A vehicle owned by the Ontario Teachers’ Pension Plan has assumed direct control of 870,000 acres of timberland in the US South through a redemption transaction with Resource Management Service.
The C$227.7 billion ($179.5 billion; €160 billion) pension announced in late January that the vehicle, Tamarack Timberlands, will assume control of governance and long-term strategy for timberland, which was previously held within a fund managed by Birmingham, Alabama-headquartered RMS.
RMS will remain timberland investment manager of the assets, which are concentrated in loblolly pine and spread across several states, with a variety of locations, customers and tree age classes.
OTPP and RMS did not return messages seeking further detail.
In a statement, OTPP natural resources managing director Christopher Metrakos highlighted that a responsible, sustainable and long-term approach to forestry “has value beyond timber production.”
“These assets will continue to provide Ontario Teachers with stable and robust cash yields as well as capital appreciation, while also acting as a natural climate solution to help mitigate the impacts of climate change,” he explained.
OTPP’s timber investments are among the natural resources housed within a C$36.6 billion inflation-sensitive portfolio that includes commodities and investments grouped under “inflation hedge”. Timber accounts for 6 percent of the portfolio, which also includes a 4 percent allocation to agriculture and aquaculture.
Hancock Timber Resources Group is among OTPP’s investment managers – OTPP has invested more than $200 million with the firm, according to its 2020 annual report.
OTPP initially invested in the assets involved in the January redemption in 2006 through ownership interest in a larger timberland investment vehicle managed by RMS.
RMS manages $4.1 billion in discretionary assets and $121.8 million in assets on a non-discretionary basis across the US and Brazil for 13 clients, according to a March regulatory filing. Tamarack Timberlands was among the entities affiliated with an RMS-managed vehicle, Evergreen Timberlands, which had raised at least $500,000 as of late 2020, according to a regulatory filing.
A source familiar with both firms told Agri Investor that RMS has been transitioning from separate accounts and funds towards an open-end structure. The source speculated the redemption deal could reflect a desire by OTPP to expand its options for utilizing timber investments as part of broader sustainability goals.
“It clearly has something to do with the fact that RMS moved everybody to an open-ended fund,” they said. “This may be a step towards an ability [for OTPP] to do other things.”
OTPP has committed to greenhouse gas reductions (from a 2019 baseline) of 45 percent by 2025, 67 percent by 2030 and 100 percent by 2050. In December, it announced an investment of an undisclosed size into GreenCollar, a Sydney-based environmental markets investor that garnered backing from KKR’s $1.3 billion Global Impact Fund in mid-2020.
Established in 2011, GreenCollar was an early participant in Australia’s Carbon Farming Initiative and in providing credits to its Emissions Reduction Fund. In the statement announcing an investment that made OTPP a “significant shareholder” in GreenCollar, Metrakos highlighted the company’s experience in Australia’s carbon market and the international growth prospects of environmental markets and project development.