CDPQ launches timber partnership with 76k-acre Georgia deal

Caisse de dépôt et placement du Québec has acquired 76,000 acres of Southeast Georgia pine timberland in the first transaction of a newly established partnership with an Alabama-headquartered timberland manager.

CDPQ and The Westervelt Company acquired the timberland for an undisclosed price from Superior Pine Products, which is headquartered in Fargo, Georgia, in mid-October.

CDPQ managing director Nicolas Leyssieux told Agri Investor that the C$389.7 billion ($310.2 billion; €271 billion) pension and Westervelt have created a yet-to-be-named common unit, through which they plan to pursue timber opportunities.

The unit is one of multiple timberland partnerships planned for CDPQ and Leyssieux said the company’s local reputation and networks will be valuable in increasingly competitive regional markets.

“The US South is attracting a lot of attention and for good reason,” Leyssieux said. “It’s a very dense market. There are a lot of customers – factories and sawmills – and you have accessible growing conditions for pine trees: a combination of rainfall and heat that is really remarkable. That makes it a very attractive market.”

Growing expectations of US housing demand acceleration and the strong performance of forest products have prompted significant capital investment into new wood product production capacity, according to a timber overview from Manulife Investment Management in October.

Industry estimates an approximately 30 percent year-on-year increase in investment for 2021, the report says. Demand for pine is predicted to grow in Southern states that have been the focus of much investment, such as Texas, Mississippi, the Carolinas, Louisiana, Georgia and Alabama.

In June, Leyssieux told Agri Investor that CDPQ intended to establish as many as seven partnerships with specialized managers within a newly formed sustainable land management sleeve of its infrastructure portfolio. In mid-November, he said the Westervelt partnership was the first to be finalized and that CDPQ is pleased with the pace of progress of efforts to establish others.

Family-owned The Westervelt Company was founded in 1884 and is headquartered in Tuscaloosa, Alabama. It maintains divisions focused on lumber manufacture, ecological services such as wetland and endangered species habitat management and land management.

Leyssieux added that the timber assets in the US South markets that it focuses on may eventually be relevant for offset markets that could expand under the Biden administration. He said CDPQ is developing its approach to the market.

“We know that timberland is one of the rare assets, but not the only one, that allows us to sequester carbon. On our end for the moment, we remain very prudent on carbon credits,” he said. “We want to see where the market is heading, how the market is structuring, what the compliance market will do in the US.”

Leyssieux said CDPQ’s sustainable land management program reflects a pension-wide focus on climate change cemented in a September policy statement.

It described plans to build upon a commitment to sustainability begun in 2017 through an effort to hold $54 billion in green assets, contributing to a more sustainable economy by 2025; to reduce total portfolio carbon intensity by 60 percent before 2030; devote $10 billion to the most emissions-intensive industrial sectors and complete an ongoing exit from oil production assets by the end of 2022.

CDPQ representative Conrad Harrington told Agri Investor that the September announcement has helped attract potential partners since its release.

“Not only are we making a statement of intent in terms of how we want to invest, but people see that and say: ‘We want to invest alongside them’,” he said.