6:22 AM – September 15, 2017
Joining you this morning from a slightly different location as I sit in the Portland, Oregon Airport. It’s not quiet here like my den but the sun is now up and everyone is going everywhere. Airports are fascinating I think.
This week I attended a forestry investment conference. This conference occurs regularly and in some years twice a year as they have an east coast version every other year. “Who Will Own the Forest” is the name of the conference and it is an interesting title as the content of the event attempts to address this thesis.
In the short term, I believe institutional investors in the form of highly capitalized investment funds will continue to control major ownership interests. It was clear however that financial returns are not what they once were and the structure of the TIMO investment vehicle is being analyzed. Due to changes in the tax code back in the 1970’s TIMOs have become the dominant force in scalable timber investing. A quick look at Investopedia under TIMO will give you a basic background. The information on Investopedia will tell you over $14 Billion in timber investments are managed through TIMOs.
Regardless of softer returns in recent years the consolidated ownership and investing in forests is here to stay. There are new ideas emerging in the industry to create profits such as carbon mitigation and conservation forestry projects.
My biggest take away is the scale of the timber industry in the US. It is expansive, but quiet. No one ever talks about the timber industry. Ever. But quietly trees grow, foresters manage and timber investors sell logs and pulp wood to ports all over the world. One attendee I met just closed a significant wood supply agreement to ship product from North Carolina to Australia. The timber industry is far more dynamic than it appears and it impacts us in the cost of our magazines to the quality and price of the plywood you buy at Home Depot.
Early in my land career I walked in forests of British Columbia and Vancouver Island. The discussions back then were largely about ecology and protection of riparian forest buffers; the economics were presented but it was clearly secondary to curriculum presented. So now my experience has now run the spectrum from the forest is a sponge to the forest is a profit. I will not even attempt to reconcile that dynamic this morning as I will miss my plane… Let’s leave that for another time and agree it is interesting. Go take a walk today in a forest, it’s quiet. Headed East. Be Well.