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?
