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6th Timberland Investment World Summit October 26-28

Eddie Lee — Fri, 18 Sep 2009 17:03:23 +0000

Come join The Land Report at the 6th Timberland Investment World Summit at the Millennium Broadway Hotel in New York City on October 26-28. This conference is absolutely essential for anyone who follows or invests in timberland, which is why The Land Report signed on as a sponsor.

Online (”Timberland Outperforms the S&P 500?”) and in print (Land Report Spring 2009), the Magazine of the American Landowner has extolled the virtues of timberland as a long-term investment opportunity.

The Timberland Investment World conference brings many major players together, including pension funds, hedge funds, endowments, family offices, TIMOs, REITs, forestry management companies, paper and forest products companies, law firms, and banks.

Among the many topics to be covered at the conference are:

- International prospects for timberland investments, including Brazil, China, Russia, Australia and New Zealand

- Macroeconomic perspectives on the future of global demand for wood products

- Cashflow generation opportunities represented by ecosystem services, carbon schemes, easements, and the market in woody biomass

-The impact of information technology on timberland investment returns

- Preparing for the implementation of a nationwide cap and trade system

- Principles for selecting between Timber Investment Management Organizations (TIMOs)

- The valuation process: appraisal, discount rates, and future lumber prices

- The impact of biotechnology on future timber yields and growth rates

For more complete details, click HERE.

Plum Creek Completes First Phase of $150 Million Montana Timber Sale

Eric OKeefe — Tue, 23 Dec 2008 19:03:41 +0000

The nation’s large private landowner — Plum Creek Timber (NYSE:PCL) — took the initial step towards completing the sale of an estimated 130,000 acres of Montana forestlands last week. In the first step of a three phase plan, the company received $150 million in cash from The Nature Conservancy and The Trust for Public Land ($1,153 per acre). The complete announcement from Plum Creek’s corporate website follows:

SEATTLE–Dec. 17, 2008–Plum Creek Timber Company, Inc., (NYSE: PCL) today announced it completed the first phase of its previously announced sale of western Montana forestland to The Nature Conservancy and The Trust for Public Land. Plum Creek received $150 million in cash for approximately 130,000 acres of Montana forestlands in the first phase of the three-phase transaction.

“Plum Creek has a strong history of conservation and is pleased to partner in this effort to keep these forests in productive timber management, promote continued public access to these lands, and protect them for future generations,” said Rick Holley, president and chief executive officer. “With this transaction, we are proud that the company has placed nearly 700,000 acres of land across the nation into permanent conservation.

“In these unsettled and challenging markets, Plum Creek remains in a strong financial position with $750 million available under our undrawn line of credit and a healthy cash balance, which is enhanced further by the completion of this phase of the transaction,” Holley continued.

The company has updated its fourth quarter earnings outlook to take into account the earnings contribution of the conservation sale, the effects of the economic downturn on near-term results, and a gain on the early extinguishment of debt. As a result, the company expects to report fourth quarter earnings between, $0.48 and $0.53 per share.

The Montana conservation sale will contribute approximately $0.40 per share to the reported fourth quarter earnings. The balance of the quarter’s rural land sales are expected to be approximately $65 million. This is lower than the originally anticipated $75 to $85 million as a handful of planned sales have been rescheduled to 2009 or cancelled. In addition, the company expects the basis in the $65 million of lands sold to be approximately 38 percent of sales, higher than initially anticipated, reducing reported earnings but having no impact on cash flow.

The company’s manufacturing segment is expected to report a loss of approximately $20 million for the fourth quarter, a larger loss than initially anticipated. Approximately $7 million of expected loss is the result of a write down of certain purchased log commitments and log inventories. During the fourth quarter, the company has further reduced its lumber, plywood and medium density fiberboard production to match weak demand.

During the quarter, the company identified an attractive opportunity to execute open market purchases of its publicly traded bonds. The bonds, with a face value of $62 million, were redeemed for $50 million and permanently retired. The bonds carried a coupon of 5.875 percent and were scheduled to mature in 2015. As a result, the company expects to record an $11 million gain on the early extinguishment of debt during the fourth quarter.

“Our financial position and diverse timber and land asset base serve the company well, providing us with both financial and operational flexibility. As a result, our attention remains focused on long-term value creation, disciplined capital allocation, and maintaining our commitments to our investors,” Holley concluded.

The company expects to release its fourth quarter and full year 2008 earnings after the close of market on Monday, Feb. 2, 2009, followed by its regular investment community conference call at 5 p.m. EST the same day.

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Plum Creek is the largest and most geographically diverse private landowner in the nation with more than 7 million acres of timberlands in major timber producing regions of the United States and 10 wood products manufacturing facilities in the Northwest.

Timberland Outperforms the S&P 500?

Eric OKeefe — Wed, 19 Nov 2008 07:00:13 +0000

That’s one of the conclusions from this report that ran online at Forbes.com a few weeks ago titled Cut Down Portfolio Risk With Timber. I had fully expected the author, Robert Stammers, to be a shill for an organization tied to the timber industry. Turns out I was wrong. He’s a CFA, a quant, who specializes in providing strategic planning and analysis for business owners and private investors. What does he have to say about investing in timber? It’s quite simple.

Timber returns have beaten stocks.
Measuring returns using the National Council of Real Estate Investment Fiduciaries (NCREIF) Timberland Index (TBL), timber investment returns exceeded those of the S&P 500 from 1990 through 2007. In that period of time, the NCREIF Timberland Index annual compounded return was 12.88 percent versus 10.54 percent for the S&P 500 index.

Editor’s Note: The market meltdown of 2008 is not factored in to these numbers. I can only imagine what ratio will emerge when more recent figures are included.

At The Land Report we’ve stressed utilizing timber to diversify your portfolio since day one. Each issue of the magazine features numerous ads from well-established brokerages and consultants specializing in timberland. Online we regularly feature foresters at Ask the Expert. And we’ve even gone so far as to highlight other ways to invest in timber, including equities.

America’s Largest Landowner Bucks Down Market

Eric OKeefe — Tue, 28 Oct 2008 12:54:57 +0000

On Monday, Plum Creek Timber Company (NYSE:PCL) reported a 17 percent increase in third quarter earnings to $69 million on revenues of $414 million compared to year-ago earnings of $59 million on revenues of $407 million. At 40 cents a share, the results matched the average analyst estimate, but given the downturn in the U.S. economy as a whole and the housing market in particular, it was an impressive performance for the Seattle-based timber REIT, which owns more than 8 million acres of timberlands in 18 states.

I missed yesterday’s earnings conference call, but the news release at Plum Creek’s website was, to say the least, somewhat subdued given the present economic climate. Take this statement by president and chief executive officer Rick Holley:

“We’re pleased to report increased income during the third quarter, reflecting the benefits of Plum Creek’s geographic, resource, and business diversity.”

Or this one: “Plum Creek enters the final quarter of the year in excellent financial shape.” I’d say. In this economy any company that’s still in business and doesn’t require a government bailout is ahead of the game.

Holley had more of bully pulpit at New West.Net’s 3rd Annual real estate and development conference in Missoula, where he gave the keynote address. Here’s Peter Metcalf’s write-up.

CAT Makes It 300 in a Row

Eric OKeefe — Tue, 21 Oct 2008 11:00:25 +0000

In the midst of a mounting avalanche of bad economic news, I thought it worth singling out one company with strong ties to the land that continues to shine. Earlier this month, Caterpillar announced that it was paying a quarterly dividend for the 300th consecutive quarter. Keep in mind that 300 quarters = 75 years in a row. Here is the announcement from the corporate website.

PEORIA, IL – The Board of Directors of Caterpillar Inc. (NYSE: CAT) today declared a quarterly cash dividend of forty-two ($0.42) cents per share of common stock, payable November 20, 2008, to stockholders of record at the close of business October 20, 2008. With this announcement, Caterpillar has completed its 75th year—300 consecutive quarters—of paying dividends to stockholders.

“Since paying that first dividend three-quarters of a century ago in the midst of the great depression, Caterpillar has faced many challenging economic circumstances including those facing the global economy today,” said Caterpillar Chairman and Chief Executive Officer Jim Owens. “Based on Caterpillar’s long-standing and conservative management philosophy, the company weathered those turbulent economic and financial conditions making dividend payments to our stockholders every quarter starting in 1933. Moving forward, Caterpillar is better positioned than ever before to build on this track record as we continue deploying our global business model to create value for our customers while rewarding our stockholders,” Owens added.

The $0.42 dividend maintains the dividend rate from the previous quarter and is 17 percent higher than the dividend paid one year ago. Including the announcement today, Caterpillar’s cash dividend has nearly tripled since 1998.

About Caterpillar:
For more than 80 years, Caterpillar Inc. has been making progress possible and driving positive and sustainable change on every continent. With 2007 sales and revenues of $44.958 billion, Caterpillar is the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines and industrial gas turbines. The company also is a leading services provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services. More information is available at: http://www.cat.com/.

JOE Nixes $130 Million Sale

Eric OKeefe — Wed, 15 Oct 2008 02:30:42 +0000

Earlier today Florida’s largest private landowner, The St. Joe Company, announced the cancellation of a major transaction: 67,365 acres for more than $130 million ($1,929 per acre). Here is the press release from the corporate website.

The St. Joe Company (NYSE: JOE) today said that the previously announced contract for the sale of 67,365 acres of non-strategic rural conservation land in Liberty, Jefferson, Gulf, and Franklin Counties has been terminated. The sale was to have closed in two transactions for a total price of $130.4 million, the first transaction in the fourth quarter of this year and the other in the second quarter of 2009.

“We are now able to return these parcels to the market,” said JOE’s president and CEO Britt Greene. “While this particular buyer had sought large contiguous conservation acreage, we are now able to offer this acreage in smaller parcels to other interested buyers. With no near-term need for the proceeds, we plan to continue our orderly disposition of these non-strategic assets.”

“We are continuing to execute our strategic plan, while keeping JOE lean and efficient to better withstand these difficult market conditions,” said Greene. “With our strong balance sheet and cash position, we are prepared to withstand this prolonged downturn and will continue to prudently manage our inventory and assets to preserve long-term shareholder value.”

How to Invest in Land (Without Living on It)

Stephen O'Keefe — Wed, 01 Aug 2007 07:00:45 +0000

Whether you own a quarter-acre urban lot or a 40,000-acre ranch, your love of the land comes from the moment you pick up a handful of ground and watch the dirt fall through your fingers, knowing that it’s yours—all yours. But while there’s that intangible, visceral satisfaction of ownership, let’s not ignore the other benefit—profit. From energy stocks to timber REITs and ski resorts to cattle ranches, a diverse group of equities is tied to the enormous natural resources of land.

BY STEPHEN O’KEEFE, CFA

Not all of us are ready yet to retire from urban life and spend all our time at our ranches, our beach homes, our hunting lodges, and our lake houses, but there’s no reason for our fields to lie fallow, so to speak. One way or another, there’s money to be made.

By buying stock in a wide range of businesses, you can participate in and profit from the land game without ever stepping foot on a piece of property. There’s the obvious, of course: timber, mining, petroleum, agriculture. But that just scratches the surface. Peek inside for an introduction to the myriad ways you can increase your land portfolio without once getting your hands dirty. As investments go, raw land can be rock solid.

But how can you profit from the increasing demand for ethanol if you don’t already own in the Corn Belt? What’s the best way to catch some upside when millions of acres of timberland are sold off? Simple. Diversify your portfolio. From the nation’s largest private landowner to Colorado’s biggest ski mountain and California’s biggest ranch, these publicly traded securities are all about land.

TRC
Tejon Ranch Company
LEBEC, CA. With more than 270,000 acres, TRC owns the largest expanse of private land in California. The ranch is located approximately 60 miles north of Los Angeles. TRC generates about half of its revenue from real estate operations and the other half from farming. Revenues have grown 10 percent per year since 2003.

PCH
Potlatch Corporation (REIT)
SPPOKANE, WA. PCH owns and manages 1.5 million acres of timberland in Arkansas, Idaho, Minnesota, Wisconsin, and Oregon. This stock converted to a Real Estate Investment Trust (REIT) structure in 2006 and may be best suited to income-oriented investors. PCH reviews its land holdings to see which parcels have high non-tim-berland values and are candidates for sale using the Section 1031 exchange program to minimize capital gains taxes.

PCL
Plum Creek Timber
SEATTLE, WA. Plum Creek has more than 8 million acres in major timber-producing regions of the United States, making it the largest and most geographically diverse private landowner in the nation. Management has acquired hundreds of thousands of acres in the last 15 years and is identifying where sales or development can be made. PCL has an attractive 4 percent yield.

WY
Weyerhauser
TACOMA, WA. An international forest products giant with sales of $21.9 billion in 2006, WY is under pressure to unlock shareholder value by restructuring its timber-lands into a REIT for more favorable tax treatment.

MTN
Vail Resorts
BROOMFIELD, CO. Skier visits were up this year, and so were lift ticket prices. MTN operates numerous ski resorts, including Vail, Breckenridge, Keystone, and Beaver Creek-and has a majority interest in RockResorts. A growing segment for MTN is real estate operations, which contributed less than 10 percent of 2006 earnings but look like a good source of future earnings growth.

SWC
Stillwater Mining Co.
BILLINGS, MT. The recent spike in platinum prices has been a boon to this Montana mining company, which refines and markets palladium, platinum, and associated metals. Both of the company’s mines (Stillwater Mine, near Nye, Montana, and the East Boulder Mine near Big Timber, Montana) are located on the geological formation known as the J-M Reef. Norilsk Nickel owns about 55 percent of shares.

CHK
Chesapeake Energy Corporation
OKLAHOMA CITY, OK. As natural gas goes, so does CHK. The prospects for a rebound in prices have propelled shares of the country’s third largest independent producer. Headquartered in Oklahoma City, the company focuses on exploratory and developmental drilling as well as acquisitions in the Mid-Continent, Permian Basin, South Texas, Texas Gulf Coast, Barnett Shale, Ark-La-Tex, and Appalachian Basin.

CWEI
Clayton Williams Energy
MIDLAND, TX. Want to throw in with one of the country’s most successful wildcatters? Clayton Williams Jr. is not your typical oil man. He owns an interest in more than 6,000 oil and gas wells, primarily in Texas, Louisiana, and New Mexico. He’s also made a name for himself as a cattleman and ranks No. 59 on this year’s Land Report 100.

TIN
Temple-Inland Inc.
AUSTIN, TX. The company owns or leases 1.8 million acres of timberland in Texas, Louisiana, Georgia, and Alabama. Pressure from financier Carllcahn is triggering a restructuring plan with TIN retaining its lumber mills and manufacturing and spinning off its Forestar Real Estate Group and its Guaranty Federal division, which has substantial presence in the highly desirable Texas and California markets.

GMTN
Gander Mountain
SAINT PAUL, MN. Like gear? Gander Mountain likes you. The company’s 105 outdoor lifestyle stores in 22 states specialize in hunting, fishing, camping, marine, and outdoor lifestyle products and services. It is poised to open 9 more stores this fall.

ADM
Archer Daniels Midland Company
DECATUR, IL. Eager to cash in on ethanol? Then take a look at this Illinois giant, which was founded in 1902. ADM processes foodstuffs: soybeans, wheat, cocoa, and that new yellow gold-corn. It has good exposure to the growing use of ethanol as a fuel (biodiesel too), but with more than 5 billion gallons of capacity in North America, the additional 4.5 billion gallons of planned construction may put a lid on ethanol’s rising price.

DE
Deere & Company
MOLINE, IL. Here’s another way to ride the ethanol boom. DE has grown from a one-man blacksmith shop in 1837 into a global corporation that now employs approximately 47,000 people. Soaring ethanol prices have spiked demand for equipment from this industry leader.

BTU
Peabody Energy Corporation
ST. LOUIS, MO. Peabody owns a majority interest in mines located throughout most major U.S. coal-producing regions. Transportation bottlenecks have dampened earnings, but rail carriers are increasing capacity, particularly in the western U.S. PS. Thanks to their Australian mines, BTU also has good exposure to the burgeoning China and Pacific Rim markets. Earnings prospects are good.

DEL
Deltic Timber Corp.
EL DORADO, AR. DEL sells its lumber products to truss manufacturers and wholesalers and is a good way to participate in the eventual rebound in homebuilding. The company owns almost 440,000 acres of timberland, primarily in Arkansas and Louisiana, and it also develops real estate in Arkansas.

ICO
International Coal Group
SCOTT DEPOT, WV. ICO has more than 1 billion tons of coal (metallurgical quality and steam) in its reserves and has idled about 1.7 million tons of high-cost production, shifting production focus to lower-cost mines. If oil prices stay high, then coal and ICO should remain attractive.

JOE
The St. Joe Company
JACKSONVILLE, FL. Ever heard of the term snowbird? JOE has. Florida’s largest owner of private land (approximately 800,000 acres) is also one of the state’s largest real estate development companies. Northwest Florida remains an attractive location for retirees, and JOE’s 3-5 year prospects are equally attractive.

RYN
Rayonier (REIT)
JACKSONVILLE, FL. Rayonier is a forest products company that converted to a REIT in 2004. It owns or manages 2.7 million acres of timberland in the United States and New Zealand. Its specialty fibers group products are used in pharmaceuticals, LCD screens, and industrial processes. And thanks to long-term contracts for 80 percent of production, RYN is poised to weather a weak housing market.

WTR
Aqua America Inc.
BRYN MAWR, PA. WTR is the holding company for regulated utilities that provide water and wastewater services to customers in 13 states. The company received rate increases in 2006 and is expected to receive more in 2007, adding to revenues and earnings.

ROAC
Rock of Ages Corporation
GRANITEVILLE, VT. A vertically integrated granite quarrier, manufacturer, and retailer, ROAC has built its business on granite memorials. The company owns and operates 10 active quarry properties and 5 manufacturing and sawing facilities, predominantly in Vermont and Quebec. It also has 81 company-owned stores in 14 states.