Sunday, October 30, 2011

Some Timberland Transactions and Other Stuff

I've had several requests for an update on issues surrounding timberland investments and transactions to date for 2011 so I am posting a chart of the transactions of which I am aware. I will also make a comment or two on conservation easements and on who is
buying timberland today. The following table shows the transactions that I have in my database for 2011 as of the end of October.


Ignore the Plum Creek to State of Wisconsin transaction for now because that was just for a conservation easement rather than a fee simple transaction. The average size of the transactions, as well as total acres, is clearly up when compared to the last two years. The key institutional buyers are Molpus and Rayonier. Last years surprise was the increased interest and purchases that came from the individual investors. LandVest sent out an interesting "Christmas card" last year that highlighted the number of fairly large tracts that they had sold to individual investors. They followed it up this year with the announcement of the million acre sale in Maine and New Hampshire to individual investor John Malone.

I deal with individual investors and their sentiment generally follows Malone's comments in a Forbes interview.
“From a financial point of view, it’s a pretty decent hedge on devaluation of currency...  It’s a commodity-based asset, a hard asset, an asset that could see a tailwind if, in fact, the U.S. construction industry comes back.”
I suspect that the Malone transaction and his comments will continue to encourage similar, but smaller, transactions by individuals.

I have a few holes in the data in the above table. If you know any of the missing sale prices, please send them to me. I'd appreciate it. Also, if you have any sales that I am missing, I'd appreciate that info too.

A quick comment on conservation easements... Beware! Know what you are doing if you consider entering into one. Note that Plum Creek got $460 per acre from the State of Wisconsin. That seems like a lot of money but it is necessary to get a big number or you will pay later. A conservation easement requires the seller getting the present value of future cash flows from HBU values, recreation values, etc. When it comes time to sell the land it will unquestionably be worth less to buyers and there will be fewer interested buyers. Ongoing management costs will likely be higher, cash flows will be lower, and silvicultural options will be fewer and costlier. The decline in value is beginning to show up in timberland transaction values. Note the sale above of 30,200 acres from Plum Creek to Conservation Forestry. When you see a sale in Florida at $728 per acre, your first thought is that timberland prices have really fallen. What you don't see is that there was a prior sale of a conservation easement on the property for $431 per acre. The $431 per acre also generally gets lost when average prices for timberland sales are reported.

Would you like to buy some timberland? Wausau Paper has about 80,000 acres for sale, mostly in Wisconsin. The sale is being handled by LandVest. If 80,000 acres is a little too much for you, Woltz will be auctioning 35 smaller tracts, totaling 5,228 acres, in Tennessee and Kentucky. The tracts range in size from 10 to 422 acres and will be auctioned November 17 and 18. As I flipped through the brochure (which you can get at www.woltz.com), I recognized several tracts that I knew very well. I bought and managed them for Westvaco back when I was a  real forester!

If I can help you with timberland investments, give me a call or visit my website at Timberland Strategies. I am also now a Realtor with Mossy Oak Properties of the Lowcountry specializing in timberland investments. e-mail me here.  --Brian






8 comments:

  1. Brian,

    Thanks for keeping us up-to-date on timberland transactions. One to add to your list is a sale by Forestar Group to The Conservation fund -- 7,000 acres of timberland in Texas for $12 million.

    I also appreciate your comments on conservation easements and how they make the comparison of timberland transaction prices more difficult.

    Bruce

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  2. Thank you Bruce. Forestar also announced a 57,000 acre sale for $87 million this week. They didn't say to who or where it was.

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  3. Clarification on Forestar: The 57,000 acre "sale" was actually the 50,000 acre sale and the 7,000 acre sale combined.

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  4. Oh my god. I didn't know there was so much money involved in buying acres of timber. Thx for sharing Brian!

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    1. Timber is an excellent - and frequently overlooked - long term alternative investment

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  5. For more information on conservation easements or on timberland investments including opportunities in the lake states, check out www.slstomahawk.com. They are a high quality firm that can help in every facet of timberland investment.

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  6. Brian,

    I listened to the PCL earnings call a few days ago. Any clarification on who purchased 70,000 acres from them in the panhandle of FL? I believe they booked the purchase in 1Q2012.

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  7. Thnaks for sharing such a helpful post. I have some Timberland online coupons to share.

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