Timberland Valuation and the global economic crisesThe issue in today’s post concerns why the transaction price of timberland has shown little or no decline in value but the stock price of the publicly traded companies that own timberland has declined dramatically. I will also look at what I think is happening in the timberland market today and how I see the market for timberland investment. But first, let’s set the stage.
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Forestry returns outperform the rest over three years
London, 24th June 2009: Investment in forestry outperformed domestic commercial property and equities last year, producing a positive annual total return of 7.0%, eclipsed only by bonds, according to the IPD UK Forestry Index.By comparison, UK commercial property delivered -22.11%; UK equities returned -29.92%, while listed property companies and trusts were the most vulnerable to the global market downturn, returning -46.63% over 2008. Bonds, however, gained 154%.
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Timberland transactions in the US 2009Major timberland transactions have slowed considerably but some continue to close. I wrote an article for Forest Landowners Magazine (THE TREND IN TIMBERLAND PRICES) that was supposed to be published in October but the publishing date was postponed until late November so I thought I would do a little update on transactions to date for this year. From the list below, you can see that there are quite a few transactions but relatively few large ones.
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Is Timber an Overhyped Investment?U.S. TIMBERLAND MAY BE ONE OF THE WORLD'S most overvalued asset classes.
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Earth Capital Partners hires sustainable agriculture and forestry team
Earth Capital Partners, a private equity firm focused on renewable energy, has hired a sustainable agriculture and forestry investment team from IBIS Capital Management and EMP Global.
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China Forestry buys RMB 464-mln forest assetMar. 1, 2010 (China Knowledge) - China Forestry Holdings Co Ltd has announced that it will spend RMB 464 million to purchase rights in a forest in Ninglang County, Yunnan Province.
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WBCSD: Sustainable Forest Finance Toolkit Now AvailableGeneva, 22 February 2010 - PricewaterhouseCoopers (PwC) and the World Business Council for Sustainable Development (WBCSD) have launched the Sustainable Forest Finance Toolkit, which aims to support the finance sector in
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Forest Investors Grapple with Sustainability Investor interest in forestry is building, driven by climate change concerns, shifting and growing markets for forestry products – and the good, old-fashioned portfolio diversification benefits of an asset class which weathered the financial crisis much better than most and which offers stable long-term returns. But, argue sustainable finance experts, barriers to monetizing the environmental attributes of the sector remain high – both retarding investment but also generating opportunities for early movers.
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Sino-Forest Increases Investment in Greenheart Resources Strengthening foothold in South American tropical forestTORONTO, May 9, 2010 /CNW/ - Sino-Forest Corporation ("Sino-Forest") (TSX: TRE), a leading commercial forest plantation operator in China, is pleased to announce that Sino-Capital Global Inc.
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As the adage goes, the best time to plant a tree is 20 years ago; the second best time is now.
Ideally, investors planted their money into forestry early enough to see their money grow along with the recent surge in commodity and equity prices.
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US-South Timberland Transaction updateThe pace of timberland transactions is still pretty slow but they are occurring (about 500,000 acres since my update last fall) and prices do not appear to have dropped below those of late last year. I think the 10% - 15% decline estimate (from the peak) is still pretty solid.
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A brief TIMO backgrounderIn discussions with newcomers considering investments in timberland or the publicly traded timber REITs, I frequently find that there is substantial misunderstandings about what a TIMO is and what the TIMO role is in the investment community.
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Turning income into capital without taxation in this world is like trying to spin straw into gold, impossible unless you know Rumpelstiltskin.
Well as it turns out he and I are on quite friendly terms and it was he who introduced me to forestry investments.
Most governments are eager to support any activities that they regard as beneficial or that allow tax planning to continue if it delivers a public benefit.
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Seeing the Forest for Its HedgesFOR decades, some university endowments, pension funds and other big investors have put part of their money to work in the woods. They’ve bought large tracts of timberland, viewing them as an asset class separate from stocks, bonds and other forms of real estate.
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Valuing natural capital for development decisions
DFID in its conceptual frameworks of Sustainable Livelihoods Approaches (SLAs) defines five types of asset: human capital, social capital (the ability to draw on support through membership of social groups), natural capital, physical capital, and financial capital for achieving poverty elimination. But most services provided by the natural environment (natural capital) to human society are not captured by GDP or other conventional macro-economic indicators, because, they are not directly traded in markets. Provisioning services (food, fibre and water) and a few cultural services (such as recreation and tourism) are somehow calculated but value of regulating services (water and climate regulation) is not calculated yet, although research on regulating services is developing rapidly.
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Should Timber Investments Be Part of Your Investment Portfolio?Timber and timberland have traditionally been investment vehicles for institutional investors because of the amount of capital required. There are however, excellent opportunities in today’s timber and timberland investment marketplace for small retail investors.
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Timberland Investment Resources Introduces European Hedge Fund
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Forest Industries Investment and Financing ForumArgentina 16-17 November 2010
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Sino-Forest acquires 13,000 ha of NZ forestsSino-Forest Corporation, a leading, commercial forest plantation operator in China, has announced the acquisition of a 13,000 ha New Zealand forestry plantation. Mr.
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Misreporting on WeyerhaeuserTimberland and timber REIT (real estate investment trust ) investors continue to wade through "erroneous and underreported analysis in financial outlets" writes Forisk blog which is a forest economics research firm. In a recent article Weyerhaeuser , now structured as a REIT, was called the worst performers in S&P. The Forisk blog show the comparative performance of the three publicly traded timber REITs: Plum Creek (PCL), Rayonier (RYN), Potlatch (PCH); and Weyerhaeuser. Read blogg
There are also reports far more positive about Weyerhaeuser
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Johann Hari: For sale - Cameron's green credentialsCan you hear the silence of the huskies? When he was rebranding the Tory party, David Cameron promised us he would lead "the greenest government ever". Since he came to power, he has broken every environmental promise he made – and then gone much further.
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Weyco Earnings and Timberland Sale
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National Trust moves to save Forestry Commission woodlands
The National Trust could step in to save the Forestry Commission's English forests, which the Government wants to sell off.
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US Timber REITs has returned 24.10% year to date
Timber REIT (FTR) Index of public timber REITs (Real Estate Investment Trusts)
has returned 24.10% year-to-date compared with 5.69% for the S&P 500 (as of February 11, 2011) reports Forisk consulting at their blog.
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What wood you do to stop this?
The government's announcement that it is postponing the sale of 15 per cent of the Forestry Commission estate, in order to review the site-by-site criteria for disposal is a first victory in the massive grass-roots anti-privatisation campaign.
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Capital Markets and Sustainable Forestry
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More Thoughts on Foreign Investments in Timberland
My last post generated a couple of comments that referenced FIRPTA (Foreign Investment in Real Property Tax Act) and the likely impact that the law would “keep Asian demand in U.S. timberland muted”. The law has been around since 1981 so I thought that I would take a look at what the impact of foreign investment on timberland has been to date.
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Norske Skog Sells Forest In Brazil
Oxenøen, Norway, May 3, 2011 - Norske Skog sells forest areas in Brazil as part of the work to improve the company's financial position
Norske Skog has entered into an agreement with CMNPAR Four Participacoes S.A., a Brazilian company advised by Global Forest Partners LP, a US based, SEC registered investment advisor, for the sale of around 21 500 hectares of forest in Brazil, of which 10 500 hectares are productive forest.
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Rising timber prices drive up forestry returns
UK forestry investments have outperformed the commercial property markets for the fifth year in a row, according to the Investment Property Databank (IPD) UK Forestry Index.
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USA - GFP puts forests on marketGlobal Forest Partners LP (GFP) has put up for sale the plantation forests, freehold land and carbon assets held jointly by two of its New Zealand-based timber funds.
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Forest companies report questioned by leading Swedish business newspaperForest Company evaluates the woods too high in their reports according to the business magazine SvD. At weaker quarter, forest companies assess their forest resources and exploit the forest to clean up quarterly results according to analysts.
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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
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Buy Timber Stocks and Watch Your Money Grow on Trees(MoneyMorning, Feb 1, 2012) - Chances are you've never considered timber stocks in your investing strategy.
But if that's the case, then you've been missing out.
Timber is a long-term investment that can reward your portfolio in good times, and protect it in bad.
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Canadian pension fund buys into KaingaroaHarvard Management Company, which manages Harvard University’s US$30.7 billion endowment fund, has sold down its stake in the central North Island Kaingaroa forest in New Zealand.
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