New West Colorado, Idaho, Montana, New Mexico, Utah, Wyoming
Confirming suspicions that western timberland has been selling for vastly inflated prices lately, a recent Barron’s report states that “U.S. timberlands may be one of the world’s most over-valued asset classes” and could see up to 50 percent reductions in value in coming years.
If accurate, the forecast doesn’t bode well for The Nature Conservancy, which recently paid an average of $1,570 per acre to Plum Creek Timber for 312,000 acres of timberland through the Montana Legacy Project (for an in-depth analysis of the Legacy Project, click here.
Clarification: There is not necessarily a direct link between the average value of timberland across the nation and the value of timberland purchased or sold as conservation land, such as the lands included in the Legacy Project. Several other factors may also affect the value of a specific parcel of timberland.
Nor will the report comfort Western Pacific Timber, which is currently accepting sealed bids for a 69,200-acre block of timberland in south-central Washington. The auction ends August 17, and the minimum bid price is $1,000 per acre.
Among other findings, the report said: “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.”
To read the entire article, click here.
Nice teaser, but I don’t want to subscribe to Barrons.
However, the driving force in long term investment deals is the pension money that is collected daily from millions of public employees. Private employee money in pensions is often required to be in the stock of the company the employee works for, or some other mechanism. But the public pension fund investment advisors and fund mangers have this infinite pile of money coming their way, daily, that has to find a home. If something has any kind of upside, they seem to overwhelm the product and drive up prices in the classic activity of too much money chasing too little investment opportunity. We have been there, had our collective asses kicked, and now suffer. Money in the bank? Drawing one percent annually? And you can’t get your line of credit continued? Gee. So what is the problem?
Timberlands will grow trees no matter who is in charge. That is why we are having ever increasing intensity in forest fires. Trees grow, every year. Some. And some years or decades they grow a lot. You start logging through a significantly large stand of timbered land, and before you get done logging it all, you will have a lot of forested land behind clogged and clotted with little trees. So some hedge funds, and some insurance companies, find timber a good investment because they don’t need to reclaim value anytime soon. But, for a publicly held timber company, having quarterly P/Ls to report, and stock rising and falling with quarterly profits, and dividends following, timber can be a poor investment, and a poor asset to hold onto. Hence the REIT, the TIMO, and LLCs holding timber and timber companies of old, the vertically integrated MegaPulps, they no longer want timber land. They can buy logs. Those who own timberland have to sell logs. That is their product. And if they are not structured to be able to avoid the purview of stockholders wanting quarterly incomes, stock dividends, that kind of thing, timberland holding publicly traded companies are now a bad deal. The result is that timberland prices are really low, and Baucus screwed Montana using taxpayer money slipped to PCT through NGOs, who take their vigorish, and life in the Green Democrat Envirolovefest continues. They work more like the Mob than a democratic government, but who knows, maybe that is who the Congress really is.
Never mind the MLP “land trust partners” who are about to be hit huge.
D’ya think Montana could snap that stuff up for what its really worth? No bailout? Just a straight buy?
A gutsy move by a legislator would be to manage a bill to have a statewide bond issue vote, paid by a surcharge on income taxes if Montana has income taxes, and just condemn and buy it under eminent domain laws. The Supremes, without a Wise Latina, did uphold a seaside town in New England that ED’d a whole neighborhood of working class homes, and promptly sold the land to a big time developer who is going to put in high rise, high end housing that will pay ten times the property taxes the existing neighborhood pays. So a government entity can ED the land for the sole purpose of selling it to Uncle Ferd so Ferd can build a McMansion and a real big garage. The Supremes spoke to that. Last year, or the year before. Pissed me off, because my house was zoned into that maximum 25% of a town that can be zoned for urban renewal, and now the house across the street is going to be remodeled, expanded, and turned into offices, and it will impact my ability to park on the street in front of my own home. But all done legally. Progress. So Montana could make progress by Eminent Domain, pay what their appraisers say it is worth, and PCT can sue to collect more. That is exactly how the Redwood National Park was created. And the ED’d property owners went to court at least twice, and got more money each time. Louisiana Pacific, Rellim, Arcata Redwood, Union Lumber, Pacific Lumber, Georgia Pacific. Hundreds of millions of dollars more than the US Govt paid in the beginning. A ruthless process. And that is a path, a pattern, a direction that is entirely legal and appropriate for the State of Montana to follow. All it would take is money. Let the people of Montana vote to tax themselves to raise the money, and it could happen very easily. Could trump the Baucus rape.
On the Redwood Natl Park. Someone tipped Weyerhaeuser off, and they sold their Rottiscraft (sp?) Door Division, which owned over 350,000 acres in the area, to Simpson in 1966. Weyco bailed on the Redwood country. They knew the fix was in. I was working on a side that got one of the big Interlock Skagit yarder/tower combinations from down there, and we put it to work up Little Fall Creek. I was one year out of college at the time. But that gives you an idea of how far ahead the thinking was for creating that National Park. And how far ahead people had been warned of what was in store. An insidious process, this Federal democracy.
The Nature Conservancy can pay ridiculous prices for land because they will then turn around and sell the carbon credits for 90% of the land, develop the choice lots and at the end of the day actually turn a profit that will allow them to buy up more land. The recent international treaty on climate change allows for ‘avoided deforestation’ to count as carbon credits. In other words if you set aside a parcel of land as a preserve you not only get the tax credit associated with doing so (pay no property tax) but the Nature Conservancy and orgs like them will actually compete to buy the carbon credit value of the land and timber if you promis to do nothing with the land. The real question is with people lining up to be part of the carbon credit gravy train, where will timber companies get timber to produce wood products, paper and all the necessities of life that 1st world families demand?
BYOB days are coming to McDonalds. That is, Bring Your Own Bag!