Update 1/2012

Late last year, a deal was struck to sell the 80,200 acres of timberland in northern Wisconsin for $42.9 million dollars to two companies that manage timberland throughout the U.S.

According to LandVest, Inc. broker David Speirs, the Lyme Timber Company, which is based in Hanover, New Hampshire, has an agreement to purchase 72,800 acres. The Forestland Group, headquartered in Chapel Hill, North Carolina, is set to purchase the remaining 7,400 acres.

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The Wausau Paper Timberlands offer approximately 80,000 acres of prime timberland located throughout the northern half of the state of Wisconsin. A leading producer of fine printing and writing papers, towel and tissue products, and specialty papers, Wausau has been divesting non-strategic timber holdings since 2005. Most of these 80,000 acres have been sustainably managed by Wausau since the 1940s for the production of wood fiber.

The acreage consists primarily of natural and planted northern pine species. In addition to timber value, the acreage offers an extensive number of land uses, including recreational and conservation opportunities.

This property is available through LandVest . For more information, contact David Speirs at (207) 874-4982 or dspeirs@landvest.com.

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Selected from what is undeniably one the finest White pine ownerships in the Northeast, Chadbourne Tree Farms is a 2,470-acre portfolio located in Western Maine near Bethel. The property consists of six tracts ranging in size from 111 to 687 acres, all well-stocked with timber. Collectively, it boasts an impressive 17,407 MBF of saw timber, more than half of which is white pine.

Total stocking averages 29 cords per forested acre, with over 40% of the sawtimber volume in trees 18” DBH and larger. In addition to its superb timber resource, the portfolio includes nearly three and a half miles of water frontage, most notably a mile and a half stretch along a pristine 155-acre cold water trout pond. This superior timberland investment opportunity is poised for strong performance well into the future.

$5.9 million
www.landvest.com

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International Paper (IP) will sell 163,000 acres in the Southeast for a minimum of $200 million to an affiliate of Rock Creek Capital, a Jacksonville-based asset management firm that invests in unique, resource-rich land. According to wire reports, IP will receive a minimum $160 million when the deal closes later this quarter. It will receive the balance, plus interest, within three years. The company will also receive 20% of the net profit generated from the land after the Rock Creek affiliate achieves “certain financial returns.”

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Foreign investors own an interest in 21.2 million acres of U.S. forest and farmland, an amount that equates to just under 1 percent of all the land in the U.S. Every one of the 50 states as well as Puerto Rico has foreign ownership, but far and away the largest concentration was in Maine with 3,323,846 acres (16 percent of the national total). Forest and timberland accounted for more than 3 million of those acres with Canadian companies the leading landowners.

The figures were compiled by the Farm Service Agency from filings required by the Agricultural Foreign Investment Disclosure Act of 1978 and are available in this handy 178-page report.

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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.

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A:The purpose of most thinning operations are: remove suppressed, diseased trees and reduce stems/ac to encourage continued growth on the remaining stems.

In a 3rd row thinning operation you take out 33% of the stems when you remove the cutout row, in a 5th row thinning operation you remove 20% of the stems when you remove the cutout row. If your timber stand is well stocked, with little disease or stem quality issues, then either a 3rd or 5th row operation may be suitable.

If you have an initial low stocking rate or have an above average amount of diseased and inferior trees, you would probably want to go with a 5th operation. The reason for this is that taking out only every 5th row vs. every 3rd row allows you more choices when selecting which trees from the remaining rows to harvest.

Sometimes there are also site or contractor equipment type issues to consider. I personally like 5th row operations in most instances as I like to have more control over which trees are harvested from the remaining rows. The quality of your 1st and/or 2nd thinning will have a large impact on the overall return of your timber investment.

———————————————-

Chuck Mathis,
AFM Regional Manager: MS, AL, & FL
Bonifay, Florida
(850) 547-2534
chuck.mathis@amforem.biz

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“We listed the Ochoco in April 2007, so it took about 18 months for it to sell,” said Robb Van Pelt, Managing Broker for Mason & Morse Ranch Company. “Properties of this caliber are few and far between, so 18 [months] to two years is the norm. Sell it too quickly, and you know you underpriced it.”

Located in Crook County, Ochoco Ranch features 35 miles of spring fed creeks and 65 mapped springs. It sits adjacent to the Ochoco National Forest and the Lookout Mountain Roadless Management Area along its eastern border and abuts private ranches on the other sides. In addition to the deeded acreage, Ochoco Ranch controls the cutting rights on an adjoining 3,111+/- of private land under a timber for grass trade use agreement.

According to the Mason & Morse website, the property included 42,428 acres of timbered high country in one contiguous block. Distinctive elements include: no public access; a high percentage of forested lands; smooth, gently rolling terrain with deep soils allowing the ranch to be very usable and productive; very secure, easily controlled and inexpensive to operate.

Among the possible uses for the property were:

1) A private and secure retreat for family/business recreation purposes, possibly incorporating a conservation strategy for tax savings benefit.

2) A buy-and-hold strategy allowing the value of the land and timber to continue growing.

3) Splitting the property into 4 to 10 smaller ranch properties for resale.

4) Developing a small area into a clustered development with “common access” to keep the remainder a large, open, natural property protected by a conservation easement.

5) A resort overlay designation for a world class destination involving mountain recreation.

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The stated mission of the FLA is to support, through advocacy, education, and information, forest landowner’s responsible management of their private property. To help fulfill their mission, the FLA has created the Forest Landowners Foundation. The foundation offers education and information through numerous programs to assist landowners, programs such as developing “How To” brochures for landowners, establishing a scholarship program for forestry students, publication of educational magazine articles, and developing programs to assist the public in appreciating the beneficial ecology of forestry.

According to FLA Executive Director Scott Jones, the topography of land ownership has undergone a major change in recent years and so has the focus of landownership rights as they sit in Washington, D.C.

“When manufacturers (such as International Paper and others) owned productive forestlands, they employed policy advocates and analysts to protect their investments against risks associated with policy,” Jones notes. “With the recent turnover of the ownership of those lands to private individuals, the new forest landowner find themselves in the same position as the traditional private forest landowner: a large investment in land with little or no political representation. The FLA is trying to fill that void in the nation’s capital.”

Membership into the FLA also includes Forest Landowners Magazine, Forest Landowners Insurance Program, full-time representation on Capitol Hill, grass roots action plans, Washington fly-in events, access to policy Fast Facts, and attendance to the annual National Forest Landowners Conference.

The FLA recently held its 2008 National Forest Landowners Conference at the InterContinental Hotel in Chicago. As the epicenter of emerging markets for private forest landowners, Chicago served as the perfect backdrop for cutting-edge information about how forests can play a role in national issues such as the reduction of greenhouse gases and energy independence. Landowners heard from experts in their respective fields, such as the Chicago Climate Exchange, institutional investment firms, legal and tax experts, and leaders in the bioenergy field. One attendee noted, “This is the best place I can come and hear the latest developments effecting my private forestland investment.”

This year’s conference seminars included topics such as carbon trading and ecosystem services, current trends in land and wood prices, new market technologies including wood for energy, and federal forest policy action for landowners. Conference sponsors included BASF, Georgia-Pacific, Arborgen, Plum Creek, Bayer Environmental Science, USDA Forest Service, Timber Mart-South, Weyerhaeuser, and the Society of American Foresters.

Next year’s conference will be held May 26-29 at the Amelia Island Plantation Resort in Amelia Island, Florida. Watch for registration information on the FLA’s website, www.forestlandowners.com.

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Maine’s North Woods is a national treasure. It boasts more than 3,000 lakes and ponds interspersed among 10+ million acres of timber. Several top Land Report 100ers – including the Irving family (No. 3), the Pingree heirs (No. 6), and the Huber family (No. 10) - have substantial holdings in the region known as the Unorganized Territory. Needless to say, a long list of interested parties will want to have a say: landowners, timber industry representatives, conservationists, and developers.

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General Info:According to Michael Tragner of Fountain Forestry in New England, investors looking to get involved in timber have three options.

The first is what Tragner calls a “pure timber play,” where buyers seek out rural forests in excess of 500 acres with some reaching 20,000 acres. “Those are generally [properties that lie] in fairly remote areas away from hot spots, tourist areas, towns where there are job markets,” Tragner says. “Those tracts generally sell for between 95 and 105 percent of timber value.”

The second option is a mix of timber and real estate with properties ranging in size from 250 to a few thousand acres. Tragner says these properties are generally not as remote as pure timberland and hold real estate value because of location, access to road frontage, or amenities like power and water. “Those properties these day are trading between 105 to 130 percent of timber value,” Tragner says. “The rate, percentage above timber value, reflects the real estate value, the speculative value.”
 
The third type of property, as Tragner points out, is considered real estate that has timber on it. Properties are usually smaller and not more than 100 or 200 acres. “Although timber does play a role, it’s a subordinate role. It’s probably 40 to 60 percent of the land’s value with the rest being real estate,” he says.

Land Value:Comparatively speaking, land values in the Northeast are cheap when put up against properties in the Midwest, Tragner says. Ethanol demand has driven prices in agriculture states to several thousand dollars an acre. That’s not the case in states like Vermont, Maine, and New Hampshire.

“In terms of the Northeast, relative to what Midwest or West Coast people are used to, land is cheap here,” Tragner says. “Timber values in [New England] generally range from a low of $300 an acre up to $1200.”

Availability:Scarce. “In terms of the pure timberland properties,” Tragner says, “there is more capital chasing pure properties than there are properties available.”

In recent weeks, Tragner has sold two 3,000-plus-acre properties at full market price, and he did so before they even made it to the open market.

The Market:Tragner says the current rate of return is about 5 to 7 percent on timber, with an expected time frame of 5 to 10 years. “That’s a long time for Americans,” he says. “Generally it’s an asset appreciation type of investment. You plunk down the money, then you’re going to see that return in the form of asset appreciation.” Tragner continues, saying that some properties will be cash flow investments: “You buy it day one, then over the 10-year period, you cut enough timber to cut all of your cost.”

FYI: New England timber hasn’t suffered the pitfalls that have struck other parts of the country, such as forest fires or the Emerald ash borer, an invasive beetle plaguing Michigan.

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