Why invest with Rock Creek?
Rock Creek has a well-defined investment strategy that is time-tested over many years. We think broadly about timberland in an effort to provide a range of alternatives that is vital to producing exceptional returns for our investors. Strategic planning that leads to long-term value creation is a core investment expertise of Rock Creek. Unlike traditional TIMOs that are singularly focused on generating returns from the biological growth of standing timber, Rock Creek regularly undertakes deals where our value-added management creates opportunities to sell land traditionally used to grow trees at attractive prices relative to its value for timber production. We have assembled a team whose core skill sets—timberland analysis, land-use planning, entitlements, permitting and marketing—will provide our investors with a significant competitive advantage over passive timber managers and those who conduct their activities from distant corporate offices or through third-party regional forestry consultants. BACK TO TOP

  

Why is now the right time to invest in timberland?

  • Industry Restructuring. We are witnessing significant restructuring in the forest and paper products industry. Historically, vertically integrated companies have owned timberland as well as manufacturing operations. Recently, however, these companies have sought to sell timberland holdings to strengthen balance sheets that have been damaged by economic weakness and debt-financed acquisitions. We believe we are seeing integrated manufacturing companies embrace a strategy of capital redeployment to their core operations and reliance on third-party timberland owners to supply their timber needs.
  • Demand for High-and-Better-Use Land. Demand for recreational, commercial, residential and conservation land, particularly in the “Sun Belt” states, has increased dramatically over the last decade. We expect demand for these “higher-and-better-use” lands will continue to increase over the long term, creating opportunities to sell timberland at attractive prices relative to its value for timber production.
  • Highly Fragmented Market. Timberland ownership in the United States remains highly fragmented. We believe that owners of small tracts, as well as those with diverse operations, cannot fully benefit from the economies of scale that are available to owners of large tracts who focus exclusively on active timberland management.
  • Correlation with Inflation. Timber prices tend to increase along with the rate of inflation. If the U.S. economy experiences robust growth, we believe this may give rise to general inflationary pressures and could positively influence the price of timber.
  • Advances in Forest Management. Advanced timber management techniques have markedly improved the industry’s ability to grow, harvest and regenerate high-quality timber. Strategic harvesting, fertilization, proper thinning, weed suppression and fire mitigation strategies, among others, have led to faster growing trees and increased harvest volumes per acre—and we expect these improvements to continue. While many owners of timberland have been content with a passive approach, we believe the use of advanced forest management techniques by experienced personnel is necessary to realize the highest-possible returns. BACK TO TOP

 

What are Rock Creek’s competitive advantages?

  • Proven Investment Results. Rock Creek’s senior management team has over 100 years of aggregate experience in timberland asset management, real estate investment and public and private financial markets. The principals have invested in more than 25 opportunistic timberland investments since 1989. Those investments are valued at more than $240 million and have generated an unlevered annualized return of over 48%.
  • Unique Investment Strategy. Rock Creek has a well-defined investment strategy that is time-tested over many years. We think broadly about timberland investing to provide a range of alternatives that is vital to producing exceptional returns for our investors. Strategic planning that leads to long-term value creation is a core investment expertise of Rock Creek. Unlike traditional TIMOs that are singularly focused on generating returns from the biological growth of standing timber, Rock Creek regularly undertakes deals where our value-added management creates opportunities to sell land traditionally used to grow trees at attractive prices relative to its value for timber production. We have assembled a team whose core skill sets—timberland analysis, land-use planning, entitlements, permitting and marketing—provide our investors with a competitive advantage over passive timber managers and those who conduct their activities from distant corporate offices or through third-party regional forestry.
  • Organizational Structure. Rock Creek’s principals have backgrounds in portfolio management, capital markets, real estate, land-use entitlements and alternative investments. Our principals work hand-in-hand with a very experienced team of in-house forestry and land management professionals to examine the underlying economics of every portfolio decision. We have consistently demonstrated that our capital markets, real estate and portfolio management expertise, combined with our top-flight forestry and land management talent, can produce attractive returns for our investors.
  • Cost Effective Access to Asset Class. Our structure, size and vendor relationships are all utilized to keep the cost of investing with Rock Creek extremely low. Contrary to industry practice, we do not charge acquisition or disposition fees, nor do we bill clients for services performed by our staff or any subsidiaries. These practices translate directly into higher returns for our clients.
  • Institutional Level Reporting and Asset Valuation. Timberland is not an illiquid investment, per se. However, it does not trade on an exchange and is not marked-to-market every day as are most financial assets. It is an asset class whose interim valuation, prior to harvesting the timber or selling the underlying land, is derived through the appraisal process. Therefore, the valuation model employed by a timberland manager needs to be diligent, consistent, comprehensive and performed on a regular basis to the highest of industry standards. The valuation techniques employed by Rock Creek have consistently proven to be realistic, if not conservative, over time when measured against actual transactions. We are committed to ensuring that our clients have confidence in the valuation of their investment. BACK TO TOP

 

With whom do you typically compete for deals?
Sources of competition include other Timber Investment Management Organizations (TIMOs), institutional investors, forest product firms, active logging operators, sawmill owners and private investors. BACK TO TOP

 

What is your investment process?
Rock Creek employs a comprehensive investment due diligence process. All of Rock Creek’s senior investment professionals are members of the Partnership’s investment committee, which meets regularly to discuss the deal pipeline and share market intelligence. Deals are prioritized according to diversification requirements and our investment professionals’ analysis of the relative value of each prospective acquisition. Our team typically reviews several potential transactions monthly. The most-promising deals will be assigned to a partner with related expertise, and this partner will be responsible for structuring and negotiating the transaction. When the general terms of a deal are known, including price, preliminary timber inventory, preliminary cash flows and comparable sales data, the investment committee may approve moving forward with the transaction, subject to completion of final due diligence.

Rock Creek’s due diligence process includes the following:

  • Thorough Investment Review. All potential acquisitions are thoroughly reviewed to ensure that the acquisition (a) conforms to the approved strategy for the region, (b) is expected to meet the required return objectives and (c) will do so with an acceptable level of risk.
  • Title, Survey and Environmental Reviews. A survey is obtained and a title search is conducted on all acquisitions. Where appropriate, a Phase I environmental site assessment is also undertaken.
  • Physical Site Visits. No property is acquired without a physical site visit by one or more of Rock Creek’s partners. Larger transactions typically will require multi-day visits by a team of two or more.
  • Portfolio Assessment. Finally, our team evaluates the property’s “fit” relative to the investment risk/return profile of the entire portfolio of properties. BACK TO TOP

 

What are the risks involved in your strategy and how do you plan to manage these risks? Describe process and controls.
There are two kinds of risk in timberland investments: physical and economic. Physical risk refers to potential losses from fire, insects, disease and weather. Economic risk refers to the volatility of investment returns that can arise from changes in timber and land prices over time.  

  • Physical Risks: There is a long-standing public perception that biological risks from timberland ownership are high. In fact, the annual losses from age, wind, insects, disease, drought and fire are generally less than 0.25% annually in privately owned and managed forests. For Rock Creek, total annual mortality loss has been even lower. While the risk of tree loss from natural and catastrophic causes is small, there are various measures that can be utilized to further reduce losses. Rock Creek employs a best practices management protocol on all properties to minimize the risks posed by natural and catastrophic events. This includes: (1) diversification by geography, (2) prevention, (3) monitoring, (4) suppression and (5) remediation. The most important measure is avoiding the purchase of large contiguous tracts of timberland in order to reduce the chance of a catastrophic loss to the portfolio. 
  • Economic Risks: Economic risks are also controlled by constructing a fully diversified portfolio of timberland assets. The diversification decision for timberland is conceptually similar to the diversification decision as applied to financial assets. Research has demonstrated that diversifying across different geographic markets and timber age classes generally results in more risk-efficient portfolios than acquiring assets in a single geographic market or age class. The level of diversification appropriate for an investor will depend on the investor's return requirements, risk tolerance and requirements for income versus long-term appreciation. BACK TO TOP

 

What about protecting the environment?
At Rock Creek, we thoroughly understand and strongly support the idea that we must manage our forestland investments in such a way as to balance investors’ financial goals with the need and desire to preserve our timberland for future generations. While our employees and clients know our goal is to maximize returns, they also know it is never at the cost of environmental degradation or unsustainable forestry management. With this in mind, Rock Creek has always operated under viable and measurable environmental policies. Generally, they are known as Best Management Practices (BMP). Some of these are very simple while others are extremely complex. But they all are specifically aimed at the mechanics of forestry operations, and addressing the Do’s and Don’ts. This is especially directed to logging and road building, and keeping an eye to protecting water quality in creeks and streams. At Rock Creek, we treat BMPs as our minimum standard in our everyday work. BACK TO TOP