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Kansas PERS invests in open-ended US timber fund

Kansas PERS invests in open-ended US timber fund | Timberland Investment | Scoop.it

Kansas Public Employees Retirement System has approved a $75m (€70.2m) commitment to the RMS Evergreen US Forestland Fund. The commitment allows the pension fund to be a limited partner in one of few open-ended funds that invest in US timberland.

The fund holds a partial interest in a 2.1 million acre timberland portfolio worth $3.9bn in the southern region of the US.
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The targeted long-term net returns for the fund are in the high single digits. The fund will accumulate most of its annual revenue and total return from active timber sales to local and regional sawmills and pulp mills.

This is expected to be driven by a recovering US housing market and growing demand for pulpwood used in packaging and wood-pellet production.

The fund plans to continue to acquire more timberland assets beyond its existing portfolio. Assets will be in the southern region of the US and the portfolio will be diversified by age-class, species and regional submarkets.

The commitment by Kansas PERS is the second to Evergreen’s fund by a major US investor. Last year, the New Mexico State Investment Council approved a $125m allocation to the fund.

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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:

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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.

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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.

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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.

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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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NCSU changes Hofmann deal, will sell most of forest to RMS

NCSU changes Hofmann deal, will sell most of forest to RMS | Timberland Investment | Scoop.it

N.C. State University has retooled its controversial plan to sell the massive Hofmann Forest near Jacksonville. It now will sell nearly all of the timberland to an investment company that specializes in sustainable timber management.


That company, Alabama-based Resource Management Service, will buy 56,000 acres, while the original buyer, Hofmann Forest LLC, will purchase the remaining 23,000 acres, including the major open tracts, university officials said Tuesday.


NCSU also agreed to cut $19 million from the original $150 million price, but the new terms could eventually reap an additional $9 million if the buyers are able to negotiate a deal to sell training rights on and over the forest to the U.S. military or to sell protection rights to a conservation group.
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In announcing the original deal, university officials said they were selling the land because it wasn’t yielding enough income and wasn’t used much for research anymore. The investments should generate about $5.5 million a year for operations of the College of Natural Resources, they say, which could help compensate for repeated cuts in state funding in recent years. It had been producing about $2 million a year from timber sales, but in 2012 that dipped to less than $900,000.


Opponents of the sale say that the university has underplayed the land’s value for research and that if better-managed, it could yield steadier income. They also say it plays a host of vital environmental roles. The original buyer is led by members of a major Illinois farming family. Opponents of the sale, who are suing to block the deal, have said they fear that Hofmann LLC would chop down the trees to make way for row crops. They said the original deal was deeply flawed because it gave no iron-clad protections for the forest, which the university uses for income from timber farming and for research.
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The new deal is still far from perfect, since there are still no absolute, permanent protections for the forest, said conservationist Ron Sutherland, one of the plaintiffs in the lawsuit to block the deal. But the participation of RMS was at least encouraging, Sutherland said, noting that the company was known to work with conservationists.
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Last fall, a Wake County Superior Court judge dismissed the opponents’ lawsuit. They then took the case to the state Court of Appeals, which hasn’t yet ruled. Sutherland said the new deal probably wouldn’t affect their pursuit of the case, because until it’s clear that the land is protected, the plaintiffs believe any sale should be subject to a full environmental review.


The new deal was signed Sept. 2. Officials expect a closing on or before Nov. 17. It’s unclear, Woodson said, whether the EPA investigation will be complete, but the new contract includes wording to allow for that contingency.

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New Zealand forestry deal prompts concerns

New Zealand forestry deal prompts concerns | Timberland Investment | Scoop.it

The Greater Wellington Regional Council says the sale of cutting rights to its forestry estate to an overseas buyer should not have any impact on the public or local timber industry.


But some local sawmillers and iwi say the sale could well have an impact on log supplies and erosion control.


The council has sold cutting rights to 5430 hectares of forests in Wellington and the Wairarapa to US company Resource Management Service (RMS).


Although the price was not disclosed, LJ Hooker agent Warwick Searle said it was more than the $28.5 million valuation and exceeded the $31m debt the council was carrying for managing the forests.


The level of overseas interest had been very high, he said.
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Because most of the logs were already exported, [Council chairwoman Fran] Wilde did not think the move would have much impact on local sawmillers.


But Adam Greshamof Kiwi Lumber, which has a mill in Masterton, said his firm had been buying some of its logs from the council and it would be talking to the new owners.

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Peter Clark of forestry consultancy PF Olsen said people should not be surprised that the cutting rights had gone to a foreign buyer, because it was an investment that suited pension funds.


"Forests are incredibly capital-intensive investments. They tie up a lot of money for a long time, so the type of investor they suit are those with long-term money, not too much borrowing and long-term need for that money."

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This week's featured TIMO: Resource Management Service, RMS

This week's featured TIMO: Resource Management Service, RMS | Timberland Investment | Scoop.it

Founded in 1950, RMS is a private timberland investment firm serving pension funds, endowments, foundations and family offices. For 60 years we have been creating value for timberland owners and investors through the disciplined integration of forestry and finance.

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Our company is employee owned and managed, with ownership broadly distributed throughout the firm. This means we share more than a professional interest in the performance of your forestland investment. Our success is tied to the success of our clients, ensuring alignment of interest and accountability at every stage of the investment process.


RMS is a registered investment adviser based in Birmingham, Alabama with offices across the US South, Brazil, New Zealand and China.


[Editor's note: our "Featured TIMO" series does not imply an endorsement of the subject organization. It is presented only to help educate readers about this corner of the Timberland Investment space.]

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NC State Sells Long Term Timber Deed to RMS on Hoffman Forest

NC State Sells Long Term Timber Deed to RMS on Hoffman Forest | Timberland Investment | Scoop.it

The Board of Trustees of the Endowment Fund of NC State University and the Natural Resources Foundation today announced a new agreement for the timberland on Hofmann Forest, ensuring long-term sustainability for the land and consistent annual income for the College of Natural Resources.

 

The Endowment Fund Board and the Foundation signed a $78 million, 50-year timber deed with Hofmann Forest Timberlands LLC, an entity managed by Resource Management Service LLC (RMS), which is a privately held timber investment management organization known for its leadership in sustainable forest management practices. The timber deed gives RMS rights to sustainably grow, harvest and replant the timber on 54,334 acres of working forest with the NC State Endowment Fund maintaining ownership of the land.

 

The agreement also maintains access for students and faculty in the College of Natural Resources to teach and conduct research across the property, and it requires RMS to manage the forest to meet sustainable forest management certification requirements and return an improved age class distribution of trees at the end of the 50-year contract. As a working forest, the majority of the 79,000-acre forest will remain dark and undeveloped, providing clear benefits for the military and economic prosperity in eastern North Carolina.

 

The proceeds from the contract will be invested in the Endowment Fund of NC State University and will provide a consistent yearly income of about $3 million that will go exclusively to support the teaching, research and outreach programs of the College of Natural Resources. The consistent annual funds replace variable yearly income previously generated by the Foundation’s management of the forest, enabling the college to better plan for and utilize resources to benefit its educational mission. The agreement also reduces the Endowment Fund’s investment risks and gets the Natural Resources Foundation out of the business of managing a commercial forest and more focused on advancing the teaching and research mission of the college.

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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.

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$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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New Forests cuts itself out of timber firm bid

New Forests cuts itself out of timber firm bid | Timberland Investment | Scoop.it

New Forests is believed to be out of the race to buy Forest Enterprises Australia, with sources suggesting that RMS — the world’s second-largest timber management company — has positioned itself as the successful buyer.


New Forests recently purchased Gunns’ forestry portfolio for about $330 million and was believed to be a strong contender to buy FEA, but is understood to have missed out on price

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Resource Management Services, a private timberland investment firm, serves pension funds, endowments, foundations and family offices.
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The company had been among five groups in the running to buy FEA, with others including New Forests, US-based Campbell Group, GMO Renewable Resources and Global Forest Partners.
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The sales price for the forestry business could be anywhere between $200m and $400m, sources said. On offer is 97,900ha of mature hardwood forests and 46,000ha of land in NSW, Queensland and Tasmania.

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New Forests in pole position for Forest Enterprises Australia race

New Forests in pole position for Forest Enterprises Australia race | Timberland Investment | Scoop.it

NEW Forests' successful raising of $707 million for a second fund adds weight to suggestions it could be competing strongly to buy Forest Enterprises Australia, which is on the market through advisory firm Gresham, and potentially the Gunns portfolio.


New Forests has previously been named by sources as among the five groups in the contest to buy FEA.


The other four are international contenders, including US-based Campbell Group, GMO Renewable Resources, Global Forest Partners and Resource Management.


FEA was put on the market in December through Gresham and Deloitte, shortly after timber company Gunns came up for sale.

The sales price for the forestry business could be anywhere between $200m and $400m, sources said.


Initial bids closed last month for the 97,900ha of mature hardwood forests and 46,000ha of land in NSW, Queensland and Tasmania.

It is thought that the players competing to buy FEA would have also thrown their hat in the ring to buy the $400m-odd portfolio of Gunns forestry assets, which are being sold through investment bank Moelis and Korda Mentha.


New Forests would not comment on its interest in either of the offerings.

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