Productive land is the ultimate hard asset. Unlike a lot in a development community or a plot in the middle of a commercial district, productive land always retains the potential for yield. By definition, productive land is land where you could produce something of marketable value. When whatever you plant or herd reaches maturity, you harvest and sell. Productive land also provides diversification and can be part of a legacy wealth plan.
This can be about farming, but I'm not suggesting you pick up a hoe. You have good options for taking advantage of this classic diversification strategy without ever getting your hands dirty. Specifically, I recommend three productive land investments that you can participate in without having to learn much of anything about how to grow and harvest crops: timber (specifically teak), coconuts, and farmland.
Yesterday, I showed you why Uruguay is one of the world's most interesting places to invest in farmland. Today: timber.
Historically, timber has enjoyed the best risk/reward ratio of any investment sector. Depending on whose chart of historical returns you consult, timber as an asset category has produced an annualized ROI in the range of 12% to 15% per year every year since they started keeping records of investment risk versus return. A friend calls timber "a long-held secret of the world's wealthiest people." It's a low-volatility hedge against inflation and an asset class that operates independent of the stock market.
On top of this, timber is a commodity that will always have a market and that doesn't have to be harvested at a particular time. That means that, if prices for your wood are less than you want or expected them to be, you can leave your trees in the ground so they can continue to grow until prices reach a level you like better.
Here's how a direct timber investment should work: You buy the land. A management company plants trees on it and maintains them for you. They take care of everything--from insect and weed control to thinnings--until harvest time. Come harvest time, the management company organizes the cutting and the sale of the trees. The revenues from the harvest go to you, as the owner. After the trees have been harvested, you still own the land, meaning you can replant and start the process over for another harvest.
I'm over-simplifying, but the point is that you want to be buying the land, not only the trees. Your returns can be good, even better, investing in trees alone, but, in the end, you are subsidizing the land ownership for the tree farmer. Once your trees are harvested, you're done, left without any residual asset, and productive land is all about the long-term hard asset. You also don't want to be buying shares of the operating company that owns and manages the land and the timber. Buying shares, again, you're undermining the opportunity you're meant to be capitalizing on, buying not a real productive asset but into a company. You have no control over the land, the timber, or how the business is operated. The only thing you control is the timing for when you sell your shares, and, once they've been sold, you're left with nothing. A productive land investment should always leave you with something.
For my money, teak is about the surest timber investment you can make. It is indigenous to only four countries--Burma, Thailand, Laos, and India. For centuries, the kings of Burma and Thailand considered teak a royal tree. Today, Burma, home to the last remaining natural teak forests, all of which are the property of the government, is the largest global exporter of premium teak, producing about 80% of world supply. These remaining natural forests are being logged at a rapid rate. Some predictions are that Burmese forests could be logged completely in the next few years, meaning the growing world demand (for outdoor furniture, flooring, boats, etc.) would have to be fulfilled by teak plantation production. And, right now, there aren't a lot of teak plantations worldwide.
While trees take years rather than months to grow to a harvestable size, they also can carry less risk of being completely wiped out than, say, a tomato crop. Teak trees have been farmed in plantations for hundreds of years starting with plantations in Southeast Asia. Today, teak plantations can be found in a band around the earth between 20 degrees north and 20 degrees south of the Equator. This includes Southeast Asia, India, Central America, Brazil, and parts of Africa. In addition to the required climate, you also need good soil to get decent growth rates for teak and a definitive dry season of at least four months. The dry season is when the hardwood in the center of the trees is made. Taking a look at a world map and all things considered (the ideal growing requirements, the ease of investment, the cost of investment, the opportunities for investment, and the tax implications), Panama jumps out as a top choice for investing in teak. This country is one of a handful of places in the world where you can grow premium teak trees. In addition, Panama is very pro-investor, home to a number of managed plantations, and, because it is interested in promoting forestry, makes the proceeds from related investments tax-free.
Owning a couple of hectares of teak trees could be a very profitable concept. At the same time, owning a couple of random hectares of any kind of tree doesn't make much investment sense. For this kind of investment to work, you need trees that are managed professionally by an outfit with both experience growing and harvesting the crop in question and access to a ready market for the end product. Few of us are prepared to invest the time that would be required to understand the industry and actually run the farm. I've known investors who have simply planted some teak trees and left them to grow. The results have never been good.
Perhaps the biggest drawback to investing in trees, teak or otherwise, is the investment term. Unlike cattle, for example, which mature in less than a year and then can be taken to market, you have to wait 10 to 25 years before you see any real return from a timber investment. Eucalyptus matures in maybe 13 years, pine in 15 to 20. It can take as long as 25 years before teak is ready for harvest, meaning it is definitely a legacy investment, made as much for your kids and grandkids as for yourself. Thinnings are done several times during the growth cycle, but they bring limited revenue. The full harvest is done sometime between year 17 and year 25, depending on growth rates, which depend on soil and weather.
While you generally have to wait at least 17 years to harvest teak trees, that doesn't mean you have to wait that long to cash out of your investment. Investors with shorter time horizons look to purchase established plantations. If you find yourself needing or wanting to cash out of your teak plantation before the full harvest, buyers are out there. This is a more liquid market than you might imagine. The reverse is also true. If you are looking for a shorter investment period, you could buy an older plantation. This strategy shortens the investment horizon but requires a larger initial investment. Your annualized returns can be about the same.
As I mentioned, several managed teak plantations operate in Panama. The important thing to understand when considering an investment in any one of them is whether you, as an investor, take title to the land where your trees are growing. For most of the plantations in this country, this is not the case. One where you do take title to the land is United Nature, operating since 1993 and with about 3,000 hectares of teak under management. As an investor with United Nature, you could decide when to take the final harvest (though I'd say the sensible thing would be to take the management team's advice on this), and you could sell on your piece of the plantation whenever you wanted.
You can find out more about investing in teak with United Nature here.
Kathleen Peddicord
P.S. Tomorrow part 3 of this series on the world's best productive land investment opportunities...Continue Reading:
Read more...
Our Panama City-based team huddled around the conference table in our office the better part of Friday afternoon trying to find an answer to this question.
Here's the first thing to know on this subject: Rents in this city have fallen significantly over the past 12 to 18 months.
When we moved here two years ago, the rentals market was at a frothy peak. Owners could name their price, and would-be tenants would bid against each other for even modest digs. If you found a place you liked and could afford, you knew to offer a cash deposit on the spot, lest you follow up even later that same day to discover the place had in the interim been grabbed up by someone else.
Our young Marketing Manager Harry, for example, rented a studio outfitted with what amounted to a nod toward a kitchenette (no kitchen sink, for example, and only a hot plate to cook on), because anything bigger was outside his budget.
"Do you remember that place?" Harry joked on Friday. "I can't believe I lived there as long as I did. I guess those few months qualify as character-building..."
Harry paid US$650 per month for the privilege of renting that tiny kitchen-less studio.
And we, shopping for a three-bedroom apartment with space for an office at the time, had four such properties snatched away from us before we learned to bring a pocketful of cash with us to any viewing.
What's the current state of the Panama City rentals market?
Rents have fallen 25% on average, and Harry's US$650 today would afford him a one-bedroom apartment (with an actual kitchen) in a decent building in a convenient location.
What's changed? Well, it's a different world today than it was 2 or 2 ½ years ago. But, specifically, here in Panama City, a whole lot of new inventory has hit the market. New condo towers with units renting in all budget ranges (low-income local to international business executive) have come online, making the long-term rentals market more competitive.
Meantime, hundreds of new hotel rooms (including, notably, in the new, mega-sized Riu Hotel, the city's biggest, opened last month) have also become available, having the same effect on the short-term and tourist rentals markets.
This is all good news. The Panama City rentals market was ridiculously over-heated two years ago. What we're seeing now is a natural, welcome correction. And it's creating an opportunity for you to rent for less in this town than has been possible for years.
We've agreed to reduce the rent for the tenant in our investment rental on Balboa Avenue. The nice Brazilian banker lady who has rented from us for the past two years wants to renew her lease again, but she has asked for a reduction in cost, as she recognizes the realities of the current marketplace along with everyone else.
We could have refused (as I know many other rental property owners are doing) and then hoped to find another long-term renter for a higher amount or maybe tried our luck on the short-term market.
Both those things seemed risky. In a market like this, you take the rent in hand and count yourself lucky to be able to continue to realize a reliable return.
Our net yields over the past four years we've owned this investment property have, at times, been absurdly high (more than 20% per year, for example). We knew that wouldn't last and recognized that we were enjoying an anomalous period in this market's cycles.
Our return last year, given the amount of rent our Brazilian banker lady was paying, netted to about 13%.
Our return this coming year, at the new rent she'll be paying, will net to slightly better than 10%. On a global scale right now, a double-digit net yield is hard to come by. Again, we're counting ourselves lucky.
Can you still buy today at a price that would allow you to realize a reasonable net yield (I'd say up to 8%) from rental income, even given how increasingly competitive this marketplace is growing?
Yep. We'll detail how and where at our Live & Invest in Panama Conference later this month.
We'll also walk through how much you should expect to pay in rent, neighborhood by neighborhood in Panama City and region by region beyond the capital.
This event has been sold out for some time. However, we'll be recording all the sessions and presentations and will make the recordings available as soon as possible following the conference.
We're planning our first Live & Invest in Panama Conference of 2011 for March 29-31. We're not ready yet to take registrations for this event, as we're still shopping for a venue. We need someplace bigger than where we've been holding our Panama City conferences, so we can accommodate more readers. We're thinking the new Riu Hotel will be the place. It has capacity for up to 1,300 conference attendees. That should fit us!
We'll publish full details for this program as soon as possible. Meantime, you can get your name on the pre-registration list to be eligible for special discounts off the registration fee.
Do that here now.
Kathleen Peddicord
P.S. What else this week?
Friend and developer in Belize Phil Hahn wrote this morning to report that he has received the environmental permits for his latest project in this country, Carmelita Gardens. This is an important milestone for Phil that creates an opportunity for you.
Phil now can proceed with his plans to build 18 cottages on the river, the start of his Carmelita Gardens community. In addition, there will be a pool, a café, and a property management office. With these services in place, cottage owners will have an easy outlet for renting their places when they aren't using them.
I'm a big fan of Belize and was sold on Phil's Carmelita community from the first time I saw the property. This is Belize at its best. And you have the chance now to become a part of it at the earliest stage (meaning the best pricing).
Lots are priced at US$35,000, but Phil is offering Live and Invest Overseas readers a 10% discount until his house plans are completed.
That means you could buy your riverfront lot atCarmelita Gardens today for just US$31,500.
In addition, if you start building within one year, Phil will give you another 10% credit on the lot price toward your construction costs. He's doing this to stimulate early construction, which he knows brings big dividends as the project matures...
Here are 11 things I've learned from the school of hard knocks after three international moves across three continents with two kids, a dog, a turtle, a husband, and two businesses...
Thailand is arguably the cheapest place on earth to live well. Intrepid Correspondents Paul and Vicki, on-and-off residents of the country for more than two decades, have long been teasing and tempting me with tales of US$1 Pad Thai lunches and US$11-a-night hotels (including breakfast and free Wi-Fi)...
"In the 1990s," writes Intrepid Correspondent Paul Terhorst, "Vicki and I lived in Las Vegas for two years. Nearly everyone in Las Vegas, we discovered, comes from somewhere else.
"One night at a party, people took turns explaining how they happened to wind up there. My favorite story: 'This is where my car broke down.'
"This woman was on her way from somewhere in Ohio to somewhere in California. Her car broke down in Las Vegas, and she had no money to pay for repairs. She got a job in a casino. That was 26 years ago; she's still there.
"You see this often. People let life happen when they are in their 20s or 30s. The car breaks down. A friend has an inside track to a job at a fine restaurant. Grandma dies. The bank is hiring. We have nothing much going on, so we get a job in a casino, at the restaurant, or in the bank. We move into Grandma's house...
"Then--and here's the point--somewhere in our 30s, we refuse all further change. The purest coincidence got us to where we live. The merest fluke put us in the present job. Now other parts of the world may beckon, other jobs may offer more. No matter. However capriciously we got to where we are, even if simply because our car broke down, we insist on staying there. Further change has become out of the question, no matter how miserable we are.
"This behavior has always mystified me. I'm a fan of capitalism and freedom. Capitalism assumes that if you're unhappy with what you're doing, you'll change.
"But that's not how the world works. If people are unhappy with their jobs, they agitate, join a union, go on strike, lobby for political change, maybe blow up the workplace. But most never even consider changing jobs.
"Similarly, when the landlord raises the rent, people vote for rent control, or sue, or withhold payment, or seek help from city hall.
"But most people never consider moving.
"Everybody behaves this way--except you and me..."
ALSO THIS WEEK From Global Real Estate Investing Guru Lief Simon:
My beat is real estate, but timber qualifies in my view...assuming you're investing in land planted with trees rather than in shares of some timber company.
Historically, timber has enjoyed the best risk/reward ratio of any investment sector. Depending on whose chart of historical returns you consult, timber as an asset category has produced an annualized ROI in the 12% to 15% range every year since they started keeping records on investment risk versus return.
A friend calls timber "a long-held secret of the world's wealthiest people." It's low volatility, a hedge against inflation, and an asset class that operates independent of the stock market.
On top of this, timber is the kind of investment I like. It's real and productive. This is more important right now than it's ever been. If you don't have some of your money in this kind of real, productive asset, you should.
Here's how a direct timber investment should work...
You buy the land. A management company plants trees on it and maintains them for you. They take care of everything--from insect and weed control to thinnings--until harvest time. Come harvest time, the management company organizes the cutting and the sale of the trees. The revenue from the harvest goes to you, as the owner.
Here's the best part: You still own the land, meaning you can replant and start the process over for another harvest.
I'm over-simplifying things, of course, but the point is that you want to be buying the land.
I've seen offers where you buy only the trees and the management company owns the land. Once you harvest the trees, your investment is done...closed out.
And I've seen many offers where you buy shares of the operating company that owns and manages the land and the timber. I find this option much less appealing, because you're not buying a real productive asset; you're buying a company. You have no control over the land, the timber, or how the business is operated. The only thing you control is the timing for when you sell your shares.
On the other hand, you probably don't want to learn how to grow and manage a forest. That's why I recommend direct ownership of the assets--land and trees--with a management company in place to take care of everything for you.
One opportunity that I've long recommended is teak farms in Panama. A friend, Robert Kroesen, who I met years ago during my first few scouting trips to this country, has a reforestation company that today owns and manages more than 3,000 hectares of teak plantations (and that is aggressively working to acquire more land).
With Robert's help over the past seven or eight years, I've learned a little about this business and have come to appreciate the opportunity tremendously.
Robert's company, United Nature, was founded in 1993, meaning he is now getting into full harvest for some of his early plantations. Growth rates have been good in the region of Panama where United Nature has cultivated its plantations, and Robert is positioned now to achieve an excellent return on his initial investment.
Robert started United Nature with a single partner as a personal investment undertaking. About 10 years ago, six or seven years after he'd been planting for his own portfolio, Robert began putting together packages for other investors. This had never been his intention, but, when people saw what he was doing and that he had the infrastructure in place to manage the plantations, they came to him asking to invest.
Rather than sell those people shares in his company, as other plantation operations in Panama were doing, Robert segregated out specific parcels of land for people to own directly. He continued to manage the plantings, the maintenance, and the harvesting, but each investor was given the opportunity to own his own piece of land and the trees planted on it outright.
Each investor with United Nature decides himself when to take the final harvest (though I'd say the sensible thing would be to take Robert's team's advice on this). And each investor can sell his land and/or his trees whenever he wants.
There is an active and expanding market of investors looking to buy older plantations. As other investment types become increasingly volatile and uncertain, more and more investors are looking to things like timber for long-term safety. However, many don't want to have to wait the full 17 to 25 years from initial planting to harvest. They're willing to pay a premium to accelerate the exit and the payout.
Robert's projected annualized ROIs are in the low teens.
This modest statement, though, doesn't do justice to the real opportunity here. Because this is such a long-term proposition, the total return come harvest time can be extraordinary. US$1 can turn into US$13.
Yes, I'm invested with Robert.
To learn more about investment options with United Nature, go here.
Another benefit to an investment in Robert's teak plantations, by the way, is that it can bring you a residency visa in Panama. With an US$80,000 investment in a registered reforestation project (United Nature's reforestation plantations qualify), you can arrange permanent residency visas for you and your dependents (that can lead to Panamanian citizenship).
Read more...
Historically, timber has enjoyed the best risk/reward ratio of any investment sector. Depending on whose chart of historical returns you consult, timber as an asset category has produced an annualized ROI in the 12% to 15% range every year since they started keeping records on investment risk versus return.
A friend calls timber "a long-held secret of the world's wealthiest people." It's low volatility, a hedge against inflation, and an asset class that operates independent of the stock market.
On top of this, timber is the kind of investment I like. It's real and productive. This is more important right now than it's ever been. If you don't have some of your money in this kind of real, productive asset, you should.
Here's how a direct timber investment should work...
You buy the land. A management company plants trees on it and maintains them for you. They take care of everything--from insect and weed control to thinnings--until harvest time. Come harvest time, the management company organizes the cutting and the sale of the trees. The revenue from the harvest goes to you, as the owner.
Here's the best part: You still own the land, meaning you can replant and start the process over for another harvest.
I'm over-simplifying things, of course, but the point is that you want to be buying the land.
I've seen offers where you buy only the trees and the management company owns the land. Once you harvest the trees, your investment is done...closed out.
And I've seen many offers where you buy shares of the operating company that owns and manages the land and the timber. I find this option much less appealing, because you're not buying a real productive asset; you're buying a company. You have no control over the land, the timber, or how the business is operated. The only thing you control is the timing for when you sell your shares.
On the other hand, you probably don't want to learn how to grow and manage a forest. That's why I recommend direct ownership of the assets--land and trees--with a management company in place to take care of everything for you.
One opportunity that I've long recommended is teak farms in Panama. A friend, Robert Kroesen, whom I met years ago during my first few scouting trips to this country, has a reforestation company that today owns and manages more than 3,000 hectares of teak plantations (and that is aggressively working to acquire more land).
With Robert's help over the past seven or eight years, I've learned a little about this business and have come to appreciate the opportunity tremendously.
Robert's company, United Nature, was founded in 1993, meaning he is now getting into full harvest for some of his early plantations. Growth rates have been good in the region of Panama where United Nature has cultivated its plantations, and Robert is positioned now to achieve an excellent return on his initial investment.
Robert started United Nature with a single partner as a personal investment undertaking. About 10 years ago, six or seven years after he'd been planting for his own portfolio, Robert began putting together packages for other investors. This had never been his intention, but, when people saw what he was doing and that he had the infrastructure in place to manage the plantations, they came to him asking to invest.
Rather than sell those people shares in his company, as other plantation operations in Panama were doing, Robert segregated out specific parcels of land for people to own directly. He continued to manage the plantings, the maintenance, and the harvesting, but each investor was given the opportunity to own his own piece of land and the trees planted on it outright.
Each investor with United Nature decides himself when to take the final harvest (though I'd say the sensible thing would be to take Robert's team's advice on this). And each investor can sell his land and/or his trees whenever he wants.
There is an active and expanding market of investors looking to buy older plantations. As other investment types become increasingly volatile and uncertain, more and more investors are looking to things like timber for long-term safety. However, many don't want to have to wait the full 17 to 25 years from initial planting to harvest. They're willing to pay a premium to accelerate the exit and the payout.
Robert's projected annualized ROIs are in the low teens.
This modest statement, though, doesn't do justice to the real opportunity here. Because this is such a long-term proposition, the total return come harvest time can be extraordinary. US$1 can turn into US$13.
Yes, I'm invested with Robert.
To learn more about investment options with United Nature, go here.
Lief Simon
P.S. Another benefit to an investment in Robert's teak plantations is that it can bring you a residency visa in Panama. With an US$80,000 investment in a registered reforestation project (United Nature's reforestation plantations qualify), you can arrange permanent residency visas for you and your dependents (that can lead to Panamanian citizenship).Continue Reading:
Read more...
Mick built a few thatched-roof cabins...then a few more...then a dining room and a bar... I met Mick nearly a quarter-century ago, when his Chaa Creek Lodge was a humble (electricity- and hot water-free) but beautiful oasis in the rain forest. I returned as often as I could for years, but, when we traveled out to see Mick this week, I realized it'd been maybe 13 or 14 years since my last visit. In the intervening years, Chaa Creek has grown up. Today it's 25 luxury villas, a spa, a swimming pool, and five-star service in the still thatched-roof dining room. "The world has changed since we saw each other last," Mick said our first evening together. "We watch the news here each evening, and we know what's gong on out there. It's not that we've got our heads stuck in the sand. It's that we choose a different reality." Here in the Cayo, it doesn't take long for any other reality you've brought with you to fade. In this frontier land of rivers and rain forest, your mind and your body are occupied with challenge and discovery from sunup until you fall exhausted into your bed each evening. At Chaa Creek, Mick and his staff (Chaa Creek employs more than 125 local Belizeans) grow their own fruits and vegetables on site, make their own furniture in their woodshop, and thatch their own roofs using techniques passed down from father to son in this part of the world for centuries. Mick Fleming is something of a legendary character in this part of the world. But the relevant point for you is that the opportunity that Mick came to this quiet corner of the world to find three decades ago exists still. Belize's Cayo District remains a place where a man (or a woman) can stake a claim and carve out a simple but rich and rewarding life. Friends and colleagues at our Live and Invest in Belize Conference this week showed all in attendance especially appealing current opportunities for doing just that—for starting over, for seeking safe haven, and for making your own reality in this beautiful, English-speaking country. If you weren't able to join us, don't worry. We recorded every presentation. The live recordings are being edited now and, when ready, will be bundled with our all-new "Live and Invest in Belize Manual," along with other key live-and-invest-in-Belize resources to create our first- ever Live and Invest in Belize Kit. You can order your pre-release copy of this one-of-a-kind Belize resource today only for 50% off. Details here. Kathleen Peddicord P.S. Take a look at what Mick, his wife Lucy, and their committed team have built at Chaa Creek. It's nothing short of extraordinary.P.S. What else this week?
- Phil Hahn tempted those of us convened in the meeting rooms of the Ft. George Hotel in Belize City with photos of the piece of property he's begun developing in the Cayo District of this country.
Carmelita is crossed by a river and a nature-lover's delight. This is lush hill country, where you spend your time on horseback, on the river, hiking the hills, exploring the rain forest, and discovering the caves and the Mayan ruins.
As Phil explains, "This is counter-largesse." Just what the doctor ordered these days.
At Carmelita, residents will grow their own food (if they want) and power their houses with solar energy. Most important, they'll become part of a like-minded community of others interested in sharing the same lifestyle.
This week, Phil offered attendees at our event in Belize City an opportunity to purchase a riverfront lot in this community-in-process for as little as US$20,000.
This was a special offer for conference attendees only. However, Phil has agreed to extend it to Live and Invest Overseas readers not in attendance, as well, for this week only...
- "I'll let my friends Bill and Jenny tell you the story of how they were able to check off their list their long-held dream of owning a resort in Belize," writes Belize Correspondent Amma Carey in her about-to-be-published "Live and Invest in Belize Manual" (in production this week).
"'Starting a small inn in Belize has been a great adventure for my husband and me,' explains Jenny. 'It all started after finding our piece of paradise on the Caribbean Sea. Once we had our view, the rest fell into place.
"'We were able to find a good local contractor for building our home, restaurant, and cabanas. His experienced crew knew how to work with the local building materials. Our cabanas are built as a local villager would build his home; comprised of a local hardwood planked floor, palmetto tree walls, and a thatched roof.
"'Coming from the States, we would have been lost trying to build this manner of structure on our own, but we had much help from the locals.
"'Now, my husband and I wake up each morning in paradise, happy to run our own place!'"...
PLUS: From Global Real Estate Investing Guru Lief Simon:My beat is real estate, but timber qualifies in my view...assuming you're investing in land planted with trees rather than in shares of some timber company. Historically, timber has enjoyed the best risk/reward ratio of any investment sector. Depending on whose chart of historical returns you consult, timber as an asset category has produced an annualized ROI in the 12% to 15% range every year since they started keeping records on investment risk versus return. On top of this, timber is the kind of investment I like. It's real and productive. This is more important right now than it's ever been. If you don't have some of your money in this kind of real, productive asset, you should. Here's how a direct timber investment should work: You buy the land. A management company plants trees on it and maintains them for you. They take care of everything--from insect and weed control to thinnings--until harvest time. Come harvest time, the management company organizes the cutting and the sale of the trees. The revenue from the harvest goes to you, as the owner. Here's the best part: You still own the land, meaning you can replant and start the process over for another harvest. I'm over-simplifying things, of course, but the point is that you want to be buying the land. I've seen offers where you buy only the trees and the management company owns the land. Once you harvest the trees, your investment is done...closed out. And I've seen many offers where you buy shares of the operating company that owns and manages the land and the timber. I find this option much less appealing, because you're not buying a real productive asset; you're buying a company. You have no control over the land, the timber, or how the business is operated. The only thing you control is the timing for when you sell your shares. On the other hand, you probably don't want to learn how to grow and manage a forest. That's why I recommend direct ownership of the assets--land and trees--with a management company in place to take care of everything for you. As I said, I'm reviewing two new opportunities for my Marketwatch members, but one opportunity that I've long recommended is teak farms in Panama. A friend, Robert Kroesen, who I met years ago during my first few scouting trips to this country, has a reforestation company that today owns and manages more than 3,000 hectares of teak plantations (and that is aggressively working to acquire more land). With Robert's help over the past seven or eight years, I've learned a little about this business and have come to appreciate the opportunity tremendously. Robert's company, United Nature, was founded in 1993, meaning he is now getting into full harvest for some of his early plantations. Growth rates have been good in the region of Panama where United Nature has cultivated its plantations, and Robert is positioned now to achieve an excellent return on his initial investment. Robert started United Nature with a single partner as a personal investment undertaking. About 10 years ago, six or seven years after he'd been planting for his own portfolio, Robert began putting together packages for other investors. This had never been his intention, but, when people saw what he was doing and that he had the infrastructure in place to manage the plantations, they came to him asking to invest. Rather than sell those people shares in his company, as other plantation operations in Panama were doing, Robert segregated out specific parcels of land for people to own directly. He continued to manage the plantings, the maintenance, and the harvesting, but each investor was given the opportunity to own his own piece of land and the trees planted on it outright. Each investor with United Nature decides himself when to take the final harvest (though I'd say the sensible thing would be to take Robert's team's advice on this). And each investor can sell his land and/or his trees whenever he wants. There is an active and expanding market of investors looking to buy older plantations. As other investment types become increasingly volatile and uncertain, more and more investors are looking to things like timber for long-term safety. However, many don't want to have to wait the full 17 to 25 years from initial planting to harvest. They're willing to pay a premium to accelerate the exit and the payout. Robert's projected annualized ROIs are in the low teens. This modest statement, though, doesn't do justice to the real opportunity here. Because this is such a long-term proposition, the total return come harvest time can be extraordinary. US$1 can turn into US$13. Yes, I'm invested with Robert. To learn more about investment options with United Nature, go here.
Historically, timber has enjoyed the best risk/reward ratio of any investment sector. Depending on whose chart of historical returns you consult, timber as an asset category has produced an annualized ROI in the 12% to 15% range every year since they started keeping records on investment risk versus return. On top of this, timber is the kind of investment I like. It's real and productive. This is more important right now than it's ever been. If you don't have some of your money in this kind of real, productive asset, you should. I was reminded of these facts when a couple of new timber opportunities crossed my desk this week. I'm reviewing these now and will have a report for my Marketwatchmembers shortly. Meantime, here's how a direct timber investment should work. You buy the land. A management company plants trees on it and maintains them for you. They take care of everything--from insect and weed control to thinnings--until harvest time. Come harvest time, the management company organizes the cutting and the sale of the trees. The revenue from the harvest goes to you, as the owner. Here's the best part: You still own the land, meaning you can replant and start the process over for another harvest. I'm over-simplifying things, of course, but the point is that you want to be buying the land. I've seen offers where you buy only the trees and the management company owns the land. Once you harvest the trees, your investment is done...closed out. And I've seen many offers where you buy shares of the operating company that owns and manages the land and the timber. I find this option much less appealing, because you're not buying a real productive asset; you're buying a company. You have no control over the land, the timber, or how the business is operated. The only thing you control is the timing for when you sell your shares. On the other hand, you probably don't want to learn how to grow and manage a forest. That's why I recommend direct ownership of the assets--land and trees--with a management company in place to take care of everything for you. As I said, I'm reviewing two new opportunities for my Marketwatch members, but one opportunity that I've long recommended is teak farms in Panama. A friend, Robert Kroesen, whom I met years ago during my first few scouting trips to this country, has a reforestation company that today owns and manages more than 3,000 hectares of teak plantations (and that is aggressively working to acquire more land). With Robert's help over the past seven or eight years, I've learned a little about this business and have come to appreciate the opportunity tremendously. Robert's company, United Nature, was founded in 1993, meaning he is now getting into full harvest for some of his early plantations. Growth rates have been good in the region of Panama where United Nature has cultivated its plantations, and Robert is positioned now to achieve an excellent return on his initial investment. Robert started United Nature with a single partner as a personal investment undertaking. About 10 years ago, six or seven years after he'd been planting for his own portfolio, Robert began putting together packages for other investors. This had never been his intention, but, when people saw what he was doing and that he had the infrastructure in place to manage the plantations, they came to him asking to invest. Rather than sell those people shares in his company, as other plantation operations in Panama were doing, Robert segregated out specific parcels of land for people to own directly. He continued to manage the plantings, the maintenance, and the harvesting, but each investor was given the opportunity to own his own piece of land and the trees planted on it outright. Each investor with United Nature decides himself when to take the final harvest (though I'd say the sensible thing would be to take Robert's team's advice on this). And each investor can sell his land and/or his trees whenever he wants. There is an active and expanding market of investors looking to buy older plantations. As other investment types become increasingly volatile and uncertain, more and more investors are looking to things like timber for long-term safety. However, many don't want to have to wait the full 17 to 25 years from initial planting to harvest. They're willing to pay a premium to accelerate the exit and the payout. Robert's projected annualized ROIs are in the low teens. This modest statement, though, doesn't do justice to the real opportunity here. Because this is such a long-term proposition, the total return come harvest time can be extraordinary. US$1 can turn into US$13. Yes, I'm invested with Robert. To learn more about investment options with United Nature, go here. Lief Simon P.S. Another benefit to an investment in Robert's teak plantations is that it can bring you a residency visa in Panama. With an US$80,000 investment in a registered reforestation project (United Nature's reforestation plantations qualify), you can arrange permanent residency visas for you and your dependents (that can lead to Panamanian citizenship). Continue Reading:
- Residency And Citizenship In Panama
|
