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 sustainable, responsible forestry management to serve attractive, growing conventional timber markets such as construction, furniture, paper, packing, and emerging bioenergy demand.
Timberland investment portfolios can be structured to meet a flexible array of investment objectives, e.g., including a variety of mature timber age classes as many investors are keener on securing income than capital appreciation. Timberland cash yields may comprise a third to a half of the total return over the life of an investment depending on the nature of the underlying property.
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 regardless of prevailing economic cycles.
- 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 and achieving a balance between income and capital growth. At times of low timber price, harvesting can be curtailed. Deferring the felling of timber also can allow the trees to gain value by growing into larger-sized product classes that can be processed into higher-value products as the trees will continue to grow regardless of prevailing economic conditions, resulting in better than average timber prices over a given period ensuing investment returns to be relatively unaffected by economic cycles.
The combination of biological growth, the unique attribute to store and increase value on the stump and the harvest option makes sustainable timberland a low-risk stable asset that provides income, 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 the scarcity of arable land – arable land is finite
Furthermore, forests absorb and store carbon, and play a crucial role in mitigating the build-up of greenhouse gases in the atmosphere. The recognition and use of forests as a carbon sink can prove to be a significant emerging source of revenue for timberland owners. Orange Ridge Capital facilitates the sale of carbon credits to third-parties seeking to offset their carbon emissions.
Orange Ridge Capital offers a strategy diversified by geography and by timber species in order to create the optimal risk/return profile in addition to very strong ESG credentials.
Orange Ridge Capital´s partnering approach facilitates these timberland strategies in various regions across 3 continents at a low cost.