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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4. On the Block: Northern California’s Kahn TimberlandsFor the first time in two decades, the 11,292±-acre Kahn...

For the first time in two decades, the 11,292±-acre Kahn Timberlands are coming on the market. Located in Northern California, these holdings contain over 142 million board feet of mature redwood and Douglas fir. The sealed bid auction will be conducted by Realty Marketing/Northwest. Bids are due no later than five p.m. July 12.

“The Kahn Timberlands contain some of the most well-managed lands we have ever put on the market, and will be offered so that adjoining owners, mill operators, timber investment management organizations, and other investors can participate in the bidding process,” said Realty Marketing/Northwest President John Rosenthal.

These well-managed North Coast timberlands, located in Del Norte, Humboldt and Trinity Counties, have been managed to create short-term cash flow and long-term growth. The properties are strategically located with access to competitive log markets responsible for processing 50 percent of California’s entire sawmill production. The individual tracts range in size from 40± to 2,739± acres, with most containing approved Timber Harvest Plans. Eureka-based Able Forestry has managed these properties for 25 years.

The Auction Catalog #1105, with Terms and Conditions of Sale, is available by contacting Realty Marketing/Northwest’s office at 800-845-3524 or online at www.rmnw-auctions.com.

For additional information contact:

John Rosenthal, President
Realty Marketing/Northwest
john@rmnw-auctions.com

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Those are the dates of the 9th Annual North American Timberland Investment Summit, which will be held this year in Vancouver, British Columbia. The conference brings together a comprehensive lineup of key players in the timberland investments value chain including pension funds, hedge funds, endowments, family offices, TIMOs, REITs, forestry management companies, law firms, and banks.

Attendees will will get critical regulatory updates and environmental updates on opportunities beyond traditional demand for housing and paper products and learn the latest developments in the use of timber resources for biomass and carbon credit investing.

For more information on the North America Timerland Investment Summit, click HERE.

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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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“Good quality timberland is selling all day long,” says Mike Patten of National Farm & Forestry. Patten has been buying and selling land and timber since the 1970s and knows the territory. According to him, individual buyers ebb and flow according to market conditions, but investors of all stripes—institutional, public, and private—continue to look for deals on timberland.

“There’s strong competition for the tracts ranging from 10,000 to 50,000 acres among the TIMOs (timber investment management organizations), REITs (real estate investment trusts), investors—everyone is all over it. Any large tract gets snapped up real quickly if it’s not cut over. But it has to be realistically priced. There’s going to be some distressed properties or bargains. There are some super buys out there from time to time. But timberland hasn’t been affected by falling prices in other sectors. It’s a great long-term investment no matter what’s happening,” Patten says.

Eroding confidence in other types of real estate is another factor driving the increased wave of investment in timberland. So says Jonathan Burt at LandVest. “There’s an awful lot of money chasing more traditional timberland deals,” Burt says. “They’re shying away from retail and strategies where they sell to Baby Boomers. With all of the perceived risks in real estate, there are still a number of bright spots for land investors to pursue.”

According to Burt, these places include undiscovered and/or emerging markets, places like northern Alabama and eastern Oklahoma. “Right now the real play is timberland. Things that are attractive now are things that can generate cash. Buyers realize that liquidity is something that can come and go. Two years ago they could buy property with the expectation there would be a motivated buyer not too far down the road. Now you have to look at holding things longer, so they want the income opportunity. That’s why timberland is getting sexy again,” Burt says.

Corrections & Amplifications
An earlier version of this article incorrectly stated that Jonathan Burt was a forester and project manager for the Institutional Timberland Group. Mr. Burt is a forester and project manager for LandVest. The Institutional Timberland Group is a division of LandVest. The above article has been corrected.

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A: The weak dollar makes Texas land less expensive to foreign investors and some have already taken advantage of the situation by purchasing timberlands in East Texas. As of July, there did not appear to be a rush of offshore investors into the market. However, some U.S.-based buyers appear to be anticipating future inflation as they aggressively seek out properties that are not offered for sale. These forces undeniably continue to exist.

The question focuses on the effects of the credit crunch and housing market woes. Currently, the volume of sales in rural Texas appears to have slowed from the frenzy of activity in the past three years. The future depends on the Federal Reserve’s response to the credit crunch and associated home market slowdown. If the Fed continues to augment the money supply by cutting the fed funds rate, as some pundits have urged them to do, many investors will likely see a higher risk of inflation in the future. 

That view will prompt more activity in the land market. On the other hand, if the downward spiral in the housing markets precipitates a recession, land markets will likely falter. At this writing, it is far from clear which path the economy will follow. Judging from past experience, the Fed will probably try to avoid recession by expanding the money supply until the panic subsides. That prescription will breathe new life into Texas land markets as inflation driven investors seek a safe store of wealth. Additionally, Texas land will become even more attractive to foreign money. If the Fed pursues this strategy, Texas land markets will thrive. 

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Dr. Charles Gilliland is a research economist at the Texas A&M Real Estate Center.

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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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