MARKET ANALYSIS
Timberland ownership is experiencing a structural change based on several trends. These trends are as follows:
Industry Consolidation
The most significant trend in timberland ownership is the continued movement by major landowners to consolidate and shift focus to their core business of producing and converting. Over the past several years, transactions and timberlands under evaluation have become significant in size and in the speed in which sellers demand that deals are closed. Sellers have been driven by strategic re-evaluation and by the slow, but steady movement to financial-based decision making.
Over 35 million acres has changed hands since 1995.
Ownership Distribution Comparison
Availability of Strategic Properties and Transactions of Scale
Larger, more strategic properties are coming to market, with transaction sizes ranging from $200 million to $2.0 billion. Over the past few years, specific sellers have come forth with individual transactions estimated to range in value from $200 million to in excess of $1.5 billion. We expect this trend to continue.
Market Opportunities
The opportunity to acquire properties that will generate a real return of seven percent to eight percent will continue based on log price forecasts and demand for premium softwood remaining strong and rising over the next several years.
Timberland Asset Gaining Market Presence
The opportunity to expand the investor base in timberland has never been greater. The asset is gaining market presence, yet represents less than 1% of all pension fund assets; approximately 100 pension funds have invested in this asset class, while virtually every fund manager is seeking quality investment alternatives. The capital markets are uniquely positioned to enhance the asset and expand ownership of the asset. Examples include the legislative changes in the REIT (Real Estate Investment Trust) criteria, which have created investment opportunities, and the debt markets are now positioned to accept timber-backed, securitized notes at favorable rates/terms.
