Campbell Global: ‘You can get your arms around supply but demand is trickier’

Newly appointed Campbell Global president Angie Davis tells us how the firm has changed since taking on a global strategy, how it assesses risk in forestry investment and describes the pace at which opportunities are becoming available in different markets.

How has your firm changed in recent years?
Five years ago we were a North American timberland advisor looking at other regions. We have now put a lot of resources and attention into a full global timberland strategy, including North America, Australasia and Latin America. Within those, we focus mature timberland markets. The US is still the core timberland region in the world; 70 percent of production and consumption is [there], and recently, we have added to our portfolio in the northwest. There are opportunities throughout these global markets though.

How do you see the forestry markets in target geographies?
What you see in Latin America, and specifically Brazil, is that your ‘off market’ transactions can be timberlands of extreme quality due to the perceived political risk in the region. We see a deep pipeline [of opportunities] there. In New Zealand and Australia there are fewer transactions, but of extremely high quality. If there is more interest in Latin America, it probably goes back the US core market [maturing] and investors getting comfortable with the asset class and looking outside the US.

What role does the US play on your books now?
We see more transactions here in the US than we have in the past couple of years, perhaps due to some co-mingled funds raised in the mid-2000s coming to the end of their term. You want to be in an active, fluid market, especially when you are a timberland owner. These can create more tension and lead to increased selling opportunities. The $250 million we have reported raised for the year for the global strategy would target US and non-US assets. We do have a product raise around that.

What are some of the risks in forestry, and why is it attractive to investors?
What is really compelling is the cashflow and yield component that timberland can provide, which can be difficult to get [in other markets] now. [First], we think of physical risk. After that, economic risk will have a bigger impact on performance returns; regional and market specific supply and demand.

Not every property or investor will be the same. For example, if you buy a very young property, it won’t have a high cashflow in the short term, which results in taking more risk relative to demand in the mid- and longer term. Positively, it may have more upside on the return. You can get your arms around supply, but demand, given that this is a long term investment, is trickier. You could be in southern Brazil, and have very deep market area with 30 operating facilities close to your property – so you would assess legal or political risks. In the US south you might be tied to home construction and repair-and-remodel. In New Zealand you are exporting to China and Korea, so an assessment of the drivers as they relate to your export partners is important.

How are US markets recovering since 2008 and why?
Post global financial crisis, we have had a quicker recovery in the West, which we believe can be attributed to an active export market, with strong demand from Asia in 2013 and 2014. In a very general sense, the south-east has struggled to recover as much [without] an export outlet. It has been mostly dependent on repair-and-remodel and new home construction, which we have seen just steadily get better though.