Timberland Investment
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Research: Long-term event study of timber real estate investment trust conversions

Research: Long-term event study of timber real estate investment trust conversions | Timberland Investment | Scoop.it
The long-term financial performance of four timber real estate investment trust (REIT) conversions in the United States is evaluated by an event study with one-, two-, and three-year event windows. Three types of benchmarks are used in gauging the abnormal returns. The first benchmark is a portfolio of firms that are closest in size and book-to-market ratio to the timber REITs, the second is a portfolio of pre-conversion timber firms, and the third is an equal-weighted timber exchange traded fund (ETF) comprised of selected forest firms. Four approaches are used to calculate abnormal returns. Buy-and-hold abnormal returns and cumulative abnormal returns measure the preliminary abnormal returns, zero-investment portfolio approach with rolling regression evaluates the market-based risk premiums, and panel data analyses capture the relative advantages of REITs over their competitors within the timber industry. On average, annualized abnormal returns of 0.5% and 8.9% are identified before and after the REIT conversions. There is no difference between variances of pre- and post-event annualized abnormal returns. Therefore, structural changes have added values to the timber firms in the long run.
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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, 2016 10:52 AM
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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Report notes new investment in research and development necessary if forest industry is to have a bright future

Report notes new investment in research and development necessary if forest industry is to have a bright future | Timberland Investment | Scoop.it

In tough times companies and governments look to cut costs. Unfortunately, those cuts may come at the expense of future opportunities, such as new product development. A new report released today finds that the forest products manufacturing industry invests less than one-seventh as much as the average U.S. manufacturing sector, seriously undermining the industry’s capacity to remain viable in the face of intense, global competition. The report, A New Model for Forest Sector Research and Development in the United States, was released by the U.S. Endowment for Forestry and Communities (the Endowment).


“In an age when more and more consumers are looking to use green, sustainable products, the forest products industry has the potential to be among the nation’s biggest growth sectors,” said Endowment President Carlton Owen. “But, this isn’t likely to happen without a more strategic and collaborative investment in research and development for state-of-the-art science such as green-building and wood-based nanotechnology.”


“America has for decades been the world’s leader in innovation in the forest products sector,” Owen continued. “That leadership is rooted in on-going research and development. Without a new commitment to research and development, and a new model for harnessing the power of public-private partnerships, the outlook for the forest products sector is uncertain at best.”

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Report: Private Forests and the Tax Code

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This comprehensive report was submitted to the House Ways and Means Committee recently by the National Alliance of Forest Owners.

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The Next 100 Years of Forests in the U.S. - Growing the Forests We Want and Need

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New reports: An understanding of the wood energy pellet sector

New reports: An understanding of the wood energy pellet sector | Timberland Investment | Scoop.it

Wood energy pellets: love them or hate them. It all depends upon your perspective and understanding. That’s why the U.S. Endowment for Forestry and Communities (the Endowment) today released two new reports on the rapidly-growing wood energy pellet industry: “The Wood Pellet Value Chain: An economic analysis of the wood pellet supply chain from the Southeast United States to European Consumers,” and “Applying Pathways to Sustainability: A case study of how hypothetical bioenergy facilities in VA and GA can increase the sustainability of their supply chains.”

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Forest Products Society journal publishes special biofuels issue

Forest Products Society journal publishes special biofuels issue | Timberland Investment | Scoop.it
A series of articles published as a special issue on biofuels by the Forest Products Journal highlights the relative impact of 15 different uses of biofuels on reducing CO2 emissions and increasing energy independence.
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Model predicts how forests will respond to climate change 

Model predicts how forests will respond to climate change  | Timberland Investment | Scoop.it

Drought could render the U.S. Northeast’s mixed forests unsustainable after 2050 while Washington’s Cascade Mountains may require tropical and subtropical forest species, according to researchers using a new type of mathematical model at Washington State University.
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WSU Vancouver mathematicians Jean Liénard and Nikolay Strigul, and ecologist John Harrison, predict the Pacific Northwest’s climate may be warmer and wetter, requiring the establishment of forest types seen in places like southeastern China, southern Brazil or sub-Saharan Africa.

 

Predicted forest types in the U.S. for projected climates determined by the WSU tolerance model.
In the northeastern U.S., the model projects forests of maple/beech/birch, spruce/fir and white/red/jack pine combinations will be ill-suited to withstand predicted drought conditions by the latter half of the 21st century. Other forested areas that were identified as being at risk from drought included the northern Great Plains and the higher elevations of the Rocky Mountains.

 

Meanwhile, low altitude areas of Texas may eventually host tropical dry forests similar to regions of eastern Mexico. Moist, deciduous forests found in locations like Cuba could one day thrive along the U.S. Gulf Coast.

 

“Until now, our ability to predict exactly how and where forest characteristics and distributions are likely to be altered as a result of climate change has been rather limited,” said Liénard, a postdoctoral researcher and the paper’s first author. “With our model, it is possible to identify which forests are at the greatest risk from future environmental stressors. Forest managers and private landowners could then take steps like planting drought tolerant seedlings and saplings to prepare.”

Sam Radcliffe's insight:

While this is an innovative way to model response to environmental changes, how accurately we predict forest impacts ultimately depends on how accurately future environmental changes are estimated. I am not convinced that scientists are very close to predicting the future climate very accurately, particularly for sub-continental regions.

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Does it take prices to make volumes move? A comparison of timber market functioning in Finland and Lithuania

Does it take prices to make volumes move? A comparison of timber market functioning in Finland and Lithuania | Timberland Investment | Scoop.it
Forest ownership structure is known to have implications for forest management and the production of forest products and services. The ownership structure, as well as the degree of state regulation of forestry, could thus be expected to affect the functioning of timber markets. Hence, in the presence of strict prescriptions for forest management, the self-regulating mechanisms of timber markets – governed by the economic principle of supply and demand – could be inhibited. Using Finland and Lithuania as contrasting cases, we found empirical evidence for the existence of such a self-regulating mechanism in timber markets that are liberal in terms of state regulation of forest management, but not in those under strict state regulation. The results highlight how price increases (reductions) generally anticipate high (low) sales volumes or at least volume increases (reductions) in the Finnish case, suggesting that timber markets here self-regulate toward the equilibrium. Such patterns were not found in the Lithuanian case. The inability to respond to – and take advantage of – price signals could hamper the economic viability of forest ownership in timber markets constrained by regulation, and thus also impede efforts to mobilize wood to satisfy a foreseen increased demand.
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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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Real-time map of all forests on Earth launches next month

Real-time map of all forests on Earth launches next month | Timberland Investment | Scoop.it
An online map that tracks in near real-time the vegetation area of all the world's forests simultaneously will launch next month, after a preview was shown at a United Nations summit yesterday....
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Timberland Return Drivers and Timberland Returns and Risks: A Simulation Approach

Timberland Return Drivers and Timberland Returns and Risks: A Simulation Approach | Timberland Investment | Scoop.it

Authors: Mei, Bin; Clutter, Michael L.; Harris, Thomas G.

Source: Southern Journal of Applied Forestry, Volume 37, Number 1, February 2013 , pp. 18-25(8)


Timberland assets exhibit several unique characteristics that are attractive to investors. In this study, we examined the three return drivers of timberland investments-timber price change, land value appreciation, and biological growth, in two settings. Timberland returns in the past 15 years were analyzed via a hypothetical loblolly pine plantation bought at age 10 years and sold at age 25 years. Results revealed that timber price had a negative contribution to the total returns. With declining timber prices, annualized average returns dropped from 14.31% for 1982-1997 to 6.88% for 1995-2010. Looking forward, timberland investment returns in the next 15 years were simulated by Monte Carlo simulations with both random and mean-reverting timber prices. Expected mean returns with random timber prices were found to be 8.35-10.16%, and those with mean-reverting timber prices were 7.25-8.56%. Returns with random timber prices were more volatile. Despite different time periods under investigation and timber price assumptions in the simulations, biological growth was identified as the dominant contributor to the total returns. However, timber price assumptions affect values of timber cut contracts, timberland liquidation values, and default risks of leveraged timberland investments.
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Assessing the Inflation Hedging Ability of Timberland Assets

Assessing the Inflation Hedging Ability of Timberland Assets | Timberland Investment | Scoop.it

Authors: Wan, Yang; Mei, Bin; Clutter, Michael L.; Siry, Jacek P.

Source: Forest Science, Volume 59, Number 1, 23 February 2013 , pp. 93-104(12)


Inflation hedging is one of the unique features of timberland assets that attract timberland investors. This study uses Fisher hypothesis and capital asset pricing model under inflation to analyze how effectively private- and public-equity timberland assets hedge actual, expected, and unexpected inflation in the United States over 1987 to 2009. Rolling regression is used to evaluate whether timberland assets can persistently hedge inflation, whereas the state space model is used to examine the time-varying inflation hedging ability. Empirical results suggest that private-equity timberland assets do hedge actual, expected, and unexpected inflation, whereas public-equity timberland assets are not consistent in hedging actual, expected, or unexpected inflation. Hedging effectiveness depends on the state of the economy. We find that private-equity timberland assets are effective in hedging inflation during the boom and less effective during the recession. Investment horizon also plays a significant role in timberland inflation hedging. The longer people invest in the private-equity timberland assets, the stronger and more consistent the hedging ability holds.

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Forestry sector awaits biofuel report

Forestry sector awaits biofuel report | Timberland Investment | Scoop.it

Crown-owned forest researcher Scion is set to present a report into the viability of generating biofuels from trees at the end of next month, a move that could throw a much-needed financial lifeline to the struggling sector.


Converting tree waste into biofuels and bioplastics has long been a Holy Grail for the forestry and wood-processing industry. It could turn pulp wood and sawmill waste into real revenue streams.


But while the technology has been proven in the lab, questions remain over the long-term commercial viability despite extensive research by forestry-dependent countries such as Canada and Sweden.

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Forest Products Lab to open first-of-its-kind pilot plant

The Forest Products Laboratory in Madison next week will open a $1.7 million nanocellulose pilot plant that will help support the emerging market for wood-derived renewable materials.


A grand-opening ceremony will be held at 10 a.m. Wednesday at the laboratory at 1 Gifford Pinchot Drive, with presentations by officials from the U.S. Department of Agriculture and the Forest Service, as well as industry representatives from IBM and Lockheed Martin.


The first-of-its-kind pilot plant will give researchers and early adopters of the technology working quantities of forest-based nanomaterials.

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