The Orange Ridge Capital Timberland Strategy is aimed at achieving attractive risk-adjusted total returns, generate current income, preserve capital investment and realize long-term appreciation by acquiring, developing, and managing timber assets located in North America, Latin America, and Australasia.
The strategy is focused on tree growth, tree improvement technology, and property management to serve attractive, growing conventional timber markets such as construction, furniture, paper, packing, and emerging bioenergy demand.
Timber Return Drivers
The primary driver for returns from timberland is biological growth:
- Trees grow each year, they increase in size and increase in unit value.
- This stable biological growth is combined with a unique attribute, the ability to store and increase value on the stump.
- The harvest option provides considerable flexibility in managing the investment to achieve a balance between income and capital growth. At times of low timber price, harvesting can be curtailed, allowing the forestry manager to achieve better than average timber prices over a given period ensuing investment returns to be relatively unaffected by economic cycles, as the trees will continue to grow regardless of prevailing economic conditions.
- This attribute contributes to low volatility of returns and differentiates timberland from farmland and agriculture, where crops must be harvested annually and improvements in yields implemented quickly. The actual returns from timberland will be enhanced by rising timber prices, which in turn feed through to higher land values.
- Biological growth can lead to capital appreciation during periods of slowing economic fundamentals, which may then be harvested when the economy once again improves.
The combination of biological growth, the unique attribute to store and increase value on stump and the harvest option makes sustainable timberland a low-risk stable asset that provides assured capital growth and low volatility of returns.
Other important timber return drivers are:
- Rising global timber demand due to world population growth & emerging bioenergy market
- Land appreciation due to scarcity of arable land – arable land is finite
Orange Ridge Capital offers a strategy diversified by geography and by timber species in order to create the optimal risk/return profile.