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8/9/2019 Cogent Partners_Why Timber
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Investment Experience
Corrigan, Texas, USA
Acreage: 21,853
Species: loblolly pine
Development stage: balanced ageclass for sustainable yield
Markets: sawtimber and pulp
Georgia/Florida, South AtlanticStates, USA
Acreage: 29,900
Species: diverse pines
Development stage: balanced ageclass for sustainable yield
Markets: sawtimber and pulp
Tarrangower, New South Wales, Australia
Acreage: 21,163
Species: eucalyptus and non-commercial
Development stage: now being planted
Markets: sawtimber, carbon credits andbiodiversity conservation
Renwick, New Zealand
Acreage: 3,200
Species: radiata pine
Development stage: mid-rotation
Markets: log exports
Pahala, Hawaii, USA
Acreage: 3,700
Species: eucalyptus
Development stage: mid-rotation
Markets: log exports
Pinnacle, Hawaii, USA
Acreage: 4,500
Species: eucalyptus
Development stage: mid-rotation
Markets: log exports
Minas Gerais, Brazil
Acreage: 29,300
Species: eucalyptus
Development stage: bare-landproperty
Markets: production of charcoal to thepig iron industry
Tocantins, Brazil (3R)
Acreage: 25,700
Species: eucalyptus
Development stage: bare-landproperty
Markets: production of charcoal to thepig iron and silicon metals industrieswith exposure to developingpulp/paper markets
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Why Timber?
Attractive Long Duration Returns
Stable Investment Fundamentals - majority of return generated from biological growth
Provides Portfolio Diversification – low correlation with other asset classes
"The outlook for timberland investors is attractive. Supplies are decreasing, demand is increasing and prices are expectedto continue to appreciate in real terms. Declining supplies are a result of competing uses for forestland, a lack of
reforestation and public pressure to curtail timber harvest on federal lands. Higher demand for timber results from anexpanding global market for wood products and a shifting emphasis to renewable resources. Increasing global demandfor forest products is expected to continue due to worldwide demographic trends."
- Quote from Forest Investment Associates
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Timber Returns
Timber has provided attractive unlevered returns on true long duration assets.
Asset 2009 2008 2007 5 Year 10 Year Since Inception*
NCREIF Timber -4.8% 9.5% 18.4% 10.9% 7.3% 14.1%
S&P 500 26.5% -38.5% 3.5% -0.1% -1.2% 7.8%
Private Equity 12.3% -20.9% 18.1% 5.5% 4.0% 11.2%
NCREIF Total Property -16.9% -6.5% 15.8% 4.7% 7.3% 6.8%
* Timberland Index Inception was 1987
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Timber Return Correlations
Timber has provided valuable diversification to other asset classes whileproviding an inflationary hedge.
NCREIF NCREIFCorrelations Timber S&P 500 Total Property Private Equity
NCREIF Timber 1.00 0.05 -0.05 0.15
S&P 500 0.05 1.00 0.18 0.68
NCREIF Total Property -0.05 0.18 1.00 0.32
Private Equity 0.15 0.68 0.32 1.00
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Biological Growth Drives Return
Timber return are uncorrelated as biological growth accounts for the largest component of the return. Treesadd units of volume as they grow and the units become more valuable as they reach different product classes.
Components of Timber Return
*Based on Southern Yellow Pine
Value Per Tree
