Lyme Timber closes fifth fund on $300m

US timberland investment manager The Lyme Timber Company has closed its fifth fund on $300 million, according to its chief executive.

Investors in Lyme Forest Fund V included high-net worth individuals, public and private pensions, endowments, foundations and other investors, Jim Hourdequin told Agri Investor, after declining to identify any by name.

The previous vehicle in the series, Lyme Forest Fund IV, closed on $250 million in May 2016 and in May 2018, Agri Investor reported that Fund V had reached a second close on an undisclosed amount.

Lyme is headquartered in Hanover, New Hampshire and its previous funds have included investment in mitigation banks and wetland properties, in addition to the firm’s core focus on large timberland assets with conservation potential. Hourdequin said no such investments will come from Fund V.

“We decided that those strategies might make sense to put in their own fund structure that would be separate from this fund,” Hourdequin explained, declining to address whether the firm was is in fact currently raising such a fund.

In addition to traditional timberland investments, Hourdequin said, the strategy for Fund V will also focus on investments designed to improve efficiency in regional timber supply chains through investments in teams and businesses managing timberland, saw mills and  harvesting operations utilizing technology that makes logging less dangerous.

Hourdequin explained that in the past, integrated paper and timber companies made such supply chain investments, but over the past 10 to 15 years, investors’ view of timberland as mostly a store of value has kept them from focusing on such opportunities.

“The focus of the investment thesis in the TIMO / REIT model was mostly on timberland as a standalone asset and the focus less on timberland as a going concern business,” said Hourdequin. “As timberland has gotten more efficiently priced, there has been a shift towards recognizing that the supply chain is important.”

Hourdequin acknowledged a broader context of negativity surrounding timberland and disappointment about its performance relative to expectations set during the last decade, adding that LPs’ previous focus on the defensive benefits of timber had led some to overlook fundamentals of return and value-add from the manager.

“Investors [now] are less focused on timberland as contributor to a portfolio and they are more focused on timberland strategies that can stand on their own and compete with other asset classes on their own merits,” Hourdequin said, declining to disclose return expectations for Fund V or performance on Lyme’s previous vehicles.