Idaho approves plan to reinvest $180m in ag and timber

The Department of Lands has already hired an advisor for its in-state timber acquisitions and is planning to add another for farmland, acting director David Groeschl tells Agri Investor.

The Idaho State Board of Land Commissioners has approved a consultant’s recommendation that $180 million in proceeds from sales of real estate be devoted to in-state timber and farmland acquisitions.

Informally known as the Land Board, the Idaho State Board of Land Commissioners comprises the five highest elected officials in Idaho – the Governor, Secretary of State, Superintendent of Public Instruction, State Commissioner and Attorney General. The body manages capital generated from the sale of state-owned assets such as cottage lots and commercial buildings and occasionally injects capital into the Idaho Endowment Fund Investment Board.

In early July, investment consulting firm Callan presented the Land Board with an update to a Strategic Reinvestment Plan, which had been approved in May 2016, and suggested that proceeds from real estate sales be devoted to timber and farmland. It was an update to that plan of what to do with proceeds of residential and commercial real estate sales that was approved by the Land Board last week, acting director of the Idaho Department of Lands David Groeschl told Agri Investor.

He explained that, under Callan’s recommendations, investments must be carried out within five years and meet minimum thresholds of return on assets of 3.5 percent net real or above for timberland and 4.5 percent or above for farmland.

Fresh hires

Callan worked with the Land Board to hire a timberland acquisition advisor to help it find potential properties, according to Groeschl. He declined to identify the advisor, but according to the minutes of a May 2017 Land Board meeting, Northwest Management affiliate Northwest Rural Properties was awarded the contract.

Because the Land Board has been actively managing timberland given to it since 1905, Groeschl said there is also significant in-house expertise that contributes to evaluating its potential timberland transactions.

“We already own about a million acres of timberland that we currently manage, and we’re looking to add to that through acquisitions of timberland that is in good, strong markets that are adjacent to, or intermingled with, our existing properties, with good transportation systems and good locations to markets that utilize that timber ,” said Groeschl.

The Land Board’s farmland investing program is just getting started, according to Groeschl, who said the body is still in the process of reviewing initial potential farmland acquisitions. It has not yet hired a farmland acquisitions advisor but plans to, according to Groeschl, who said that any future such purchase would likely be focused on dry-land agriculture, such as properties devoted to crops including wheat, canola and mint.

“Because of the price per acre and some of the other costs associated with irrigated farmland, it felt like we could hit our return thresholds easier on dryland ag,” Groeschl said.

Local wealth

In addition to the income returns on its existing timberland, which he declined to disclose beyond saying that they have compared favorably to the NCRIEF’s Northwest regional performance statistics, Groeschl said there are secondary benefits to limiting the Land Board’s farmland and timber investments to Idaho.

“On timberland, every million board feet harvested creates about 10 direct and several indirect jobs. Those are jobs that are family-wage jobs, of about $58,000 per year, so there’s a direct and indirect benefit to the local economy,” Groeschl said. “By the lands being managed in Idaho, we can also manage at a landscape level and have a greater influence on forest health, air quality, water quality and all of the ecosystem services that are important here.”

In addition, Groeschl said, Idaho residents support the idea of the Land Board’s timberland and farmland investments being concentrated in the state because of its policy to keep such lands open to the public for recreation purposes.

“They’re seeing private timberland being bought and divided up and locked up, meaning loss of recreational access,” he explained. “That is another really important local community benefit that helps explain why they really like seeing the state own and manage those as endowment trust lands.”