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Posts published in “Day: March 19, 2006”

Timber split

forestGood perspective in an Oregonian piece on a tectonic change in the timber industry. "Tectonic" may be the wrong adjective since it connotes glacial speed; but we'll stock with it in suggesting a fundamental realignment.

The core point in the piece was this: "Historically, giant timber companies managed vast empires that included both mills and forestland. At their peak, International Paper Co., Louisiana-Pacific Corp., Georgia-Pacific Corp. and Boise Cascade Corp. owned more than 25 million acres. But tax and business changes over the past decade encouraged specialization, and companies increasingly split ownership of the trees from production in the mills."

Now, privately-held partnerships, like the Obsidian Finance Group, Forest Capital Partners and the Campbell Group, increasingly are buying and holding the timber lands.

Why the change? The article doesn't spell it out, but one suggestion is this: Management of timber lands properly should be considered a long-term investment proposition, not something you can turn into big profits in the next quarter. But what they lack in immediate returns they gain in solid, long-term value, something concrete and real that will have value, and likely not lose value, years from now. (The Campbell Groups likes to say that "Over the past 35 years, timberland has outperformed common stocks and long-term corporate bonds.") In other words, sounds like a job for a privately-held company: One less concerned with the hot analysis from Wall Street next week than it is in building value deep into the future.

Something to think about as we consider the structure of resource industries, and of business in general, in this country.