Timberland Investment | Scoop.it

Inflation Hedges That Pay Today

Sam Radcliffe — Mon, 20 May 2013 13:26:27 GMT

...a great antidote to deflation is current income: so investing in real assets that also provide yield is a double-purpose move.

There aren’t so many, but there are some. Timber is a favorite of Harvard, and, when you think about it, its easy to understand why. It’s fully renewable, generates annual income, and has solid fundamental support: as the world’s middle classes grow, its use in homebuilding does too.

But maybe the most interesting thing about trees is the way you can “store on the stump.” Instead of selling in a bad year, when the market down, you can just defer the harvest and let them get bigger. With commercial real estate, a year of lost income is lost forever; not so with timber.

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Now, I know what you’re thinking: these all sound great, but how do I invest in them? Well, first, here’s how not to: ETFs. There are all sorts of “timber” or “agriculture” ETFs but they invest in public companies that own these sorts of assets, not the assets themselves. That is a huge difference. Investing in companies means investing in management teams, not assets; and it also means riding the general ups and downs of the market, which is definitely not the point.

Instead, you’ll probably have to go to less liquid formats to get the benefits of these inflation busters. Direct ownership, of course, works just fine. But traditional privately placed partnerships can be very attractive, since you probably want an expert to select and manage the investments for you (certainly you do with art), and you usually want diversification that pooled investment delivers.

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Pennsylvania Municipal adds $42.5m to FIA timber allocation

Sam Radcliffe — Mon, 20 May 2013 13:14:34 GMT

...the pension fund added $42.5 million each to core real estate manager TIAA-CREF, giving the portfolio a total of about $152 million, and to timber manager Forest Investment Associates, bringing that portfolio to about $117 million.

The additions are the result of the pension fund's approval of a recommendation at its March meeting to increase the overall target to real estate to 20% from 15%.

The allocation to core real estate increases to 12.5% from 10% of the overall fund, while timber increases to 7.5% from 5% of the overall fund.

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Brookfield closes second Brazilian timber fund at $270m

Sam Radcliffe — Fri, 17 May 2013 17:18:47 GMT

Brookfield Asset Management’s second Brazilian timber fund has hit its $270m target after raising $150m in five months, AltAssets has learned.

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Timber! Watch out for Falling Lumber Prices

Sam Radcliffe — Fri, 17 May 2013 13:40:13 GMT

First it was Copper. Now it is Lumber.

In an article I recently wrote, " Are Weak Commodity Prices Signaling Deflation ", the focal point was on copper, its historical relationship with the health of the overall world economy, and its currently bearish chart pattern. The takeaway was that copper has been declining since 2011, suggesting an economic slowdown and potentially deflationary scenario.

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Copper used to be considered the leading indicator for the world's economy, but since 2011 its price has fallen even as world stock markets
(NYSEARCA:VTI) climb.
***

Another leading indicator, lumber, is known as the barometer for the housing market. When lumber prices are in an uptrend, typically so are housing builds, home prices, etc. Lumber prices have been very strong
over the last five years, having turned up in price in early 2009 and making new highs recently. This has helped buoy the homebuilder equities (NYSEARCA:XHB) as well.

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If you believe the media headlines, then all is good with the housing sector. The latest confidence data shows a big rise from April to May. But this, along with most fundamental data, is more a coincidence than leading indicator. It also should be noted that homebuilder confidence came in at 44, which suggests negative sentiment (any reading below 50 is considered negative). Oh, by the way, the last time homebuilder confidence was actually above 50 was April 2006.

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Lumber has taken a cue from copper, precious metals (NYSEARCA:GLTR), and the other commodities, falling over 20% the last two months. Is this a sign that homebuilders, the housing market, and the equities market as a whole are finally about to roll over?

Looking at the last few months shows the collapse in prices of lumber. Meanwhile, homebuilder stocks continue upward. The last time these two highly correlated markets became this disconnected preceded the 2011 market top that sent stocks down over 20%. How long will this disconnect last?

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Rubber barons: the destruction of forests continues

Sam Radcliffe — Fri, 17 May 2013 13:30:58 GMT

ALONG Route 7 in Cambodia’s remote north, dozens of small tractors known as “iron buffaloes” are plying a dilapidated piece of highway. Under cover of darkness, they transport freshly cut timber into nearby sawmills. The drivers wear masks, their tractors fitted with just one dim lamp at the front. Each carries between three and six logs which locals say were felled illegally on or near the Dong Nai rubber plantation, owned by Vietnam Rubber Group (VRG).

Illegal logging and land-grabbing have long been problems in Cambodia. A new report entitled “Rubber Barons” by Global Witness, a London-based environmental watchdog, has highlighted the issue once again. Dong Nai features prominently in the report, which claims that luxury timbers like rosewood, much in demand for furniture in China and guitars in the West, were culled as a 3,000-hectare (7,400-acre) section of forest was illegally cleared.

Global Witness says that local and foreign companies have amassed more than 3.7m hectares of land in Cambodia and Laos since 2000, as governments have handed out huge land concessions, many in opaque circumstances. Two-fifths of this was for rubber plantations, dominated by state companies from Vietnam, the world’s third-largest rubber producer.

The report claims that VRG and another Vietnamese company, HAGL, are among the biggest land-grabbers, and have been logging illegally in both Cambodia and Laos. It says that, through Vietnam-based funds, the two companies have received money from Deutsche Bank, while HAGL also has investment from the IFC, the private-sector arm of the World Bank. The two Vietnamese companies have denied any wrongdoing. Deutsche Bank and the IFC say they are studying the findings.

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LandVest offers 20k Oklahoma acres @ $806/ac

Sam Radcliffe — Fri, 17 May 2013 13:09:56 GMT

"The LeFlore Timberlands, located in LeFlore County in Southeastern Oklahoma, have been owned and operated for nearly a half-century by Green Bay Packaging Co. The property lies in the distinct Ouachita timber market area. The rolling hills of this region offer the legendary winter logging conditions of Oklahoma, with convenient access to robust Arkansas markets. Decades of conservative management has created large stands of plantation pine sawtimber, with natural stands of pine and hardwood still suitable for conversion. With four distinct blocks all convenient to Poteau, Oklahoma, the property offers economical and efficient management. With the benefit of a new, third party forest inventory, completed in March of 2013, interested parties can be confident in the value and integrity of this growing resource."

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Brookfield wants to sell its stake in Island Timberlands

Sam Radcliffe — Wed, 15 May 2013 14:18:08 GMT

Brookfield Infrastructure Partners has reported that it is negotiating the sale of its 25-per-cent stake in Vancouver Island forest company Island Timberlands for $170 million.

The sale involves a change in the positions held by the timber company’s existing shareholders and is expected to close in the second half of 2013.
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“Since the release of our quarterly results on May 2, 2013, we have executed definitive agreements to sell the remainder of our Canadian timber operations for $170 million,” the prospectus stated. “Consistent with our financing strategy, we will seek to re-invest these proceeds at our targeted, after-tax annual return on equity of 12 per cent to 15 per cent.”

Island Timberlands is a private forest company that owns 258,000 hectares of timber land, most of it on Vancouver Island. It is the second-largest private landowner in the province.

***

The Wall Street Journal reported last November that the China Investment Corp. was close to making a deal to purchase a stake in Island Timberlands. That deal did not happen.

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Wisconsin conservation groups hope to ward off stewardship program cuts

Sam Radcliffe — Mon, 13 May 2013 15:37:46 GMT

Wisconsin's massive land conservation program could once again be in the cross hairs of Republican legislators who want to cut funding for it.

The threat is prompting pre-emptive strikes from conservation groups and others, including the Rotary Club of Milwaukee, which are pressing lawmakers and saying reductions in the Knowles-Nelson Stewardship Program could impair the state's ability to preserve critical land and habitat.

The program has helped fund everything from developing bike trails and electrifying campsites to providing the lion's share of funding for blockbuster deals such a $35.1 million transaction, the Wild Rivers Legacy Forest, involving more than 64,000 acres in Florence, Forest and Marinette counties in 2007, 2009 and 2010.

The program's central aim is to buy or gain access to land through the use of easements for myriad purposes, ranging from hunting and fishing to bird watching and snowmobiling.

In recent years, advocates say the program has been able to parlay tens of millions of dollars for deals with paper companies, which have increasingly sold off timber holdings as they concentrate on their manufacturing operations.

But interest costs of the stewardship program are growing at a time when Republicans controlling the Legislature are pushing for tax cuts and shrinking the size of government.

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Two years ago, with the state in fiscal dire straits, Gov. Scott Walker and lawmakers pared the program from $86 million annually to $60 million a year.

Republicans are debating whether to make more reductions than Walker's budget calls for, and they're privately tossing around figures on how much to slash, Darling said.

They're also talking about selling off some land - especially parcels that could be used for farming - and they are mulling using a smaller amount of funding and earmarking it for maintenance of existing holdings and increasing public access, according to Darling.

From 1990 to June 30, 2012, the Department of Natural Resources purchased or bought easements to more than 560,000 acres, according to the Legislative Fiscal Bureau.

The cost: $527 million, with the federal government spending an additional $62.4 million on land and land-related purchases.

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Mackays go bananas for Elders' Queensland timber land

Sam Radcliffe — Mon, 13 May 2013 14:34:34 GMT

AUSTRALIA'S biggest banana grower, Mackays, has purchased listed agricultural group Elders' timber properties Gold Tyne and Mount Ray outside Cooktown in far north Queensland for more than $10 million.

The purchase of the teak tree properties, which cover 3200 hectares of high-quality land, is a significant market transaction, showing a discount of about 40 per cent, reports The Australian Financial Review.

Elders purchased the properties in 2007 for $16.5 million, during a frenzy of managed investment scheme-backed buying.

Forestry companies purchased more than $100 million of high-quality land in north Queensland during 2007.

The Ark Fund, Great Southern and Elders-owned ITC Timberlands were the main buyers, contributing to what valuers at the time said were 20 per cent premiums to market prices.

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Why Harvard Spends Billions on New Zealand Timberland

Sam Radcliffe — Mon, 13 May 2013 14:26:16 GMT

The stock market rise has been dubbed by some the “idiot-maker rally,” for its gravity-defying gains despite a lack of fundamentals. Nevertheless, the Dow (DJI) now sits above 15,000 and the S&P 500 (^GSPC) above 1600, both up more than 14% this year.

When you look at the smart money, though, how are they actually making impressive returns?

Take the Yale endowment. It’s up 100% over the last decade, according to Bob Rice, author of The Alternative Answer. But in 2012, just 6% of Yale’s portfolio was allocated to U.S. equities. Half was invested in absolute return, private equity, and real asset strategies – all alternative investments - while another chunk was in emerging markets.

***

Harvard, as another institutional example, has 10%, or $3 billion, of its endowment in timber, according to The Alternative Answer. In fact, it’s the biggest timberland owner in New Zealand.

Meanwhile, the average person may be taught the ideal portfolio contains 60% stocks and 40% bonds, with these asset classes representing the best returns in the long-run.

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Rice contends that the conventional wisdom about stocks and bonds is skewed. He says in the 11 decades since 1900, the 60/40 portfolio has returned “a grand sum of 1% after inflation” in seven of the decades. And while you get big bursts like in the 1980s, this distorts the long-term averages, and not everyone can wait it out 30 to 40 years so that the timing works out like it’s supposed to.

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In Rice’s view the good news is that because of changes to laws and new products, the average person can now access some of the “same kinds of things the big boys have been investing in all along and what has carried them so far.”

***

In the accompanying video, he gives more details and responds to the more traditional investing gospel of gurus such as Suze Orman and Warren Buffett.

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Recap: 2012 MN Windstorm Impacted 127,000 acres

Sam Radcliffe — Mon, 13 May 2013 14:18:30 GMT

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'Insourcing' trend growing among big institutional investors

Sam Radcliffe — Mon, 13 May 2013 13:39:56 GMT

Large institutional investors increasingly are “insourcing” asset management to improve returns by cutting costs.

That's the opposite of the trend toward smaller institutions outsourcing some or all of their investment operations.

Among the large institutional investors shifting more assets to internal management, known as insourcing, are the $258.3 billion California Public Employees' Retirement System, Sacramento; the $27.3 billion South Carolina Retirement Systems, Columbia; and the $78.1 billion North Carolina Retirement Systems, Raleigh.

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The cost savings of switching to insourcing are significant, according to analysis of Dec. 31, 2010, data by CEM Benchmarking Inc., Toronto:

The median cost for internally managed active equity strategies was 10 basis points, vs. 40 basis points for externally managed strategies.
For fixed-income strategies, the median internal cost was three basis points compared with 18 basis points for external.
For real estate, the median internal cost was 21 basis points vs. 75 basis points for external and 134 basis points for an external fund of funds.
In private equity, the median internal cost was 25 basis points vs. 165 basis points for external and 244 basis points for external funds of funds.

***

Chief investment officers stress that the real goal is cost savings that lead to better investment returns. “There is really strong evidence ... that funds that can manage assets internally have an advantage,” Joseph Dear, CalPERS CIO, said during a presentation in late April at the Milken Institute Global Conference in Beverly Hills, Calif.

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Pope Resources Announces $5.7 Million Conservation Sale

Sam Radcliffe — Fri, 10 May 2013 17:59:36 GMT

Pope Resources (Nasdaq: POPE) announced a $5.7 million conservation sale to Columbia Land Trust of 2,330 acres on the southern flanks of Mount St. Helens. he sale conserves approximately nine miles of sensitive Pine Creek riparian habitat and adjacent forestlands. Pine Creek is a prime habitat for bull trout, a threatened species listed under the federal Endangered Species Act.

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This parcel, adjacent to Pine Creek, is part of a much larger Mount St. Helens Forest Conservation Project that is spearheaded by Columbia Land Trust and aims to protect from development 20,000 acres of working forest and critical wildlife habitat around the Swift Reservoir on the Lewis River. The first of four parcels in the Mount St. Helens Forest Conservation Project was conserved in 2010. With a Forest Legacy grant procured by Columbia Land Trust, the Washington State Department of Natural Resources was able to buy a conservation easement from Pope Resources in 2010 that permanently protects 6,886 acres of forestlands south of the reservoir from development. Since the Pope Resources property is one of the county's largest private holdings, project proponents have worked to insure all conserved lands remain on the county tax rolls.

"We are pleased to see the second phase of this innovative project move forward, and we are very optimistic about another state grant that will help us conserve an additional 3,074 acres under a conservation easement," said Jon Rose, president of Olympic Property Group, Pope Resources' real estate subsidiary.

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Commodity Chart Of The Day: Lumber - Off The Beaten Path

Sam Radcliffe — Fri, 10 May 2013 17:54:01 GMT

Lumber prices have lost ground over the last six weeks, with prices down 17% off their March 14 highs. This puts futures into oversold levels, and the price seems to be finding support just under $330 (red line).

The contract size for lumber is 110,000 board feet. This means every $1 move represents a gain/loss of $110. This contract is far from liquid, as volume and open interest are both light. The open interest (OI) in July contracts is only 4000, and average daily volume for the last several weeks has been between 500 and 600 contracts. Factor in slippage, bad fills and the potential to see volatile moves when big orders hit the market.

***

Perhaps it's too elementary to look just at the housing market, but the question continues to nag me: if we have a housing recovery… why are lumber prices on the decline?

I think the disconnect between the housing recovery and lumber prices has to do with pre-existing home inventory. If buyers are scooping up pre-existing homes instead of building new ones, it's easier to understand why the recovery isn't a bullish driving force for lumber prices.

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The Vermont Syrup Rush Is On, but Is Big Maple a Boon or a Bubble?

Sam Radcliffe — Fri, 10 May 2013 16:50:21 GMT

When Eric and Laura Sorkin got into the maple sugaring business five years ago, they went big. The couple invested $1.4 million in a vacuum pump, reserve-osmosis machine and other equipment and tapped sugar maples across 1000 acres they own in Cambridge and Underhill.

At the time, maple syrup prices were at a record high of around $4 a pound — double where they were a year prior — with a gallon fetching up to $70. The timing seemed perfect.

***

Prices have softened a little since then, but Vermont today is experiencing a liquid gold rush nonetheless. Maple producers have tapped new technologies — such as those used by the Sorkins — that allow them to collect more sap and cut down on the energy-intensive boiling process that turns it into syrup. As a result, entrepreneurs of all stripes are getting into the biz.

This spring, sugar makers across the “maple belt” — 17 states and Canadian provinces where maple products are produced — harvested what could turn out to be the largest crop of maple syrup in modern history.

***

But foresters and smaller maple producers warn about growing too large, too fast. Where some see a boon to Vermont’s agricultural economy, others spy a bubble waiting to burst.

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Gone are the metal sap buckets of yore. Bigger producers have switched to more industrial setups. Vacuum pumps suck sap through plastic tubes crisscrossing the woods — a process that can increase sap yield by 50 to 200 percent.

Once sap is back at the sugarhouse, reverse-osmosis, or RO, machines can remove up to 85 percent of the water from the sap, cutting down significantly on boiling time. It doesn’t come cheap — the newest touch-screen RO machines can run as high as $120,000 to $150,000 — but ultimately makes sugaring more profitable and efficient on a large scale.

Marvin of Butternut Mountain Farm wonders aloud if demand can keep up with the flood of new maple hitting the market; if it doesn’t, a price drop would hurt his company and the more than 300 sugarhouses in Vermont, Maine, New York and Québec whose syrup Marvin buys and packages. But he and his counterparts have reason to be optimistic. After a poor season in 2012, syrup packers were desperate to get their hands on this year’s crop. And they’re paying around $2.75 a pound for it — on par with lower-producing years, in which syrup makers benefit from supply-and-demand economics to get top dollar for their product.

***

“People are going into it making 10,000 gallons of maple syrup in their first year without any idea of where they’d sell it, just assuming that the bulk buyers would take it,” says Kevin Hall, a sugar maker in Braintree. “The maple bubble may break someday.”

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Mirvac to sell forestry land

Sam Radcliffe — Wed, 08 May 2013 20:02:53 GMT

MIRVAC Group is selling one of the last of its legacy funds management assets – more than 20,000 hectares of forestry land held by Australian Sustainable Forestry Investors.

The Mirvac managed fund bought the land from the managed investment scheme Timbercorp in 2004. When Timbercorp collapsed, the fund emerged as its biggest single landlord, The Australian Financial Review reports.

At June 30, 2012, Australian Sustainable Forestry Investors had three institutional investors, one of which was Mirvac itself, and funds under management of $57 million.

The Mirvac forestry portfolio consists of 68 parcels of blue gum plantation and farming land – 20,657 ha all up – in the Green Triangle of Victoria and South Australia and in south-west Western Australia.

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Major investors like the Future Fund, the Swedish pension fund Forsta AP-fonden and the Boston-based Hancock Timber Resource Group have bought Australian timberland since the collapse of the managed investment trust boom.

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The Mirvac portfolio is for sale in whole or parts with expressions of interest to close on June 13.

Most properties are leased to Australian Bluegum Plantations, but some of the trees have been harvested and the agreements with ABP terminated.

ABP was created by the US-based Global Forest Partners LP in 2009 to buy and manage blue gum plantations on land that now has more than 90,000 ha of trees.

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Local timber helps meet world’s needs

Sam Radcliffe — Mon, 06 May 2013 15:36:47 GMT

The demand for wood pellets in Europe has gone up dramatically the past few years as power companies across the continent have switched from using fossil fuels to produce electricity to renewable energy alternatives.

According to a report from the North American Wood Fiber Review, exportation of wood pellets from North America to Europe reached a new record of 3.2 million tons in 2012, with U.S. exporters more than doubling their shipments.

Locally, Enviva Pellets – with one mill open in Ahoskie; another set to go online in Northampton County; and a third planned for Southampton County (VA) – is ramping up their operations to meet the increased demand for their product.

“Utilities around the world are increasingly turning to solid biomass fuels as a cost-effective means to deliver lasting reductions in the carbon intensity of energy generation,” said John Keppler, Chairman and CEO of Enviva. “As a key mid-stream supplier, Enviva and its growing capacity is positioned to sustainably source from one of the most robust natural resources in the United States the key renewable fuel for these growing international markets.”

Pellets shipped overseas from companies such as Enviva and others from North America increased over 60 percent from 2011 to 2012. The wood pellet export industry in North America has grown exponentially in a relatively short period of time. The export value has increased from an estimated 40 million dollars in 2004 to almost 400 million dollars in 2012. This fairly new trade development is the result of Europe’s quest to reduce its dependence on fossil fuels and to reduce CO2 emissions. Energy generation from renewable resources has, with varying pace, gone up in all countries in the European Union during the past decade.

Woody biomass, including wood pellets, is one energy source that has attracted both much attention and investments in a number of countries on the European continent. With limited domestic wood raw-material sources, countries such as the UK, Belgium and the Netherlands have increasingly relied on the importation of industrial wood pellets to reduce the usage of coal at some of their power utilities. The relatively high costs for wood pellets in Europe have resulted in increased interest in importing pellets from British Columbia and the southern states of the U.S. where wood raw-material costs are lower than in Europe.

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If you're buying alternative investments, seek the lowest costs

Sam Radcliffe — Mon, 06 May 2013 15:33:40 GMT

How many times have you heard someone speak of minimising costs in the investment process? It is sexier to discuss instead the wonderful returns from investing in residential property in Hong Kong and the United States, or gold, or a host of other areas. Yet efficient investing through tight cost management is one of the keys to success.

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Now that index funds and exchange-traded funds have proliferated, especially in the past decade, it is time that investors turned their attention to the next target ripe for efficient investing: alternatives.

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As you can imagine, there is no shortage of investment products in this category: think hedge funds, private equity, venture capital, timber, oil and gas, property, structured products, the list goes on.

Here are a few ways to get investors started on the path of low-cost investing in the alternatives arena:

Read the fine print

Fees, costs and expenses are typically found in offering memorandums and detailed executive summaries, but they are often not well-explained in presentations or fact sheets.

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Review the audit report

Reviewing a fund's annual profit and loss statement might cause crooks to blush: you would be amazed at what can go unnoticed in the expenses section - especially my favourite category, "other expenses".

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Seek out smaller funds

Not only does research show that smaller funds outperform their larger brethren, you can get a double bang for your buck by negotiating lower fees and/or revenue participation if you help a struggling manager regain their footing.

Show me the money

Ask for, and receive, transparency. It has been said that anyone who does not disclose what they are investing your money in does not deserve the privilege of managing it.

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More Brands Dump Sustainable Forest Initiative’s Paper Certification Program

Sam Radcliffe — Mon, 06 May 2013 15:03:23 GMT

On Wednesday, ForestEthics announced that more major brands have moved away from the Sustainable Forestry Initiative (SFI) paper products certification program. Office Depot, Southwest Airlines and Cricket Communications have joined HP in the shift away from the U.S. paper industry-backed SFI in the tussle over certified paper products.

ForestEthics has long alleged that SFI is a front for the paper industry, and a Fall 2010 report accusing SFI of “greenwashing” has been just one battle in the fight between paper certification programs including the Forest Stewardship Council (FSC).

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Boise to cut 300 jobs, close 2 paper machines in International Falls

Sam Radcliffe — Thu, 02 May 2013 23:18:57 GMT

Northern Minnesota’s wood products industry woes continued in a big way today when Boise Inc. announced it will close two of its four paper machines at its International Falls mill resulting in 300 jobs being permanently eliminated.

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Boise will retain about 580 employees at the mill running two paper machines producing uncoated white office paper and producing the pulp that’s made into paper, Virginia Aulin, Boise vice president of human resources and corporate affairs, told the News Tribune this morning.

"We will no longer have to buy pulp to make our paper in International Falls," Aulin said.

***

Earlier this year, Wisconsin-based Wausau Paper says it is closing its Brainerd mill and eliminating 134 jobs because of stiff global competition in overseas markets where the company was trying to expand.

Last August, Georgia-Pacific announced it would permanently close its Duluth hardboard plant, putting 141 employees out of work.

Since 2008, three oriented strand board manufacturing mills closed in Grand Rapids, Bemidji and Cook with a loss of hundreds of jobs. In Deerwood, 158 jobs were lost when Weyerhaeuser closed its strand lumber plant. And last year the Verso Paper Mill in Sartell closed for good after a deadly Memorial Day explosion and fire. It had already shed 175 jobs in late 2011 and the closure meant 260 more layoffs.

Sam Radcliffe's insight:

The story says the Boise closing should hurt the logging industry, but it appears Boise will still be making the same tonnage of pulp and therefore require the same tonnage of pulpwood.

Thanks to Bob Hedburg (http://linkd.in/133tlvp) for bringing this story to our attention.

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NCREIF TIMBERLAND INDEX RELEASED FOR 1Q2013

Sam Radcliffe — Wed, 01 May 2013 19:08:03 GMT

The NCREIF Timberland Index was released today and results are: Total 1.53%, Income 0.85%, and Appreciation 0.68%.

Sam Radcliffe's insight:

Download the full press release with some regional detail here: http://bit.ly/130C01y

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Plum Creek Executive Says Audit Activity Increasing for Timber REITs

Sam Radcliffe — Wed, 01 May 2013 19:01:02 GMT

Paul Stamnes, vice president of tax with Plum Creek Timber Company (NYSE: PCL), joined REIT.com for a video interview at REITWise 2013: NAREIT’s Law, Accounting and Finance Conference in La Quinta, Calif.

Plum Creek is one of the largest land owners in the nation. Stamnes described audit issues surrounding timber REITs.

“In the last couple of years there has been increased activity, in particular looking at transfer pricing,” he said. “The IRS is really starting to focus on REITs, primarily from the taxable entities, because that’s where the tax dollars are.”

Stamnes explained concerns regarding recreational leasing.

“Recreational leasing is somewhat unique to the timber REIT industry, because timber REITs own a lot of land,” he said. “Clubs engaged in hunting or other activities will lease land from timber companies because our land is generally open to the public when we’re not engaging in forestry activities. The critical tax issue is ensuring that income remains qualified for REIT purposes.”

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Plum Creek's Earnings Top Estimates

Sam Radcliffe — Wed, 01 May 2013 17:09:08 GMT

Plum Creek has once again reported impressive results with earnings per share reaching 35 cents, comfortably surpassing the Zacks Consensus Estimate of 32 cents and well ahead of the year–ago quarter earnings of 18 cents. Net income for the quarter nearly doubled to $56 million from $29 million reported in the prior-year quarter.

The better-than-expected results at this real estate investment trust (REIT) were driven by increasing demand for wood products stemming from a recovery in the residential construction market. The company has registered a decent performance across its segments.

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Northern Resources – This segment reported operating profit of $11 million during the quarter, which was well ahead of $6 million recorded in the year-ago period. Results reflect a rise in prices of sawlogs (15% year over year), driven by increased production at West Coast lumber mills to meet a recovering domestic demand. Pulpwood prices also registered a rise (2% from the prior-year period) attributable to solid hardwood pulpwood demand in the Northeast. Overall, harvest volumes remain nearly unchanged year over year.

Southern Resources – This segment booked an operating profit of $24 million, which surged 14.3% year over year, reflecting improved pricing for both sawlog (up 6% year over year) and pulpwood (up 14%). However, overall, harvest volumes fell around 2.3% year over year.

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German Pellets plans second giant wood pellet plant in U.S.

Sam Radcliffe — Fri, 26 Apr 2013 18:30:21 GMT

Just as it is readying to opening a 500,000-metric ton wood pellet production facility in Woodville, Texas, German Pellets announced that it plans to build an additional 1 million-metric ton plant in Louisiana, with construction slated to begin this month.

The plant will be located in the central Louisiana town of Urania, which has a population of about 1,300. German Pellets expects the new plant to create around 500 direct and indirect jobs in the region.

Much of the facility’s infrastructure is already in place—including a railway siding—as it is the former site of a Georgia Pacific fiber/particleboard plant that closed over a decade ago.

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Ohio Police & Fire bulks up tactical real estate allocation, commits $100 million to Global Forest Partners

Sam Radcliffe — Fri, 26 Apr 2013 17:15:58 GMT

Ohio Police & Fire Pension Fund, Columbus, committed $50 million to USAA Eagle Real Estate Fund, confirmed spokesman David Graham.

The commitment to the tactical real estate fund, managed by USAA Real Estate, is part of the $13.1 billion pension fund's efforts to reach a goal of a 50-50 split between strategic and tactical investments within its real estate allocation.

***

Separately, the pension fund committed $100 million to Global Timber Investors 10. It is a first-time commitment to a Global Forest Partners fund.

[Real estate consultant] Townsend [Group] and general investment consultant Wilshire Associates assisted.

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Chinese SOE Makes Long-Term Investment in NZ Forestry

Sam Radcliffe — Fri, 26 Apr 2013 17:10:57 GMT

China Forestry Group New Zealand Company Limited (China Forestry Group NZ) has agreed to acquire part of the NZ Superannuation Fund’s North Island forestry assets, following a competitive tender and Overseas Investment Office approval.

China Forestry Group NZ is a wholly owned subsidiary of China Forest Group Corporation, a Chinese State Owned Enterprise owned and controlled by the People’s Republic of China. China Forest Group Corporation’s is a major Chinese forestry company with business interests covering a range of timber related businesses including the ownership of forest plantations, wood processing, facilities and timber product manufacturing and related sale and distribution to the Chinese Construction sector. Each year China Forest Group Corporation imports over US$311 million of forestry products worldwide.

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Graeme Wong, Director of China Forestry Group NZ and spokesperson for the buyer said, “The parent company China Forest Group has made this investment on order to secure part of its overall demand for New Zealand logs from its own forests. This is a long-term investment and the forests acquired will be re-planted following harvest to maintain continuity of supply.”

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This is the first step in CNFP’s strategy to invest in the NZ forestry industry, by acquiring additional forests to expand its total forest estate over time and exploring profitable opportunities to add value to its NZ forest assets.

The forestry estate comprises some 13,600 hectares of which around 10,400 are productive.

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“Owning the forestry estate will not likely see any reduction in the purchase of export logs from other New Zealand suppliers. Rather it should see the company sourcing more of its timber requirements from New Zealand,” Graeme Wong said.

Lin Zhan, General Manager of China National Forests said, “China Forestry Group NZ will establish a permanent base in New Zealand in order to manage the newly acquired forest estate. To ensure that the forests are managed to best practice, New Zealand based in-forest suppliers will continue to provide the in-forest services. We don’t envisage job losses, in fact over time; our forestry interests in this country should generate additional employment opportunities for New Zealanders.”

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Plum Creek Completes Purchase of Timberlands in Georgia and Alabama

Sam Radcliffe — Wed, 24 Apr 2013 03:14:10 GMT

Plum Creek Timber Company, Inc. (NYSE: PCL) today announced the completion of the purchase of approximately 46,000 acres of timberlands in western Georgia and eastern Alabama from the Campbell Group, LLC for approximately $72 million.

"We are pleased to add these well-managed timberlands to our existing asset base in this attractive timber market," said Rick Holley, Plum Creek chief executive officer. "We're uniquely positioned to efficiently integrate these lands into our operations and generate an attractive return for our investors."

Plum Creek is one of the largest private landowner in the nation, and most geographically diverse, with approximately 6.4 million acres of timberlands in major timber producing regions of the United States and wood products manufacturing facilities in the Northwest. For more information, visit www.plumcreek.com.

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Phaunos Timber Fund sees NAV decline in 2012

Sam Radcliffe — Fri, 19 Apr 2013 14:04:57 GMT

Phaunos Timber Fund, the investment scheme managed by FourWinds Capital Management, saw its net asset value (NAV) decline by $70m in 2012 during a challenging year for global timber markets.

Revenues dropped from $18.8m to $15.6m during the year, which the firm said was largely due to a 70 per cent reduction in income from its Matariki asset $4.4m.

At the end of 2012, NAV stood at $488.4m compared with $558.8m the previous year.

Liane Luke, head of timber at FourWinds Capital Management, said, ‘2012 was a challenging year for global timber markets, with signs of recovery in the US offset by generally flat markets elsewhere.

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Report: Private Forests and the Tax Code

Sam Radcliffe — Fri, 19 Apr 2013 14:02:37 GMT

Sam Radcliffe's insight:

This comprehensive report was submitted to the House Ways and Means Committee recently by the National Alliance of Forest Owners.

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Tax Plan May Provide Real-Estate Boost

Sam Radcliffe — Thu, 18 Apr 2013 13:48:36 GMT

Despite the austerity mood in Washington, President Obama's proposed budget would provide tax relief to some foreign investors, a move the U.S. real-estate industry has been seeking for years.

As part of a larger push to spur private investment in U.S. infrastructure, Mr. Obama has proposed changes to a 1980s tax policy called the Foreign Investment in Real Property Tax Act, or Firpta, that would exempt foreign pension funds from paying taxes on gains from real-estate sales.

The proposal is still subject to congressional approval, which will likely prove tricky in the current budget-cutting climate. It also doesn't go as far as the real-estate industry would like because the proposed exemption would only apply to overseas pension funds, not all foreign investors.

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Firpta had led a number of investors to change their strategies to investing in real-estate debt in the U.S. rather than equity, said Ben Sanderson of Hermes Real Estate Investment Management Ltd., which manages money for pension funds. ***

Firpta taxes gains from foreign sales of assets including buildings, land, mines and timber, as well as stock in real-estate companies. While foreign investors consider it onerous, many still invest in the U.S. because of its clear legal system and a transparent property market, where price and performance data is easy to obtain.

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Patrick Kanters, managing director of global real estate at APG Asset Management, the fund manager that invests €329 billion ($428.9 billion) for pension funds including Dutch civil-service pension fund ABP, said the group had been investing in U.S. real estate since the late 1990s, but that the proposed change was a "great idea" that would set a more-level playing field for investors.

He said that today, domestic buyers in the U.S. are able to place higher bids in competitive tenders for properties because their future internal rates of return, or IRR, aren't affected by the added tax on future capital gains. "They can pay slightly more to get the same IRR," Mr. Kanters said.

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