Monday, April 30, 2007

TimberVest and GMO TIMOs Share $60 million

The San Bernardino County Employees Retirement Association is recognising Timberland as an asset class separate from Real Estate and, with that recognition, is doubling the amount of money to be invested in timberland to 4% of its portfolio.

According to IPE Real Estate:
"The outcome of a recent fund board meeting was that the pension fund made two commitments to two timber commingled funds. One was a $30m ($22m euros) to the Timber Vest Partners II fund, which will be a commingled fund with a total equity raise of $600m. The investment strategy is to invest in timber in the US."

"San Bernardino County also allocated $30m to invest in GMO Long Horizons Forestry Fund. This commingled fund will have a total equity raise in the neighborhood of $300m to $350m. This investment fund will be looking for assets in the US and internationally. "

The pension fund is expecting a real rate of return of 6% over the next 10 to 20 years. Reportedly, the fund will be ready to invest another $40 to $60 million in Q1 and Q2 of next year. Read the entire article here. --Brian

Saturday, April 28, 2007

MWV to Announce Plans for SC Timberland

According to Columbia's "", MeadWestvaco will be announcing it's long awaited plans for 400,000 acres of timberland in the Lowcountry of South Carolina. This article, and another in the Charleston Post and Courier, reported on a Friday briefing by John Luke, MWV's CEO, in North Charleston which included key people from SC's state government, agencies, conservation groups and community leaders. Details of the plan were not announced at the meeting.

"Spokeswoman Donna Cox said she could not answer questions about the property’s future. 'We are going to announce the details of this plan with our earnings call mid-week next week,' Cox said Friday." That conference call is scheduled for Wednesday morning.

The following is an extract from the Post and Courier:
But the fate of the rest of its holdings has sparked anxiety about growth and development in the Lowcountry. MeadWestvaco owns about 145,000 acres on the outskirts of the greater metro area, land that for decades has acted as a passive growth boundary west of Charleston and to the north of Goose Creek.

The uncertainty escalated last fall when a top MeadWestvaco executive suggested that the company was considering selling some or all of its remaining acreage in the United States, telling a group of investors: "We believe there is significant value to be unlocked in this asset."
Conservation advocates have been fretting ever since that some or all of the company's local property will be put up for grabs, opening it up to home builders or large-scale commercial real estate developers.

That was not the message Luke gave at Friday's meeting.

The person who attended said the fact that the CEO traveled to Charleston to deliver it in person, however vague, gave some weight to the matter, considering the audience.
"You don't go calling in people who sit on boards and staffers from Columbia to Charleston and pledge to put conservation as your highest priority and then go back on your word," the attendee said.

Read the articles from "The State" and the "Post and Courier"

According to MeadWestvaco: "The live conference call and presentation slides may be accessed on MeadWestvaco’s website at After connecting to the home page, look for the link to Investor Information, then Financial Calendar, to access the webcast. Go to the website at least one hour prior to the call to register, download and install any necessary audio software."

Thursday, April 12, 2007

Kudos to Weyco!

While politicians promote corn, sugar beets and other annual crops, Weyerhaeuser and Chevron have announced an alliance to "assess the feasibility of commercializing the production of biofuels from cellulose-based sources". Kudos to Weyerhaeuser, Chevron and capitalism!

"The two companies said the partnership reflects their shared view that cellulosic biofuels will fill an important role in diversifying the nation's energy sources by providing a source of low-carbon transportation fuel. The venture leverages the strengths of both companies, combining Chevron's technology capabilities in molecular conversion, product engineering, advanced fuel manufacturing and fuels distribution with Weyerhaeuser's expertise in collection and transformation of cellulosics into engineered materials, innovative land stewardship, crop management, biomass conversion and capacity to deliver sustainable cellulose-based fiber at scale." The entire news release is well worth reading.

On April 4th, Roger Sedjo with Resources for the Future, moderated a session on Biomass Energy: Biorefineries. All of the presentations are available at the previous link but I found the presentation by Theodore H. Wegner, Assistant Director, Forest Products Laboratory to be particularly informative. It is an outstanding look at the current situation while clearly laying out the hurdles that must be overcome to begin using wood to replace oil. --Brian

Wednesday, April 11, 2007

What to Teach?

A former colleague of mine and professor at Virginia Tech, Dr. Stephen Prisley, dropped by over the weekend to say Hello and catch up on what has been happening over the last few years. As it always does, the subject eventually shifted to the changes that have occurred along with the nation's shifting timberland ownership. Steve's statements centered on the question "Are we at VPI teaching the right things to the new crop of foresters?"

For many years, Steve and I worked together as "industrial foresters". That term is almost an anachronism today! There are a few left at MWV, Weyerhaeuser is a holdout (for now at least) and some of the timber REITs do have minimal industrial holdings but, by and large, it appears that the day of teaching a crop of students for the industrial forestry market is over. In the area of industrial forest research, of the big three (International Paper, MeadWestvaco and Weyerhaeuser), only Weyerhaeuser remains. Most of my MWV forest research colleagues have returned to universities, gone somewhere in government, or in the case of one biometrician, went to work for HP where his skills were better rewarded financially.

But timberland must still be managed by someone so the questions are "Who" and "How does that affect how the new forestry students should be educated". The "who" part of the question is easily answered. TIMOs and the consulting foresters that serve them. Some of the TIMOs and TREITs mange the land themselves and some employ consultants to do the job for them. Either way, the basics of silviculture have not changed and they must still be taught. What has changed is the objectives of the landowner. The primary objective of growing a crop to supply mill furnish is generally not an objective of the new owner (even with fiber supply agreements). The new primary objective of TIMOs and TREITs is one of financial return which suggests that universities must strengthen efforts on teaching the tools that accomplish that objective. This includes not only a new emphasis on the traditional financial tools but on those, such as harvest scheduling, which are specific to timberland management. --Brian

Monday, April 2, 2007

160,000 Acres in Adirondacks Changing Hands?

The following info was taken from two different news releases on Finch, Pruyn's web site.
GLENS FALLS, N.Y. — Richard J. Carota, Chairman of the Board of Directors of paper manufacturer Finch, Pruyn Co., Inc., has announced that the Board of Directors has voted to recommend that the company’s shareholders accept an offer from Atlas Paper Resources LLC to purchase all of the company’s assets, including its manufacturing facilities in Glens Falls, N.Y., and its Adirondack forestland. The shareholders will vote on the transaction at a meeting on Tuesday, April 24, 2007.
Finch, Pruyn has owned and cared for the vast majority of its 161,000 acres of forestland in New York State’s famed Adirondack Region since the early 1900s. In 1910, the company increased its contributions to modern forestry with the hiring of one of the nation’s first professionally trained foresters, Howard Churchill. Today, the company employs 11 professional foresters who oversee company lands and the purchase of wood from outside sources.
Get more details from Finch, Pruyn's web site.

Atlas Holdings is a diversified private investment firm whose ownership includes Forest Resources LLC which reportedly owns four paper mills and nine packaging plants. Based on their web site, it looks like Atlas has been a very aggressive buyer in the past year. --Brian

Potlatch to Sell it's Hybrid Poplar Plantations

The following was extracted from Potlatch's news release. --Brian
"Potlatch Corporation (NYSE:PCH), a real estate investment trust (REIT), has announced the sale of the company's 17,000-acre hybrid poplar tree farm in Boardman, Oregon, to a private-equity tree-farm investment fund for $65 million. A definitive purchase agreement was signed today and closing is expected during the second quarter of 2007. ...
This 17,000-acre property is certified under the stringent forest practices guidelines of the Forest Stewardship Council (FSC), along with the remaining 1.5 million acres under Potlatch ownership. Development of the unique Boardman plantation was started in 1992 to supplement Potlatch's fiber needs...
"After spending the past year evaluating the best path forward, and meeting with a number of interested poplar-focused operators, we are pleased to have reached an agreement with a global leader in the hybrid poplar industry who we believe is better positioned to deliver greater value from the operation," said Chairman, President and CEO Michael J. Covey." Read the entire news release.

Sunday, April 1, 2007

Ethanol from Trees, Not Corn!

Before I start on the corn rant again, there are a couple of recent articles that I found interesting. The first is kind of a summary, from an investor/financial perspective, of the shifting ownership from industry to investors that was done by Laura Mandaro with MarketWatch. See "For-sale signs pop up on U.S. timberlands". Some interesting facts.

For an update on what is happening in the State of Washington, click here. The focus is on the loss of timberland to development. There are references to Hancock, Weyerhaeuser, Port Blakely, UW and the Forest Service.

On Feb.3, disappointed with President Bush's push for corn ethanol, I wrote "Perhaps soon a President will wake up to the fact that he/she has a nation with forests capable of providing ethanol (and other forms of fuel) and a very capable research team already in place that is capable of making it happen". I doubt that Dubya spends much time reading blogs but I am certainly glad that he woke up and is now making research commitments to "cellulosic" ethanol!

The obvious outcomes of the corn ethanol push are already well under way. Corn prices have jumped. Today's newspaper reported farmer's intent to increase the acreage in corn by 15% (farmers are no dummies, they have already sold a portion of that harvest at these increased prices). Most of the new acreage in corn will be at the expense of other crops, like soybeans and milo, meaning we will see price increases in many other foods plus the many non food products manufactured from soybeans. If the corn thing isn't halted quickly, there will be a new rash of conversion from timberland to farm land. When the shift to cellulosic ethanol occurs, some folks will be holding the bag as corn prices drop substantially. The only thing that will hold corn prices up will be farm subsidies funded by us good old taxpayers. And in a double whammy, we will have higher food prices as well. There is a certain odor about this. To put it bluntly, it stinks of farm belt politics!

But things are at least moving in the right direction (slowly). The following appeared in a recent issue of the Forest Landowners Fast Facts newsletter.
New Wood Biomass Coalition Formed

Recently, FLA lobbyist Frank Stewart participated with other representatives from like-minded groups to help effectively organize to "provide advocacy, education, information, and outreach to public and private entities that promote research, development, and funding for sustainable woody biomass utilization and markets."
As a result of that organizational meeting, the coalition adopted the name, "Woody Biomass Committee," and set goals, including: · Reduce America's dependence on foreign oil and improve the nation's national security position · Improve forest health · Create new markets for renewable fuels, including woody cellulosic ethanol in rural America, which will promote economic opportunities and growth while supplying a sustainable supply of woody biomass for all biomass/bioenergy products
These are certainly aspirations in keeping with FLA ideals for the 110th Congress, which are: · Statutory and regulatory definitions of "wood biomass" should be defined as "wood" and not simply as wood residues, wastes, and/or byproducts. · Wood biomass must be a full partner with other cellulosic feedstocks in all bills, laws, regulations, and other federal initiatives. · Markets for wood biomass must be developed to maintain forestland investments as vital, so forestland investors continue to hold their land as forestland. Without suitable markets, forestland divestitures may increase.

There was also an article in the last NC State alumni magazine with a focus on research aimed at reducing lignin in cottonwood specifically for ethanol production (although originally the research was done for pulp production). So, overall, research is beginning to shift from pulping to energy production in support of the new role that timberland will soon play. --Brian