year. Results reflect soft demand from Asia early in the year, which caused average realized prices to decline by more than 7%, combined with operational restrictions due to a prolonged fire season that impacted its harvest in the second half of the year. For the year, exports represented 41% of total log sales, which was down from 47% in the prior year as demand in the domestic markets strengthened with early stages of recovery in the U.S. housing market.

***

In December, Brookfield Infrastructure completed the sale of a 12.5% interest in its Canadian timberlands to an institutional investor for approximately $85 million, which is equivalent to its IFRS book value.

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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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MassPRIM returns 1.1% for calendar year; timber return 0%

MassPRIM returns 1.1% for calendar year; timber return 0% | Timberland Investment | Scoop.it

Massachusetts Pension Reserves Investment Management Board, Boston, posted a 1.1% investment gain, 133 basis points above its benchmark, for the year ended Dec. 31, said the board's expanded agenda for its meeting Tuesday.

Broken down by asset class, private equity posted a one year return of 16.5%; real estate, 11.9%; timber, zero. Meanwhile, global equities returned -1.6% for the year; hedge funds net of fees, -1.8%; core fixed income, -2%; and value-added fixed income, -4.1%.

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Weyerhaeuser (WY) Doyle R. Simons on Q4 2015 Results - Earnings Call Transcript

Weyerhaeuser (WY) Doyle R. Simons on Q4 2015 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

Collin P. Mings - Raymond James & Associates, Inc.

Okay. Then, moving to Timberlands, just maybe as we enter the year here, just update us on your latest thinking as it relates to the potential improvement in sawlog prices in the U.S. South this year? What are you thinking about for 2016 and then, just more broadly continue to extend, just how you're thinking about the price recovery in the South?

Doyle R. Simons - President, Chief Executive Officer & Director

Yes. So, if you think about Southern log prices, Collin, our prices were up a couple of percent in 2015 versus 2014, and we would anticipate a similar increase in 2016 versus 2015.

From a broader picture, if U.S. housing starts continue to improve, demand for lumber will rise. And we expect the tension and rising prices across the Southern log markets, we are confident that's going to continue to pay out.


And frankly, the additional mills, whether it be the Canadians coming down and investing in mills and increasing the productivity of those mills or Klausner adding the three mills that they're adding, that's all positive from a demand standpoint for Southern sawlogs as well.


So we are – we remain confident that we're going to reach that inflection point and see Southern sawlog prices begin to rise on a more aggressive basis than the 2% that we've seen over the last couple of years.
***
Mark William Wilde - BMO Capital Markets (United States)

And, Doyle, just to follow on this, we all, I think, buy into supply and demand. But on the supply side, it seems like for many years here because of the weakness in housing, we've really been under-harvesting the growth rates down in the South. So we've got some accumulated inventory, and I just wonder how that accumulated inventory affects the rebound in pricing.

Doyle R. Simons - President, Chief Executive Officer & Director

Yeah, Mark, that's a really good point and there's no doubt that there is some accumulated inventory as housing has improved over the last couple of years, we have started to work through some of that accumulated inventory, but there's still some out there. So that's why I'll say there's still a little bit of time, if housing continues, to improve to work through accumulated inventory. But once we do that, you can hit that inflection point of supply and demand, and that's where you start to see the significant increase in pricing.
***
Mark A. Weintraub - The Buckingham Research Group, Inc.

Okay. And then, maybe lastly, kind of following on Mark Wilde's question a little bit. One of the components of the bullish lumber, as well as log story has been the expected reduction in supply coming from British Columbia related to the beetle, et cetera. It doesn't seem to have happened yet and lots of reasons maybe that (51:48). Are you still of that view that we will see a reduction and any color you can provide on how that might play into the market?

Doyle R. Simons - President, Chief Executive Officer & Director

Yes, Mark. We are absolutely confident that that's going to happen and all you have to do is spend some time in that area and see the devastation that the pine beetle has, in fact, caused. You're starting to see some announcement as you know of some lumber mill closures because of that. I think what's happened is, part of that has just been distorted by the fact that there's been less demand from China. So, some of the impact from lumber that would normally would get on to China has come to the U.S. and that has temporarily offset the pine beetle situation. But if you just look at what the allowable cuts are, if you look at just the overall fiber situation in Canada, we are confident that the pine beetle scenario is going to play out.

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Acadian Timber considers sale of its assets in N.B., Maine or other alternatives

Acadian Timber considers sale of its assets in N.B., Maine or other alternatives | Timberland Investment | Scoop.it
The second-largest timberland operator in New Brunswick and Maine says it's looking for a buyer for some or all of its assets.


Acadian Timber Corp. (TSX:ADN) says its board of directors has begun a review of strategic alternatives that could include a sale, merger or other transaction.


The company, which has its head office in Vancouver, manages more than 950,000 hectares in total — including more than 500,000 hectares of Crown land in New Brunswick.


It also owns more than 400,000 hectares of freehold lands in New Brunswick and Maine and a forest nursery in Second Falls, N.B.


Acadian says Scotiabank has been hired to advise Acadian's board, but noted that there's no guarantee that the review will result in a transaction.

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France aims high with first-ever investor climate-reporting law

France aims high with first-ever investor climate-reporting law | Timberland Investment | Scoop.it
In August last year, France became the first country to introduce mandatory climate change-related reporting for institutional investors.

The relevant law has been hailed as “groundbreaking”, with potentially far-reaching implications.

Many investors, in the meantime, have their work cut out for them.

The reporting obligations are set out under Article 173 of France’s law on “energy transition for green growth”, with an implementing decree setting out the requirements in greater detail.

Effective since the beginning of January, the decree applies to a wide range of investors, including asset managers, insurance companies, Caisse des Dépôts et Consignations and pension and social security funds.

They are being required to report not only on how they integrate environmental, social and governance (ESG) factors in general into their investment policies – and, where applicable, risk management – but also specifically on how climate change considerations are incorporated.
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Potlatch Corporation's (PCH) CEO Mike Covey on Q4 2015 Results - Earnings Call Transcript

Potlatch Corporation's (PCH) CEO Mike Covey on Q4 2015 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

Mike Covey, Chairman and Chief Executive Officer
Shifting to a strategy that we discussed on last quarter’s earnings call, we are actively pursuing opportunities to take advantage of the arbitraged between high private market timberland values and this deep discount in which are stock currently trades in the public equity market. Hence we have shifted from being a buyer of timberland to a seller with intend of using sale proceeds before successful to repurchase our share and reduce debt. 
***
Collin Mings of Raymond James

First question from me just on the land sales front, can you discuss if there are any specific packages you are planning to market or actively marketing right now?

Mike Covey

Okay, well, we’ve been in the process of evaluating land throughout the company’s portfolio both in the south and then the west that would be suitable and attractive to institutional investors. We still think there is a lot of institutional pension fund few more money on the side lines. 
***
Collin Mings

Okay. And then I think you kind of addressed this in the remarks but just to clarify, there is not really one region or you might have a bias of completing a transaction whether it be Idaho or the U.S. South as wherever you are able to maybe generate interest that at a price you think is fair?

Mike Covey

I think that’s a good summary certainly in the U.S. South, you know there is strong institutional interest in timberland there, you know it values that I think continued to be quite strong the most recent transactions that Plum Creek executed with Twin Creek’s joint venture. Last year you know point that timberland values for high quality timberlands over 2000 an acre certainly lesser stock lands would fetch a bit less. And in Idaho although it’s not as a dynamic of a market, we certain feel that our timberland there is attractive and highly valued. So we haven’t constrained to one area.
***
Chip Dillon of Vertical Research

Yes, hi, good morning and afternoon. When you look at the guidance you gave for the log pricing in the - for the year succeed in the south you said you thought it would be roughly flat, is that a full year sort of look because I know it seems like prices where their weakest point in the fourth quarter, I didn’t know if you thought that they would stay at the fourth quarter level or maybe recover to the year and there might be a mix issue in there as well?

Eric Cremers, President and Chief Operating Officer

Yeah, Chip, it’s Eric. Yeah generally they are going to be flat year-over-year. There is a flat bit of seasonality in the south particularly as it relates to mix impacting the third quarter. So a lot of a hardwood stands, you really can’t access until you get to drier weather and that tends to occur in the third quarter. So you’ll see our prices pickup as hardwood logs sawlog sell for 70 to 80 bucks a ton compared to pine at 40 bucks. So you can see meaningful changes in our reported prices just from that mix impact. But generally pine prices are flat in the south.
***
Mark Weintraub of Buckingham Research

Thank you. I was hoping if possible to get a little bit more color on what you are seeing in the timberlands market, I should say little sensitive given that you are potentially going that to market yourselves with some acreage. But just generally speaking, did you sometime seem to be in a whole lot of liquidity of late when it comes to the types of private transactions that we have been seeing previously, but maybe that’s not right, so if there is any color you could provide that would be helpful?

Mike Covey

Well Mark, the higher profile transactions that have occurred have been for what I would think of is not typical timberland assets the fully transaction, its North Florida was not a classic timberland package, the Campbell sale that happened in Louisiana. Last fall had a lot of impairments around it with leased acres, that wasn’t really a typical classic one. I think the - you know the best examples of kind of clean transactions have been the Plum Creek, Twin Creek’s joint venture announcement that was you know the fall of 2014. I think that was probably the cleanest timberland deal that was authorized what hasn’t closed yet, those prices were around $2,100 an acre. But there’s been several smaller transactions that I think have been indicative.

But I’d agree with you it’s not been as robust as maybe it was a couple of years ago, but I think having said that our discussions with teams in particular I think there is still fair amount of money. It’s been allocated to the asset class and people are looking for good assets to purchase.

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Northeast Pulpwood Market Creates Challenges, Uncertainty for Region

Northeast Pulpwood Market Creates Challenges, Uncertainty for Region | Timberland Investment | Scoop.it

In the thirteen-month period from November 2014 through December 2015, Maine lost markets for about 2 million green tons of pulpwood and mill chips. In a state where the total pulpwood use was 8.1 million green tons in 2014, that’s a big deal. With mill closures in Bucksport, Old Town and a capacity reduction at Verso’s Androscoggin mill in Jay, the state and the Northeast region have suffered real market losses. It was only a matter of time before these losses would affect fiber pricing, and it appears that time has finally come.


The biggest impact, by far, has been seen in softwood prices. Verso’s shuttered Bucksport mill was a major softwood market, Old Town used some softwood (and had ambitious plans to use a lot more) and recent capacity reductions at Verso’s Androscoggin mill cut softwood demand as well. The shrinking market has led to an over-supply of softwood, which is reflected in current pricing. Landowners and loggers in the region with large volumes of spruce/fir, white pine and hemlock pulpwood have lost both markets (permanently), and seen a significant reduction in price.


Hardwood has also taken a price hit, partly due to market dynamics. The now-idle Old Town mill primarily used hardwood, but it didn’t use nearly as much as competing (and remaining) mills in Woodland, Skowhegan, Rumford and Jay. The loss of Old Town left a relatively small hole in the market, which has resulted in modest price reductions for hardwood.

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Two Northern California fires cause at least $1 billion in insured losses

Two Northern California fires cause at least $1 billion in insured losses | Timberland Investment | Scoop.it

Two deadly Northern California wildfires that scorched more than 140,000 acres, ravaged homes and devoured firefighting resources in September have amounted to at least $1 billion in insured losses so far, according to a state insurance department report.


The Valley and Butte fires took a devastating toll on the region as flames chewed through homes, farms, vehicles and personal belongings, and eventually gave rise to a large number of claims, the California Department of Insurance reported. The preliminary $1 billion loss estimate did not include damage to roads and utilities, so the total figure for insured losses is likely to grow.
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In Lake, Napa and Sonoma counties, the Valley fire consumed 1,958 structures, resulting in $700 million in insured losses. Because the blaze destroyed many homes and buildings, it became the third most damaging wildfire in California’s history.


Four people were killed during the 76,067-acre blaze, which started Sept. 12 in southern Lake County and lasted a little more than a month.


The 70,868-acre Butte fire ran through grasslands and timber in California’s Gold Country – Amador and Calaveras counties. The blaze is the seventh most destructive wildfire in the state’s history, destroying 818 structures and resulting in $300 million in insured losses. Two deaths were attributed to the Butte fire.

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Import Value of Logs and Lumber to China Falls 25% in 12 Months

Import Value of Logs and Lumber to China Falls 25% in 12  Months | Timberland Investment | Scoop.it
Seattle, USA. China imported softwood logs and lumber valued at 498 million dollars during the month of November in 2015. This was 26% lower than the same month in 2014 and the third lowest monthly level in three years. As recently as April 2014, the import value was at an all-time high of almost 900 million dollars, reports the Wood Resource Quarterly (WRQ).


The reduction in house construction in China has resulted in a substantial decline in the importation of forest products during 2015, reports the Wood Resource Quarterly. The total value of imported softwood logs and lumber has fallen 25% and import prices have declined almost 30% that past 12 months.


The reduced demand for both overseas and domestic wood products in 2015 has been a consequence of the slowdown in the Chinese economy, which has not only reduced construction activities but also consumer spending on home remodeling and furniture.


Not only have log and lumber imports plummeted the past year, but so has the price paid for imported products. In November 2015, the average costs of imported softwood logs were down 30% from their peak in April of 2014 to reach their lowest level since early 2009. The biggest price drops during 2015 were for logs from New Zealand, Australia and Russia. According to the WRQ (woodprices.com), domestic log prices have fallen much less than import prices during 2015, with Chinese fir sawlog prices declining less than six percent from the 1Q/15 to the 4Q/15.

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Forest Industry Performance: December 2015

Forest Industry Performance: December 2015 | Timberland Investment | Scoop.it

Forest industry performance in November and December was reported by both the US government and the Institute for Supply Management. Total industrial production (IP) tumbled 0.6% in November (-1.2% YoY). It was the ninth month in 2015 with MoM IP declines, as well as the biggest MoM drop since March 2012. Historically, YoY declines in IP have often been associated with recessions.


Manufacturing output was unchanged in November, as gains in nondurable goods offset decreases in durable goods and other manufacturing. Wood Products output was unchanged (+1.4% YoY) while Paper rose by 0.2% (-1.5% YoY).


Capacity utilization (CU) for all industries retreated 0.7% (-2.6% YoY) to 77.0%. Manufacturing CU edged down to 76.2%, a rate 2.3 percentage points below its long-run average.

  • Wood Products dipped 0.2% (-1.0% YoY) to 70.8%
  • Paper advanced 0.2% (-1.1% YoY) to 82.6%

Capacity at the all-industries and manufacturing levels moved higher:

  • All-industries: +0.1% (+1.5% YoY) to 138.4% of 2012 output
  • Manufacturing: +0.1% (+1.3% YoY) to 139.1%
  • Wood Products: +0.2% (+2.5% YoY) to 160.4%
  • Paper was unchanged (-0.3% YoY) at 116.9%
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Webinar: Timber Tax Filing for the 2015 Tax Year

Webinar: Timber Tax Filing for the 2015 Tax Year | Timberland Investment | Scoop.it
Timber tax laws have changed due to the new tax law that was passed by Congress in December 2015. Brand new tax provisions on capital gains for timber corporations will affect timber businesses and owners. Business deductions on equipment costs have been increased significantly. Special charitable donation deduction on qualified conservation easement was extended.

To help the 2015 tax return filing, this one-hour webinar will cover the rules for timber tax reporting, including the latest law changes.
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Linn County plans $1.4 billion class-action lawsuit over state forest management

Linn County plans $1.4 billion class-action lawsuit over state forest management | Timberland Investment | Scoop.it
A county that claims the state mismanaged Oregon Forest Trust Lands and cost it and others millions of dollars in lost revenue for schools and public safety is threatening to file a class-action lawsuit seeking $1.4 billion.

Linn County notified the governor and state forester of its plans to sue on behalf of 14 other counties over breach of contract. It says Oregon has failed to live up to decades-old contracts that allow counties to receive payments based on annual timber harvests on state-managed lands.

The payments go toward local law enforcement, schools and other special county districts to help cover basic services.

“This breach of contract has had devastating effects on local communities that have seen both poverty and unemployment rates skyrocket in the last two decades as a result of current practices,” Linn County Commissioner Roger Nyquist said at a news conference.

Josh Laughlin, executive director of Cascadia Wildlands in Eugene, said the county’s claims lack merit and called the arrangement of clear-cutting forests to fund essential services archaic.

“It appears the counties missed the memo that the state is not required to log to infinity in these state lands,” Laughlin said. “They also have a duty to protect clean water, fish and wildlife habitat, recreational opportunities and other values held closely by Oregonians.”

The state manages about 654,000 acres of Forest Trust Lands it purchased from the counties several decades ago. Linn County officials say a forest management plan adopted in 2001 emphasized improvements to fish and wildlife habitat and other conservation measures, which reduced logging and slashed timber revenue by half.

“We believe over time a delta has developed: the difference between what these lands could produce ... versus the production that is occurring,” said John DiLorenzo, an attorney at the Portland law firm Davis Wright Tremaine LLP who is representing Linn County.
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How Did Timber REITs Perform in 2015? What Should Investors Watch in 2016? - Forisk

How Did Timber REITs Perform in 2015? What Should Investors Watch in 2016? - Forisk | Timberland Investment | Scoop.it
The timber REIT sector tumbled in 2015. The Forisk Timber REIT (FTR) Index fell -9.3% for the year, while the S&P 500 essentially flatlined at -0.7% over the same period. Of the five public timber REIT equities – CatchMark Timber (CTT); Plum Creek (PCL); Potlatch (PCH); Rayonier (RYN); and Weyerhaeuser (WY) – only Plum Creek generated positive returns for 2015 (Figure). And in the case of Plum Creek, its performance outpaced the sector only since its announced merger with Weyerhaeuser in early November.
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Forisk Forecast: US Housing Starts Outlook, Q1 2016 Update

Forisk Forecast: US Housing Starts Outlook, Q1 2016 Update | Timberland Investment | Scoop.it
Overall, Forisk projects 2016 housing starts of 1.26 million, up 13.7% from 2015. Forisk’s 2016 Base Case peaks at 1.58 million housing starts in 2020 before returning to a long-term trend approaching 1.52 million. For comparison, our October 2015 Base Case peaked at 1.56 million housing starts in 2019.
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Molpus Woodlands Group Announces the Acquisition of 87,225 Acres of Timberland in Northern Florida and Southern Georgia

Molpus Woodlands Group Announces the Acquisition of 87,225 Acres of Timberland in Northern Florida and Southern Georgia | Timberland Investment | Scoop.it

The Molpus Woodlands Group, LLC (Molpus), a timberland investment management organization headquartered in Jackson, Mississippi, announced today, on behalf of clients, the successful purchase of approximately 87,225 acres of timberland in northern Florida and southern Georgia from affiliates of CLAW Forestry Services, LLC.

The properties are located within three counties in northern Florida and seven counties in southern Georgia between the cities of Jacksonville and Tallahassee in Florida and Valdosta in Georgia—one of the most attractive timberland investment regions of the county due to its highly productive soils, excellent growing climate, and well developed timber markets. These properties have been in timber production for decades, with historical management by Packaging Corporation of American and International Paper Company. Molpus has established an office in Jasper, Florida, to oversee management.

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Growth rates of alt investments fall off for year

Growth rates of alt investments fall off for year | Timberland Investment | Scoop.it

Alternative investment asset growth slowed, stalled and in some asset classes reversed in the year ended Sept. 30, Pensions & Investments' annual survey of the largest U.S. retirement plans shows.

Infrastructure had by far the most growth among alternative investment asset classes in the 12 months.
***
The next fastest growing alternative asset classes were mezzanine debt, up 10% to $6.6 billion; distressed debt, up 7.3% to $26.5 billion; and real estate equity, up 6% to $300.7 billion.


The worst showing among alternative investment asset classes were energy and commodities. Energy assets dropped 17.9% to $14.2 billion after growing 45.4% in the year-earlier survey. Commodities were down 16.9% to $21.2 billion; commodities had risen 9.9% in the year ended Sept. 30, 2014.


Real estate investment trust assets were basically flat, up 0.4%, after a double-digit increase in the year-earlier survey.

Asset class returns had no part in the relatively low growth of real estate equity and REITs. For the 12 months ended Sept. 30, the NCREIF Property index was up 13.48% and the NCREIF Open-end Diversified Core Equity index return was 14.93%, net of fees. The FTSE NAREIT All REITs index was up 7.35% during the survey period, and the FTSE NAREIT All Equity REITs index was up 7.84%.


The same was true of timber assets, which fell 3.35% to $10.4 billion. By comparison, NCREIF's Timberland Property index returned 9.26% for the year ended Sept. 30.

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Dividend Yields and Timberland Discount Rates

Dividend Yields and Timberland Discount Rates | Timberland Investment | Scoop.it

Timberland investors often use timber REIT dividend yields and U.S. Treasuries as inputs, proxies or reference points for discount rates applied to valuation models. In the case of Treasuries, 2016 opened with the 10-Year and 30-Year at 2.24% and 2.98%. Over the past three weeks, equity markets continued to play pickle with timber REIT shares (and, as a result, yields) along with the S&P 500.
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How do timber REIT dividend yields compare to private timberland discount rates of 5.5 to 6.5%? Each public timber REIT pays quarterly cash dividends. On an annualized per-share basis, these total:

  • CatchMark (CTT): $0.50
  • Plum Creek (PCL): $1.76
  • Potlatch (PCL): $1.50
  • Rayonier (RYN): $1.00
  • Weyerhaeuser (WY): $1.24

***
Current timber REIT yields now “approach” discount rates commonly applied to recent timberland transactions. While timber REIT yields averaged 4.34% at the close of 2015, the recent declines in equity prices pushed average yields up to 5.13% on January 20th (with Potlatch nearly high-fiving 6%) and closed at 5.00% on January 22nd.

Sam Radcliffe's insight:

FORISK's notion of "private timberland discount rates of 5.5 to 6.5%" I believe must come from discount rate surveys conducted by various consultants and appraisers. I prefer discount rates extrapolated from actual transactions, which are usually significantly lower than what surveys indicate. 


The REIT yields cited in this article are based on dividends as a percent of share price, which is the correct way to view yield from the shareholder's perspective. Another perspective would be the yield on net asset value. Because all of the REIT's currently trade at a discount to their net asset values, the yield or discount rate on NAV will be even lower than their yield on share price.


Both of these factors -- the relatively high yield on share price and the gap between market capitalization and net asset value -- go a long way toward explaining the rationale for the Weyerhaeuser/Plum Creek deal, the share buyback programs of the timber REIT's, and analysts' banter on Potlatch and Rayonier as takeover targets.

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TIAA-CREF Reveals Reorganization

TIAA-CREF Reveals Reorganization | Timberland Investment | Scoop.it
TIAA-CREF plans to combine its real assets units into a single business line, the asset management giant announced Tuesday. 

The new standalone division will wrap in many of TIAA-CREF’s largest units, including global real estate, agriculture, timber, infrastructure, and energy. In addition, the real assets group is to take over subsidiaries TH Real Estate, Westchester Group Investment Management, GreenWood Resources, and Churchill Asset Management.

All told, TIAA-CREF expected the real assets business to comprise roughly 900 staff members in 16 countries. The New York-based firm managed $100 billion in real assets as of December 31, 2015. 

Private Markets head Joes Minaya is to take over the new division as president, the company said, and supported by current private markets CIO Heather Davis. 

TIAA-CREF scooped a COO for the unit from Nuveen Investments: John MacCarthy spent a decade there as chief legal officer. 
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Low loonie expected to bring out U.S. protectionist forces: forestry firm Tembec 

Low loonie expected to bring out U.S. protectionist forces: forestry firm Tembec  | Timberland Investment | Scoop.it
The boost Canadian lumber exports are getting from the falling loonie is certain to bring out protectionist forces in the U.S. lumber lobby, says the CEO of Quebec-based forestry company Tembec.


“I think that they’re watching the Canadian dollar drop, particularly in lumber, and they’re saying, ‘This isn’t fair,'” CEO James Lopez said Thursday before a company meeting with shareholders.
While groups like the U.S. Lumber Coalition didn’t complain about the Canadian dollar when it was above parity, Lopez suspects they will use the loonie’s slump to argue that American producers are now at a competitive disadvantage, particularly since the Canada-U.S. softwood lumber agreement expired in October.

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The business of trees

The business of trees | Timberland Investment | Scoop.it
Timberland assets can provide good returns driven by biological growth. There is little or no storage cost and spoilage because trees can remain on the stump and continue to gain value. Timberland investments have historically low volatility and low correlation to traditional asset classes. It has also traditionally performed well in inflationary environments.

While it is difficult to ascertain exactly how much money investors have placed in timber, it’s estimated that over the past five years, investments in real assets, which includes timberland, have increased 325%1.

Although commercial timberland plantations can be found in all parts of the world, investing in these assets mainly arose in the US because of the abundant and diverse types of timber that are naturally present in the country. The private ownership of land also made it fairly straightforward to buy and sell property.

As the US market has matured over the past 20 years, institutional investors are increasingly turning their attention to timberland opportunities outside the US. In particular, timberland plantations in regions with faster growth rates such as the Southern Hemisphere, have become more attractive.

There are two core attributes that distinguish international timber assets from those in the US. First is land tenure. There is often a greater lack of clarity around ownership with international timber, which increases the latent illiquidity of the asset. Nearly all US timberland assets are held in simple ownership fees. In other words, there is an undivided ownership of the land with attached rights and responsibilities.

The second is a bit more obvious, and that is tree species. In the US, practically all of the major commercial timberlands are made up of tree species that are native to North America. The demand for each tree species can vary, and their biological growth is a critical determinant of how much a particular timberland asset returns.

Although timberland investing has gained traction, it’s not the easiest asset to put money into. In some parts of the world, native forests are not available for investment. Instead, timberland investors tend to acquire plantations that are stocked with timber introduced to that geography.

The structure of timber markets is another challenge because it varies in almost every country. Some are characterised by a few dominant players that distort prices to benefit their own production. Some have healthy levels of competition but rely on external demand from other countries, which introduces exchange rate risk. And some others don’t have any transparency on pricing at all.
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Verso Paper aims to reorganize ‘in a short time frame’ after bankruptcy filing

Verso Paper aims to reorganize ‘in a short time frame’ after bankruptcy filing | Timberland Investment | Scoop.it

Once the primary supplier of glossy paper to the likes of Time magazine, Verso Paper Corp. filed for bankruptcy reorganization Tuesday, seeking protection from creditors for a business that has been clobbered by market shifts and changing consumer habits.
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In a written statement, Verso said the filing is intended to allow it to restructure its debt, and the bankruptcy will “have virtually no impact on the day-to-day operations of the company.” President and CEO David J. Paterson said the decision was difficult but made easier by strong support from creditors.
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Like many paper companies, Verso Paper faces formidable challenges, both within its own corporate structure and the global industry as a whole. To stem the loss of revenue, it sold off its unprofitable Bucksport mill in 2014, eliminating 500 jobs. The move was part of a complicated $1.4 billion deal that involved the acquisition and then sale of the former NewPage mill in Rumford in January of last year. That mill is now owned by Canada-based Catalyst Paper.
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Verso seeks creditor approval for a bankruptcy plan that would provide its creditors with equity shares in lieu of repaying the company’s debt, according to a release from the company. Verso is an affiliate of Apollo Global Management, a private equity firm based in New York City that purchased the papermaker from Memphis-based International Paper in 2006 for $1.4 billion.


Maine pulp and paper industry analyst Lloyd Irland said it’s unlikely that the creditors would be interested in being repaid with shares of Verso, a “penny stock” that no longer is traded on a major exchange.
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Verso’s woes are reflected in other paper industry transitions. Unable to recover from a devastating boiler explosion in November 2013, the bankrupt Lincoln Paper and Tissue mill was purchased after a November 2015 auction. Wisconsin-based Expera Specialty Solutions intends to shutter its Old Town facility, once a major producer of pulp for mills across the country. Demolition of the Bucksport mill for scrap started in December.


The industry, which employed 18,000 in Maine at its peak in the 1960s, now employs just over 6,000.

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Record Precipitation in 4Q2015 has Little Effect on US South Stumpage Prices

Record Precipitation in 4Q2015 has Little Effect on US South Stumpage Prices | Timberland Investment | Scoop.it

The total amount of precipitation the US South received in the fourth quarter of 2015 was a record high, making it one of the wettest periods of the last 15 years. While certain geographic areas are still recovering from the deluge and the accompanying flood damage, the unusually wet season did not dampen regional stumpage prices and timber markets.

According to the National Oceanic and Atmospheric Administration (NOAA), a total of 185 inches of precipitation fell across the US South in 4Q2015 compared to an average of 109 inches that fell in the fourth quarters from the previous 14 years. This represents a 70 percent increase. It also marks a 3 percent increase over the old 15-year record of 180 inches in 4Q2009.

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While prices have increased marginally and some emergency spot purchases have been observed, overall averages remain lower than averages observed earlier in 1Q2015 and for some products, increases are lower than 2014’s seasonal increase. One would expect that record precipitation totals and the end of the calendar year would have converged to create a substantial bump in regional stumpage prices, but they did not. So, what exactly is going on within this market?

While our 4Q2015 delivered data is still being collected, evidence suggests that many mills established deep inventories during 3Q2015 and that demand softened during 4Q. As a result, it is likely that mills held delivered prices in check (as much as possible), thereby forcing the price pressure down the supply chain. The restricted supply is likely to have had more of an immediate effect on wood suppliers’ freight cost and margins, as they were forced to increase haul distances to secure supply.


As the remaining data arrives and is finalized, we will discover the answers. But if these current wet weather conditions persist, we will see that effect become much more pronounced on the stump in 1Q2016. Expect stumpage prices to increase sharply as mill inventories dwindle and delivered prices are forced upward, giving suppliers greater flexibility for better stumpage price offerings.

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Timber Investments in Your Self-Directed Retirement Plan

Timber options are one of the many alternative investments allowed in a self-directed IRA.
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Maine company hoping to change how we clean our homes

Maine company hoping to change how we clean our homes | Timberland Investment | Scoop.it

A Maine company is offering an alternative to the rolls and rolls of paper towels people go through at home. GLOBEco Maine has created a product called DuraFresh. The company claims that one DuraFresh cloth equals 20 rolls of paper towels.

"We're taking a paper towel and reconstructing it, and we're going to make it a smarter way," Phil Pastore, of GLOBEco Maine, said.

Inside a former credit union on Main Street in Dover-Foxcroft, workers stitch together what appear to be swatches of cotton cloth. However, the cloth is a bio fiber derived from wood pulp.

"This is about as environmentally responsible of a product as you will find in terms of sustainability -- made of trees, the most abundant, fastest-growing resource on Earth," Mark Snyder, of GLOBEco Maine said.

Snyder and Pastore founded GLOBEco Maine last summer, and DuraFresh is already being sold in hundreds of stores.

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Molpus Woodlands Group Announces the Purchase of 26,786 acres of Timberland in northern Idaho and eastern Washington

Molpus Woodlands Group Announces the Purchase of 26,786 acres of Timberland in northern Idaho and eastern Washington | Timberland Investment | Scoop.it
The Molpus Woodlands Group, LLC (Molpus), a timberland investment management organization headquartered in Jackson, Mississippi, announced today, on behalf of a client, the successful purchase of approximately 26,786 acres of timberland in northern Idaho and eastern Washington.

The property is located within six counties in northern Idaho and three counties in eastern Washington, in the vicinity of three fast growing population centers – Spokane, Washington, Coeur d’Alene, Idaho and Sandpoint, Idaho.  Located in the timber-rich region known as the Inland West, the property is surrounded by well-developed and well-capitalized sawmill markets.  It has been managed on a sustainable basis for decades.  The property is primarily dominated by conifer sawtimber, with a wide range of commercial species – Douglas-fir, western larch, grand fir, alpine fir, western hemlock, western red cedar and ponderosa pine.  Molpus currently maintains an office in Coeur d’Alene, Idaho that will assume the responsibilities associated with this new acquisition.  The Idaho team will now be managing approximately 163,000 acres. 
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Global Warming Did Not Make 2015 The Worst Year Ever For Wildfires

Global Warming Did Not Make 2015 The Worst Year Ever For Wildfires | Timberland Investment | Scoop.it

Liberal news outlets are reporting 2015 is a record year for wildfires in the U.S. and that that record was likely driven by man-made global warming.

That’s completely false.


The U.S. Forest Service reports fires burned 10.1 million acres of private, state and federal lands in 2015 — a record number of acres, according to the agency. Forest Service officials told liberal media outlets they had to borrow money three times to put out fires, and more than half the agency’s budget went to firefighting in 2015.


But 10.1 million acres is not a record amount for wildfires. In fact, it’s not even close to the worst wildfire season in U.S. history. The number of acres burned last year is only about one-fifth the acreage burned in 1930 and 1931 when more than 50 million acres burned.


There’s even evidence wildfires burned upwards of 140 million acres in pre-industrial times. Federal data shows effective management strategies like prescribed burns can reduce wildfire risks and improve land health.


What’s most interesting is the years with the worst wildfires occurred when carbon dioxide emissions were only a quarter of what they are today. This is important because scientists claim CO2 and other greenhouse gases are heating up the planet and driving more wildfires.


Data going back nearly 90 years seems to indicate a negative correlation between CO2 and wildfires, but that changes when data is “cherry-picked” to only include data going back to the 1960s. A correlation between rising CO2 and wildfires magically appears when data only starts in the 60s.

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