Forest Investment Associates completed two transactions through which the firm acquired and sold timberland properties in Carolina and Mississippi to New York Stock Exchange-listed Weyerhaeuser.
Seattle-headquartered Weyerhaeuser said in a statement it had sold 69,600 acres in upstate South Carolina to FIA for $170 million and acquired 60,700 acres of timberland in North Carolina, South Carolina and Mississippi for $163 million. Weyerhaeuser president and chief executive Devin Stockfish said the assets acquired were well-integrated with existing properties and the deal’s like-kind structuring was tax efficient and reduced transactions costs.
FIA’s Mike Cerchiaro – who assumed a new position as president and chief executive in January and joined the Atlanta-headquartered firm in 2004, according to his LinkedIn profile – told Agri Investor the transaction was carried out on behalf of an existing investor he declined to identify. He also declined to discuss the properties involved in the Weyerhaeuser transaction individually, citing confidentiality agreements.
Cerchiaro said the increase in the number of interested parties active in timberland markets with a focus on climate mitigation efforts has translated into increased transaction activity outside of regions with well-developed forest product infrastructure.
“You’re not always able to see with full clarity exactly what premium, if any, is being paid on those assets, but we are seeing a more depth of demand for lower-quality assets, presumably for some of these other aspects of value,” he added.
FIA managing director and head of business development and sustainability MaryKate Bullen told Agri Investor there has been evolution in how carbon value of timber properties has been approached. Whereas between roughly 2015 to 2020 the focus was largely on a search for opportunities adjacent to core timberland operations, she said, managers are now taking a more comprehensive approach.
“There’s been a true broadening to investors’ appreciating and understanding the intrinsic value that working forests provide around climate benefits and climate mitigation and that is supporting interest,” she said. “In the past, the industrial pine plantations that are the core of the US South were not a focus from the carbon markets perspective. Now, they are still of interest because of the overall climate mitigation potential and the role of wood in the grand net-zero transition.”
Bullen assumed her current role in January and joined FIA as director of sustainability and ESG in April 2021 after 12 years in sustainability focused positions at New Forests, according to her LinkedIn profile. She highlighted the example of PFA – a Danish pension that awarded FIA a $130 million mandate in 2022 as part of plans to use forestry in a portfolio-wide net-zero effort – as an example of how the firm builds portfolios specific to LP needs.
“If you come in and you underwrite with slightly different priorities, or you are piecing this into a larger business instead of a standalone timber transaction or piece of a larger timber portfolio, that can lead you to: “It’s worth something different for you.”
Cerchiaro said that although there are more interested parties in and around timberland markets recently, 2023 deal volumes have remained largely unchanged, with between $2 billion and $2.5 billion of property changing hands in the United States and about $1.5 billion to 2 billion worth of deals internationally.
“We are providing sustainable wood products on a regular basis into a variety of different markets, that too has also underpinned a lot of the interest in the space. That sustainability story – outside of the opportunity set in carbon – is very well-founded and well understood by an increasingly-large number of investors,” he added.
Weyerhaeuser did not reply to messages seeking further detail.
FIA was founded in 1986 and manages more than 2 million timberland acres on properties in the United States, Brazil and Chile and had $4.3 billion in discretionary assets and $307 million in non-discretionary assets under management as of a March regulatory filing. Late last year, the Iowa Public Employees Retirement Association finalized its decision to liquidate its timberland separate account with FIA due to underperformance.