Major US LPs commit $600m to timber JV

Three major US state funds have committed $600m to a new timber JV, which will not charge traditional management fees or carried interest.

Public funds from Washington, Oregon and Alaska have committed $600 million to a new timber joint venture between investment boutique Silver Creek Capital Management and Plum Creek Timber that will initially buy 260,000 acres of US forest worth $560m.

Pension fund Washington State Investment Board committed $300 million to the Twin Creeks joint venture, followed by Oregon Public Employees Retirement Fund with a $200 million commitment, and oil fund Alaska Permanent Fund Corporation, which pledged $100 million. The JV will acquire an initial portfolio of forest land across five southern US states from real estate investment trust Plum Creek, which will retain a 25 percent interest in the portfolio and serve as the project’s asset manager.

Two more US pension funds are considering commitments to Twin Creeks, which would take institutional equity investments to $750 million, Silver Creek managing director and head of real assets Bob Ratliffe told Agri Investor.

“Pension funds are more and more trying to get closer to the assets and disaggregate all the people who are taking fees along the way. And they want their partners to be significantly invested,” Ratliffe said. Silver Creek, which acts Twin Creeks’ fund manager and fiduciary, and manages some $7 billion of assets and commitments, will not take traditional management fees and carried interest. Instead it will gather fees from auditing, monitoring and valuation work on the assets, Ratliffe added.

Twin Creeks intends to invest the remaining investor capital, plus Plum Creek’s $250 million investment, over the next two to three years into new US timber deals. It hopes to generate annualised returns at the top end of the 7-9 percent range that timberland investment typically generates.

The Twin Creeks venture will officially begin operations in the first quarter of 2016 and has a 15-year initial term. However, the partners are considering subsequent joint ventures that could appeal to the existing investors as well as new investors.

“Our hope is to grow this business with Plum Creek; to grow this fund potentially or do a second fund when we have the money invested,” Ratliffe said.