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P&C Quarterly Newsletter

Sam Radcliffe's insight:

In addition to an excellent overview of conditions in our operating regions, see the last section for current perspectives on the institutional timberland investment world.

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Timber Inventory Uncertainty: Impact on Property Valuation

Sam Radcliffe's insight:

The timber inventory piece appears toward the end of our quarterly newsletter, but check out the rest of it as well!

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Jack D Bridges's curator insight, May 1, 2014 10:28 AM

Even in long-cycle businesses, it pays to mind the details. While I make a habit out of reading P&C quarterly newsletters, for those who don't need to know the subtle variances of hardwood versus softwood pulp pricing in the NorthEast region, skip to page 7, please.

 

There you'll find Sam Radcliffe's excellent discussion of uncertainty in timberland valuation methods & outcomes. Everyone has their own models, which attempt to account for a fair amount of unknown elements compounded over time. The point from S. Radcliffe's work that resonates with me is simple: One needs a conservative range of values--not merely one single number, when trying to determine an asset's appraised value. 

 

http://www.businessweek.com/articles/2012-07-05/zack-parisas-forest-inventory-software

 

Now, if a system like Zack Parisa's allows us to more efficiently and precisely measure how timberlands are stocked,  it would eliminate some (not all) of the uncertainty from a difficult, time consuming task. 

 

Until then, especially for small owners of timberland, it pays to heed S. Radcliffe's words. And, then go back and run the numbers again--and then again. 

 

JDB

 

Post-Script

Let's say you are interested in owning timberland directly, say in the northeast or upper-midwest: You want to invest between $500K and $1M to buy land, then develop & grow hardwood saplings from acorn to saw timber, as a long-term investment for your own seed. Where would you start? If it were me, I'd read a few more Prentiss & Carlisle quarterly letters....and then pick up the phone to call Sam Radcliffe. 

 

http://www.prentissandcarlisle.com/

 

*The author has no business relationship with P&C--just a great deal of respect for the work of the firm and its principals. 

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Working Forest Conservation Easements: Doing Well While Doing Good

P&C's 3rd quarter newsletter reviews timber markets and prices in the Northeast, and contains an article on how working forest conservation easements can be a sound strategy for timberland investors. 

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Q1 markets in Maine reflect outstanding operating conditions; guarded optimism for Q2

The demand for wood continued to be strong this quarter, but with optimum operating conditions, some millyards quickly filled to (or near to) capacity. These mills stopped taking wood, put suppliers on quota, or limited the hours they would accept deliveries. Some eliminated traditional nighttime delivery hours, which dramatically curtailed the amount of wood hauled to them.

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The average stumpage rate for the combination of all species and products – exclusive of biomass – was 5% higher this quarter than the average rate for calendar year 2011. An interesting observation, the average hardwood rate exceeded the average softwood rate.

...

Mill-delivered wood prices this winter were good for most products. Spring prices can best be described as good with some opportunity for premiums on certain products and in certain regions. But the ability to get wood to the mills is very limited. Pricing and demand for wood over the summer should be good to very good for certain products. Pricing will be affected by how quickly we get through mud season and onto summer operations. We are well ahead of the curve with low water content in the ground and frost dissipating ahead of schedule, but heavy spring rains can trump any hope for an early start to operations. 

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Sponsored by...

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

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


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

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


About this magazine

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


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Some useful links


Stock quotes, news and financial metrics

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


Prentiss & Carlisle newsletters

Quarterly updates on conditions in our operating regions


Timber Mart North 

Lake States price reporting service published by P&C


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

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Estimating the Timberland Discount Rate

Sam Radcliffe's insight:

One of several pieces in P&C's latest quarterly newsletter. I would be interested in reader feedback on the discount rate article.

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Jack D Bridges's curator insight, July 13, 2013 1:06 PM

Yesterday, I made a lengthy attempt to build on Mr. Radcliffe's excellent discussion of discount rates & risk premia in timberland investment models. Sadly, my one-year-old decided she preferred a shorter version of my treatise: She deleted the whole thing with one slam of her chubby hand. Ugh.

 

So, where to begin? I'll talk briefly about three issues: ultra-low rates, and how it skews risk; where and how this occurs in the marketplace; and why we should be careful about assumptions and models. Let's start with the entity that seems to filter through every asset class and investment decision at present: The Federal Reserve. 

 

Thanks to the never-ending stream of bond buying (QE, or quatitative easing), investors across every asset class are literally being pushed into taking risk. It's no different for timberland investment--and what the Fed is doing is having a clear impact on the assumptions (and math) employed by institutional market participants. 

 

In short, low discount rate assumptions provide for a bigger margin of safety when buying an asset; higher, more aggresive discount rates, increase the odds of over-paying--or sometimes produce outright losses (in the case of most asset purchases in 2008, when the credit bubble burst, and our financial system collapsed).

 

Where is this impact in the market? I'm not dealing with a great data set here, but in the Lake States region, I can think of several auctions over the last two years where aggressive assumptions not only won an auction, but left the other bidders scratching their collective heads. I won't get into specifics, but the winning bidder was a large TIMO, and the losing bidders (some end user timber companies, mixed with other PE funds) told me of the likely small future returns for the properties at such prices. 

 

I'm far from an expert in building and applying DCF models. For one, while the exercise is worthwhile, I think in climates of increased systemic risk (and shorter boom-bust cycles), relying on linear relationships between too many variables is dangerous. 

 

Mr. Radcliffe's introduction of a 'timberland risk-premium' is useful, however. In that it adds a component to valuation that better encompasses economic conditions and targeted returns. This effort is clearly worthwhile. 

 

To close, equity and timberland investors alike should be familiar with the commonly used assumptions in determining an asset's range of values. Investors should also use caution when applying absolute certainty and confidence to models--even ones based on decent assumptions.

 

Plenty of investors across all asset classes deploy capital well without calculators and complicated models (simply staying on the sidelines when others chase prices; spending freely during panics and liquidity deserts).

 

Thanks again to Mr. Radcliffe at P&C for delving into a great subject!

http://www.prentissandcarlisle.com/

 

JDB

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Ponsse Equipment Bolsters the Woodlot Services Division at Prentiss & Carlisle

Ponsse Equipment Bolsters the Woodlot Services Division at Prentiss & Carlisle | Timberland Investment | Scoop.it

A firm belief in the possibility of perfection guides Tom R. Nelson, vice president at Prentiss and Carlisle. Tom oversees the woodlot services division at Prentiss & Carlisle (P&C), a forest resource management company headquartered in Bangor, Maine.

...

“There’s nothing we can’t do for you,” said Tom. Yet two goals transcend most projects, he explained. Landowners want an aesthetic result. And they want to merchandise wood to realize maximum value. Ponsse equipment enables P&C to meet both goals, explained Tom.


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Prentiss & Carlisle opens Rhinelander branch

Prentiss & Carlisle opens Rhinelander branch | Timberland Investment | Scoop.it

Prentiss & Carlisle, an 88-year-old forest management firm headquartered in Bangor, Maine, recently announced the opening of a new branch in Rhinelander.


According to Vice President William Miller, Rhinelander is the economic hub for a large part of northern Wisconsin, and the office's geographic location will enable Prentiss & Carlisle to better serve that region as well as Michigan's upper peninsula and Minnesota.


"Prentiss & Carlisle's new office brings the firm and its services to key players in one of the region's most powerful economic engines - the forest industry," Miller said. "Major investment landowners, equipment manufacturers, conversion facility owners, and state and federal agency employees regularly pass through Rhinelander."

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Prentiss & Carlisle 4th Qtr 2011 Newsletter

Prentiss & Carlisle 4th Qtr 2011 Newsletter | Timberland Investment | Scoop.it


The latest edition contains a review of Lake States timber prices.

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