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About Pope Land Company

Pope Land Company, LLC (PLC) is a Georgia Limited Liability Company, formed in April 2001 to manage investments within a diversified portfolio of real assets, including timber and agricultural land. Timber and agricultural land investments are focused within the southwest quadrant of Georgia and the southeast quadrant of Alabama.

Ed Pope, the managing director of PLC has 25 years of experience in investment management. Ed earned a degree in Biology with specialization in wildlife and fisheries ecology from Georgia Southwestern State University in Americus, Georgia (1968). Ed is on the Alumni Board of Georgia Southwestern State University and has family land holdings in Stewart County dating back to the 1830’s.

PLC has reviewed the historical land prices in the northwest quadrant of Stewart County, Georgia (the location of Chattahoochee Bluff Plantation), where the population has remained the same for the past 100 years and there has been no commercial development. Based on deed records from Stewart County, Georgia’s 22nd land district, agricultural and timbered land in that area has appreciated at an annualized rate of 8.8% over the past 64 years and a rate of 9.77% annually over the past 20 years (timber sale proceeds included). This compares with a 9.84% annualized rate of return for the S&P 500 Stock Index over the same 20-year period (dividends included).

Historically, land and timber prices have exhibited significantly lower volatility than either stocks or a combined portfolio of stocks and bonds while maintaining similar returns. Therefore the risk-adjusted returns, as calculated by PLC, favor the land and timber asset class. While land and timber assets, in this case, share similar returns with stocks. They do not typically have the liquidity associated with publicly traded instruments. Therefore investments should be considered over a longer-term time horizon.

For these and other reasons investment capital is being increasingly allocated to rural timberland and farmland investments by individual and institutional investors. Many individuals with interests in hunting and other outdoor recreational activities are choosing to invest in an asset they may enjoy in their leisure time. As a result, hunting land with timber and perhaps some agriculture is finding increasing demand. Substantially all of the available land in Stewart County is leased for hunting.. Hunting lease rates have increased from an average of one dollar per acre twenty years ago to an average of eight dollars per acre today. Lease rates at eight dollars per acre are roughly two times the average annual tax rate for timberland owners. Over the years they have maintained or exceeded the growth rate of taxes in the area.

If you would like additional information please contact Ed Pope by clicking here.

Please see our Advisors, Notes and Timberland Primer in the following sections.

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Timber Primer

Competitive Returns

The National Council of Real Estate Investment Fiduciaries ("NCREIF") publishes a timberland index patterned after the NCREIF Property Index, which is well known for measuring commercial real estate returns. NCREIF compiles the data from members who submit property return information specific to the properties they manage. This becomes the basis for the composite return figures for the timberland asset class. Annualized Returns Bonds, Stocks and Timberland 1987-2003

Based on statistics compiled by The Campbell Group, timberland returns, represented by the NCREIF Timberland Index, have outperformed stocks and long-term corporate bonds over the last six years. Factors that affect timberland returns include:

Regional Returns

There are three generally recognized timber-growing regions in the U.S. Each of these regions exhibits different return profiles based on the species of timber grown; the ratio of private to public ownership; the demand trends for the species in these regions; the ratio of export to domestic sales; and other regional, national and international economic factors.

In the Northwest, western hemlock and Douglas-fir account for as much as 90% of the commercial volume, while species such as cedar, ponderosa pine and other fir species account for about 10%. The rotation age is typically 45-60 years.

In the Southeast, the most dominant commercial species is Southern yellow pine, accounting for about 80% of the commercial volume. The other 20% includes a variety of other pine and hardwood species. The rotation age is usually between 20-40 years.

In the Northeast, the species include about 50% Northern hardwoods, 40% spruce and balsam fir, and about 10% Eastern white pine. The stands are uneven-aged, meaning that trees are harvested at various ages and times.

The returns for the three regions are shown below. The returns are from the NCREIF Timberland Index sub-regions for the period 1987 to 2003, with the exception of the NE Index, which began in 1994. The Northwest has outperformed the other two regions based on annual average return since inception. Source: NW NCREIF 1987-2003, Southeast NCREIF 1987-2003

Inflation Hedge

There is support for timber serving as a hedge against inflation, especially with respect to unanticipated inflation. Binkley and Washburn note, in Do Forest Assets Hedge Inflation?, “that the land and growth components of timberland hedge inflation in the long run, but that due to log or stumpage price volatility, standing timber values do not, in the short term, hedge inflation.”

Our findings are that over a 15-year period, from 1987 through 2003 (no properties managed in 1998), NW timberland properties managed by The Campbell Group hedged inflation, on a total return basis, more effectively than any other asset class, with the exception of 90-day Treasury securities and the Goldman Sachs Commodity Index. In conclusion, it does appear that timber hedges inflation over the longer term, although in lower inflation periods the strength of the relationship may not be as strong.

The following chart indicates the correlation of Inflation (CPI) to various investment indices. The center vertical line (0.00%) represents inflation. The NCREIF Northwest Timberland Index and The Campbell Group returns are both positively correlated to inflation along with the 90-day U.S. Treasury Bill and the Goldman Sachs Commodity Index. Correlation of Selected Asset Class Indices to Inflation 1987-2003

Potential Tax Benefits

For investors with taxable portfolios, timberland offers certain advantages related to the unique attributes of the asset. Current federal tax laws allow income from timber harvesting to be treated as capital gains. Federal law also gives timberland owners a tax deduction, known as depletion, which is the annual cost assigned to timber harvested. This is similar to the annual depreciation allowance for tangible assets such as plant and equipment.

For tax-exempt investors, income generated from timberland can be structured to prevent Unrelated Business Taxable Income (UBTI).

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