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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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Brookfield Quarterly Research Report on TIMO's vs REIT's

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Provided by Industry Intelligence

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Plum (PCL) Tones it Down-- CEO R. Holley says housing market still "anemic."

Plum (PCL) Tones it Down-- CEO R. Holley says housing market still "anemic." | Timberland Investment | Scoop.it

Via Jack D Bridges
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Jack D Bridges's curator insight, July 29, 12:58 AM

What follows is a quick look at Plum Creek's (PCL) Q2 Conference Call. 

 

On the housing market, Mr. Holley strikes quite a different tone than he did in early 2014. To wit, we'll call this section humble pie.

 

Mr. Holley begins, "The economists have moderated their growth expectations for residential construction this year, in part due to the lackluster activity during the first six months of the year."

 

Holley continues, "As housing demand improves, we expect to see increased lumber demand and increased lumber production and log prices in the U.S. South. However, the overall pace of demand growth in 2014 is not as robust as originally expected and we have moderated our price growth expectations to Southern sawlogs in the second half of 2014.

 

This reduced view of demand / pricing in the US South is why PCL is deferring so much previously planned harvest (500K--1M tons deferred, in fact).


In Holley's own words, "With this in mind, we have chosen to defer a portion of our sawlog harvest to certain other southern micro-markets and as a result we now expect our harvest to be at the low end of our 20 million to 21 million tons harvest range we gave you at the beginning of the year. The great thing about timber is that we are not foregoing this income or cash flow; we are simply delaying its delivery."

 

And, while my thoughts on the SE cabal of optimists are well known, this isn't a bad move for Plum, given their views of the future. I just think we'll see more unscheduled deferrals when the Southern Sawlog revival keeps getting pushed out another year at a time.

 

So, what does Mr. Holley feel is ailing the housing market?

 

Steven Chercover- DA Davidson

Go it. And then finally, would be willing to hazard a guess as why the housing recovery in so anemic; is it lack of lots of labor jobs or policy?

 

Rick Holley - Chief Executive Officer

All the above. We want to learn that from your guys, but no, I think it’s all the above. I just think it’s a jobs thing, it’s a housing formations thing, it’s still tough for young couples to get a mortgage and then they are trying to improve some of that. The outlook for most people and job out don’t feel good to people, so I think it’s why I can come up with a better word; it’s anemic. It’s just kind of, it’s not there yet. So it’s a combination of all the above.

 

And, then Mr. Holley addresses the broader timberland marketplace in the US: 

 

Rick Holley - Chief Executive Officer

There is still at any point in time, two or three or four five transactions in the market place, generally kind of 40,000 to 60,000 acres. A lot of the TMOs are bringing some lands outs of the funds that they’ve had over time and bringing them back to market. So a lot these are in the U.S South and we look at all of them and as the question was asked earlier and the ones that have transacted generally been north of $2,000 an acre and I think it’s justifiable given the productivity, a lot of those properties that they have come to market.

 

I think one of the things that a lot of investors probably, or just even Plum Creek for a long time maybe we are behind on is how productive these lands are with some of the silvicultural treatments that we’ve all put in place over the last couple of decades, and how much cash flow they are going to generate off that productive and then you start to see a better pricing  environment. You can clearly justify our per acre number with a two in front of it.

 

But there’s always a few things in the market place and I think they seemed to get snapped up pretty quickly, so there’s still lot of capital looking at those.

 

Moving onto Rick Holley's thoughts on rural / raw land markets:

 

Rick Holley - Chief Executive Officer

Well, one of the comments that I made in my prepared remarks today was that some of the markets that have been pretty dormant the last several years like Montana have kind of lit up again, so we see a lot more interest in lands in some of those areas. A lot of the buyers are places from like Texas. Some of those market places are looking at Montana now.

 

Clearly we see a lot more recreational interest in the south. Values still aren’t where we expect them to be longer terms, so we’ll be pretty stingy about selling a lot of these higher various properties in the south, but we are starting to see some movement in the market place and prices are starting to recover a bit.

 

But we’re very pleased to see Montana, because it was a great market a number of years ago as you know and it just went to sleep for the last years. It’s awake now, so that’s a positive trend.

 

Wrapping it up:

 

Me again. In keeping with my recent post about the Rodney Dangerfield-like treatment of the Lake States region, the Plum conference call barely even mentioned the northern resources segment at all--excluding the planned Wisconsin divestiture which closed this summer. 

 

Looking at the equity market reaction to Plum's reduced harvest forecast (and lowered profit / revenue for the remainder of 2014), the stock was off about 3% after-hours. The damage should be mitigated by the accretive value of the 500K MWV acreage Plum diluted shareholders to buy.

 

But, it also bears mentioning how many shares of PCL are shorted--some Wall St. types think betting against Plum is a good way to short the housing market. There are better ways to execute this view--and whatever I think about management's housing forecast, I wouldn't want to bet against Plum Creek. Maybe if the equity market ever corrects, it does drop below $40 for a little while. We also know that's the magic number where Mr. Holley starts talking about buying back stock. 

 

Here is the full Plum CC transcript link:

 

http://seekingalpha.com/article/2350265-plum-creek-timber-company-pcl-ceo-rick-holley-discusses-q2-2014-results-earnings-call-transcript?part=single

 

And, what a 10-year chart of Plum Creek equity looks like--

 

http://screencast.com/t/7u9qwBibAbu

 

JDB

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Timberland Values Increase 9.69% In 2013

Timberland Values Increase 9.69% In 2013 | Timberland Investment | Scoop.it

I wrote a similar article to this last year titled "Timberland Values Increase 7.76% in 2012". Again, the data come from a quarterly newsletter from Brookfield Timberlands Management LP, a wholly owned subsidiary of Brookfield Asset Management Inc. (BAM). In it, the company discussed the NCREIF (National Council of Real Estate Investment Fiduciaries) Timberland Index results for 2013. NCREIF is an appraisal-based index. It included both third-party independent appraisals as well as internal appraisals of timberlands purchased for investments. Its members are generally the TIMO (Timberland Investment Management Organizations) community. TIMOs manage privately owned timberland investments. As far as I know, none of the timber REITs are members of NCREIF. Pope Resources (POPE), however, is.


In any case, the results would also reflect on the value of the timberlands owned by the publicly traded timber REITs and companies - Weyerhaeuser (WY), Plum Creek (PCL), Rayonier (RYN), Potlatch (PCH), CatchMark (CTT) and Acadian (OTC:ACAZF). Timberland properties are routinely bought and sold by the TIMOs and timber REITs to and from each other.


For 2013, the total return from timberland investments in the NCREIF index was 9.69%, up from 7.76% in 2012. This is broken down between EBITDDA returns and appreciation returns. Total EBITDDA returns were 2.80% for 2013 versus 2.68% in 2012. Appreciation returns for 2013 were 6.75% compared to 4.97% in 2012. The NCREIF Timberland Index in 2013 was made up of 457 properties totaling 13.6 million acres with a total market value of $23.1 billion.


The Index is further broken down by region.
***
The next table applies a weighted average of the NCREIF 2013 returns by region to each company. As you can see, you can assume about an 8.5% appreciation to Plum Creek's land holding in 2013. In like manner, Rayonier's land appreciated 9.4%, Potlatch's 13.9%, Weyerhaeuser's 11.6%, Pope's 17.4%, Acadian's -0.9%, and CatchMark's 7.7%. Of course, these are all approximations.
***
Commercial timberland is a very liquid asset. TIMOs have billions of dollars invested and are always in acquisition mode. Most of the REITs and other timber companies are also always in the market. For these reasons, I believe that the NCREIF index is very pertinent and investors in timber stocks should be aware of this.

Sam Radcliffe's insight:

IMO, Tom Kametz made an error in his calculations of land appreciation, by using both the EBITDA and capital appreciation portions of NCREIF total returns. If change in timberland value is the desired metric then only the capital appreciation is relevant.


After I recalculated using only the capital appreciation portion of NCRIEF, the implied change in value of the REIT timberlands is significantly lower: PCL goes from 8.5% to 5.9%, WY 11.6% to 10.3%, PCH 13.9% to 6.7%.

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Arkansas Public Employees awarded $16.5 million from timber manager

Arkansas Public Employees awarded $16.5 million from timber manager | Timberland Investment | Scoop.it

National Timber Partners was ordered to pay $16.5 million to the Arkansas Public Employees Retirement System, Little Rock, for breaching a contract with the $7.3 billion pension fund.


The Arkansas attorney general, who serves as legal counsel for pension fund, filed suit in Pulaski County Circuit Court, Little Rock, on Sept. 27 after the timber manager failed to pay a scheduled $15 million installment to the pension fund that was due June 28. He filed a motion for default judgment earlier this month.


APERS sold its stake in NTP Timber Plus Fund I to the manager in October 2012 to be paid in three installments totaling $110 million. Carlos Borromeo, APERS chief investment officer, said National Timber executives approached the pension fund about buying the fund stake back when they were concerned they could not live up to their projected returns. APERS committed $100 million to the fund in April 2006 with the goal of a 10% annual return on the investment.


National Timber paid the first installment of $85 million and a portion of the $15 million second installment. A final installment of $10 million due Dec. 31 was never made, according to a news release from Attorney General Dustin McDaniel. National Timber was ordered to pay $562,000 in prejudgment interest as part of the $16.5 million total, according to the news release.


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2014 webinars from University of Minnesota

2014 webinars from University of Minnesota | Timberland Investment | Scoop.it
REITs, TIMOs, and changing industrial forestry

Tuesday, January 21 from 9:00-10:00am

How has industrial forestry changed because of the shift in corporate structure? Minnesota industrial forests have seen a large turnover in ownerships in recent years with investment companies purchasing large tracts of Minnesota forestlands. This webinar will and how industrial forestry has changed because of the shift in corporate structure. Samuel J. Radcliffe will explain the changes in ownership and the difference between real estate investment trusts (REITs) and timber investment management organizations (TIMOs).


Speaker:  Samuel J. Radcliffe, Prentiss & Carlisle Management Company

Sam Radcliffe's insight:

Sorry for the shameless promotion ;-)


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Jack D Bridges's curator insight, December 14, 2013 7:50 PM

This will be my first U of Minnesota webinar--and it should be a good one. Put Jan 21 at 9am on the calendar, and get ready to learn! 

This won't be on the agenda, but here is one subject I would ask about: How CALPERs expects to manage a $2B timberland portfolio with a part-time employee? Is it any wonder their performance numbers are lousy (and their portfolio construction seems, well, very Bush-league, considering their over-allocation to the US South).

 

If I could construct a model showing buying $2B worth of Plum Creek which is also heavily weighted below the Mason Dixon (and collecting the 3%+ dividend) versus their returns net of fees, it would be an interesting comparison. The conclusion: There are far better ways to invest in timberland, especially for such a massive buy-side institution.

 

Anyway, please listen in to Mr. Radcliffe's talk on January 21st. It will be an hour well spent. 

JDB

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Phaunos terminates investment management agreement with FourWinds

Phaunos terminates investment management agreement with FourWinds | Timberland Investment | Scoop.it

Phaunos Timber Fund has reached agreement by mutual consent to terminate its investment management agreement with FourWinds Capital Management with immediate effect. The company has established a new subsidiary, Phaunos Boston, through which it intends to manage its assets.


The majority of the employees of the FourWinds Capital Management group (the FWCM Group) who have been responsible to date for the day to day management of the company’s portfolio of assets will be offered employment with Phaunos Boston with immediate effect.

The subsidiary will initially be led by Mason Browne, formerly director of timber operations at FourWinds. Property management of the company’s wholly owned assets will continue to be carried out by local management teams in the countries in which they operate.
***

The board has entered into a consultancy agreement with Stafford Timberland to provide a review of the company’s timber assets in close consultation with Browne and his colleagues. Stafford Timberland, which is authorised and regulated by the Financial Conduct Authority in the UK, is a global timberland investment organisation that manages approximately USD1.4bn in timber assets worldwide on behalf of institutional investors. The board expects to announce the results of Stafford Timberland’s review with the company’s annual results for the year ended 31 December 2013, in April 2014.

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UK Forest Fund now one of the largest forest owners in the UK

UK Forest Fund now one of the largest forest owners in the UK | Timberland Investment | Scoop.it

FIM Forest Fund I LP – Haregrain Forest ... raised a further £19.1 million, increasing the value of the portfolio to over £60 million. It now owns 9,851 hectares of highly productive commercial forestry and is harvesting some 220,000 tonnes of timber per annum.


The LP is structured to allow smaller scale investors to enjoy the benefits of a forestry investment, which are normally only available to those investing in excess of £1 million in a directly owned property. The LP is tax transparent, so the favourable tax treatment applying to commercial forestry applies to each individual member.


Forestry income is exempt from income tax and capital gains tax. In addition, it qualifies for 100% relief of inheritance tax once an investment has been held for two years.
***
These benefits were available subject to a minimum investment of £30,000, making forestry readily accessible to a wide range of investors.

Forestry has been an excellent investment in recent years. The IPD UK Forestry Index has outperformed equities, gilts and commercial property over the past 10 years. The LP has provided strong returns to date. The blended IRR of all members has been 11.9% post-tax.

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Modern Money Trees

Modern Money Trees | Timberland Investment | Scoop.it

Most investment funds that own Woodlands make their money when the trees are cut down and carted off. Ecotrust ­Forest Management, based in Portland, Ore., also profits from the natural habitat left untouched in the forest. The small fund harvests trees far more selectively than in traditional forestry and then picks up additional income by selling everything from ­carbon credits to brush undergrowth for floral arrangements.


Ecotrust’s CEO, Bettina von Hagen, believes the approach renders woods more resilient—both ecologically and financially. Since inception in late 2004 through the end of 2012, her Ecotrust Forest Fund I, with $30 million under management, notched average gross returns of 10.6% per year through December 2012, according to third-party ­appraisals. The fund’s fee is 1.25%.


Like most timberland funds, Ecotrust calculates its returns by toting up the cash from trees that were cut down for wood and the appreciation of the land and the trees still growing on the property. But this fund also receives ancillary benefits from tax credits. In comparison, a commonly used timberland index produced an average annual return of 8.17% during the same time frame.


Ecotrust’s investors include some high-profile names like the Packard Foundation and Patagonia founder Yvon Chouinard.

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New Forests Announces Final Close of the Tropical Asia Forest Fund with $170 million of Capital Commitments and Completes Fund’s First Transaction

New Forests Announces Final Close of the Tropical Asia Forest Fund with $170 million of Capital Commitments and Completes Fund’s First Transaction | Timberland Investment | Scoop.it

New Forests today announced the final close of the New Forests Tropical Asia Forest Fund (“TAFF”). TAFF has closed with a total of US$170 million in capital commitments, which will be invested in sustainable plantation forestry investments in Southeast Asia, with a primary focus on Malaysia, Indonesia, and Vietnam.


New Forests also announced the completion of the fund’s first investment, the acquisition of a majority interest in the Hijauan group, which includes the wholly-owned Hijauan Bengkoka Plantations and a 50% shareholding in Acacia Forest Industries. Together, these two companies are responsible for management, harvest, and future rotations of an Acaciamangium plantation in northern Sabah, Malaysia. The plantation area currently includes approximately 11,000 hectares of acacia plantation, producing saw logs and pulpwood for domestic and regional export markets.

***
As timber supply from natural forests in Southeast Asia declines, there is an increasing need for investment in high quality, sustainably managed plantation forests. TAFF is the first private investment vehicle dedicated to sustainable plantation timber production in Southeast Asia using long-term, institutional capital. TAFF will establish a portfolio of assets producing high value sawlogs and veneer logs. The fund’s investments are overseen by New Forests Asia (Singapore) Pte Ltd and managed by co-portfolio managers Darius Sarshar and Paul Speed, supported by a team of specialist forestry and investment professionals.
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Pennsylvania pension fund starts timber search

Pennsylvania pension fund starts timber search | Timberland Investment | Scoop.it

Pennsylvania Municipal Retirement System, Harrisburg, is searching for a timber manager to run $70 million, confirmed James Allen, secretary of the $1.6 billion pension fund.


State law requires that external manager services be put out to bid every five years. Current timber manager Forest Investment Associates' contract expires in March. The firm is invited to rebid.

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Pennsylvania Municipal pension fund to look for timber manager

Pennsylvania Municipal pension fund to look for timber manager | Timberland Investment | Scoop.it

Pennsylvania Municipal Retirement System, Harrisburg, in the next two or three weeks will search for a timber manager to run $70 million.

***

The contract of the pension fund's current timber manager, Forest Investment Associates, expires in March 2013. State law requires that external manager services be put out to bid every five years, Mr. Allen said in a telephone interview. The firm can rebid.

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Real estate managers' assets up 11.7% for year

Real estate managers' assets up 11.7% for year | Timberland Investment | Scoop.it

Boosted by new acquisitions and property appreciation, the top real estate money managers' total worldwide assets under management increased to $811 billion in the year ended June 30.


[Editor: By this survey, timberland represented just 3.5% of the investable real estate universe. Among the top 100 real estate managers were seven TIMO's: Hancock, Campbell Group, Forest Investment Associates, Global Forest Partners, Regions Timberland Group, Molpus Woodlands Group, and Timberland Investment Resources. P&I missed some that should have made the list, e.g. The Forestland Group and GMO.]

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Timberland Investment Fees and Returns

Timberland Investment Fees and Returns | Timberland Investment | Scoop.it

This post includes excerpts from Forisk’s timberland investment research and Brooks Mendell’s September 2014 presentation at the “Who Will Own the Forest?” conference in Portland, Oregon. The complete presentation is available here.


During the ten-year period from January 2004 through December 2013, annualized returns for timberland investments – both direct ownership (8.4%) and equity plays in public timber REITs (9.4%) – outperformed the broader stock market (5.2% for the S&P 500). Basically, timberland investments provided the desired stability and diversification through a distressing economic cycle.

***

The table above includes data from 11 TIMOs covering 11.9 million acres of private timberlands in the United States. The analysis separates commingled funds, which pool investments from multiple investors, from separate accounts, which manage funds from specific institutions separately. The “net” returns subtract all investment management advisory fees, including paid and unpaid performance incentive fees.

 

The implied annual fees are consistent with Forisk analysis of prospectuses and contract structures, which find that TIMO incentive pay representing an “overage” or “carried interest” of 10 to 20% above a hurdle of 7 to 8% nominal is common. In addition, the implied fees are consistent and in line with ranges reported by Mercer at WWOTF for other non-timber asset classes. Specific to timberland, Forisk research found average total fees from 2005 through 2012 of 84 basis points.

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North Dakota board puts Timberland Investment Resources on watch

North Dakota board puts Timberland Investment Resources on watch | Timberland Investment | Scoop.it

North Dakota State Investment Board, Bismarck, put Timberland Investment Resources on watch for performance, said David Hunter, executive director and chief investment officer, in an e-mail.


Timberland Investment Resources manages a $190 million portfolio for the board's $4.5 billion in pension assets. The board's current allocation to timber is 4.5%.


Tom E. Johnson, managing director, client service and business development at Timberland, said that short-term performance has been challenged by the slow housing recovery. However, “inception to date, since we have been managing the portfolios, we are 400 basis points above the benchmark index,” he said.

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Campbell Global parent files for IPO

Campbell Global parent files for IPO | Timberland Investment | Scoop.it

Old Mutual Asset Management — a well-heeled, multi-boutique asset manager with $203.1 billion in AUM, has filed for an IPO.

***

Old Mutual Asset Management’s roots go back to 1980, which certainly was an ideal time to start an asset management firm given that was the start of America’s massive bull market. To build scale, the firm pulled off a variety of acquisitions of boutique operators.

***

Old Mutual currently has seven boutiques, and each has access to the parent company’s core infrastructure, such as compliance, distribution channels, talent management and risk management.

The boutiques include:

  • Acadian Asset Management ($65.9 billion)
  • Barrow, Hanley, Mewhinney & Strauss ($93.5 billion)
  • Campbell Global ($6.7 billion)
  • Copper Rock Capital Partners ($2.8 billion)
  • Heitman ($24 billion)
  • Investment Counselors of Maryland ($2.4 billion)
  • Thompson, Siegel & Walmsley ($7.8bn billion)


All in all, Old Mutual funds have chalked up competitive returns.

***

Financials have been solid, with revenues climbing from $435.7 million in 2011 to $528 million last year, while pre-tax income went from $124.3 million to $153 million.


As for the prospects for the Old Mutual IPO, it’s still tough to tell, as few asset managers have gone public recently, and the latest one — Ares Management (ARES) — was a disappointing deal. It was priced at $19, which was below the range of $21 to $23, and the stock hasn’t moved much from there.


Still, it might be hasty to think the Old Mutual IPO will fare just as poorly. After all, the firm has a strong brand and an enviable long-term track record, not to mention a broad platform of investments.

Old Mutual IPO Notes

  • Expected Listing: New York Stock Exchange, ticker OMAM
  • Lead Underwriters: BofA Merrill Lynch (BAC), Morgan Stanley (MS), Citi (C) and Credit Suisse (CS).
  • So far, there are no pricing terms on the Old Mutual IPO.
  • The offering will likely hit the markets some time during the fall.
Sam Radcliffe's insight:

Campbell Global, formerly The Campbell Group, has 3.1 million acres of timberland under management.

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Seeing the trees, missing the forest

Seeing the trees, missing the forest | Timberland Investment | Scoop.it

If I've learned anything in the last 12 months it's this: Professional investors just don't understand timberland investment. 

 

I could easily spill 5,000 words on the subject, but let's just focus on three brief reasons why. 

 

1) Many wealth managers still prefer liquid, faux-timber investments: The timber REITs (WY, PCL, RYN, PCH, CTT). These vehicles are publicly traded equities--and are highly correlated to the S&P 500. Actual, physical timber assets exhibit a negative correlation to common stocks--which offers real peace of mind when the financial system seizes up in panic about every 7-8 years.

 

It also pays to remember the REIT structure encourages leverage, in order to take a somewhat lumpy business with varied harvests, and pay-out a steady distribution to shareholders. With our current monetary policy (and Wall St. feasting on the Fed's carry), this might not seem like a big deal; let's see how this balance works in a time of "normalized" rates. So, increased debt loads and reliance on Wall St. popularity and sell-side analysts to keep investors interested: You've been warned.

 

2) Timberland is an incredibly hard asset class to generalize about. There are huge differences between continents, regions, wood-baskets, specie mix, HBU values, etc. So, when someone says to me, "the asset class is over-valued," it trips my antennae. Really? You think so, do you? What regions seem over-priced, and why? Because, to say the domestic timber REITs are over-valued is actually quite a different statement altogether...

 

3) The trick is finding inefficiently priced assets--or managers with access to them. And, guess what? Much of the domestic timberland marketplace is probably too efficient, making alpha far harder to come by. So, one needs to look to other markets (or at least niche managers) within the asset class to find growing wood baskets at attractive prices. And, sorry Charlie, these opportunities are not available in liquid, ETF form. 

 

To be fair, not all TIMOs and PE funds are, by default, preferable to listed timberland businesses. But, for sophisticated, accredited investors, with choices--the opportunities in the current marketplace aren't found on an exchange. 


Via Jack D Bridges
Sam Radcliffe's insight:

The above opinion is from Jack D. Bridges who has a great column at http://www.scoop.it/t/risk-adjusted-returns. Check it out.

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Jack D Bridges's curator insight, March 13, 2:06 PM

If I've learned anything in the last 12 months it's this: Professional investors just don't understand timberland investment. 

 

I could easily spill 5,000 words on the subject, but let's just focus on three brief reasons why. 

 

1) Many wealth managers still prefer liquid, faux-timber investments: The timber REITs (WY, PCL, RYN, PCH, CTT). These vehicles are publicly traded equities--and are highly correlated to the S&P 500. Actual, physical timber assets exhibit a negative correlation to common stocks--which offers real peace of mind when the financial system seizes up in panic about every 7-8 years.

 

It also pays to remember the REIT structure encourages leverage, in order to take a somewhat lumpy business with varied harvests, and pay-out a steady distribution to shareholders. With our current monetary policy (and Wall St. feasting on the Fed's carry), this might not seem like a big deal; let's see how this balance works in a time of "normalized" rates. To sum up, leverage, equity correlation, and a reliance on Wall St. with its hyper short-term thinking, in a long-cycle industry. The price of liquidity is steep indeed: You've been warned.

 

2) Timberland is an incredibly hard asset class to generalize about. There are huge differences between continents, regions, wood-baskets, specie growth rates, specie mix, HBU values, etc. So, when someone says to me, "the asset class is over-valued," it trips my antennae. Really? You think so, do you? What regions seem over-priced, and why? Because, to say the domestic timber REITs are over-valued is actually quite a different statement altogether...

 

3) The trick is finding inefficiently priced assets--or managers with access to them. And, guess what? Much of the domestic timberland marketplace is probably too efficient, making alpha far harder to come by. So, one needs to look to other markets (or at least niche managers) within the asset class to find growing wood baskets at attractive prices. And, sorry Charlie, these opportunities are not available in liquid, ETF form. 

 

To be fair, not all TIMOs and PE funds are, by default, preferable to listed timberland businesses. But, for sophisticated, accredited investors with choices--the opportunities in the current marketplace aren't found on an exchange. 

 

JDB

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Timberland Investment Webinar: still time to register

Timberland Investment Webinar: still time to register | Timberland Investment | Scoop.it

REITs, TIMOs, and changing industrial forestry

Tuesday, January 21 from 9:00-10:00am

How has industrial forestry changed because of the shift in corporate structure? Minnesota industrial forests have seen a large turnover in ownerships in recent years with investment companies purchasing large tracts of Minnesota forestlands. This webinar will and how industrial forestry has changed because of the shift in corporate structure. Samuel J. Radcliffe will explain the changes in ownership and the difference between real estate investment trusts (REITs) and timber investment management organizations (TIMOs).


Speaker:  Samuel J. Radcliffe, Prentiss & Carlisle Management Company

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Sam Radcliffe's curator insight, December 14, 2013 7:03 AM

Sorry for the shameless promotion ;-)


Jack D Bridges's curator insight, December 14, 2013 7:50 PM

This will be my first U of Minnesota webinar--and it should be a good one. Put Jan 21 at 9am on the calendar, and get ready to learn! 

This won't be on the agenda, but here is one subject I would ask about: How CALPERs expects to manage a $2B timberland portfolio with a part-time employee? Is it any wonder their performance numbers are lousy (and their portfolio construction seems, well, very Bush-league, considering their over-allocation to the US South).

 

If I could construct a model showing buying $2B worth of Plum Creek which is also heavily weighted below the Mason Dixon (and collecting the 3%+ dividend) versus their returns net of fees, it would be an interesting comparison. The conclusion: There are far better ways to invest in timberland, especially for such a massive buy-side institution.

 

Anyway, please listen in to Mr. Radcliffe's talk on January 21st. It will be an hour well spent. 

JDB

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Timber Private Equity Fund Managers – November 2013

Timber Private Equity Fund Managers – November 2013 | Timberland Investment | Scoop.it

Preqin’s Fund Manager Profiles online service shows that the universe of fund managers which invest in timber opportunities as part of a wider strategy continues to be dominated by US-based firms. Two-thirds of timber-focused fund managers are headquartered in the US, or 23 out of the 35 that are currently active in the space. Preqin’s Fund Manager Profiles shows that after the US-based firms (66%), the next largest proportion of timber-investing fund managers are based in the UK, with 11% of the total.


In terms of dry powder, or capital available for investment, US-based timber-focused firms command an estimated total of $1.7bn in dry powder, while UK-based managers have only $298mn at their disposal. The anomaly in terms of dry powder is Canada, with only one fund manager focused on timber based in the country, but with $1.4bn in estimated dry powder. This firm is Brookfield Asset Management, which has global operations focused on not only the timber industry, but also natural resources as a whole, including agriculture and renewable energy.


Unsurprisingly, Brookfield Asset Management is the largest firm that focuses on timber investments as part of a wider strategy in terms of total funds raised in the last 10 years. The firm has raised just shy of $4bn since 2003, which represents more than triple the amount raised by the second largest timber-investing firm. This is Timbervest Partners, a US-based private equity firm that has raised $1.3bn over the last 10 years. The next largest firm by total funds raised in the past 10 years is UK-based manager, Stafford Timberland. This firm is an international timberland fund of funds manager that manages pooled investment vehicles and co-investment opportunities and advises on timberland investments located in most major international forestry economies.

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PPF appoints new farmland and timberland managers

PPF appoints new farmland and timberland managers | Timberland Investment | Scoop.it

The Pension Protection Fund (PPF) has appointed seven fund managers as part of its development of its alternative investment portfolio.


The managers will invest in farmland and timberland. The PPF has made this decision so that it can benefit from greater diversification and reduce its overall risk.


The seven appointed fund managers are: Brookfield Investment Management, Dasos Capital Oy, GMO Renewable Resources, Hancock Timber Resource Group, Macquarie, New Forests Pty and Stafford Timberland Group.

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Pensions guardian favours alts over equities, branches into timber

Pensions guardian favours alts over equities, branches into timber | Timberland Investment | Scoop.it

Overstretched finances are an all too familiar issue for Alan Goodman, fund management principal at the Pension Protection Fund (PPF), which absorbs the assets of insolvent company pension funds and covers their liabilities to members.


It’s therefore no surprise that Goodman says the PPF adopts a low-risk strategy but that doesn’t mean it’s averse to taking some well-balanced risks. The fund’s current exposure to alternatives stands at 20%, double that of its allocation to equities at only 10%.

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Since the PPF was established in 2004 its assets have grown significantly, says Goodman, which in turn has widened its focus towards alternative investment.


‘We started with real estate, then added private equity, infrastructure, global tactical asset allocation and alternative credit strategies. Alternative credit funds were added a couple of years ago, such as distressed debt, mezzanine and senior loans.


‘The most recent strategy we’ve tapped into is farming and timber.’

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The search this specialised investment started in 2012 and the group has recently backed its first timber fund manager.


‘The market provides a number of characteristics in terms of stability,’ he says. ‘The logged timber prices can be volatile but the overall growth rate can really come through, especially if you get geographical diversity via the different rainfall patterns around the world.


‘Demand is high for timber products. Australia and New Zealand have strong export markets to the growing middle classes of Asia where less timber is traditionally grown.’


Goodman and his team have focused their first timber investment on this market through a fund which is able to invest in a variety of regions.

At present they have shortlisted seven managers to target timber and farmland investments, which include groups such as Brookfield Asset Management, GMO Renewable Resources and Hancock Timber Resource Group.

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However, one risk which Goodman highlights is linked to the sector’s nascent status.


‘One of the outstanding issues is how you exit this type of investment? Who is the next natural buyer? It will be interesting see how this pans out over the next 10-15 yeas,’ he says.

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BTG Pactual expands its timberland investment platform with completion of the acquisition of Regions Timberland Group

BTG Pactual expands its timberland investment platform with completion of the acquisition of Regions Timberland Group | Timberland Investment | Scoop.it

BTG Pactual is pleased to announce the completion of its acquisition of Regions Timberland Group ("RTG"), a division of Regions Bank.


This acquisition, which expands BTG Pactual's current timberland investment platform, establishes the bank as the largest independent timberland manager in Latin America and one of the largest worldwide, with committed and invested assets of nearly US$3 billion and a portfolio of over 1.77 million acres (716,000 hectares) diversified across the USA, Latin America, Europe and South Africa.


"This acquisition is key to the development of BTGP Timberland's strategy, and we are very pleased to welcome RTG's many top tier North American and European clients to our platform", said Carlos Fonseca, partner and Head of Merchant Banking at BTG Pactual.


"We are very excited by this acquisition as we have known the team for many years. This acquisition immediately expands our footprint to several key geographies beyond Brazil," says Gerrity Lansing, Head of Timberland Merchant Banking.


"When looking for an ideal buyer of this business, BTG Pactual was at the top of our list, and this transaction memorializes our team's commitment to continued global timberland investing," says Charlie Daniel, former President and CIO of RTG, who will take the role of Head of Timberland Investment Management at BTG Pactual.

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2013 US Timberland Ownership: Descriptive Statistics

2013 US Timberland Ownership: Descriptive Statistics | Timberland Investment | Scoop.it

According to Forisk tracking of timberland ownership in the United States, 117 firms currently own or manage in excess of 100,000 acres of timberland. These firms feature the following descriptive statistics:

  • As a group, they own/manage 86.2 million acres of timberland.
  • On average, they own/manage 736,589 acres of timberland.
  • The median ownership is 312,000 acres.

Assuming an average per acre value of $1,500, each firm owns or manages on average $1.1 billion in timberland assets.

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Jeffrey Wikle's comment, April 4, 2013 9:20 AM
I think there is some overlap for AFM, which manages a lot of FIA timberland. AFM is a forestry consultant. All the rest on the list, perhaps with the exception of Wagner, are purely TIMOs or REITs.
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PPF appoints seven farmland and timberland managers

PPF appoints seven farmland and timberland managers | Timberland Investment | Scoop.it

The Pension Protection fund (PPF) has appointed seven farmland and timberland fund managers. Some managers will be funded immediately, while others are appointed for deferred investment.


The selected managers are Brookfield Asset Management, Dasos Capital Oy, GMO Renewable Resources, Hancock Timber Resource Group, Macquarie, New Forests Pty, and Stafford Timberland.

***

PPF executive director for financial risk Martin Clarke said: “We now have an investment portfolio worth more than £12bn and the size of our assets means that we can take advantage of a broader range of investment opportunities.

“Investing in farm and timberland will complement our existing alternative investment portfolio, allow us to diversify our investments more widely and make our portfolio more resilient.


“But we do need to be aware that there are some risks in these asset classes, for instance land price risk. Therefore, our approach will be to invest conservatively – which is consistent with our overall low-risk strategy.”


The proportion of PPF assets allocated to farm and timberland will vary over time and depend on the opportunities available now and in the future, the fund said. All managers are appointed for four years, with the flexibility for two extensions of up to two years.

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MetLife Forming Third-Party Real Estate Management Business

MetLife Forming Third-Party Real Estate Management Business | Timberland Investment | Scoop.it

Seeking to leverage its extensive investment in real estate, commercial mortgages and private bonds, MetLife Inc. plans to launch a third-party asset management business that will arrange and manage investments in those areas for other institutional investors, including insurance companies, public and private pension plans and sovereign wealth funds.

...

The new organization will be led by MetLife's global head of real estate investments, Robert Merck, and will manage investments for both institutional investors and MetLife.

...

"Our goal is to lever our industry-leading real estate platform to become a top five institutional real estate investment manager," Merck said.


[Editor: MetLife has been a major player on the debt side of timberland. Is it now going to become the newest TIMO?]

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