forestry investment funds

Larry Caldwell larryc at
Wed Oct 22 17:03:56 EST 1997

In article <19971016121401.IAA07256 at>,
jostnix at (Jostnix) wrote:

> Next, you hire a smart forester (that's the catch:>) or group of same to
> find high site index land with optimum reproduction of a good species or
> presently growing good timber.  Again, that smart forester can do that by
> actually getting in a truck or Mercedes M-Class (if he is doing a good job)
> and purchasing these properties in include corporate takovers and
> poorly managed family estates.  You have to have a lot of land...not a
> yankee woodlot.

That will work if you are looking for harvestable trees.  If you're looking
for a long term investment, you want to make sure the seller hires a 
forester to appraise his trees.  That's an almost certain guarantee you'll
be able to skin him alive.

I've griped about this here before.  If you have a commercial tree plantation,
planted with fir or pine, brush suppressed and free to grow, you can't get
a forester to appraise it at $10 a tree for 10-year old trees.  These are
trees a quarter of the way to a commercial thinning, but I bet you can't
find a forester that will put over $800 an acre on the trees, when they're
easily worth twice that.

So you buy 1,000 acres for $800,000, hold it for 30 years, which puts your
capital cost at $3.2 million with interest at 8%.  Then you do a commercial 
thinning, take half the stems (roughly 160 trees/acre at 4 trees/mbf), which
grosses you $6.4 million, and leaves you with the land and that much more
standing timber.  Your gross return is roughly $12 million over 30 years, for
an inflation sheltered APR of somewhere around 18%, and an eventual net
payday of around $9 million.  

Of course, if somebody tells the farmer what his trees are worth you won't
get away with it, but as long as he sticks with professional foresters he'll
never have a clue.  

-- Larry

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