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In one recent response from TATF I got the info that the ground is firming after the rains and thinning should start in 2 weeks or so (from now). Thinning should continue into June or later. The dry season ends by early April. I am only relaying their answer, not endorsing it as the unvarnished truth.
The e-mail I received today is basically identical to the updated What's New page.
I'm considering purchasing additional trees and I have asked a few questions regarding what's available and details about different purchase methods. In the same e-mail, I also have been asking my questions about other aspects of TATF's business, such as the thinning schedule.
When they respond to my questions about the purchase I'm considering, it seems they take my other questions fairly seriously and attempt to answer those as well. I haven't yet placed an order for any additonal trees. While I'm considering whether to buy or not, I think it's likely that they will recognize that it's in their interest to continue responding promptly.
1derfull,
noticed the same phrase that you pointed out in #1665
I'm fairly recent to the board so my perspective may not be as clear as some of you who have been in for the long haul. I've been getting significantly more/faster communication from TATF recently (last few weeks), including this latest broadcast e-mail.
It may be my short-term view that makes me feel this way, but it seems like TATF is hearing the rumblings and trying to soothe the disgruntled investors on this particular board. There are answers to some of our recent significant questions - e.g., where did all the money go? Their answer: They have huge capital holdings but no cash - their business plan didn't anticipate expensive production equipment for value-add. (and so they need us to buy more trees)
Looking at it in the best possible way, I might think that they were seeing the light at the end of the tunnel with new production capacity coming, at the end of a couple of difficult years of sitting on a growing mountain of fairly worthless lumber with a huge backlog of thinning commitments. If this capacity were a real new hope of starting to churn through the backlog, I could see them having renewed interest in following up on e-mails, etc.
Looking at it in a pessimistic light, I could see this as trying to silence the criticism before it gets too deafening and make a last big cash grab. Doesn't this seem a little bigger? Bigger discounts, older trees, and a plea for help to put us over the hump. Maybe the stream of new investments is starting to dry up.
In either case, I feel like things are coming to a head, but maybe that feeling is by design. They have said they are shifting from new plantings to care. They are promising new production capacity and a new era of meeting thinning commitments. All they need is a few more bucks and then the gusher of money will start to flow. That has all the earmarks of a con. "what's a couple more thousand dollars - you are already in to the hilt - if it just takes that little bit more to make it pay off".
Unfortunately, if this is a real business with a real capital need, it would probably look the same. It could be looking and walking like either duck.
Not to be US-centric, but did anybody else get the feel that the e-mail today was written primarily by a person for whom English is a second language? Not sure if that matters, could be mostly written by staff and then Brunners add/modify a bit. That would not be unexpected.
I recently e-mailed to ask about ordering some 2009 trees - what trees would be available for order. I got a response from TATF that says they don't have any 2009 trees for sale except for some clones of one species. They have a very limited selection of older trees for sale (2-3 species, a couple of recent plantings and a couple of older plantings).
I didn't ask about 2010 plantings as I assumed there wouldn't be any yet. Not sure if my thinking was correct on that.
I'm also interested in hearing about the visits. As much specifics as you are willing to share. How many people are working there? Did you see active working going on? Were they putting on a show for you or did you see random people working at various activities? Which/how many farms did you see? What farms look bad/good? What percentage of trees look as good as you expected, or are they all scrubby? Did you buy new plantings or special older trees, and do the special older trees look like they were selling the worst ones off?
Basically, the contract seems to boil down to this: they are responsible to thin the trees in the best way to make them grow as well as possible, but TATF is the only entity that has the right to judge whether the trees need to be thinned or not, so in other words, they watch over themselves to see if they are doing a good job. So we have no independent way to hold their feet to the fire. No USDA to inspect the trees and give them a seal of approval for what they are doing.
I don't think everyone thinks it's a scam where they will take the money and run (but if even '93 owners haven't gotten any money at all? I'm pretty uncomfortable about that - hadn't read back that far). More that they aren't doing what they said, trees might not be growing as expected, wood might not be as valuable as expected. Like they sold it a lot bigger than it is, they are managing it very poorly and what we end up with may not be a whole lot.
To all: You are welcome to contact me for verification if you like. Not sure if my cheerful innate optimism makes me sound like a shill.
I don't think it's hopeless scbuk
- The last TON talks about combining thinnings to reduce the backlog. If you were waiting for money for your first thinning then:
a. you weren't going to get much money this time anyway
b. I would guess the 7/10 year thinnings are most likely to be combined, so:
c. that pushes out the deadline for the theoretical first thinning schedule for 2000/2001 planted trees to 2011/2012 at most (assuming 7/10 year thinnings combined at 10 years and "10 years" means "10 full years of growth after planting", which is not clear)
- Thinnings happen at TATF's sole discretion, according to the contract, based on what they think is best for the trees. The measure of whether they are doing what's right or not is what they are doing with their own private plantings, in other words, if they thin their own trees they had better thin ours.
- the contract is very loose in terms of TATF's responsibility to us. It intentionally doesn't specify very much that they are actually required to do. Most of it is "best effort" kind of stuff, and they are solely charged with determining what their best effort is. The only specifics are the hooks to their own trees (which are probably hard to nail down as well) and the promise to cut the remaining trees down at 25 years.
- still, I think it's a positive that apparently they haven't breached the contract to this point (whether it's because it's so loose or not). That leaves room for this to be a legitimate business that is having troubles, rather than a scam. There was no promise to catch up last year, only an expectation/hope.
- I don't think we should watch the early thinnings to see if they are fulfilling the contract. If I were TATF and 3 years or more behind on thinnings, I wouldn't be trying to catch up on the 7/10 year thinnings first. I would be working on doing the thinnings that have a potential to put some cash in peoples pockets.
I found it pretty interesting. I was just a little surprised that I only expect $.65/bf for the lumber from my trees but I would have to pay $1.50/bf to buy some.
What does the unsuitable lumber look like? Is it just sapwood or what's wrong with it?
It sounds like you have a lot of very good information and have made a very close study of this situation, fawtsc. I'm not a wise investor, I just took a stab at TATF because it caught my imagination and I bought the sales pitch. It helped that Fine Woodworking did a story on TATF, I had read the brief article years before and filed it away in the corners of my mind as a great idea. Several years later, I stumbled across the website when I had some money available to invest. I like trees and wood. FWW article was the seal of approval in my mind, so I dove in, probably a lot deeper than I should have.
Hearing from you folks that have taken the time to dig into the local situation, travelled to examine your trees, studied the costs and evaluated the investment a lot more deeply than I was willing to is very informative. I really appreciate this board.
So when I was asking if you were speculating about their costs, I wasn't saying it was just a wild guess. By speculation I mean that you are estimating their costs because you don't have any inside information from their own books - so even though your speculation is very informed by real facts and FAO reports, you are speculating, not that that is a bad thing. You have obviously spent a lot of time and thought on gathering information and looking at the markets in that area. I have no reason to doubt that your cost estimate is pretty close, it sounds very reasonable and you back it up with a lot of good information.
My speculation is a lot wilder :). I don't have a lot of facts, just my limited personal experience with TATF, what I have heard here, my forgotten half-finished MBA, my bent toward optimism, and my judgment of human nature.
What I'm saying about the costs is: it's interesting to know what TATF's costs are, but that is information that would only be helpful to make an informed purchase decision. That helps to answer the question of whether the price they set is reasonable for the value and service that they are providing. If you can get the same service elsewhere for a better price or at a lower risk, it would be wise to buy somewhere else.
We're all in the same boat now, we're tree owners. Once you are a tree owner, it doesn't matter whether you bought at a good price or not. It doesn't matter if the farms are on great land or poor land. Now the trees belong to you, and not TATF. So the question of whether it was a good deal to start out with is not important. The only question now is, are you getting what you paid for - however much you paid.
The real questions:
1. What did they promise to do in return for our money?
2. Have they breached the contract in any way to this point?
3. What recourse is there if they have breached the contract?
I don't know the answers to those questions - what do you think? At what point does the apparent lack of projected thinnings become a breach of contract? Are they required to post new information regularly or to let us know if things are going badly, or is that just our reasonable expectation of a valid, solid business?
fawtsc -
In response to your question, yes, I am not trying to buy trees but boards.
You speculate (at least, I think you are speculating) that the cost for TATF of planting trees is about $2.50 each, and are suggesting that the $43 cost per tree is an astronomical profit.
While the price may seem disproportionate to the cost, what is being sold is future earnings. The price isn't based on the cost of the inputs, it's based on the demand, and the demand is based on the potential reward and the perceived risk that you won't get that reward. Similar to stocks - when you buy a promising tech stock, the actual value of the land, buildings, machinery and capital you currently hold when you get a stock certificate is not very great. What you are buying is potential, just as with the trees.
One square meter of land is not worth very much. Move it to Manhattan in NYC and suddenly it is worth much more. I could plant teak trees under the snow in my backyard and they would have none of the potential of teak trees planted on TATF's farms. So something else that TATF is selling is the sunshine, rain that will make the teak trees grow and the use of their land for the next 25 years. There aren't many places in the world that have the potential that these farms have, so they are renting us a scarce resource. They are also selling the political stability, democracy, and the lack of frequent hurricanes in their location of Costa Rica, a mix of factors that are fairly unique among the places that can grow teak well.
I'm not sure I agree with your $70 million figure (I saw a suggestion earlier that perhaps 70% of the trees were sold, that sounded reasonable) but it doesn't matter. Some astronomical amount of money has been collected by selling trees. Some of that must have been used to capitalize the operations: buying the farms, building the necessary buildings and infrastructure, buying equipment, etc. Some was certainly used to pay the labor, taxes, maintenance, expenses until the trees start generating a regular income - one assumes that at that point, the care and management fee should be enough to pay for ongoing operations. The total care and management fee in their projections is over $5k per 100 trees, so they have another $100 million in care and management fees to collect, and they only collect when they sell the wood. Sure, their big payoff is at 25 years, just like ours is, but the better job they do of caring for our trees, the bigger their payday is.
Anyway, let's make something clear: I don't own any of that $70 million. I didn't buy a piece of that when I bought trees - I didn't "buy" some or all of my money back. What I bought was trees and the use of the land for 25 years. I don't own stock in TATF. If the Brunners set things up minimally and took $60 million as profit, that's their business - as long as they fulfill their part of their bargain. If your'e asking whether that "fulfilling" is happening or not, that is certainly a valid question, and I'm asking that myself. It remains to be seen if they are fulfilling their end of it. But if they hold up their end of the deal while blowing $60 million on bonbons and big-screen TVs, that is none of my business. If I think they are managing their company poorly and taking too much profit for themselves instead of building the business well, my recourse (if it could happen) is to sell my trees to somebody else and stop doing business with them.
I think it's very understandable if trees haven't been growing as well as they hoped, and if the trees are maturing later than they hoped, and since they originally committed to paying 3x the going rate for materials for Raleo, etc. - all these things would push back their operational payday on our trees and also on whatever they planted for themselves. I don't know how they are financing their operations. It would be a dangerous thing (in my opinion) if they are using the sale of trees to one owner to finance paying other owners their distributions. That smacks of a Ponzi scheme. But I have no evidence that they are doing that, and it almost seems like a demonstration of their honesty that NOBODY IS GETTING PAID. If their operations were that shady, they could keep a scam going a lot longer and more profitably by hushing discontent. Especially with the early distributions, which are pitifully small. They could keep all signs of impropriety veiled by paying out a little bit - even a reduced amount - especially to those who complain. As mattyo said, I will tell 3 people about TATF if things are going well and 9 if they aren't. They will sell a lot more trees if these tiny early distributions are happening on schedule - which would give them far more money. Another factor against a scam is that they say they have stopped planting trees for sale. If selling trees is the only way they make any money for their operation, why would they stop? (If they really have)
I think there's a lot of evidence that this business was based on optimistic projections that haven't panned out so far and that the business hasn't been run in a very sound way. Evidence also seems to point to ongoing operations being run by a skeleton crew. I don't know if that's true, I just wonder why they aren't answering e-mails and why they aren't able to keep up with thinning distributions despite the obstacles - again, something that would allay suspicions and promote a good scam. I don't know whether to believe that TATF keeps picking bums to run their operations or whether the bums are at the top. They seem to have an awful lot of trouble with their staff.
It seems like TATF has a bunker mentality right now, just trying to keep the wolves at bay long enough until some of the teak starts to pay off. Imagine that they thought their operations would start producing mature teak three years ago and that's how they timed their operating budget in the beginning, but the teak isn't mature yet at 13-15 years. Note that in their projections they don't take any care and management fee until the 13-year thinning. If that's the case, it may be that they are just strapped for operating budget and trying to keep things going on a shoestring until the payoff. That seems pretty likely to me.
I appreciate mattyo's comments about the tree markings. That was something that has worried me, I'm glad that you checked and were satisfied on the same point that was a concern for me.
Thoughts?
Two more thoughts:
They've already said they aren't taking any more wood for Raleo for the time being. I'm prepared to sell my lumber locally or whatever I have to do. I just want to get it thinned and sell it. As ma has said, give us the bad news. It is what it is - keeping it a secret won't make it any better, it just erodes confidence.
Ab seems to imply that letting competitors know how we are adding value to lumber in order to sell it will hurt us. Won't they figure it out eventually? It's hard to sell something without telling SOMEBODY that it's for sale. Sure, they will try to duplicate and undercut or whatever, but if the products were ready to launch as said in last TON, then where are they? I would consider buying some just to get my trees moving...
Ab also said that they only sell to the trade (as Raleo site still indicates). I thought that was being changed as said in last TON. I thought they decided custom one-offs weren't going through wood quickly enough. The TON indicated two retired tree owners helped evaluate and select new products. As gistheman indicated, I'm sure there are a ton of committed tree owners who would be willing to help in many, many more ways to help get and keep this thing going. I hope that if there are problems, TATF will reach out to tree owners somehow to help respond to issues. If Steve has trouble picking reliable and useful staff, there have to be hundreds of people that could give him a hand. If there are problems marketing the wood, responding to potential wood buyers, engineering the product assembly, etc. I would bet there are many tree owners with very significant useful experience. So what's the holdup? It would be so helpful to know what the problems are and to have an opportunity to contribute. Trees are such an awesome idea and I still believe in the potential of this company. How can we help?
In reply to fawtsc
I was attempting to order wood from TAH for my personal use. They list two shipping methods: container and LTL (less than (truck)load). I'm not in the market for 4-8000 bf, I'm looking for 1-2000. Still, that should retire the 1st thinning for a couple of owners.
I was given pricing details - the price was about $1.50 a bf for unselected 7-year-old teak, $1.50 more per bf if I wanted to "select" by giving size restrictions. I was also given some details about what shipping costs would be by container load, though I am interested in LTL costs. I am waiting for the follow-up to that request, about 3 weeks so far since my last e-mail.
I was sent several pictures of "1st quality" teak at different ages - 7, 10, 13 and 15, front and back sides.
Here are my thoughts to some of the discussion so far:
- I think I fall in with the optimistic side by nature. Not probably as optimistic as ab appears to be, but certainly in line with ma.
- so we are using oxen teams intead of machinery. Certainly I understand why that greatly slows the process. Since TATF gets paid from the thinnings, it seems to me that it would be in their best interest as well as owners to hire more oxen teams. There is a limit to how much machinery we can buy, but there have to be oxen teams available out the wazoo I would think. Why can't we keep up to half or better of the thinning schedule?
- I should have seen thinning reports for 2001 trees so far, expecting 1996 and 2003 to come fairly soon. None so far.
- even with oxen teams running instead of the machinery, some trees should be being thinned. where are the reports?
About IRR, ab said and contiues to imply that most of the IRR comes from the final payoff. This isn't really true - the more money comes back early, the better the IRR. I did some IRR calculations early on and the early money does a lot to make the investment more worthwhile in terms of IRR. If the early money is reduced, pushed back or eliminated (all of which seems to be either threatened or de facto result currently) then IRR will drop significantly. If you disagree, please show your calculations and I'll show mine :)
- My fear of having been suckered in a scam is greatly reduced by the fact that there are trees. If the trees are there, I don't care (per se) if they are puny or harvested slower than expected, TATF could still be honest if bad businessmen. I still believe that they projected conservatively, so there is some fudge room in the numbers. TATF doesn't have to lose goodwill if they make reparations with replacement trees, either additional puny trees or young trees in better locations in addition to harvest of existing trees. TATF didn't promise that our trees would grow well. They promised that there would be trees and they would care for them. Whether the trees grow well or not is up to God. If I am dissatisfied with their ability to pick sites and care for trees well, I won't do business with them again. But it doesn't have to be a scam.
If things are going poorly, I understand why info is slow to come. Who wants to send another bad update? Maybe they are waiting until they have some of the scarce good news to give some more info.
Gistheman - Andres is also the one who has answered my questions so far. If you ever get some wood, I would love to get some from you. I am interested in flooring wood and I think 7-year-old trees should work for that. Please let me know if you hear some more.
MY BIGGEST CONCERN is that TATF is not currently doing a good job of selling the wood. If the trees are there, who cares about thinning? Really. If it takes a year or two longer, it hurts a little money-wise, but in the meantime they are growing (I think). But if you have lumber and you're not selling it, you:
1. run out of room to store and dry
2. have no pressure to thin any more
3. will never be able to pay anyone
As somebody else has said, this should be the top priority and commission-based sales are an excellent idea. There seems to be no selling urgency here. That has to be corrected quickly, or my thoughts about whether this is a scam are going to turn south fast.
I received some information about Tropical American Hardwoods because I tried to get some information about how to place an order. It took 3-4 e-mails and a couple of weeks to get a response when I was asking how I could go about buying some teak lumber.
I asked a follow-up question a couple of weeks ago, within a few days of the response, and haven't gotten a response yet.
The feel of the communication is not like there is a business there that is waiting to take my order and sell me something. My answer came from the Tree Owner Relations department, not Tropical American Hardwoods. The feel is that the hardwoods web sites were just slapped up there as another portal to TATF to make it look like something is happening. I felt like I might have been the first one to ask how I could order something and they had to put in some time to figure it out. However, I did get a fairly detailed and helpful answer (although it didn't seem much like a sales pitch, it seemed somewhat like an attempt to put me off from asking the question).
I don't see anything more on the Raleo site about their expanded product lines that were about to be unveiled after the last Owner News.