June 05, 2020

New forest ownership

The recent closing on 138,000 acres of Maine land purchased by a Boston-based investor of pension funds provides an opening for constructive changes in forest management, expanded uses for wood fiber and protection of large tracts of woodland against fragmentation and development.

This month, the Hancock Timber Resource Group, a unit of John Hancock Financial Service, became the first pension fund to make a large-scale land purchase in Maine. Its new holdings, in the historic and scenic Katahdin Iron Works area, were part of its first major land acquisition in the Northeast, which included an additional 62,000 acres in New Hampshire and 37,000 acres in Vermont.

The company has been in the timber real estate business for 35 years, first as a bankroller of land purchases by traditional forest industry companies, and since 1988 as a landowner. After acquisitions in the past six years in the Southeast and Northwest, it decided to blend New England forests into its land portfolio because woodland here has value as a fiber resource and as real estate.

The implications in this for Maine, where the historic emphasis has been on growing spruce and fir to feed paper mills, are significant and potentially exciting. A company investing pension funds is not under pressure to harvest its trees in a cycle to influence quarterly profit-and-loss statements. It can choose its land carefully and wait.

The possibilities:

Selective cutting to support a new generation of furniture or veneer mills that add value to a larger variety of wood at a time when major expansion of traditional softwood pulp mills is not anticipated.

Greater flexibility to make deals for conservation easements and other agreements that protect land against development. Hancock or similar companies can sell the development rights to the land resource, with the promise of a long-term return, and still sell timber and fiber off its holdings to support jobs in the forest-products industry.

Financially strapped mill owners with a large land base can sell to pension companies, and invest the capital in a mill’s physical plant, with assurance that the fiber will be there for harvest and manufacture.

With the economic incentive to be good stewards of the land, the experience to do the job and the self-interest in expanding opportunities in the forest-products industry, these companies are a welcome addition to the historic mix of owner-managers of the Maine woodlands.

There is a natural marriage between handling pension money and managing forests. Done right, both require a long view.

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