Meetings, Global Reports and More Pricing Services

There are three upcoming meetings that readers may be interested in attending. The first, scheduled for March 19 & 20 in Waukesha, WI, is an SAF program entitled The Effects of Change in Forest Ownership. The registration fee is $100 and the list of topics and speakers (see below) is outstanding. For more information, call Julie Peltier at 262-670-3404, John Eschle at 262-264-5705 or Hank Kleppek at 414-463-1991. There is no web site that I am aware of. This looks like an excellent program at an excellent price.

Here is the list of presentations

• 
  What Happened to Industrial Land Ownership – Sam Radcliffe
• 
  Forest Fragmentation – Susan Stewart
• 
  The Role and Tools for Conserving Lands – Tom Duffus
• 
  The Impact of Forest Certification –Bill Rockwell
• 
  Banquet Guest Speaker – Miles Benson “A Historical Perspective”
• 
  The Next Generation of Family Forest Owners – Catherine Mater
• 
  Future Wisconsin Forest Land Markets – Ed Steigerwaldt
• 
  The Role of Bioenergy – Lew McCreery
• 
  Carbon Credits – David Miller
• 
  Changes in Traditional Forest Products Markets – Peter Ince

The second meeting is the 4th Timberland Investing World Summit taking place June 9th-11th in San Francisco, CA. The registration fee for the conference is $1599 until March 7th. Call 646.253.5526 for details (no web link provided). The list of speakers will include:

• 
  Liane Luke-Managing Director of Four Winds Capital Management
• 
  David Bischel-President for The California Forestry Association
• 
  Corey Brinkema-President for The Forest Stewardship Council
• 
  Klas Sander-Natural Resource Economist for The World Bank
• 
  Jacques Beadry-Loisque-Program Manager for the U.S. Department of Energy BioMass Program
• 
  Jose Rente Nascimento-Senior Natural Resource Specialist for Inter-American Development Bank
• 
  Burl Carraway-Program Manager for The Texas Forest Service

The third program is in September and is hosted by the World Forest Institute which focuses on the shift in forestlands and its implications. They are holding their fourth such event this September (last year's sister event focused mainly on international investing). You can check out last year's agenda at: http://wfi.worldforestrycenter.org/invest/agenda.html. This year's theme is "What Next?"

The World Forest Institute also has many “Country Reports” available in addition to past conference proceedings and special reports. Here is a link to their publications. Another source of global data is RISI. Here is a link to some of their publications.

Some time ago, I provided info on some of the available pricing services that are available to timberland owners. Following that Blog, RISI sent me the following note and links to some of their stumpage pricing services which may be of value to you.

“I wanted to let you know that RISI also provides a stumpage pricing service called Timber Transaction Pricing Service (TTPS). We currently offer comprehensive online stumpage pricing for the entire US South and are actively working to expand our footprint into the northeast as well as a few other areas of the country.”

“Here are several links that you might find interesting.
The first is the link to our TTPS description. http://www.risiinfo.com/risi-store/do/product/detail?id=10035&pcId=23&parentId=&rootId=12
But, I also wanted to send you an example of a stumpage pricing report we have developed for northern Pennsylvania, where we have begun to look at providing hardwood stumpage pricing. http://www.risiinfo.com/pareport
Finally, here is a link to another service we provide that while not a stumpage pricing service, does include stumpage prices and does help landowners, or prospective landowners determine the investment attractiveness of specific timberland tracts. http://www.risiinfo.com/risi-store/do/product/detail?id=10732&pcId=23&parentId=&rootId=12 “
There seems to be several good stumpage pricing services available. The key is to match the cost with the value that you will receive. --Brian

Changes in Timberland Investments in the South

There is an outstanding paper by Tom Harris, Jacek Siry and Sara Baldwin (the TimberMart-South crew) that can be downloaded at no charge from Forestweb's site. The paper looks at the major changes and trends impacting forestry investments in the U. S. South. An outline of what is covered follows:

• "Major Changes in the U. S. South: New items worthy of note
  »» A decade of timber price declines
  »» Retirement of the vertically integrated model for forest products
  »» Improved competitive position
  »» Maturing forestry investment industry
  Southern Timber Trends: Key, Overarching Issues
  »» Globalization
  • Increased Global Trade in Forest Products
  • Shift in Manufacturing
  • Role of Paper in Communications
  • Energy and Bioenergy
  »» Abundant Timber Supplies
  • Planting Rates down
  • New emphasis on thinnings
  »» Consolidation and Dis-integration
  • More concentrated products markets.
  • Dis-integration essentially complete
  »» Forestland Ownership Shifts
  • New owner objectives and investment horizons unclear.
  • HBU based values assuming new importance.
  A long-term history shows nominal increases in stumpage prices"

The paper is well illustrated with charts and graphs illustrating the authors' observations. It covers "all the usual suspects" (price trends, ownership changes, transactions, etc.) but I think the most interesting observation is the impact of the declining U. S. dollar. The charts compare delivered prices of conifer pulpwood in the major wood producing regions as well as a more detailed comparison (see graph) between the U. S. South and Brazil. Guess what? The South is now very competitive!! So while we hear all of the wailing and gnashing of teeth due to the falling dollar on the nightly business shows, there is a very positive impact in our manufacturing sector (more jobs, higher wages, higher stumpage prices from increased demand? etc.).

I would recommend reading FORESTRY INVESTMENTS: Major Changes in the U.S. South made available from Forestweb. Harris and bunch did a good job. --Brian

Timberland for Retirement

Things have been a little slow on the transaction front lately but a couple of articles caught my attention with respect to investing retirement funds in timberland. The first is another example of Europeans moving more aggressively with pension fund investments (which is not really news) and the second relates to an individual buying timberland in his/her self-directed IRA. The latter one was certainly news to me and I found the methodology very interesting.

In the case of the Europeans, a Dutch company, Stichting Pensioenfonds ABP, (reportedly the third largest pension fund in the world), had a contest among employees to select some innovative investments to supplement the standard stocks and fixed income investments. APB is committing $5 billion to this particular investment. They had several ideas (art, wine, etc.) but the winner at this point is timber and ABP plans to make an investment by the end of the year. The article makes reference to the NCREIF Timberland Property Index which shows the value of timber assets increasing at an annual rate of 15 percent over the last 20 years compared to a 12 percent annual return for the Standard & Poor's 500 Index. Those kind of numbers certainly do draw investment interest.

The article also states "California Public Employees' Retirement System, the largest public U.S. pension fund, said in January it planned to start a new asset class that would include some timber investments". That's an interesting development when just two years (three years?) ago the concern was that timberland prices would fall because CALPERS was selling its timberland investments and getting out of that market! If interested, you can read the whole article here.

Here is a final quote from the article above which I will use as a springboard into the self-directed IRA discussion.

"While a fund the size of ABP can explore esoteric investments, most company pension funds wouldn't be able to, said John Hastings, a consultant at Hymans Robertson in Glasgow.
'If you are going to do something like this you have got to understand it and smaller pension funds wouldn't have the resources to do that,' Hastings said."

So if you think timberland is an "esoteric" investment, if you don't know what a TIMO is and if you have never heard of consulting foresters, read no further. But if you would like to consider timberland as a part of your (or a client's) IRA, read on.

The key to a timberland investment in an IRA is to create a Limited Liability Corporation and then to transfer the assets of the IRA into the LLC. The IRA actually owns the LLC which can then purchase and own timberland or other "alternative" investments (or "esoteric" if you prefer). For a more lengthy and much clearer explanation, see "The IRA Owned LLC, A Great Tool for Investing".

I have a self-directed IRA, mainly invested in stock, which I can assure you has not produced anywhere near the return of my Tree Farm so this does sound very interesting. The one issue that merits a little more thought is the taxation issue. A timberland investment outside the IRA would not be taxed until it was sold (at retirement let's say) and then it would be taxed at the capital gains rate. I believe the same investment for timberland in an IRA would be taxed at the normal rate as it was withdrawn from the IRA. Somebody check me on this.

Finally, it looks like there may be an opportunity for a consultant forester or two to link up with the lady that wrote the article to provide a package for IRA investors interested in adding timberland to their IRA portfolio. That would take the "esoteric" out of it!

Cambium Raises Cash

The Scottish financial investment firms are teaming up with the Brits to put more money into the global timberland investment market.

"Cambium, which is incorporated in Jersey, will invest in a diversified portfolio of timberland assets. The placing raised £104m from Scottish institutions and from investment funds like British Steel Pension Fund, Altimus, Midas Capital and AXA-Framlington. Cambium intends to invest the cash raised in a global portfolio of forestry-based properties and in forests that can be managed on a sustainable basis, McGrady said. Cambium is the first purely timberland investment vehicle to be hedged into sterling and designed specifically for British investors. Read more.


It seems like every day more money pours into the timberland market. Are we in the early stages of a developing "timberland bubble"? The positive market factors (beyond historical returns of timberland) include the political momentum for carbon sequestration and energy independence. The down side is a lot of money chancing a fairly finite land base. Another positive point is that if institutional investors have really accepted timberland as a separate asset class, there is still a HUGE amount of money to flow in that direction. As we are seeing from the Brits. And yesterday's Bank of America announcement. Temple-Inland should do quite well.