Thursday, March 26, 2009

RMK Gets the Adirondack Finch Pruyn Timberland


It appears that The Nature Conservancy has sold the 90,593 plus acres of the former Finch Pruyn lands in the Adirondacks to a subsidiary of the Danish pension fund ATP. The sale was handled on a sealed bid basis by LandVest (see details). The land will be managed by RMK Timberland and is subject to both a Fiber Supply Agreement with the current owners of the Finch, Pruyn mill and a conservation easement. According to my sources in Denmark, the purchase price was 180 million Kroners. If I’ve got my conversions correct from Kroners to Dollars, the price would be $361 per acre. The price/acre clearly reflects the result of the conservation easement. The location map to the left includes the entire TNC purchase of 160,000 acres. --Brian

7 comments:

  1. Where is this 90,593 acres that was sold

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  2. You can view and download a map from The Nature Conservancy website: http://www.nature.org/wherewework/northamerica/states/newyork/press/press3958.html

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  3. Map Link
    http://www.nature.org/wherewework/northamerica/states/newyork/files/adk_disposition_overview_032709.pdf

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  4. Brian,

    What do you mean it reflects the easement? Meaning that it is cheap because it can not be build on? So there is no HBU optionality? Will the fiber supply agreement still be intact? I heard that the state is going to pay ~500/acre for the remainding piece of the land TNC purchased.

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  5. Yes, the Fiber Supply Agreemnent remains intact. I doubt that it impacted the price significantly if at all. The conservation easement is a different matter. First, the development rights (building)on current HBU land are a part of the value of the easement. Second, as land evolves over time into sites suitable for future development, the conservation easement prohibits that too (essentially the easement "sells" future HBU lands also). A similar sale of an easement (TNC to NYS) on the Domtar lands in the Adirondacks was for something over $180/acre. So that gives you an idea of how much the sale value cab be reduced by an easement. In addition, a conservation easement can also reduce the value of timberland if management/ silvicultural options are reduced. I'm not familiar with the terms of the easement in this case but it has been described as "strict".
    On the final point, there is some type of understanding that NYS will acquire the remaining 60,000 acres but I don't beleive there is actually an agreement in place.
    Let me also speculate that, in the end, virtually all of the 160,000 acres will become a part of the Forest Preserve. --Brian

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  6. Brian, are you aware of any sales of large restricted tracts in PA or Maryland? 2,000 to 8,000 acres? Timberland selling subject to restriction.

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  7. I am not aware of any timberland transactions of that size and location subject to easements but I would expect the NY transactions to be a good proxy. The residual timberland value will be pretty well nailed down by the discounted cash flows of forest management - no HBU, no disaggregation of values. If the conservation easement opens the land to public hunting, there will be no DCF value there either. All tracts will be different depending on the terms of the easement. The point is that disaggregation of values has happenned and future transaction values will be much lower for those tracts. --Brian

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