Hancock Timber Resources Group (HTRG) announced the acquisition of 78,896 acres of timberland across Bayfield, Burnett, Douglas, and Washburn Counties in northwestern Wisconsin for an undisclosed amount.
The acquisition of the timberland – which was acquired from investment funds managed by The Lyme Timber Company, a Hanover, New Hampshire-based private timberland investment management firm – brings HTRG’s total portfolio to approximately 440,000 acres of managed timberland holdings in the Lake States. On a wider scope, HTRG now manages 3.6 million acres across the U.S., and 5.9 million acres globally, including assets in the U.S., Brazil, Chile, Canada, New Zealand, and Australia.
More than 90 percent of the timberland acquired through this deal have been managed under working forest conservation easements purchased from The Lyme Timber Company by the Wisconsin Department of Natural Resources (DNR). These easements, which were acquired under the Brule-St. Croix Forest Legacy Project, ensure that the land in question will remain in timber production, while remaining open to the public for recreational activities including hunting, fishing, hiking, trapping, and cross country skiing, and serving the wood products industry.
“These assets are attractively stocked with primarily red pine, jack pine and hardwood forest types. They will supply a diverse customer base who manufacture utility poles, lumber, studs, and pulp and paper products. We are very pleased to add these high quality productive timberlands to our clients’ portfolios,” said Brent Keefer, president, HTRG. “We also look forward to managing these timberlands which have been protected under conservation easements. This type of management is consistent with our long standing stewardship ethic.”
Timberland and Farmland – Better Together
Investing in timberland offers specific benefits that provide a range of value propositions. Particularly suited to the long-term investor, timber holdings provide much needed portfolio diversification while also having a low correlation to other assets classes. The inclusion of such investments also offers a buffer against inflation, preserving capital for future generations.
Over the past few years GAI News has discussed some of the higher impact deals in the sector including Grupo BTG Pactual SA’s asset management unit’s announcement in May 2015 of the closing of its timberland fund – BTG Pactual Brazil Timberland Fund I at $860 million.
The fund invests in timber, forestry, and related assets to the class across Brazil and throughout the wider Latin American region in answer to growing interest in such sector investments from investors, including both Brazilian and global institutional investors.
One month later, in June, TIAA-CREF and its subsidiary. GreenWood Resources (GWR) announced the close of the $667 million global timber company, Global Timber Resources LLC (GTRCo).
The newly-formed company, which had capital commitments from investors including TIAA General Account, Caisse de dépôt et placement du Québec, AP2, and the Greater Manchester Pension Fund, was an addition to TIAA-CREF Asset Management’s growing $124 billion global asset management platform, and invests in timberland assets across North America, Latin America, Europe, and Asia.
The following year in July 2016 timber investment management firm Resources Management Services (RMS) reached a new $78 million, 50-year lease agreement with North Carolina State University (NCSU) giving RMS the right to sustainably grow, harvest, and replant timber assets on 54,334 acres of working forest land within the 79,000 acre Hofmann Forest owned by the North Carolina State Endowment Fund.
However, while timber assets offer a unique value, and have been typically managed separately from ag investments, they work best for the investor when combined with agricultural assets in a mixed portfolio, according to the article, “Farmland and Timberland, Working Together in a Mixed Asset Portfolio”, written by HNRG for the latest issue of GAI News’ Gazette.
In the piece, HNRG concludes that over the 25-year period between 1992 and 2016, the risk-return profile for a 50-50 farmland/timberland land investment vehicle surpassed that for a pure farmland, pure timberland, or commercial real estate vehicle, with each, farmland and timberland, offsetting periods of falling returns for the other asset class.
This 50-50 ag and timberland structure is exactly the course being pursued by Andrew Wiltshire, former head of alternative assets with Harvard’s $36.9 billion endowment fund. In July of last year, it was announced that Wiltshire was partnering with former Harvard Management Company colleagues, Oliver Grantham and Alvaro Aguirre, to co-found Folium Capital – a Boston-based investment firm raising $500 million, with $250 million committed to each ag and timberland assets across North America, Latin America, Eastern Europe, the Nordic region, Oceania, and the Iberian Peninsula.
-Lynda Kiernan
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