Timber purchasing trend changes

Published 3:17 pm Wednesday, December 13, 2006

By By Janet Little Cooper
Trends in Alabama timberland investments were discussed at a recent international timber investment forum in New York City.
Jacob F. "Jake" Schutt, its chairman of the board, represented Wilmon Timberlands, an Alabama-based forest management firm, in a panel discussion.
The International Quality and Productivity Center sponsor the semiannual event, Timberland Investment World Summit.
Schutt's roundtable session examined the pros and cons of investing in timber-considered an "alternative" asset-from the investor's point of view. Schutt was joined on the panel by Amy Chen, Director of Investments for the Smithsonian Institution and Sandy LaBaugh of TIAA-CREF.
Schutt discussed how demographic changes in southern Alabama are creating trends that affect how timber investments are viewed by investors and timberland managers.
"We're seeing a steady influx of people who move to our area (southwestern Alabama) from the Gulf Coast and from northern states. They are looking for rural lands for retirement, hunting, and recreational uses. Along with the actual timber investment, these monetizable rights change the way a timberland investment is shaped. We're getting more creative in how we advise our clients on a timber deal since these 'non-timber' factors impact the pricing on the front end of the investment cycle."
Schutt also pointed out that his company, Wilmon Timberlands, based on the border of Monroe and Wilcox counties, does not encourage using leverage in timber investments. Since timber is often a 20 to 30 year investment, "we don't want to accelerate timber cuts in a timeframe where we don't think it's advantageous. Having to cut timber in an early stage of the growing cycle is the number one harm to long term return."
Alabama forestry is a $13.2 billion industry, according to the Alabama Forestry Association.
Swift Lumber Mill, the largest and only mill in the Atmore area helps contribute to billion-dollar industry.
Swift vice president John Swift, III agrees with Schutt's views on the recent trends in timber purchases.
"Alabama's timberland is a big commodity at this point," Swift said. "Mississippi is on its tail after the storm and I haven't heard much about what is going on in Georgia. but in Alabama timber land is still being purchased, just in a different way."
According to Swift the larger companies, such as International Paper are divesting themselves of land ownership.
"One group bought all the International Paper land available in the state of Alabama," Swift said. "IP saved some of the premier land around interstates and other prime spots, but the bulk of the timberland from Atmore north to Tennessee has been sold."
Swift says that he sees a huge trend in the timberland industry that involves purchasing 'large – small' blocks consisting of several thousand acres instead of 200 to 500 hundred acres.
"The large blocks they are referring to consist of hundred's of thousands acres," Swift said. "The trend is to buy the large blocks and then break them off into smaller large blocks of land of about 100,000 acres. They don't want to fool with small acreage anymore."
Professional people, including doctors and lawyers are among the group of people who are leading this trend in timberland purchases according to Swift.
"Rather than coming from far away, people are coming from Mobile, New Orleans and Pensacola, Fla.," Swift said. "They are all trying to get out of the big city environment and to do so you have to get on in to Alabama to find timberland. And generally it is the professional people such as doctors and lawyers who are looking to purchase such large blocks to use as investments for whatever reason. Land has always been a wise investment."

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