From the Kern Valley Sun...
http://www.kvsun.com/articles/2009/08/25/news/doc4a8af0f574140156721020.txt
Friday, August 28, 2009
Wednesday, August 26, 2009
Self-Employed Workers Clock the Most Hours Each Week
Yo, check it.
http://www.gallup.com/poll/122510/Self-Employed-Workers-Clock-Hours-Week.aspx
http://www.gallup.com/poll/122510/Self-Employed-Workers-Clock-Hours-Week.aspx
Falling Timber Industry Hits Backwoods US Hard
http://www.forbes.com/feeds/ap/2009/08/24/business-financial-impact-us-stress-map-backwoods-breakdown_6808615.html
Monday, August 24, 2009
You Can Achieve Whatever You Set Your Mind To — No, Really!
Check this out...
http://pajamasmedia.com/blog/you-can-achieve-whatever-you-set-your-mind-to-%E2%80%94-no-really/
http://pajamasmedia.com/blog/you-can-achieve-whatever-you-set-your-mind-to-%E2%80%94-no-really/
Monday, August 17, 2009
The Green Eyeshade Boys
Here is a link to an article by Jim Petersen of the Evergreen Foundation...
http://evergreenmagazine.com/web/The_Green_Eyeshade_Boys.html
...and International Paper's response...
http://evergreenmagazine.com/index.html
http://evergreenmagazine.com/web/The_Green_Eyeshade_Boys.html
...and International Paper's response...
http://evergreenmagazine.com/index.html
New strategy to save forests: logging
By LYNDA V. MAPES
The Seattle Times
Stumps and slash piles are the tallest things on this forestland less than 30 miles from the Space Needle as the crow flies.
Clear-cut two years ago, this is the sort of sight that not long ago would have riled most environmentalists. But the white hats are on new heads these days. Conservationists are partnering with timber companies on deals, and environmentalists are praising "working forests," the friendly new term for clear-cuts - in order to stave off development.
It's a shotgun wedding born of duress, as sprawl, slowed only temporarily by recession, chews away at the last green places holding the Puget Sound ecosystem together.
For any timber company, real estate - especially sales of developable land - is what brings in the big money. Since the 1970s, more than 1.2 million acres of privately owned forestland have been converted to development in Washington.
Today, nearly 1 million more acres of Western Washington's lush, low-elevation forests - an area four times the size of Mount Rainier National Park - are at risk of development, according to a new study from the College of Forest Resources at the University of Washington. Most vulnerable are forests where the property assessment alone exceeds the value of the land for growing trees. They are typically forests nearest population centers and major roads.
"The battle lines have changed, and the terms of the debate have shifted," said Peter Goldman of the Washington Forest Law Center in Seattle. A longtime nemesis of timber companies, Goldman today is working to keep loggers in business on these privately owned timberlands, where Washington's identity as the Evergreen State is most at risk.
"We are logging these forests to save them," Goldman said.
From the Puget Sound region to the Cascade foothills in Southwest Washington, the future of the landscape is quietly being decided. As land values rise, forestland owners are marking properties, particularly those closer to urban areas, for their most profitable use: development.
The shift speeds a downward spiral for the timber economy. As lands go out of timber production, mills starved for logs shut down. That creates longer hauls to faraway mills and less-profitable harvests from smaller parcels, driving even more conversion from forestland to development.
"Essentially everything in the (Cascade) foothill area is high risk," said David Nunes, president and CEO of Pope Resources, "or the ballgame is (already) over."
His Poulsbo-based company has been growing and cutting timber in the Puget Sound region since before statehood. But the company today is getting rid of entire swaths of its forestlands, including most of its holdings - nearly 70,000 acres - in Kitsap County.
"We are in the process of exiting North Kitsap, and we make no bones about it," Nunes said.
But elsewhere, in the foothills of Mount St. Helens, his company is partnering with The Columbia Land Trust in an effort to keep thousands of acres in forestry. His company - the largest private landowner in Skamania County - is being courted as a savior of the landscape.
"For many years, the timber industry was the black hats," Nunes said. "All of the sudden people want to embrace our activities."
In a high-water mark of the new collaboration, timber-company representatives recently met with conservationists for a news conference in a Seattle skyscraper.
They met to announce their common cause in backing federal legislation introduced last week to create community forestry bonds - up to $3 billion in tax-exempt revenue bonds nationwide to buy forestlands teetering on the edge of conversion.
Under the legislation, lands purchased with the new bonds would remain in private ownership and still be logged. But the land would carry a permanent conservation easement, under which it could not be developed. It would remain a working forest, logged in perpetuity to pay off the bonds.
The legislation marks a shift in thinking, recognizing the value of forests not only as wilderness or parks, but as working landscapes that function almost like public utilities, cleansing water and air, sequestering carbon, stabilizing soils and providing habitat and wildlife corridors.
In some ways, conversion of Puget Sound forestlands to development is one of the oldest stories in the region. The past 100 years have been one long exit strategy for Washington timber companies that were among the first industrialists to convert the region's natural bounty to cash, first as logs, then as development.
Broadmoor, one of Seattle's first gated communities, and Alderwood mall each used to be Pope forests.
"We've always been exiting," said Jon Rose, president of Olympic Property Group, Pope's wholly owned real-estate subsidiary. For any timber company, real estate provides the most money per acre.
Pope enjoyed its most profitable years in 2006 and 2007, on the strength of its real-estate portfolio, not its timberlands. The sale in 2007 of 6 acres for a Costco shopping center site in Gig Harbor brought a record $1.2 million per acre.
That was an extreme case - and the company had to invest millions of dollars in roads, water and other infrastructure, as well as years in the permitting process, to make the deal work.
But even ordinary deals on its lands in North Kitsap make timber a losing proposition. Developable land normally sells for about $12,500 an acre, and timberlands can be purchased elsewhere for $2,000 to $3,000 an acre.
While the economy has slowed, no one, including timber company real-estate executives, regard the cool-down as permanent. Pope just subdivided its tree farm near Mount St. Helens into 37 square miles of 20-acre lots, and it is working steadily at a development plan for the property to have in place when the market heats back up.
Today, while the company is still in the timber business, it's increasingly looking outside the Puget Sound region and population centers such as Seattle and Portland for its timberland, and targeting its near-in property for development.
Pope is working in Kitsap County on its so-called String of Pearls development, planned in waterfront communities united with a regional trail system. In Skamania County, the company is proposing a recreation-themed development for its 24,000 acres on the south flank of Mount St. Helens, surrounding Swift Reservoir.
Pope is partnering with the Columbia Land Trust to cluster the development on 15 percent of the property, with the rest kept as working forest. The land trust wants to raise the money to buy the development rights or title to the rest of the tree farm.
Clustering the development - and keeping the rest of the land in forestry - would stop square miles of low-density sprawl development, which, while perfectly legal, is one of the worst outcomes for the ecosystem. The land trust also wants to help retain timber jobs and a natural-resources economy close to home, said Glenn Lamb, the trust's executive director.
Mitch Friedman, executive director of Conservation Northwest, headquartered in Bellingham, sees a logical evolution of the logging debate as the region grows.
"It would be a mistake for logging and forestry to be branded as evil," Friedman said. "It's about supporting quality farming and forest practices and protecting the right places."
It's not always an easy sell, said Friedman, a tree-sitter during the Northwest's old-growth battles of the 1970s. "I'm an apostate, a turncoat on this issue," Friedman said. "We need to hug loggers the way we do farmers. Given the choice between a logger and a developer, I'm going to take the logger, even if that challenges some of the notions of my old friends."
To some foresters, the new thinking is old hat. They always have seen the next forest amid the clear-cut trees, and regarded their work as preservation, caretaking a resource for another generation's harvest.
Gilbert and Carolyn Oster, of Fall City, recently decided to keep their 90-acre property in forestry, despite the 5-acre-lot subdivision zoning already on the property - just the sort of sprawl eating up the Puget Sound ecosystem. They have put a conservation easement on their land, under which they will continue to own and log their property, but may not develop it.
Forestland like theirs helps keep the lowland, riparian valleys of the Puget Sound functioning ecologically. Even clear-cut, the land holds stormwater runoff, and provides habitat for native plants, birds and other wildlife. The forest, by law, is replanted - and it's vigorously growing back.
Gilbert Oster walks the clear-cut with a video camera, to document the growth of the replanted trees, stretching with bright new growth. Carolyn patrols with clippers, snipping a blackberry branch here or a kicking over a thistle there.
They've worked this forestland since the 1950s, and don't intend to let it convert to housing subdivisions now.
Across the way, they can see the development moving east from Issaquah.
Gilbert Oster takes binoculars from his eyes with a pained expression. "What I see over there on that ridge makes me very happy we did what we did."
INFORMATION
Read the University of Washington study: www.nwenvironmentalforum.org
http://www.miamiherald.com/living/health/healthAP/story/1175665.html
*************************************************
The Seattle Times
Stumps and slash piles are the tallest things on this forestland less than 30 miles from the Space Needle as the crow flies.
Clear-cut two years ago, this is the sort of sight that not long ago would have riled most environmentalists. But the white hats are on new heads these days. Conservationists are partnering with timber companies on deals, and environmentalists are praising "working forests," the friendly new term for clear-cuts - in order to stave off development.
It's a shotgun wedding born of duress, as sprawl, slowed only temporarily by recession, chews away at the last green places holding the Puget Sound ecosystem together.
For any timber company, real estate - especially sales of developable land - is what brings in the big money. Since the 1970s, more than 1.2 million acres of privately owned forestland have been converted to development in Washington.
Today, nearly 1 million more acres of Western Washington's lush, low-elevation forests - an area four times the size of Mount Rainier National Park - are at risk of development, according to a new study from the College of Forest Resources at the University of Washington. Most vulnerable are forests where the property assessment alone exceeds the value of the land for growing trees. They are typically forests nearest population centers and major roads.
"The battle lines have changed, and the terms of the debate have shifted," said Peter Goldman of the Washington Forest Law Center in Seattle. A longtime nemesis of timber companies, Goldman today is working to keep loggers in business on these privately owned timberlands, where Washington's identity as the Evergreen State is most at risk.
"We are logging these forests to save them," Goldman said.
From the Puget Sound region to the Cascade foothills in Southwest Washington, the future of the landscape is quietly being decided. As land values rise, forestland owners are marking properties, particularly those closer to urban areas, for their most profitable use: development.
The shift speeds a downward spiral for the timber economy. As lands go out of timber production, mills starved for logs shut down. That creates longer hauls to faraway mills and less-profitable harvests from smaller parcels, driving even more conversion from forestland to development.
"Essentially everything in the (Cascade) foothill area is high risk," said David Nunes, president and CEO of Pope Resources, "or the ballgame is (already) over."
His Poulsbo-based company has been growing and cutting timber in the Puget Sound region since before statehood. But the company today is getting rid of entire swaths of its forestlands, including most of its holdings - nearly 70,000 acres - in Kitsap County.
"We are in the process of exiting North Kitsap, and we make no bones about it," Nunes said.
But elsewhere, in the foothills of Mount St. Helens, his company is partnering with The Columbia Land Trust in an effort to keep thousands of acres in forestry. His company - the largest private landowner in Skamania County - is being courted as a savior of the landscape.
"For many years, the timber industry was the black hats," Nunes said. "All of the sudden people want to embrace our activities."
In a high-water mark of the new collaboration, timber-company representatives recently met with conservationists for a news conference in a Seattle skyscraper.
They met to announce their common cause in backing federal legislation introduced last week to create community forestry bonds - up to $3 billion in tax-exempt revenue bonds nationwide to buy forestlands teetering on the edge of conversion.
Under the legislation, lands purchased with the new bonds would remain in private ownership and still be logged. But the land would carry a permanent conservation easement, under which it could not be developed. It would remain a working forest, logged in perpetuity to pay off the bonds.
The legislation marks a shift in thinking, recognizing the value of forests not only as wilderness or parks, but as working landscapes that function almost like public utilities, cleansing water and air, sequestering carbon, stabilizing soils and providing habitat and wildlife corridors.
In some ways, conversion of Puget Sound forestlands to development is one of the oldest stories in the region. The past 100 years have been one long exit strategy for Washington timber companies that were among the first industrialists to convert the region's natural bounty to cash, first as logs, then as development.
Broadmoor, one of Seattle's first gated communities, and Alderwood mall each used to be Pope forests.
"We've always been exiting," said Jon Rose, president of Olympic Property Group, Pope's wholly owned real-estate subsidiary. For any timber company, real estate provides the most money per acre.
Pope enjoyed its most profitable years in 2006 and 2007, on the strength of its real-estate portfolio, not its timberlands. The sale in 2007 of 6 acres for a Costco shopping center site in Gig Harbor brought a record $1.2 million per acre.
That was an extreme case - and the company had to invest millions of dollars in roads, water and other infrastructure, as well as years in the permitting process, to make the deal work.
But even ordinary deals on its lands in North Kitsap make timber a losing proposition. Developable land normally sells for about $12,500 an acre, and timberlands can be purchased elsewhere for $2,000 to $3,000 an acre.
While the economy has slowed, no one, including timber company real-estate executives, regard the cool-down as permanent. Pope just subdivided its tree farm near Mount St. Helens into 37 square miles of 20-acre lots, and it is working steadily at a development plan for the property to have in place when the market heats back up.
Today, while the company is still in the timber business, it's increasingly looking outside the Puget Sound region and population centers such as Seattle and Portland for its timberland, and targeting its near-in property for development.
Pope is working in Kitsap County on its so-called String of Pearls development, planned in waterfront communities united with a regional trail system. In Skamania County, the company is proposing a recreation-themed development for its 24,000 acres on the south flank of Mount St. Helens, surrounding Swift Reservoir.
Pope is partnering with the Columbia Land Trust to cluster the development on 15 percent of the property, with the rest kept as working forest. The land trust wants to raise the money to buy the development rights or title to the rest of the tree farm.
Clustering the development - and keeping the rest of the land in forestry - would stop square miles of low-density sprawl development, which, while perfectly legal, is one of the worst outcomes for the ecosystem. The land trust also wants to help retain timber jobs and a natural-resources economy close to home, said Glenn Lamb, the trust's executive director.
Mitch Friedman, executive director of Conservation Northwest, headquartered in Bellingham, sees a logical evolution of the logging debate as the region grows.
"It would be a mistake for logging and forestry to be branded as evil," Friedman said. "It's about supporting quality farming and forest practices and protecting the right places."
It's not always an easy sell, said Friedman, a tree-sitter during the Northwest's old-growth battles of the 1970s. "I'm an apostate, a turncoat on this issue," Friedman said. "We need to hug loggers the way we do farmers. Given the choice between a logger and a developer, I'm going to take the logger, even if that challenges some of the notions of my old friends."
To some foresters, the new thinking is old hat. They always have seen the next forest amid the clear-cut trees, and regarded their work as preservation, caretaking a resource for another generation's harvest.
Gilbert and Carolyn Oster, of Fall City, recently decided to keep their 90-acre property in forestry, despite the 5-acre-lot subdivision zoning already on the property - just the sort of sprawl eating up the Puget Sound ecosystem. They have put a conservation easement on their land, under which they will continue to own and log their property, but may not develop it.
Forestland like theirs helps keep the lowland, riparian valleys of the Puget Sound functioning ecologically. Even clear-cut, the land holds stormwater runoff, and provides habitat for native plants, birds and other wildlife. The forest, by law, is replanted - and it's vigorously growing back.
Gilbert Oster walks the clear-cut with a video camera, to document the growth of the replanted trees, stretching with bright new growth. Carolyn patrols with clippers, snipping a blackberry branch here or a kicking over a thistle there.
They've worked this forestland since the 1950s, and don't intend to let it convert to housing subdivisions now.
Across the way, they can see the development moving east from Issaquah.
Gilbert Oster takes binoculars from his eyes with a pained expression. "What I see over there on that ridge makes me very happy we did what we did."
INFORMATION
Read the University of Washington study: www.nwenvironmentalforum.org
http://www.miamiherald.com/living/health/healthAP/story/1175665.html
*************************************************
Tuesday, August 11, 2009
Trouble in the Forest
From the August 10, 2009 BARRON'S magazine:
By ANDREW BARY
Soaring timberland prices could be chopped in half in coming years.
U.S. TIMBERLAND MAY BE ONE OF THE WORLD'S most overvalued asset classes.
Timberland is a rarity because prices have risen steadily since the mid-1990s, with Southern timber properties more than doubling to around $1,700 an acre, even as the price of logs, lumber and other forest products scrapes multiyear lows. Last year, when almost all investment categories declined in value and the U.S. stock market fell about 35%, timberland prices rose 9%, atop a 17% gain in 2007. In the first half of 2009, prices are down 0.5%, according to the National Council of Real Estate Investment Fiduciaries, or NCREIF, which tracks the timber market.
Timber prices could be vulnerable to a decline of as much as 50% in coming years. That likely would sting a group of real-estate investment trusts focused on timber, including Plum Creek Timber (ticker: PCL) and Potlatch (PCH), as well as Weyerhaeuser (WY), the forest-products company whose most valuable asset is two million acres of prime forest in the Pacific Northwest. Plum Creek, whose shares are flat this year, at 34, is expected to generate most of its 2009 profits from land sales, prompting analysts at Off Wall Street Consulting to write in a recent report that the company "increasingly looks like a self-liquidating entity rather than an ongoing business concern."
Plum Creek currently pays a dividend of $1.68 a share, and Potlatch, $2.04. Both dividends could be vulnerable because they're not generated from operations. Rayonier (RYN), another timber REIT, is in better shape because it has a more diversified business mix.
Credit Suisse analyst Chip Dillon downgraded Weyerhaeuser last week to Underperform from Neutral, citing its ongoing losses, a low dividend yield of less than 1% and potential tax and other hurdles if it tries to convert into a tax-advantaged REIT in the next two years. Weyerhaeuser, whose shares have moved up to 37 from 28 amid a rally in commodity stocks, is expected to lose about $2 a share this year. Dillon pegs "peak earnings" at about $4.45 a share in 2013.
If timber prices crash, the biggest losers could be university endowments and other institutional investors that plowed an estimated $40 billion into timber investments in the past decade as part of a major shift toward so-called alternative investments. The private market for timber is even more inflated than the timber values embedded in public REITs. Plum Creek, for instance, is valued at about $1,100 an acre, versus an average national private-market price of $1,800 an acre, according to NCREIF.
"If you look at income per acre, you're earning about a 1% return. A bank will pay you 2% or 3%," says Dillon. "The price of timberland is up two times in 10 years, while the income stream has gone down."
Dillon thinks timberland prices may decline as timber-investment-management organizations, or TIMOs, which hold millions of timber acres on behalf of institutional investors, begin to sell holdings in the next several years. Their funds hit predetermined liquidation dates, often eight to 10 years after inception.
IT'S TOUGH TO ASSESS THE STATE OF THE U.S. timber market because it is illiquid. It has gotten even harder to gauge the market lately because there have been no significant transactions since the global financial crisis erupted last fall. It is rumored that some sizable deals were shopped in late 2008 but were pulled from the market because of big gaps between what sellers wanted and what buyers would pay. On Plum Creek's earnings conference call in late July, CEO Rick Holley ventured that timber prices were down 10% from their peak. That could be an optimistic assessment.
Some small sales have been made at what Dillon considers inflated prices as TIMOs bought timberland from Plum Creek and other sellers. His view, in a recent note: TIMOs are "hustling to 'put money to work' in funds they created just before the financial crisis in order to avoid refunding these monies to fund investors" and thus getting lower management fees. Small sales at inflated prices also help maintain the value of existing timber holdings, but do a disservice to investors in the timber funds.
In the past decade, timber has migrated from the hands of long-time corporate holders such as International Paper (IP) and Boise Cascade to TIMOs, as forest-products companies sought to rid themselves of low-return assets, bolster their balance sheets and showcase hidden assets. Forest-products stocks generally have been terrible performers in the stock market for two decades. International Paper has rallied to 19 from 4 but remains below where it traded in 1989. Despite its impressive land holdings, Weyerhaeuser, at 37, is only slightly higher than it was 20 years ago.
Corporate owners found ready buyers in the TIMOs as timber became a hot asset class. Early investors such as the Harvard University endowment racked up big returns. Yet Harvard sold its U.S. timber holdings four years ago to Hancock Timber Resource Group, the largest of the TIMOs, with about $8 billion of timber assets under management. Hancock Timber executives weren't available to comment.
Timber has been hailed as an ideal investment for university endowments and other institutions because of strong historical returns, a low correlation with stocks and bonds, its renewable nature and supposed benefit as an inflation hedge. Bulls like to say timber "grows while you sleep" and isn't a depleting resource, unlike oil wells or copper mines.
Oscar Schafer, managing partner at O.S.S. Capital Management in New York and a member of the Barron's Roundtable, outlined the bear case for timber in our Midyear Roundtable in June ("Too Far, Too Fast," June 15). He said timber's "seductive investment pitch" doesn't make sense today. "The reality is the underlying cash flow is highly dependent on cyclical industries like housing, paper and newspapers," he said. "It is also tough to hedge inflation when you are buying at an inflated price. This is the greater-fool theory at work."
Compared with the outlook for key commodities such as oil, copper or aluminum, the outlook for most forest products isn't strong. Demand could weaken as the world goes digital and uses less paper.
One of timber's great selling points, its renewable nature, also means wood is less likely ever to be in tight supply. "With many of the trees maturing in recent years 'remaining on the stump,' we certainly do not see an immediate log-price jump when lumber markets heat up, as there will be a 'pent up' supply of logs for several years," Dillon wrote.
PART OF THE BULL CASE FOR TIMBER is that some land near expanding urban areas can be sold to real-estate developers. That argument, however, is less compelling now, given the weak state of the housing market.
"If timber is an inflation hedge, why are log prices at a 25-year low?" Dillon asks. Log prices are around $50 a ton, while lumber recently went for $222 per thousand board feet, half the 2004 high. North American newsprint is near a 20-year low at $450 a ton.
In outlining the bear case for Plum Creek in the Midyear Roundtable, Schafer noted it was valued at about 30 times estimated 2010 earnings and nearly 20 times projected pre-tax cash flow. Plum Creek's seven million acres of timberland are now valued at more than $1,100 an acre. He said $600 an acre is a more realistic value, which would translate into a stock price of $15 a share or less.
The Bottom Line
Early investors in timberland, such as university endowments, earned big returns. Those who invest today in timberland, and timber companies and REITs, are likely to see big losses.
Timberland's tiny yields compare with 7% to 8% yields on commercial real estate for an all-cash buyer and similar returns on real-estate investment trusts. Why should timberland return so much less? Most of the reported returns on timberland in recent years came from appreciation, not log sales.
In the future, the timber market could see a shift in assets toward REITs and away from TIMOs. "We do not see sufficient benefits of having a private and illiquid interest in a multiyear timber fund versus having a highly liquid investment in a diversified timber portfolio owned through shares in a publicly traded timber REIT," Dillon wrote. He thinks the TIMO model also is in trouble because endowments and other institutions increasingly prize liquidity.
Dillon thinks Plum Creek, in particular, ought to consider cutting its dividend, both to husband cash for potential acquisitions in coming years and deal with debt maturities in 2011 and 2012. Plum Creek CEO Holley said on the recent conference call that the current dividend is "important" to both the company and shareholders and could be increased in the future.
Timber is one of those overhyped investments whose supposed virtues don't hold up well under closer scrutiny. It is hard to find an asset that has appreciated so much, even as the products created from it are so weak. This doesn't bode well for private holders of timber and investors in timber REITs. For those seeking commodity investments and inflation hedges, look elsewhere.
In accordance with Title 17 U.S.C. section 107, any copyrighted material contained herein is distributed without profit or payment to those expressing prior interest in receiving this information for non-profit research and educational purposes only. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml
By ANDREW BARY
Soaring timberland prices could be chopped in half in coming years.
U.S. TIMBERLAND MAY BE ONE OF THE WORLD'S most overvalued asset classes.
Timberland is a rarity because prices have risen steadily since the mid-1990s, with Southern timber properties more than doubling to around $1,700 an acre, even as the price of logs, lumber and other forest products scrapes multiyear lows. Last year, when almost all investment categories declined in value and the U.S. stock market fell about 35%, timberland prices rose 9%, atop a 17% gain in 2007. In the first half of 2009, prices are down 0.5%, according to the National Council of Real Estate Investment Fiduciaries, or NCREIF, which tracks the timber market.
Timber prices could be vulnerable to a decline of as much as 50% in coming years. That likely would sting a group of real-estate investment trusts focused on timber, including Plum Creek Timber (ticker: PCL) and Potlatch (PCH), as well as Weyerhaeuser (WY), the forest-products company whose most valuable asset is two million acres of prime forest in the Pacific Northwest. Plum Creek, whose shares are flat this year, at 34, is expected to generate most of its 2009 profits from land sales, prompting analysts at Off Wall Street Consulting to write in a recent report that the company "increasingly looks like a self-liquidating entity rather than an ongoing business concern."Plum Creek currently pays a dividend of $1.68 a share, and Potlatch, $2.04. Both dividends could be vulnerable because they're not generated from operations. Rayonier (RYN), another timber REIT, is in better shape because it has a more diversified business mix.
Credit Suisse analyst Chip Dillon downgraded Weyerhaeuser last week to Underperform from Neutral, citing its ongoing losses, a low dividend yield of less than 1% and potential tax and other hurdles if it tries to convert into a tax-advantaged REIT in the next two years. Weyerhaeuser, whose shares have moved up to 37 from 28 amid a rally in commodity stocks, is expected to lose about $2 a share this year. Dillon pegs "peak earnings" at about $4.45 a share in 2013.
If timber prices crash, the biggest losers could be university endowments and other institutional investors that plowed an estimated $40 billion into timber investments in the past decade as part of a major shift toward so-called alternative investments. The private market for timber is even more inflated than the timber values embedded in public REITs. Plum Creek, for instance, is valued at about $1,100 an acre, versus an average national private-market price of $1,800 an acre, according to NCREIF."If you look at income per acre, you're earning about a 1% return. A bank will pay you 2% or 3%," says Dillon. "The price of timberland is up two times in 10 years, while the income stream has gone down."
Dillon thinks timberland prices may decline as timber-investment-management organizations, or TIMOs, which hold millions of timber acres on behalf of institutional investors, begin to sell holdings in the next several years. Their funds hit predetermined liquidation dates, often eight to 10 years after inception.
IT'S TOUGH TO ASSESS THE STATE OF THE U.S. timber market because it is illiquid. It has gotten even harder to gauge the market lately because there have been no significant transactions since the global financial crisis erupted last fall. It is rumored that some sizable deals were shopped in late 2008 but were pulled from the market because of big gaps between what sellers wanted and what buyers would pay. On Plum Creek's earnings conference call in late July, CEO Rick Holley ventured that timber prices were down 10% from their peak. That could be an optimistic assessment.
Some small sales have been made at what Dillon considers inflated prices as TIMOs bought timberland from Plum Creek and other sellers. His view, in a recent note: TIMOs are "hustling to 'put money to work' in funds they created just before the financial crisis in order to avoid refunding these monies to fund investors" and thus getting lower management fees. Small sales at inflated prices also help maintain the value of existing timber holdings, but do a disservice to investors in the timber funds.
In the past decade, timber has migrated from the hands of long-time corporate holders such as International Paper (IP) and Boise Cascade to TIMOs, as forest-products companies sought to rid themselves of low-return assets, bolster their balance sheets and showcase hidden assets. Forest-products stocks generally have been terrible performers in the stock market for two decades. International Paper has rallied to 19 from 4 but remains below where it traded in 1989. Despite its impressive land holdings, Weyerhaeuser, at 37, is only slightly higher than it was 20 years ago.
Corporate owners found ready buyers in the TIMOs as timber became a hot asset class. Early investors such as the Harvard University endowment racked up big returns. Yet Harvard sold its U.S. timber holdings four years ago to Hancock Timber Resource Group, the largest of the TIMOs, with about $8 billion of timber assets under management. Hancock Timber executives weren't available to comment.
Timber has been hailed as an ideal investment for university endowments and other institutions because of strong historical returns, a low correlation with stocks and bonds, its renewable nature and supposed benefit as an inflation hedge. Bulls like to say timber "grows while you sleep" and isn't a depleting resource, unlike oil wells or copper mines.
Oscar Schafer, managing partner at O.S.S. Capital Management in New York and a member of the Barron's Roundtable, outlined the bear case for timber in our Midyear Roundtable in June ("Too Far, Too Fast," June 15). He said timber's "seductive investment pitch" doesn't make sense today. "The reality is the underlying cash flow is highly dependent on cyclical industries like housing, paper and newspapers," he said. "It is also tough to hedge inflation when you are buying at an inflated price. This is the greater-fool theory at work."
Compared with the outlook for key commodities such as oil, copper or aluminum, the outlook for most forest products isn't strong. Demand could weaken as the world goes digital and uses less paper.
One of timber's great selling points, its renewable nature, also means wood is less likely ever to be in tight supply. "With many of the trees maturing in recent years 'remaining on the stump,' we certainly do not see an immediate log-price jump when lumber markets heat up, as there will be a 'pent up' supply of logs for several years," Dillon wrote.
PART OF THE BULL CASE FOR TIMBER is that some land near expanding urban areas can be sold to real-estate developers. That argument, however, is less compelling now, given the weak state of the housing market.
"If timber is an inflation hedge, why are log prices at a 25-year low?" Dillon asks. Log prices are around $50 a ton, while lumber recently went for $222 per thousand board feet, half the 2004 high. North American newsprint is near a 20-year low at $450 a ton.
In outlining the bear case for Plum Creek in the Midyear Roundtable, Schafer noted it was valued at about 30 times estimated 2010 earnings and nearly 20 times projected pre-tax cash flow. Plum Creek's seven million acres of timberland are now valued at more than $1,100 an acre. He said $600 an acre is a more realistic value, which would translate into a stock price of $15 a share or less.
The Bottom Line
Early investors in timberland, such as university endowments, earned big returns. Those who invest today in timberland, and timber companies and REITs, are likely to see big losses.
Timberland's tiny yields compare with 7% to 8% yields on commercial real estate for an all-cash buyer and similar returns on real-estate investment trusts. Why should timberland return so much less? Most of the reported returns on timberland in recent years came from appreciation, not log sales.
In the future, the timber market could see a shift in assets toward REITs and away from TIMOs. "We do not see sufficient benefits of having a private and illiquid interest in a multiyear timber fund versus having a highly liquid investment in a diversified timber portfolio owned through shares in a publicly traded timber REIT," Dillon wrote. He thinks the TIMO model also is in trouble because endowments and other institutions increasingly prize liquidity.
Dillon thinks Plum Creek, in particular, ought to consider cutting its dividend, both to husband cash for potential acquisitions in coming years and deal with debt maturities in 2011 and 2012. Plum Creek CEO Holley said on the recent conference call that the current dividend is "important" to both the company and shareholders and could be increased in the future.
Timber is one of those overhyped investments whose supposed virtues don't hold up well under closer scrutiny. It is hard to find an asset that has appreciated so much, even as the products created from it are so weak. This doesn't bode well for private holders of timber and investors in timber REITs. For those seeking commodity investments and inflation hedges, look elsewhere.
In accordance with Title 17 U.S.C. section 107, any copyrighted material contained herein is distributed without profit or payment to those expressing prior interest in receiving this information for non-profit research and educational purposes only. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml
Forest*A*Syst
If you've got a prospective client who's interested in practicing forestry but doesn't know what they want to do, tell them to check out Forest*A*Syst at www.forestasyst.org. It's an interactive website that will help them decide what their objectives are, which will help you better advise them. Your job as a consulting forester is much more difficult--if not impossible--if you don't know what your client wants to do with their property.
Monday, August 10, 2009
American Chestnut
Check this out...
http://www.dailyitem.com/0100_news/local_story_220225929.html/resources_printstory
http://www.dailyitem.com/0100_news/local_story_220225929.html/resources_printstory
Friday, August 7, 2009
What should a Forester do?
“The forester should work for the good of the forest as an entity, not for the sake of the forest itself, but to ensure that it will remain a permanently productive source of goods and benefits to the owner and to society.”
David M. Smith
The Practice of Silviculture, 1962
David M. Smith
The Practice of Silviculture, 1962
Tuesday, August 4, 2009
Ten Commandments for a Consulting Forester
From the Winter 2007 ACF Newsletter...
ACF veteran Bill Lebold, ACF (Ret.) has accumulated wisdom through years of experience. After a recent visit to Mount Sinai, Mr. Lebold was inspired to put pen to paper.
1. KNOW THY CLIENT
A: If an individual or couple -- know all names involved, marital status, parents if living, children, divorce, death, etc.
B: If government agency, i.e. federal, state, county, city, water authority, etc., make sure you know who has the proper authority to sell standing trees, or any other activity on the public property. For example, county commissioners, township trustees, mayor, city council, etc.
C: If on private property belonging to a hunt club, boat club, recreational group, golf course, etc. Again, make sure the board, or elected officers, or whoever have the authority to sign the papers and approve the forest work.
D: If an estate, trust, family group, or other such entity holding title to the land involved; be sure to check land ownership, and also it is a very good idea to check with the family attorney handling any forestry transactions.
2. THY CLIENT MUST KNOW YOU
Tell him or her about yourself. A forest consultant should give his or her client a complete rundown on the consultant’s educational background and qualifications, complete work experience, professional associations, references on similar work experiences and other information pertinent to the actions proposed.
3. ALWAYS MAINTAIN CLOSE COMMUNICATION WITH THY CLIENT
Promptly answer all phone calls, letters, e-mails, etc. Your client should know where and how to reach you in as quick of a manner as possible. Keep your client advised of the progress (or lack thereof) on the work you are doing for him or her. Most clients will become upset if they are kept in the dark, or seldom receive a progress report on the activities you are performing for them.
4. KNOW THY CLIENT’S PROPERTY AND PRESENT FOREST STATUS
It is very important to have in hand all of the current plat maps, topographic maps, aerial photos, county records, etc., when working on a client’s property. You cannot know too much about property lines, corners, line fences, neighbors, past forest practices, right-of-ways, easements, gas and power lines, farm rentals, hunting rights, etc. Often it is necessary to study the land deeds, or work with a surveyor or others if property lines or ownership status is in question.
5. ALWAYS CONDUCT THYSELF IN THE BEST ETHICAL STANDARDS
Never lie to a client or anyone else in the conduct of your business. Never evade questions, answer them to the best of your ability. Never belittle, denigrate, or rundown a fellow consultant, forester, logger, lumber company, law enforcement officer, or anyone else in the conduct of your forest consultant duties, or at any other time for that matter.
6. HOW TO TREAT THY CLIENT
Always treat your client with respect, integrity, dignity, promptness, fairness and efficiency. Be prompt at meetings, reliable and properly dressed for all occasions. Have all papers, paint and other necessary tools and accessories available and ready to go for the forest project you are planning to pursue. If you are unable to timely conduct an assignment for a client, so inform him or her. Whatever it is; timing, health, inexperience, size and scope of the project, distance, etc., advise your client accordingly and recommend another consultant or course of action.
7. RECOMMENDING ASSISTANCE IN RELATED FIELDS
Always be ready to recommend experts or assistants in other fields if you or your client feel it is necessary to augment the total practice. Such assistance could come from surveyors, attorneys, engineers, environmentalists, agricultural experts, accountants, etc. You should provide your client with the best knowledge and expertise pertinent to his or her overall situation, and of course in line with their willingness to pay for such services.
8. COOPERATION WITH OTHER EXPERTS
Always be willing to cooperate and work with other forest consultants, or individuals as suggested in number seven above. Be ready to use such persons and agencies as you and your client feel would be helpful in fully accomplishing the client’s desires.
9. KNOWLEDGE ABOUT LAWS AND LOCAL REGULATIONS
A forest consultant should keep him or herself knowledgeable about local laws and regulations. A consultant does not wish to involve a client, others, or him/herself in any illegal or improper activities. Most forest consultants carry some form of Errors and Omissions insurance to adequately cover themselves in the event of a catastrophic award in the rare even of court action against them.
10. KEEP CURRENT ON ALL FORESTRY ISSUES
A forest consultant should always keep him or herself fully updated on all forestry issues, economic trends, timber prices and markets, weather activities, etc. A forest consultant should attend such seminars and courses to qualify for accreditation in his or her field. It is important that a forest consultant read and study current forestry related publications, and other media news, so that she or she is knowledgeable with the latest and best forestry information. Finally, it is also advisable for a forest consultant to keep up professional relationships by belonging to various local, state and national forestry organizations.
ACF veteran Bill Lebold, ACF (Ret.) has accumulated wisdom through years of experience. After a recent visit to Mount Sinai, Mr. Lebold was inspired to put pen to paper.
1. KNOW THY CLIENT
A: If an individual or couple -- know all names involved, marital status, parents if living, children, divorce, death, etc.
B: If government agency, i.e. federal, state, county, city, water authority, etc., make sure you know who has the proper authority to sell standing trees, or any other activity on the public property. For example, county commissioners, township trustees, mayor, city council, etc.
C: If on private property belonging to a hunt club, boat club, recreational group, golf course, etc. Again, make sure the board, or elected officers, or whoever have the authority to sign the papers and approve the forest work.
D: If an estate, trust, family group, or other such entity holding title to the land involved; be sure to check land ownership, and also it is a very good idea to check with the family attorney handling any forestry transactions.
2. THY CLIENT MUST KNOW YOU
Tell him or her about yourself. A forest consultant should give his or her client a complete rundown on the consultant’s educational background and qualifications, complete work experience, professional associations, references on similar work experiences and other information pertinent to the actions proposed.
3. ALWAYS MAINTAIN CLOSE COMMUNICATION WITH THY CLIENT
Promptly answer all phone calls, letters, e-mails, etc. Your client should know where and how to reach you in as quick of a manner as possible. Keep your client advised of the progress (or lack thereof) on the work you are doing for him or her. Most clients will become upset if they are kept in the dark, or seldom receive a progress report on the activities you are performing for them.
4. KNOW THY CLIENT’S PROPERTY AND PRESENT FOREST STATUS
It is very important to have in hand all of the current plat maps, topographic maps, aerial photos, county records, etc., when working on a client’s property. You cannot know too much about property lines, corners, line fences, neighbors, past forest practices, right-of-ways, easements, gas and power lines, farm rentals, hunting rights, etc. Often it is necessary to study the land deeds, or work with a surveyor or others if property lines or ownership status is in question.
5. ALWAYS CONDUCT THYSELF IN THE BEST ETHICAL STANDARDS
Never lie to a client or anyone else in the conduct of your business. Never evade questions, answer them to the best of your ability. Never belittle, denigrate, or rundown a fellow consultant, forester, logger, lumber company, law enforcement officer, or anyone else in the conduct of your forest consultant duties, or at any other time for that matter.
6. HOW TO TREAT THY CLIENT
Always treat your client with respect, integrity, dignity, promptness, fairness and efficiency. Be prompt at meetings, reliable and properly dressed for all occasions. Have all papers, paint and other necessary tools and accessories available and ready to go for the forest project you are planning to pursue. If you are unable to timely conduct an assignment for a client, so inform him or her. Whatever it is; timing, health, inexperience, size and scope of the project, distance, etc., advise your client accordingly and recommend another consultant or course of action.
7. RECOMMENDING ASSISTANCE IN RELATED FIELDS
Always be ready to recommend experts or assistants in other fields if you or your client feel it is necessary to augment the total practice. Such assistance could come from surveyors, attorneys, engineers, environmentalists, agricultural experts, accountants, etc. You should provide your client with the best knowledge and expertise pertinent to his or her overall situation, and of course in line with their willingness to pay for such services.
8. COOPERATION WITH OTHER EXPERTS
Always be willing to cooperate and work with other forest consultants, or individuals as suggested in number seven above. Be ready to use such persons and agencies as you and your client feel would be helpful in fully accomplishing the client’s desires.
9. KNOWLEDGE ABOUT LAWS AND LOCAL REGULATIONS
A forest consultant should keep him or herself knowledgeable about local laws and regulations. A consultant does not wish to involve a client, others, or him/herself in any illegal or improper activities. Most forest consultants carry some form of Errors and Omissions insurance to adequately cover themselves in the event of a catastrophic award in the rare even of court action against them.
10. KEEP CURRENT ON ALL FORESTRY ISSUES
A forest consultant should always keep him or herself fully updated on all forestry issues, economic trends, timber prices and markets, weather activities, etc. A forest consultant should attend such seminars and courses to qualify for accreditation in his or her field. It is important that a forest consultant read and study current forestry related publications, and other media news, so that she or she is knowledgeable with the latest and best forestry information. Finally, it is also advisable for a forest consultant to keep up professional relationships by belonging to various local, state and national forestry organizations.
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