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NCSU deal to sell Hofmann Forest falls through

NCSU deal to sell Hofmann Forest falls through | Timberland Investment | Scoop.it

The Endowment Fund of North Carolina State University said Friday that a deal to sell the 79,000-acre Hofmann Forest near the coast is off after the two firms planning to buy the land couldn't finalize the financial contingencies of the contract.

The research forest will continue to be owned by the endowment fund for the benefit of the university's College of Natural Resources, officials said, adding that the endowment board and the Natural Resources Foundation hope to find another buyer.
***
N.C. State had planned to sell 56,000 acres of Hofmann Forest to Resource Management Service of Alabama, a timber management firm, and the remaining 23,000 acres to Hofmann Forest LLC, an Illinois-based agribusiness firm that planned to develop part of the property.

The two firms would have paid a total of $131 million for the land.

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Sponsored by...

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

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

 

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

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

 

About this magazine

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

 

We encourage readers to interact with our site:

  • Click on the Follow  button (upper left), and Scoop.it! will deliver a summary of our new content to your inbox every morning.
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Some useful links

 

Stock quotes, news and financial metrics

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

 

Prentiss & Carlisle newsletters

Quarterly updates on conditions in our operating regions

 

Timber Mart North 

Lake States price reporting service published by P&C

 

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Proposed Chinese Tariffs: Potential impacts for the PNW Forest Industry

Proposed Chinese Tariffs: Potential impacts for the PNW Forest Industry | Timberland Investment | Scoop.it

On August 8, China's Commerce Ministry released a preliminary list of proposed tariffs on $16 billion in US goods, which came just a day after the U.S. Trade Representative's office released a finalized list of $16 billion in Chinese goods that will be hit with tariffs.

The tariffs are scheduled to be activated on August 23, the Chinese ministry clarified, which is the same day that the US plans to begin collecting an additional 25 percent in tariffs on $16 billion in Chinese goods.

The list identified duties of 5, 10, 20 or 25 percent on 5,207 US imports that include a number of wood products such as softwood and hardwood logs, veneer and lumber, chips, pellets, MDF, OSB, wood pulp, paper and other processed and unprocessed wood materials.
***
If enacted, these tariffs will have a significant impact on US markets, particularly the Pacific Northwest (PNW). Due to its proximity to Asian markets, the PNW region exports a number of wood products to China, including softwood logs, lumber, chips, wood pulp, paper, and other processed wood materials.

What will these proposed tariffs mean for the forest products industry in the PNW?

Landowners/Land Managers

Harvests have been near sustainable long-term levels and there has been very little wiggle room in regional private harvests over the last year. Those involved in the log export market could see diminished export opportunities, which will cause a shift to domestic markets that will result in lower pricing due to increased supply.

Sawmills/Veneer Mills

These mill facilities may benefit from increased log supply and lower pricing due to restricted export markets. While lower raw material costs would be a welcomed change for these manufacturers, North American lumber pricing has dropped precipitously over the last two months. Raw material cost gains may be offset by challenging condition for lumber, veneer and residual chip pricing.
***
With a potential for a major shift in global markets, it’s more important than ever for supply chain managers to remain nimble and adaptive when circumstances change. Sales and procurement managers must monitor these market changes closely and be prepared to make adjustments quickly.

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US Housing Starts Drop to Nine-Month Low in June

US Housing Starts Drop to Nine-Month Low in June | Timberland Investment | Scoop.it
After jumping 11 percent in May, housing starts dropped 12 percent in June to a seasonally adjusted annual rate (SAAR) of 1,173,000 units. Single-family starts accounted for 858,000 units, which is 9.1 percent below the revised May figure of 944,000. Starts for the volatile multi-family housing segment plunged 19.8 percent to a rate of 315,000 units in June; starts for buildings with five or more units fell to a 10-month low.

Privately-owned housing authorizations dropped 2.2 percent to a rate of 1,301,000 units in June. Single-family authorizations fell to 850,000, which is 0.8 percent above the revised May figure.

Privately-owned housing completions were flat at a SAAR of 1,261,000 in June. Regional performance was down across the board as confirmed by the US Census Bureau report, although unlike like month when the Midwest drove nearly all of the growth, the same region accounted for a lion’s share of the decline. Seasonally-adjusted total housing starts by region included:

Northeast: -6.8 percent (-15.0 percent last month)
South: -9.1 percent (-0.9 percent last month)
Midwest: -35.8 percent (+62.2 percent last month)
West: -3.0 percent (-4.1 percent last month)

Seasonally-adjusted single-family housing starts by region included:

Northeast: +3.1 percent (+10.2 percent last month)
South: -6.8 percent (-3.5 percent last month)
Midwest: -29.1 percent (+44.4 percent last month)
West: -3.6 percent (-0.5 percent last month)
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AIMCo, BCI, PSP to affiliate TimberWest, Island Timberlands

AIMCo, BCI, PSP to affiliate TimberWest, Island Timberlands | Timberland Investment | Scoop.it
British Columbia Investment Management Corp (BCI), Public Sector Pension Investment Board (PSP Investments) and Alberta Investment Management Corp (AIMCo) have agreed to affiliate their timber investments. The agreement will see TimberWest Forest Corp and Island Timberlands LP, both Canadian timberland companies, share facilities and services, align best practices and work together to enhance forest stewardship. They will continue to operate independently. BCI and AIMCo have backed Island Timberlands since 2005. BCI and PSP Investments acquired TimberWest in 2011.
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CalPERS Cuts Most of Its Forestland Investment Program

CalPERS Cuts Most of Its Forestland Investment Program | Timberland Investment | Scoop.it

The California Public Employees’ Retirement System (CalPERS), the largest US public pension plan, has sold most of its poorly performing forestland portfolio, a consultant’s [Wilshire Associates] review of the program shows.

***

CalPERS took a double hit with the sale of the $1.559 billion portfolio, consisting of forestland in eastern Texas and western Louisiana, selling the portfolio at a loss after poor long-term investment results.

 

CalPERS had purchased the timber portfolio sold last month starting back in 2008, paying around $2 billion as part of then-Chief Investment Officer Russell Reed’s efforts to diversify the system’s portfolio and invest in sustainability-oriented strategies.

***

Wilshire went on to say that challenges of the investment included “onerous debt arrangements,” and “unfavorable supply arrangements.” It also noted depressed timber market pricing.

CalPERS officials were not immediately available for comment, but it is their policy not to comment on upcoming board agenda material.

 

The Wilshire report did not detail the exact amount of the loss CalPERS incurred in the sale or who was the purchaser. One source said CalPERS lost approximately $500 million from the sale.

 

CalPERS data shows that the Crown Pine Timber portfolio made up almost 80% of the value of the plan’s timber portfolio. The remaining two portfolios, one valued at $425 million, and another valued at $2 million, are also for sale, sources say.

 

CalPERS does break down specific investment returns for the Crown Timber Portfolio. But CalPERS data shows that investment results for the Crown Timber  portfolio, and a second unrelated smaller timber tract combined, produced a negative 4.2% return in the three-year period ending June 30 and  a negative 1.4% return for the five- year period, also ending June 30.

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Trump Inaccurately Claims California Is Wasting Water as Fires Burn

Trump Inaccurately Claims California Is Wasting Water as Fires Burn | Timberland Investment | Scoop.it

In his first remarks on the vast California wildfires that have killed at least seven people and forced thousands to flee, President Trump blamed the blazes on the state’s environmental policies and inaccurately claimed that water that could be used to fight the fires was “foolishly being diverted into the Pacific Ocean.”

 

State officials and firefighting experts dismissed the president’s comments, which he posted on Twitter. “We have plenty of water to fight these wildfires, but let’s be clear: It’s our changing climate that is leading to more severe and destructive fires,” said Daniel Berlant, assistant deputy director of Cal Fire, the state’s fire agency.

 

He and others said that Mr. Trump appeared to be referring to a perennial and unrelated water dispute in California between farmers and environmentalists. Farmers have long argued for more water to be allocated to irrigating crops, while environmentalists counter that the state’s rivers would suffer and fish stocks would die.

 

The president first addressed the fires late Sunday, writing on Twitter, “California wildfires are being magnified & made so much worse by the bad environmental laws which aren’t allowing massive amount of readily available water to be properly utilized.” He also referred to a debate in forest management about the effectiveness of removing trees and vegetation as a fire control method.
***
William Stewart, a forestry specialist at the University of California, Berkeley, said he believed Mr. Trump was referring to the battle over allocating water to irrigation versus providing river habitat for fish.

 

That debate has no bearing on the availability of water for firefighting. Helicopters lower buckets into lakes and ponds to collect water that is then used to douse wildfires, and there is no shortage of water to do so, Cal Fire officials said.
***
Mr. Trump raised another issue when he wrote that officials “must also tree clear to stop fire spreading.” Scientists and forest experts said the president was referring to a valid and continuing debate.

 

The timber industry has argued that “thinning” forests — removing certain trees to improve the health of the remaining ones and diminish the plants and underbrush that fuel fires — reduces the risk of wildfires. Republicans in Congress have sought to loosen environmental restrictions to allow more thinning. Democrats and environmentalists argue the practice will open the door to expanded commercial logging and threaten wildlife.
***
The president in the past has dismissed climate change as a hoax and his top cabinet officials have questioned the established science that rising global temperatures are caused by human activity.

 

Michael F. Wehner, a senior staff scientist at Lawrence Berkeley National Laboratory, said it was not possible to quantify precisely the likelihood that climate change is having an impact on forest fires, as can now be done with other extreme-weather events such as heat waves.

 

And, he said, it’s not easy to weigh how much of the problem can be laid at the feet of forest-management practices.

***

California fire officials on Monday said the Carr Fire in Shasta County had ravaged more than 160,000 acres while the Mendocino Complex fires grew overnight and had charred more than 273,000 acres across Mendocino, Lake and Colusa counties.

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WWOTF Agenda

WWOTF Agenda | Timberland Investment | Scoop.it

Who Will Own the Forest? 14 is a 2.5 day event, beginning with an evening reception on September 25, conference sessions and evening reception on September 26, and conference sessions on September 27.

Wednesday, September 26, 2018

 

  • Session 1: The Big Picture: Interest Rates, Housing, Labor Markets
  • Session 2: Investor Perspectives
  • Session 3:  Tax and Regulatory Affairs
  • Session 4: Valuations and Investment Performance
  • sion 5 (Part I): Forest Investments in Conservation and Carbon

 

Thursday, September 27, 2018

  • Session 5 (Part II): Forest Investments in Conservation and Carbon
  • Session 6: Succession Planning
  • Session 7: Supply Chain and Transportation Issues 
  • Session 8: Innovation and Technology: Impact on Forest Management and Silviculture
  •  Session 9: International Markets

 

Sam Radcliffe's insight:

Looking forward to participating as a speaker and seeing old friends again at this granddaddy of timber investment events.

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Oregon Court Rules Sale of Elliott State Forest Tract Illegal

Oregon Court Rules Sale of Elliott State Forest Tract Illegal | Timberland Investment | Scoop.it

The Oregon Court of Appeals ruled today that the 2014 sale of the 788-acre East Hakki Ridge tract on the 93,000-acre Elliott State Forest east of Coos Bay was illegal. The ruling, which overturns the sale of the public land to a private timber company, marks a major win for the state’s public lands.

 

“This is a huge victory for public lands enthusiasts who were locked out of the forest after the state of Oregon recklessly sold this tract to the timber industry,” said Josh Laughlin, executive director of Cascadia Wildlands and an individual plaintiff in the case. “Privatizing public land would have been a disaster for imperiled salmon and wildlife that rely on clean water and old forests to survive.”

 

Cascadia Wildlands, Audubon Society of Portland and Center for Biological Diversity brought the lawsuit under an Oregon law, ORS 530.450, which states that it is illegal to sell the Elliott State Forest. State officials defended their decision to dispose of the parcel in court saying the State Land Board should not be required to follow the law.

 

“The decision by the state to sell off portions off the Elliott State Forest and avoid its legal obligations to protect imperiled marbled murrelets and the forests in which they depend was fundamentally flawed from the start,” said Bob Sallinger, conservation director for Portland Audubon. “It is now time for the state to step up and manage this amazing forest in a way that truly protects murrelets, spotted owls, coho salmon and other species that depend on our older forests.”
***
Sold to Seneca Jones Timber Company, the East Hakki Ridge parcel was one of a handful of forested tracts the state sold to the timber industry in 2014. Another parcel, the 355-acre Benson Ridge tract, was sold to Scott Timber Company and is also currently subject to litigation.

 

The different state sales were looked at as test cases to sell off the entire Elliott State Forest to the timber industry. The State Land Board, made up of the governor, secretary of state and treasurer, oversees management of the Forest and was ready to sell the entire forest in 2017.

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Weyerhaeuser Company (WY) Q2 2018 Earnings Conference Call Transcript

Weyerhaeuser Company (WY) Q2 2018 Earnings Conference Call Transcript | Timberland Investment | Scoop.it

Brian Maguire -- Goldman Sachs -- Analyst

Okay. That makes sense. Just one last one for me. The June housing starts where we don't want to make too much out of one month, a lot of noise in the numbers. But some people will call it out maybe impacts of higher lumber prices. Maybe given some of the home builders pause with caution, did you see any signs of that? Do you think with this correction back in lumber prices we might see some pickup back in that starts activity now?

 

Doyle Simons -- Chief Executive Officer

We've heard some of that. You've got to remember that only roughly 2% of the cost of a new house is attributable to lumber prices. So, while I think it may have some effect on the margin, both when it's up and when it's down, I don't think that's a big catalysts for what happens on the housing stats or housing sales numbers.
***
Mark Weintraub -- Buckingham Research Group -- Analyst

Okay. Thank you. Then obviously, lots of talk on trade wars and China in particular, as you think about potential implications for Weyerhaeuser, what would you highlight?

 

Doyle Simons -- Chief Executive Officer

Market has a lot of uncertainties, you very well know regarding trade policy in China tariffs. What I would tell you at this point is now the proposed tariffs on U.S. goods did not affect our export logs, thus far we've not seen any impacts to our business. If something does change, we'll figure out a way to manage through this. The bottom line is China does need to source some percentage of their logs from the United States on go-forward basis.

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Could a Mature Timberland Asset Class Spur Conservation?

Could a Mature Timberland Asset Class Spur Conservation? | Timberland Investment | Scoop.it

Sustainable forestry represents a major portion of conservation finance’s investable landscape. According to a 2016 Forest Trends report, “State of Private Investment in Conservation 2016,” sustainable timberland investments accounted for approximately 34 percent of all private conservation investments from 2004 to 2015.

 

Also, according to a 2017 report by Credit Suisse AG and McKinsey Center for Business and Environment, “Conservation Finance from Niche to Mainstream: The Building of an Institutional Asset Class,” sustainable forestry is among the most well-developed conservation finance markets. With the maturity and scale needed to attract higher volumes of private capital, it resembles a mainstream investment product.

 

However, according to speakers at the 2018 RISI Forest Investment Conference, timberland has matured as an asset class. Financial returns have fallen dramatically, particularly since the mid-2000s, making timberland investments less attractive. As a result, timberland investment managers will feel pressure to differentiate their products and increase returns.

 

This may lead managers to adopt innovative models such as well-managed conservation strategies. Because such strategies can increase returns through creating additional revenue streams such as the sale of carbon credits, they will likely become more common in timberland investing. Thus, the maturation of the timberland asset class could prove to be a catalyst for the growth of conservation finance.

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NCREIF Timberland Index decreases in second quarter 2018

NCREIF Timberland Index decreases in second quarter 2018 | Timberland Investment | Scoop.it
The National Council of Real Estate Investment Fiduciaries (NCREIF) has released second quarter 2018 results of the NCREIF Timberland Index. The index returned 0.48 percent for the quarter, down from 0.92 percent last quarter and 0.70 percent in the second quarter 2017. The EBITDDA return, at 0.75 percent, was lower than 0.87 percent last quarter but higher than 0.62 percent a year ago. Appreciation in the second quarter dropped by 0.27 percent.

The Total Timberland Index had a 3.57 percent trailing year return, with 1.41 percent as the 2018 year-to-date total return.

The Northwest led regional returns for both the second quarter and for the trailing year. The total quarterly return for the Northwest was 2.49 percent, fairly evenly split between appreciation and EBITDDA return. The South dragged the index in the second quarter, with a total quarterly return of -0.35 percent, driven by a negative appreciation return of -0.94 percent.

Timberland market value per acre, at $1,804 as of the second quarter, has slightly decreased from $1,824 over the past year. Within the regions, the Northwest region continues to climb higher with a 5.78 percent increase year-over-year in the market value per acre. Market value per acre for the South region continues to follow closely with the Total Timberland Index market value per acre.

The NCREIF Timberland Index consists of 453 investment-grade timber properties with a market value of $25.3 billion. This includes 307 properties in the South, 93 in the Northwest, 35 in the Northeast, and 17 in the Lake States. This data enhances the ability of institutional investors to evaluate the risk and performance of timberland investments across the United States.
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Truck driver shortage could reach crisis levels for wood products

Truck driver shortage could reach crisis levels for wood products | Timberland Investment | Scoop.it

In the American Transportation Research Institute’s annual industry issues report for 2017, driver shortage topped the list of critical issues facing the industry for the first time since 2006. The industry was around 51,000 drivers short in 2017 - up from 36,000 in 2016 - and that number is projected to increase to a whopping 174,000 by 2026.

As virtually every segment of the economy grows, and online sales continue to soar across many industries, the demand for truck drivers is extreme. Shipping expenses are at an all-time high: it costs more than $1.85 a mile to ship a dry, non-refrigerated good. That's an increase of nearly 40 percent from a year ago, according to data from DAT Solutions.

Businesses are compensating by increasing driver wages and getting them home more often.

"It's as bad as it's ever been to find drivers," Bob Costello, chief economist at the American Trucking Association, told the Washington Post. "Companies are doing everything they can to make drivers happy: increasing pay and getting them home more often, but that means they aren't driving as many miles."

Many wood products companies have reported that the shortage of drivers is directly responsible for their own fourth-quarter shortages, according to the Hardwood Distributors Association (HDA). Some are seeing significant impacts to capacity levels due to inability to efficiently transport materials.

Montreal-based Resolute Forest Products' lack of drivers impeded its ability to ship lumber from its sawmills to its paper plants, said now-retired CEO Richard Garneau. Garneau said truck driver shortages caused production slowdowns, which along with restructuring in its specialty operations, reduced volume and increased distribution costs.

Arkansas-based Anthony Timberlands CEO Steve Anthony told Arkansas Business that its product is just sitting on the shelf. Anthony said he can't find any trucks. Anthony said that despite seeing the strongest market in his lifetime - with robust prices and surging demand - he has been unable to reap rewards.

Low unemployment, uninterested young people, the advent of self-driving trucks, and new and required implementations all seem to be factors.

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Third N.H. Power Plant To Shut Down

Third N.H. Power Plant To Shut Down | Timberland Investment | Scoop.it
A third biomass power company has made plans to temporarily wind down operations following Gov. Chris Sununu’s veto of a bill that sought to prop up the industry, an official confirmed on Tuesday.

Bridgewater Power Plant in Ashland, N.H., joins two other plants in the state that have stopped buying wood chips from local suppliers and are planning to burn through their stockpile in the coming weeks, according to Michael O’Leary, the plant’s asset manager.

The plant will then switch to “dispatch mode,” standing by with a small reserve of fuel ready to provide power at the request of ISO New England, which runs the reg ion’s electric grid, according to O’Leary.

“It’s unlikely we’re going to run certainly in the shoulder months in the year,” he said, referring to spring and fall, when demand for electricity dips.

The plant will “definitely” go dark by September and wait for the call to refire, he said.

The decision to cancel wood purchases was a direct result of Sun unu’s veto of Senate Bill 365, according to O’Leary. That bill would have mandated that utilities purchase power from the biomass plants — which have struggled to remain profitable amid a flood of cheap natural gas — at 80 percent of the market rate.

The company’s decision was made on June 20, according to O’Leary, one day after Sununu’s veto. If the Legislature could override the governor, O’Leary said he’s confident the plant could remain running year-round.

Bridgewater employs 20 workers directly, but it purchases wood product from about 25 logging companies in the area, O’Leary said.

Sununu and other critics of the bill said the veto was necessary to lower electricity costs and help protect ratepayers from bearing the brunt of the subsidies through higher utility bills. And critics have argued that the profitability problems facing the biomass industry run far deeper than any law can fix.
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Phaunos Timber Fund rejects Stafford bid; ups asset sale guidance

Phaunos Timber Fund rejects Stafford bid; ups asset sale guidance | Timberland Investment | Scoop.it

Phaunos Timber Fund issued a letter to shareholders urging them to reject a takeover bid for the company, which is currently in the process of being wound up.

 

Phaunos had in June announced it received a takeover approach from Stafford Capital Partners, its former fund manager, worth 49 cents per share.

 

'Stafford's offer undervalues Phaunos,' the company said.

'There is significant upside from the asset realisation process compared to Stafford's offer.'

 

Phaunos also published an updated asset realisation range of 54-to-60 cents per share.

 

'This updated range, based on indicative bids received in US dollars, represents a 10% to 22% upside to Stafford's offer,' it said.

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Here's How America Uses Its Land

Here's How America Uses Its Land | Timberland Investment | Scoop.it

Using surveys, satellite images and categorizations from various government agencies, the U.S. Department of Agriculture divides the U.S. into six major types of land. The data can’t be pinpointed to a city block—each square on the map represents 250,000 acres of land. But piecing the data together state-by-state can give a general sense of how U.S. land is used.

***

Forestland is the last major category of land categorized by the USDA. Unprotected forests and timberland constitute a quarter of the contiguous U.S.

 

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Zinke on California fires: 'This is not a debate about climate change'

Zinke on California fires: 'This is not a debate about climate change' | Timberland Investment | Scoop.it

Interior Secretary Ryan Zinke said climate change had "nothing to do" with California's wildfires, as he visited neighborhoods hard hit by the massive Carr Fire over the weekend.

“I’ve heard the climate change argument back and forth. This has nothing to do with climate change. This has to do with active forest management," Zinke told Sacramento station KCRA.

It's a tone the Interior secretary struck throughout his visit to Redwood, Calif., where, alongside Department of Agriculture Secretary Sonny Perdue, he met with local officials and fire crews battling the wildfire.

Zinke echoed President Trump in his assertion that active forrest management -- including logging -- is the key to stopping the forest fires.

"It doesn’t matter whether you believe or don’t believe in climate change. What is important is we manage our forests," Zinke told reporters while visiting the Whisteytown National Recreation Area Sunday. “This is not a debate about climate change. There’s no doubt the (fire) season is getting longer, the temperatures are getting hotter.”

The Interior secretary blamed environmentalists for having their own agenda in keeping officials from logging -- a method he said would remove much of the fuel fed to fires.
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Zinke's argument runs counter to a number of California officials and environmentalists who say the underlying factor responsible for the state's expanded fire season and acres burned each year is drought caused by global warming.

“California has some of the strongest environmental laws in the country, but the impact of extreme drought conditions caused by climate change are intensifying wildfires,” Rep. Mark DeSaulnier (D-Calif.) wrote in a op-ed for The Hill on Friday. “Contrary to his tweets, the Trump administration’s anti-environment policies, not California’s pro-environment reforms, will make matters worse and hurt our planet for generations to come.”

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MassPRIM returns 10% for fiscal year

MassPRIM returns 10% for fiscal year | Timberland Investment | Scoop.it

Massachusetts Pension Reserves Investment Management Board returned a gross 10% in the fiscal year ended June 30, documents from the Boston-based pension system show.

The return drove MassPRIM's value to $71.8 billion. It also outperformed the pension fund's benchmark of 8.1% for the year.
***
Private equity returned 21.8% in fiscal 2018, followed by global equities at 11.9%; real estate, 9.4%; timber, 7.9%; portfolio completion strategies, 6.9%; value-added fixed income, 3.8%; and overlay, 3.1%. Core fixed income returned -1%.

The current asset allocation is 41.9% global equity, 13.4% portfolio completion strategies (which includes hedge funds), 12.8% core fixed income, 10.8% private equity, 9% real estate, 8% value-added fixed income, 3.4% timberland and 0.4% overlay.

Callan is MassPRIM's public markets consultant, NEPC is asset allocation consultant; Aberdeen Standard Investments, hedge funds; Townsend Group, real estate and timberland; and Hamilton Lane, private equity.

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The Lyme Timber Company LP Closes $20 Million of New Markets Tax Credit Capacity from LLC to Sustainably Steward West Virginia Forestland

The Lyme Timber Company LP Closes $20 Million of New Markets Tax Credit Capacity from  LLC to Sustainably Steward West Virginia Forestland | Timberland Investment | Scoop.it

 

An investment fund managed by The Lyme Timber Company LP (“Lyme”), a private timberland investment manager, has received $20 million in New Markets Tax Credit (NMTC) financing from CEI Capital Management LLC (“CCML”) to help it acquire 118,300 acres of timberlands in the Wyoming, McDowell, Mingo and Logan Counties of West Virginia.

 

This addition to Lyme’s portfolio is in keeping with the company’s approach to partnering with rural communities and landowners to sustainably manage working forestland with living wages paid to employees, and strategies including recreational leasing, the sale of carbon-offset credits, and restrictions on future commercial or residential development through the sale of working forest conservation easements.

 

Lyme’s West Virginia forestland purchase qualified for the NMTC program, which was designed by Congress to stimulate private investment and economic growth in low income communities that lack access to capital needed to grow businesses, create jobs, and sustain healthy local economies. The tracts are located in a highly economically distressed area of coal country that cites poverty rates as high as 37.9 percent, and unemployment as high as 14.8 percent.

 

Importantly, Lyme will work to introduce new worker safety and job quality standards to the local logging industry. Due to its steep and mountainous terrain, West Virginia woodlands are particularly difficult to safely harvest, with loggers using chainsaws on steep slopes, making them susceptible to injury when trees fall or are moved. To address these safety issues, Lyme will focus on bringing “winch-assist” harvesting technology to the region. The technology allows logging crews to operate harvesting machines on slopes that were previously logged by hand. Harvesting machines are tethered by cables to an anchor machine at the top of the slope supporting the harvesting machine to remain upright on the hill and protects workers by moving them inside a safety cab. Harvesting with machines also increases productivity and can create higher paying jobs with better benefits.

 

Though used in Canada, New Zealand, and the Pacific Northwest, tethered harvesting systems has yet to be used in the eastern US. The flexible financing from CCML via the New Markets Tax Credit (NMTC) program helps make the cost of testing its implementation possible.

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CalPERS Loses Over $500 Million on Botched Timber Investment; May Have Sold at Bottom of Market

CalPERS Loses Over $500 Million on Botched Timber Investment; May Have Sold at Bottom of Market | Timberland Investment | Scoop.it

The Financial Times reports that CalPERS lost over $400 million on Lincoln Timber, a failed 2008 purchase of $2.38 billion of timberland in the southern part of the US. CalPERS exited the remainder of this investment in June, for $1.39 billion, a loss of $355 million on the purchase price. Combined with losses on disposals of previous portions of this holding, the total loss was over $500 million.

 

From the Financial Times:

Combined with previous disposals, it appears that total sales of the forestry land netted $1.85bn, leaving Calpers and its partners with a $534m loss before taking into account lumber revenues, inflation, management fees and debt servicing costs.

 

The article later states that the giant fund paid $52 million in fees. And of course, there were opportunity costs. Again from the pink paper:

According to Calpers documents, its return on the investment was a negative 0.5 per cent over 10 years, underperforming its benchmark, the NCREIF Timberland Index, by 497 basis points over that time.

 

“Leverage has exacerbated cash flow issues,” said a Calpers external audit last year. “Assets that would otherwise have been allowed to grow and appreciate, have been harvested to manage the debt.”

 

It also appears that CalPERS, as it is sometimes wont to do, timed its sale badly. The Financial Times points out CalPERS was in haste to exit its holdings:

After starting 2018 with the seventh-largest holdings of forestry land on the continent, the Texas sale all but takes Calpers out of the asset class.

 

“They made a decision to get out and they wanted to get out fast,” said Brooks Mendell of Forisk Consulting. “They’ve basically accomplished that objective.

 

 

***

In the 1990s, CalPERS had been an early entrant into timberland investing, along with Harvard, and had done well with this investment strategy. JJ Jelincic said the Lincoln investment was intended to be the first of a new program, but that a timber portfolio with holdings only in the South, and nothing in the Pacific Northwest, “made no sense”.

 

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Trump's timber tariffs divide the construction industry

Trump's timber tariffs divide the construction industry | Timberland Investment | Scoop.it

Last November, the U.S. Department of Commerce under President Trump announced an average of 21 percent import duties on Canadian timber products entering the U.S. The announcement was greeted with mixed reactions within the construction industry; builders claimed that the tariffs would increase the cost of construction, and American suppliers argued that the domestic timber industry would benefit, expand, and keep wood prices low.

 

Single-family home construction in the U.S. relies heavily on Canadian softwood for roofing and framing. In 2017, Canadian lumber yards supplied 28 percent of the U.S. softwood lumber market, and home builders have been the first to raise concerns about the new duties, which were in effect by January.

 

The National Association of Home Builders (NAHB) claims that the imposed tariffs have added approximately $9,000 to the cost of single-family homes and up to $3,000 on multi-family homes. The NAHB doesn’t believe U.S. domestic production is capable of meeting the current market demand and that the tariffs only hurt native manufactures by forcing them to increase their lumber prices. The NAHB is calling for the Trump administration to resume talks with Canada to secure a more mutually beneficial long-term agreement.

 

David Logan, director of tax and trade policy analysis at the NAHB, says that historically, the U.S. lumber field has never been able to support rapid housing growth. “Buyers are still buying from the distributors they’ve always sourced from despite the tariffs,” he said. “Domestic lumber production has increased marginally in the last year, but it’s not kept up with the housing demand in terms of percentages, so it’s hard to say that we’re meeting the challenge. This has always been the case. We can’t meet that need…not even close.”

 

Logan also argued that larger lumber companies in the U.S. are profiting unfairly from the deal, citing the Seattle-based Weyerhaeuser, which owns 12.4 million acres of forest in the U.S. alone and manages 14 million acres in Canada, as well as West Fraser, a Vancouver-based company that operates 48 mills across both countries. The NAHB claims that these companies are able to reap the benefits of both markets under the current trade agreement and likely won’t be affected if things change again.
***
The U.S. Lumber Coalition (USLC) rejects these claims. “Since the duties were implemented,” the USLC wrote in a statement last week, “U.S. lumber shipments have increased by about 1.4 billion board feet, roughly filling the gap left by the decrease of Canadian imports. U.S. companies continue to invest in expanding their production capabilities to mill lumber from American trees by American workers to build American homes.”
***
On behalf of the NAHB, Logan said that his organization doesn’t foresee a new Canada-U.S. deal happening in the near future.

“We don’t think the dialogue will reopen any time soon as long as the North American Free Trade Agreement negotiations are ongoing. If history repeats itself…the last time this happened it took around 5 years to settle,” he said referring to the original SLA. “Hopefully I’m wrong and this is done very quickly. Until then, prices will maybe get a bit higher, but volatility will certainly increase.”

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Rayonier's. (RYN) CEO David Nunes on Q2 2018 Results - Earnings Call Transcript

Rayonier's. (RYN) CEO David Nunes on Q2 2018 Results - Earnings Call Transcript | Timberland Investment | Scoop.it

Ketan Mamtora

And last question, there has been some press recently around reworking the Endangered Species Act. Do you think there was any possibility that the federal lands could be opened again on the Pacific Northwest for harvest I mean for most of us we haven't seen that at all in the last 25 to 30 years but do you think there is any possibility that could happen?

David Nunes

That would surprise us. I think that recognize that you have virtually no manufacturing capacity in place that could even handle that wood if it were to occur. And I think that we've just gone too far down that line you know from a policy standpoint. So I think that that's not something that we think is really on the horizon.
***
Mark Weintraub

Two quick questions one on the Timberland sales that you're seeing out there. Is this primarily an auction type processes or are you talking about more situations where it's you and maybe a contiguous owner et cetera?

David Nunes

It's really both. We're always in discussions with neighbors whether it's on the buy side or the sell side. Those are obviously logical situations and then there's always a decent mix of negotiated sales versus auction situations and different sellers have different preferences around doing that and it's our job to sort of understand both the landscape there in terms of properties that may or may not be for sale as well as the preference of those owners in terms of how they take it to market.

Mark Weintraub

And in those situations where it is more auction process, is there any shift that you could describe as to what seems to be going on in the processes relative to what we've been seeing in the last couple of years? I know that's a tough question to answer but any color you could give?

David Nunes

I am sorry, what do you mean by that Mark in terms of what's going on in those processes. I mean they remain very competitive I mean we certainly haven't seen demand for timberland properties trailing off and in fact we haven't been very successful in auction processes in the last couple years.

Mark Weintraub

And that's really what is trying to get out is I mean you haven't been very successful because it's been so competitive. Is there any reason to think that you're that much more likely to be successful in the auction type processes or I assume if it still remains very competitive. It's more likely you're going to be in the more private type of negotiated transactions?

David Nunes

I'd say the bulk of the activity that we have acquired has been and negotiated transactions. No question, that doesn't mean that we don't still take a crack at auctions and we have a low batting average there that we're proud of. You don't want to have a high batting average in auctions frankly.

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Barings Offers Alternative Investments to HNW Clients

Barings Offers Alternative Investments to HNW Clients | Timberland Investment | Scoop.it

High-net-worth investors now will have access to alternative investment strategies due to a new agreement between Barings and iCapital Network, the financial technology platform. iCapital has provided Barings with a customized platform to offer alternative strategies to individual clients, including RIAs and their clients.

 

About 20% of Barings $306 billion in assets under management is in alternative strategies, defined as private credit, private equity, real assets (such as commodities, timber, energy) and real estate.

 

“Clients are looking for a diversified set of solutions that can help them meet their investment goals,” said Duncan Robertson, head of Asia and global head of distribution and marketing for Barings, in a statement. “Increasingly, alternative investments are an important component of a balanced portfolio, and both our high-net-worth and institutional clients will now be able to leverage the full capabilities of our global investment platform.”

 

iCapital CEO Lawrence Calcano added that “This agreement with Barings is an exciting step forward in our mission to democratize alternative investments for the high-net-worth community.”

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Alternative Investment Forum 2018

Alternative Investment Forum 2018 | Timberland Investment | Scoop.it
Following on from the success of the 2017 Alternative Investment Forum, Arena International is delighted to announce that the event will return for its 10th year in October 2018.

The 2018 event welcomed institutional investors from across the globe to discuss investment opportunities in timber and agriculture to diversify their portfolios and achieve healthy returns.

Investors, Funds and service providers enjoyed a dynamic two days of presentations and 1:1 business meetings. Key themes on the 2017 programme included sustainable and impact investing, the impact of climate change on real assets and the outlook for biomass investments. The dual focus on timber and agriculture enabled investors to discover the complimentary role these assets can play in a portfolio and to spot the best ventures available in both.

The 2018 programme includes a broad range of topics including how both timber and agriculture contribute to making an institutional investor’s portfolio green, the latest technologies in timber management, block chain and a South American spotlight.
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New research calculates capacity of North American forests to sequester carbon

New research calculates capacity of North American forests to sequester carbon | Timberland Investment | Scoop.it

Researchers have calculated the capacity of North American forests to sequester carbon in a detailed analysis that for the first time integrates the effects of two key factors: the natural process of forest growth and regeneration, and climate changes that are likely to alter the growth process over the next 60 years.

The result is a compelling picture that's of great value, because forests play a critical role in mitigating the effects of climate change. Trees absorb carbon dioxide from the atmosphere as they grow, storing the carbon in their wood.

 

"There's a lot of hope that our forests will soak up the carbon dioxide we're producing, but the capacity of our forests is limited," said lead researcher Kai Zhu, an assistant professor of environmental studies at the University of California, Santa Cruz.

Zhu's team found that North American forests have reached 78 percent of their capacity to sequester carbon and will gain only 22 percent capacity—at most—over the next 60 years. That's a cautionary finding that has implications for forest managers, climate scientists, and policy makers.

 

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Will Strong Lumber Prices Bring a New Dawn for US Producers?

Will Strong Lumber Prices Bring a New Dawn for US Producers? | Timberland Investment | Scoop.it

In the last few months, lumber supply from Canada, United States' biggest lumber provider, was shaken by a slew of factors like insect attack, forest fires and shortage of transportation. President Trump's decision to impose a huge tariff on lumber imports from Canada hit lumber supply from that country further and cleared the path for local players.

 

Declining supply boosted U.S. lumber prices , which have jumped more than 60% since the beginning of 2017. Despite, an increase in lumber prices, demand refuses to fall as evident from the fact that construction activity touched an all-time high in May and jobs data was encouraging. Also, homebuilder sentiment remained steady in July.

 

U.S. lumber producers are evidently busy meeting the rising demand. In this context, Pleasant River Lumber's co-president, Jason Brochu, said import duties on Canadian lumber serve as "a level playing field" for domestic players. Brochu added that Pleasant River Lumber, which has mills in Maine, will be "able to expand and produce more lumber," following these developments.

 

Although concerns remain over labor shortage and regulatory issues in the industry, Brochu is positive that the industry has a lot of room to expand over the long term. Additionally, Chief Economist of the National Association of Home Builders, Robert Dietz, said that producers need more land to "harvest lumber on," in order to adjust to the demand-supply gap.

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U.S. tariffs removed from Port Hawkesbury Paper's products

U.S. tariffs removed from Port Hawkesbury Paper's products | Timberland Investment | Scoop.it

A paper mill in Port Hawkesbury, N.S., is celebrating a decision by the United States Department of Commerce to end countervailing duties that were imposed in 2015 on its glossy paper.

Some American companies had complained that several Canadian mills, including Port Hawkesbury Paper, were receiving unfair subsidies.

 

The tariff against Port Hawkesbury Paper was 20.18 percent.

 

Mill officials won't say exactly how much the tariffs cost the company over the past 36 months, but co-manager Mike Hartery said the impact was significant.

 

"It had strained our business significantly, to the point where there would be a concern as to whether it would be an ongoing operation in the area," said Hartery.

 

The decision to end the duties came Friday, after the last remaining U.S. producer of glossy paper involved in the complaint, Verso Corp., withdrew its objections.

 

Verso reached a settlement with Port Hawkesbury Paper and J.D. Irving of New Brunswick this spring, which will see the two Canadian companies pay Verso up to $42 million.

 

That money will come from the duties that the Canadian companies will be refunded, dating back to 2015.

Port Hawkesbury Paper officials will not say how much they expect to get back, but they said the ruling will also allow the mill to ramp up its sales in the U.S., which traditionally has been its largest market.

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