Brookfield stops investing Timberland V before full deployment – exclusive

A glut of investors seeking exposure to timber has pushed up acquisition costs, according to Brookfield's Reid Carter, leading the asset manager to shift to a more opportunistic strategy.

Brookfield Capital will not extend the investment period for its $1 billion Timberland Fund V (BTFV) to call on its remaining commitments, an executive from the asset manager confirmed.

Brookfield Timberlands managing partner Reid Carter told Agri Investor that the firm will also shift to a more opportunistic timber strategy and pursue timberland acquisitions on a deal-by-deal basis, rather than through a committed fund model.

The asset manager concluded the investment period for BTFV, despite still having committed funds available from a $1 billion final close which was reached in 2013, over the $750 million target. Carter did not disclose the value of the remaining commitments to the fund, but said the money would now remain with LPs.

A glut of investors looking to gain exposure to timber has pushed up acquisition costs, pushing the asset manager towards the opportunistic strategy, said Carter.

The fund made a single acquisition in December 2013 of 205,000 hectares of eucalyptus plantations in Brazil from forest products company Fibria for an undisclosed sum.

“There may be a tendency to think that we’re backing away from timber, but I think that’s wrong,” Carter told Agri Investor. “For the time being, we’re backing away from a committed fund strategy.”

Too few sellers makes it challenging to execute an investment strategy over a typical fund investment period, Carter added. He said full deployment over a three to four year period would make overpaying for assets more likely.

Carter said patience is a virtue when it comes to timber investment: “This is an asset class that is small enough and illiquid enough that good transactions [require it],” he said.

Aquila portfolio manager Nils von Schmidt suggested funds over €300 million be too large in his guide to timberland investment vehicles: “Timber funds are an efficient means to invest, [starting] from about €100 million. From my perspective, funds with a €300 million to €500 million final closing target can be too large, and run the risk of taking too long to be invested and thus of returns becoming depressed.”

Brookfield sold its interest in British Columbia’s Island Timberlands in a series of deals for a combined $335 million in 2013, according to US Securities and Exchange filings, although Brookfield continues to manage the company. The same year the firm sold timber assets in Longview, Washington to Weyerhaeuser for $2.65 billion.

“The assets we sold, we were not looking to sell at the time,” said Carter. “In both cases, we were approached with an offer that… we found to be very good.”

Brookfield is a global asset manager focused on property, power, and other infrastructure assets. The firm has more than $225 billion in assets under management.

The firm reached a first close on $300 million for Brookfield Brazil Agriland Fund II in May last year, which is expected to raise between $500 million and $700 million.