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Who Will Own Southern Forests in the Future?

Who Will Own Southern Forests in the Future? | Timberland Investment | Scoop.it

Forest ownership in the South has changed substantially over the past decade, raising questions about future landowner objectives and approaches to forest management — and ultimately about the retention of forest lands. Chartered by the U.S. Forest Service Southern Region and Southern Research Station along with the Southern Group of State Foresters, the Southern Forest Futures Project (SFFP) examined a variety of possible futures and how they might shape southern forests and their many ecosystems and values.
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Key Findings:

  • Private landowners hold 86 percent of the forest area in the South, with two-thirds of this area owned by families or individuals.
  • Fifty-nine percent of family forest owners own between 1 and 9 acres of forest land, but 60 percent of family-owned forests are in holdings of 100 acres or more.
  • The average size of family forest holdings is 29 acres. Ongoing parcellation and fragmentation through estate disposal and urbanization will continue to alter forest management in the South.
  • Two-thirds of family forest land is owned by people who have harvested and sold trees from their land.
  • The largest gain in ownership was realized by timber investment management organizations and real estate investment trusts.
  • Forest products industry divestitures were likely driven by a combination of factors including mergers, alleviation of timber-scarcity concerns, new technologies for reducing the cost of fiber acquisition, redeployment of capital, and desire to reduce tax burdens.
  • As a result of the transfer of holdings from the forest products industry to timber investment management organizations and real estate investment trusts, forest land held by corporations is now a more liquid asset class and will likely trade more frequently in the future. If this holds, individual corporate forest holdings could decline in size over time.
  • Although the forest products industry land base was long perceived to be a stable and predictable component of the forest landscape in the South, corporate lands may become less stable and more changeable with implications for both timber and nontimber values of forest lands.
  • Increased liquidity of forest assets argues for increased monitoring of ownership changes and of forest land transaction values to better understand the conservation implications of economic trends.
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Forest industry leaders plan review of options to strengthen timber hauling

Forest industry leaders plan review of options to strengthen timber hauling | Timberland Investment | Scoop.it
The U.S. Endowment for Forestry and Communities (Endowment) released a report–Enhancing the Strength and Vitality of the Nation’s Timber Harvesting/Hauling Network –from a late summer convening of sector leaders that explored opportunities to strengthen the nation’s timber harvesting and hauling link in the forest products value chain. The report contains a commitment by participants to explore and test 21st century solutions to what the group considers the most significant bottleneck in the system – hauling or trucking wood from timber harvesting sites to manufacturing facilities.
“As the economy has rebounded from the Great Recession, it appears that every segment of the business community faces a common challenge – finding and training qualified truck drivers to get their raw materials and products to market,” said Endowment President & CEO Carlton Owen. “This bottleneck is perhaps even more acute in the forest sector than it is in others markets.”
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These Are The Biggest Landowners Among America's Richest Families

These Are The Biggest Landowners Among America's Richest Families | Timberland Investment | Scoop.it

On September 29, 2014, the Reed Family acquired 600,000 acres of prime timberland in South Central Oregon. It was one of the biggest land purchases since John Malone’s 2011 acquisition of one million acres in Maine and New Hampshire, making the Reed clan one the nation’s largest landowners.


With 1.4 million acres, the Reeds are the largest landowners on Forbes’ 2015 list of America’s Richest Families. While the Reeds have been accumulating acres since the late 1800s, feeding a growing lumber empire in the American Northwest, land is becoming increasingly valuable for the wealthiest investors in the country. Their 2014 purchase, made through the family-owned Green Diamond Resource Company, puts the Reeds atop a select group that has recognized the true potential of land, extracting value from its natural beauty, inherent scarcity, and underlying economic capacity.
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The market for productive land took a turn after the financial collapse of 2008, according to Joe Taggart of LandVest, a managing director focused on timberland with vast experience with high net worth investors. “Prior to the collapse, we saw undisciplined buyers,” Taggart explained. “Since then, investors recognize they need to look for underlying value in the land.”


Eric O’Keefe, editor of The Land Report, said that buyers are looking for unique properties much in the same way as they are investing in art, particularly at the high-end. “It’s like a Picasso,” he noted. Beyond its aesthetic beauty, massive tracts of land in key places have the potential to provide capital appreciation and steady cashflows, beyond just aesthetic value. “Land is actually generating income. It’s as if you were exhibiting your Picasso three times a year and making good money for it as well,” Taggart said.
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Ample liquidity and low returns in traditional conservative asset classes like bonds, including U.S. Treasuries, have pushed investors into land, Taggart believes. Using little debt, buyers are deploying capital at accessible prices to take advantage of guaranteed returns, the broker explained.

After the dot-com bubble and the collapse of the global financial system in 2008, more wealthy families have turned to hard assets to park their cash. From apartments in Manhattan, contemporary art, or a 1960s stock Ferrari, the world’s richest people have boosted the prices of all sorts of vanity goods. When it comes to land, prices haven’t gone haywire just yet. But, as wealth creation accelerates in the U.S. and across the globe, interest in such scarce resource will only increase, push and it’ll be just a matter of time until the next bubble brews.

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Launch of Climate Change Report

Launch of Climate Change Report | Timberland Investment | Scoop.it

A new report from Mercer modelling the potential impact of climate change on investments, has found investors cannot ignore the implications for investment returns.

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The investment modelling in Mercer’s report estimates the potential impact of climate change on returns for portfolios, asset classes and industry sectors between 2015 and 2050, based on four climate change scenarios and four climate risk factors.
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The investment modelling supports the following key findings:

(1) Climate change will give rise to investment winners and losers

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(2) The biggest risk is at the industry level
Differentiation between winners and losers is most apparent at the industry level – For example, depending on the climate scenario which plays out, the average annual returns from the coal sub-sector could fall by anywhere between 18% and 74% over the next 35 years...

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Conversely, the renewables sub-sector could see average annual returns increase by between 6% and 54% over a 35 year time horizon (or between 4% and 97% over a 10-year period) depending on the climate scenario.


(3) Asset-class return impacts will be material, but vary widely by climate change scenario
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A 2°C scenario could see return benefits for emerging market equities, infrastructure, real estate, timber and agriculture. A 4°C scenario could negatively impact emerging market equities, real estate, timber and agriculture.

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10 Predictions for Wood Consuming Industries in 2015

10 Predictions for Wood Consuming Industries in 2015 | Timberland Investment | Scoop.it
Pete Stewart, Forest2Market's President and CEO, makes 10 predictions about the performance of wood consuming industries in 2015
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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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New study: Global warming triggers surge in tree growth

New study: Global warming triggers surge in tree growth | Timberland Investment | Scoop.it

Some trees are growing up to 70 percent faster than just a half century ago, as global warming supercharges their metabolism, German researchers report in a new study published in Nature Communications


Three decades ago, forest dieback was a hot topic, with the very survival of large forest ecosystems seemingly in doubt. But instead of a collapse, the latest studies indicate that forests have actually been growing at a faster rate. The new data from the Technische Universität München comes from forest plots that have been closely monitored since 1870. The forested areas are also representative of the typical climate and environmental conditions found in Central Europe.


“Our findings are based on a unique data pool,” maintains Prof. Hans Pretzsch from TUM’s Chair for Forest Growth and Yield, who headed up the study.

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The Top 88 Must-Read Real Estate Blogs Of 2014

The Top 88 Must-Read Real Estate Blogs Of 2014 | Timberland Investment | Scoop.it

If you’re anything like us – looking for ways to save time, become smarter real estate investors, uncover proven marketing strategies, and stay on track with industry news and trends - you need a quality reading list.


Thanks to the abundance of blogs popping up all over the internet, finding quality (actionable) information is becoming very challenging.

As you can see in the following graph from Statista, the number of posts and blogs is increasing exponentially. This makes it very easy to miss out on important information that could help you become a more informed investor and grow your business.


I have compiled a list of 88 real estate blogs that every investor, property manager and landlord should read. These blogs are authored by notable brands and industry experts, and will teach you key investment strategies, marketing tactics, as well as keep you up-to-date with the latest industry trends on both a national and local scale.

Sam Radcliffe's insight:

Although this blogger somehow failed to include Timberland Investment on his list ;-) there is still plenty to browse here that may be useful for us timber types.

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VA Tech Monthly Housing Report

Sam Radcliffe's insight:

Nice snapshot of housing indicators. This one (p.27) caught my eye: "Housing Outlook: 2015 is the year for housing to return to 'normal' ". Haven't we been hearing/saying that for about 4 years now?

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Canada & U.S. “Top 20” Lumber Producers’ Annual Report: The big Companies are Getting Bigger!

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Radical change projected for northern forests is rooted in past, current management 

Radical change projected for northern forests is rooted in past, current management  | Timberland Investment | Scoop.it

Forests in the Nation’s most densely forested and most densely populated region will change radically in the next 50 years, primarily because of the way they are managed – or not managed – today, according to a new report by a team of USDA Forest Service scientists and partners.

 

Released this week by the USDA Forest Service’s Northern Research Station, Future Forests of the Northern United States is an analysis of future forest change in the 20 states stretching from Maine to Minnesota and from Missouri to Maryland. Scientists analyzed the ramifications of land-use change, economic change, greenhouse gas emissions, climate change, forest growth, forest harvest, invasive species, and other factors from ecological, social, and economic perspectives.

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A few of the trends that will affect Northern forests over the next 50 years include:

  • Forest area is projected to decrease between 3.5 and 6.4 percent with losses concentrated around existing urban and suburban areas.
  • Forest area is currently concentrated in the 40-to-80-year age class and is expected to increase in mean age over time, reducing forest diversity and, with it, important types of wildlife habitat.
  • Forests are under the expanding influence of numerous native and invasive insect pests including emerald ash borer, Asian longhorned beetle, spruce budworm, Sirex woodwasp, winter moth, hemlock woolly adelgid, and gypsy moth as well as dozens of invasive plants.
  • Aboveground forest biomass is expected to increase by about 4 percent, but total carbon sequestered by northern forests (including soils) is expected to decrease by about 2 percent, primarily as the result of reduced forest acreage combined with slower tree growth that is typical for aging forests.
  • Projected population increases in the North are expected to cause Federal and State park land area per capita to decrease by 19 percent and non-Federal forest land area per capita to decrease by 26 percent.
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Jeffrey Wikle's comment, March 23, 2:52 PM
Federal forest land area per capita? Is this what we pay these guys to research? A rationale to take more federal lands taken out of the economy? As they say, the apple always falls under the tree.
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Alabama’s timberland acreage increases to 23 million acres

Alabama’s timberland acreage increases to 23 million acres | Timberland Investment | Scoop.it
All it takes is a drive down virtually any road in Alabama for one to come to the conclusion that there is an abundance of timberland – commercial forestland – in the state. This conclusion is substantiated by 2014 Forest Inventory & Analysis (FIA) data which shows that the amount of timberland in Alabama has increased to an all-time high of 23 million acres. The only states in the nation having more timberland than Alabama are Georgia and Oregon. These 23 million acres of timberland account for 69 percent of Alabama’s total area, an increase of 360,000 acres since the year 2000.

Despite the perception of some that trees and forests are vanishing, FIA data also shows an increase in timber volume over previous years. The fact is that the amount of timber growth exceeds the amount of timber being harvested annually. More specifically, for every ton of timber harvested, 1.55 tons of new growth are added to our forests each year. Total timber volume has increased 18.7 percent since 2000 to a total of 1.17 billion tons. Softwood timber volume (primarily pine species) has increased 31.1 percent, while hardwood timber volume has increased 7.6 percent.
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Brookfield's Q4 Research Report

Sam Radcliffe's insight:

Reid Carter always has some frank insights into the TIMO/REIT space.

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Deer account for almost half of long-term forest change, study finds

Deer account for almost half of long-term forest change, study finds | Timberland Investment | Scoop.it

A study released this week has linked at least 40 percent of species changes in the forests of northern Wisconsin and Michigan over the past 60 years to the eating habits of white-tailed deer.

A research group led by Donald Waller, a professor of botany at the University of Wisconsin-Madison, used a pair of strategies to look at the ecological impact of deer. First, they resurveyed 62 sites across northern Wisconsin and Michigan in 2000-01 that were first studied by former UW-Madison Professor John Curtis and his students in the 1950s. "This showed us just how the forest has changed during a time when deer were becoming much more common, but it did not pinpoint the deer themselves as the cause of the changes," Waller says.


Waller's group later examined plant communities inside and outside 17 fenced "exclosures" built to keep out deer but not smaller mammals. The study was published in the journal PLOS ONE.

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Forest ecosystem vulnerability assessment and synthesis for northern Wisconsin and western Upper Michigan: a report from the Northwoods Climate Change Response Framework project

Forest ecosystems across the Northwoods will face direct and indirect impacts from a changing climate over the 21st century. This assessment evaluates the vulnerability of forest ecosystems in the Laurentian Mixed Forest Province of northern Wisconsin and western Upper Michigan under a range of future climates. Information on current forest conditions, observed climate trends, projected climate changes, and impacts to forest ecosystems was considered in order to assess vulnerability to climate change. Upland spruce-fir, lowland conifers, aspen-birch, lowland-riparian hardwoods, and red pine forests were determined to be the most vulnerable ecosystems. White pine and oak forests were perceived as less vulnerable to projected changes in climate. These projected changes in climate and the associated impacts and vulnerabilities will have important implications for economically valuable timber species, forest-dependent wildlife and plants, recreation, and long-term natural resource planning.
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Scotland's timber industry warns of forest slump

Scotland's timber industry warns of forest slump | Timberland Investment | Scoop.it

Scotland's forestry and timber industry has said not enough trees are being planted now to meet expected demand for wood in 50 to 100 years time. Industry body Confor said trees for commercial use could take up to 40 years to grow but that there had been a fall in planting since 1990.


Public agency Forestry Commission Scotland (FCS) said there were good levels of supply for the next 20 years. It said it would need to work with the private sector to meet later demand.


Confor said FCS's 50-year and 100-year timber supply forecasts showed a shortage of 60 million cubic metres of timber.

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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 3:28 PM

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.