Investing in Timber

[fawtsc]

Dear Mr. Steve Brunner,
When I stump over this web site, I thought it was another internet hole in the wall.
I admire the time you take to answer questions.
Therefore, I will continue the conversation in this board.
You law education shows your ability to craft excellent answers.
I have a few requests:
Please post market prices and approximate dates for income on all varieties of products you sell. This information is available from buyers and for sure you have enough of them available to you, to post such indicative information.

Please reflect the actual practices and the income generated to investors in your projections page.
As you wrote, TATF net distributions of harvested amount to near 1.6% of the invested capital in your company. Thus, your projections claims are not correct and/or they are misleading. They might be true 10 years from now, but today what you express in your projections page can be consider fraudulent.
With the information you have at hand the projections page it is due for an update.
You can always say, the projections are unfunded and they are a speculative assessment of returns.
Or you do consider that at year 7-10 and as you state in notes 3-14 and 15 of your projections page, people whould start to receive reports with the status of their projected harvest and aproximate dates to market their woods?

I think that we both agree that your teak projections are based on timely manner of income, with the caveat you add in note # 3. But teak is only one of the 12 products you sell. It is clearly to the buyers to understand what they purchase and you have done a good job and making as generalized as possible without much specific data and the one provided seems to be speculative. (it sounds a lot like the selling of the war of Iraq, lots of insinuation to get the buy-in but little specification and lots of make-believe assumptions)

The note on the table reads:
“3. Both the timing and number of trees harvested for the first two thinnings are based upon our actual practices here on our plantations, and for the subsequent thinnings and final harvest, on a combination of our experience and the latest published silvicultural practices derived from years of others' experience in teak plantations.
The actual thinnings and harvests of your trees will be determined by our professional foresters, who monitor the growth profiles of your trees in the plantations.
If your projections reflect the practices stated, should it be normal for tree owners to receive their harvesting reports at year 7 with the correspondent instructions.

I do not believe most people will purchase trees from you if the information you have in your projections page states the obvious. Such as what you have said:
1) Young Teak trees years 7 and 10 have very little value, with arbitrary timing for harvesting, thus the years of harvesting are at purpose of reference and it should not be consider as any indication of future income.
The market value of trees betwenn 7 to 10 years is at the present date of 3/15/2008 an average of $0.60 p/b/ft less $0.29 in expenses for net of $.31 or around $9.65 per tree (this is an actual average quote I received three sellers and four buyers).
This information should be revised every six months. – It should not be that difficult to update this every 6 months. Thus, investors should consider at least years 13 after planting to receive any income.

2) Harvesting for year 7 and 10 year tree thinning is indicative and investors should consider in their projections up to 3 years delay in harvests due to operational and other factors.

3) Raleo will buy at the above stated prices of $ 2.51 and $3.16 but it will be determined by demand of wood from Raleo, as of now, is our experience is that Raleo has at least 4-5 years to catch up to buy the early 7 and 10 year available from present owners. We expect in the future to increase our volume, that is our strategy, but there is not guarantee that volumes will change at any time.

The above three assertions are based on your comments and the information you provide in your web site, 13 thru 16:
13. Net profit per harvest is your estimated net cash flow from each harvest if you have us sell your trees, arrived at by subtracting our care and management fee from the net harvest proceeds.
14. Especially for the earliest thinnings, it would be good to anticipate as much as a year or more delay from the time of the thinning harvest until your lumber is milled, dried, and marketed if that is your wish. This anticipated delay is incorporated into the calculations of the IRR for the first and second thinnings.
15. Cumulative net proceeds is a running total of your estimated cash flow from the harvests of your trees if you have us sell your lumber.
16. The internal rate of return, or IRR, is the calculation of the annual compound yield from the projected cash flow if you have us sell your lumber for you, based on the 100-tree price of $4,992 per 100 teak trees. Lower tree prices for higher quantities would result in a higher projected IRR.
Steve, If TATF have distributed $800,000 to tree owners as you assert, and TATF have planted 2,000,000 trees with and average income per tree of $29.9 -as average that I keep- over the last 12 years. You have received from tree owners at least $50 Million dollars.
I believe you are an honest person, thus please adjust the information.

I will be interested to read comments from others who thought your projections meant to wait 15 years to receive a check.