Aurora backs Molpus with $5m commitment amid transaction slowdown

The $475m pension’s investment is its third with the Mississippi-headquartered timber manager, which officially launched the fifth iteration of its flagship fund in August.

The City of Aurora General Employee’s Retirement Plan has tentatively approved a $5 million commitment to Molpus Woodlands Group Fund V, according to the $475 million pension’s administrator.

Thomas Connell told Agri Investor that Aurora, which was also an investor in two previous iterations of the Molpus Woodlands Group fund series, invests in timber to protect itself against inflation. After having made $15 million commitments to both Molpus III and Molpus IV to build its position to its original target size, this time Aurora made a smaller investment just to maintain the position, he said.

Connell, who declined to describe the fund’s strategy, size or return expectations, said that Molpus executives had acknowledged that timber transaction activity has slowed of late and the overall pace of transactions had fallen below their expectations.

“One of the reasons that we’ve continued to invest with them is their expertise in sourcing deals and being aware of opportunities that may not hit the public market,” he said.

“In the last five years, folks are becoming more aggressive in looking at development attributes over and beyond just growing wood”
Mark Power, Molpus Woodlands Group

In 2015, Molpus announced that it had surpassed its initial $500 million target for Molpus Woodlands Fund IV, which launched in 2013, and closed the vehicle on $662.5 million. The firm said that the fund had successfully secured commitments from both new and existing investors, including public and private pension plans, endowments, insurance companies, family offices and high-net-worth individuals.

According to meeting minutes by the Pembroke Pines Fire & Police Pension Fund, Molpus Woodlands Fund IV had returned 0.4 percent in the quarter to December 31, 2016, and 5.7 percent over the trailing 12 months. At the meeting, Molpus senior analyst George Dahduh provided an overview of recent activity in Fund IV, which included three acquisitions of timberland portfolios spanning Louisiana, Florida, Georgia, Arkansas and Texas.

Molpus formally announced the launch of Fund V in August, according to the minutes.

‘Decent returns’

In July, the firm said it was selling a portfolio of 48,850 acres of investment-grade timberland spread across four states of the US south-east. Molpus’s director of value-added real estate, Mark Power, told Agri Investor at the time that the firm’s efforts to market the portfolio as ripe for commercial, residential or recreational development was in line with wider industry trends.

“In the last five years, folks are becoming more aggressive in looking at those attributes over and beyond just growing wood,” said Power.

In November, the $1.5 billion Tallahassee City Pension made a $15 million commitment to Molpus Fund V, according to deputy treasury clerk Kent Olson. He told Agri Investor that returns from the vehicle were expected to be “decent”  before going on to say that in his view, Molpus’s strength was in its ability to dispose of properties.

Molpus had not responded to requests for comment at the time of publication.