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Timbaland Intro
So you’ve seen lumber futures skyrocket and you’re bullish housing BUT you’re an allocator for a pension fund and so need something to match your fund covenants and long term liabilities - you might be looking for Timberland!
So you’ve seen lumber futures skyrocket and you’re bullish housing BUT you’re an allocator for a pension fund and so need something to match your fund covenants and long term liabilities - you might be looking for Timberland!
Timbaland 2.
It’s not rocket surgery. Timberland is a forest which is grown, tended, and harvested to make things. Also known as TIMO’s.
They are as varied as any other asset class.
- species and geography -> end markets
It’s not rocket surgery. Timberland is a forest which is grown, tended, and harvested to make things. Also known as TIMO’s.
They are as varied as any other asset class.
- species and geography -> end markets
Timbaland 3.
Returns are connected to growth cycle -> geography (Tropics vs Temperate)
- Eucalyptus in Brazil - 10-20 year cycle 20% IRR+
- Southern Yellow Pine - North America - 40 yr cycle - 6% IRR
Source for graph: http://caia.org/aiar/access/ar
Returns for North American TIMOs
Returns are connected to growth cycle -> geography (Tropics vs Temperate)
- Eucalyptus in Brazil - 10-20 year cycle 20% IRR+
- Southern Yellow Pine - North America - 40 yr cycle - 6% IRR
Source for graph: http://caia.org/aiar/access/ar
Returns for North American TIMOs
Timbaland 4.
Obviously, NA timberland values are connected to commodity lumber prices which have been flat (yes with lots of vol) since the early 90’s.
Notice the trend from 2005 onward...
NA Timber is basically a play on US Housing. (Currently rapidly expanding)
Obviously, NA timberland values are connected to commodity lumber prices which have been flat (yes with lots of vol) since the early 90’s.
Notice the trend from 2005 onward...
NA Timber is basically a play on US Housing. (Currently rapidly expanding)
Timbaland 5.
On the micro side, forests derive value from the type of wood. Species, dimensions, and grade aka how many knots or defects.
Knotty Cedar $ vs Clear Cedar $$$
On the micro side, forests derive value from the type of wood. Species, dimensions, and grade aka how many knots or defects.
Knotty Cedar $ vs Clear Cedar $$$
Timbaland 6.
Because the volume of a tree increases exponentially to its radius (growth ring) you want the tree to grow for as long as possible. Ideally to where this flattens out
Something like if value of wood added per yr < than Hurdle rate, then cut
Natural growth curve
Because the volume of a tree increases exponentially to its radius (growth ring) you want the tree to grow for as long as possible. Ideally to where this flattens out
Something like if value of wood added per yr < than Hurdle rate, then cut
Natural growth curve
Timbaland 7
Look at those trees
These are high value because
-large diameter
-straight
-fewer branches (knots)
Better lumber-> more $$$$
Look at those trees
These are high value because
-large diameter
-straight
-fewer branches (knots)
Better lumber-> more $$$$
Timbaland 8
Risks include disease and fires.
The Pine Beetle Infestation in the West has taken a very large percentage of trees with it. Can be devastating.
Fires are self explanatory.
However, proper management can reduce the probability of both.
Risks include disease and fires.
The Pine Beetle Infestation in the West has taken a very large percentage of trees with it. Can be devastating.
Fires are self explanatory.
However, proper management can reduce the probability of both.
Timbaland 9.
End intro
Disclaimer: I’m not in the TIMO industry, just sell some of the end products.
also, very broad industry, lots of rocks to uncover.
/fin pour le moment
End intro
Disclaimer: I’m not in the TIMO industry, just sell some of the end products.
also, very broad industry, lots of rocks to uncover.
/fin pour le moment
