Timberland ownership moving from regional to globalFriday 28 Mar 2008 Although the total investable timberland (forestland) universe in the United States is only a microscopic percentage of the total institutional asset base (about 0.2%); in the last decade institutional and private equity timberland investments have graduated from being an obscure asset class pursued by only pioneering investors, to rapidly becoming a semi-mainstream investment for an increasing number of pension funds, university endowments and private equity/hedge fund firms.In the United States there has been a massive swing away from C Corp company ownership of timberlands. In just three years from 2004 to 2007, the area of timberland owned by forest products companies halved, while areas managed by Timber Industry Investment Organisations (TIMOs) increased by 120%, by private investors almost 110% and T-REITS by 35%. Of the top 10 company timberland owners in 1981, only one (Weyerhaeuser) had any significant core holdings left by early 2008. TIMO-only investments have increased three-fold from $9.0 billion in 1997 to more than $29 billion in early 2008. On top of that Endowment and private equity funds have also invested - and so the total new ownership investment is perhaps more than $50 billion; out of a total timberlands investment space of $70 billion. The biggest challenge facing the investment timberlands industry in 2008 is a lack of affordable properties on the market. The excess liquidity searching for timberland deals has driven up timberland prices by 2-3 times over the last several years. For instance, timberland values in the US South, which averaged only about $500 per acre in the late 1980s, now sell for in excess of $1,500 per acre; and the most recent large- tranche transaction in February this year went for almost $1,900 per acre. Incidentally the very highly geared investment in this 900,000 acre property (purchased by TimberSTAR in mid- 2006) returned an estimated annual equity Internal Rate of Return (IRR) approaching 90%. This compares with fundamental annual returns on timberlands of perhaps 5-8% in the US PNW, and 4-6% in the US South. By early 2008, a number of TIMOs had become the largest landowners/managers in the United States. Several manage more than 1.0 million acres and some more than 2.0 million acres. One TIMO now manages more than 2.5 million acres in the USA; and the largest TIMO, counting its international assets manages more than 3.5 million acres. This compares with the largest truly private landowner in the United States (Sierra Pacific) with only about 1.8 million acres under (timberlands) management. Plans to establish a number of country specific timberlands investing funds have been developed in 2007-2008 including in Russia, Brazil, Chile, Colombia and Japan. The number of global timberlands owners, funds managers, fund of funds managers, listed vehicles and institutional funds in North America, Europe Oceania, Latin America, Africa and Asia have grown so much recently that DANA Limited has been able to identify and profile/list more than 600 global players in the timberlands business; to provide material on historic and recent trends, and on the timberlands investment risk profile outlook in a new Review: The International Timberlands Ownership and Investment Review published in March 2008. For more information visit www.dana.co.nz or contact or contact jan@dana.co.nz |
Copyright 2004-2024 © Innovatek Ltd. All rights reserved. |