I have received post-thinning reports for the first thinning of my 1993 teak and for the first thinning of my 1997 teak trees.
Both of those post-thinning reports had projected distributions. In both cases, I was told TATF would do whatever I asked them to do with my milled thinnings, but also specifically mentioned I could take possession of my wood, buy new trees with the projected distribution, or take the distribution in cash after it had been sold. I opted for taking my distributions in cash. However, my milled thinnings haven't yet been sold, so I have not received any money. I did not ask, or want, TATF to sell my milled wood in the local market. I wanted, and still want, them to do their value-adding process, whether through Raleo or another value-adding company.
I didn't realize so few tree owners have received projected distributions. Has anyone here besides me received any pre- or post-thinning report? I'm curious how many tree owners here own 1997 or older teak trees and when they bought them. In my response to Mattyo5 (#2010) I mentioned that in late 2006 I received my most recent thinning report, and it was for the first thinning of my 1997 teak (which apparently took place in 2004). From my own experience, I knew TATF was years behind in issuing post-thinning reports, so I didn't give it a great deal of thought in regards to my own second thinnings (which might not have occurred yet).
I have to take an exception to your claim about TATF and their advertised high payouts from thinnings.
I met Steve and Sherry Brunner in 1993 when TATF was only about one year old. They still lived in Columbus, Ohio, at that time, as did I. Neither of them had a background in forestry management or any other field specifically relevant to what they were undertaking with TATF in Costa Rica. They never tried to hide that fact. When I decided to buy trees, I was aware that the Brunners were going to be figuring this stuff out as they went along to some extent. That's a risk I decided I was willing to take after meeting with them. They had already done an impressive amount of research, but that's one of the problems of being a pioneer: you have to figure some things out on your own, and you just can't predict everything that will come up and turn into a problem.
I also understood the nature of investing in growing trees to be very illiquid and long term, which are risks in themselves.
Anyway, my point is that I understood that projections so far into the future of something that hadn't really been done before in the way that they were doing it just had a lot of uncertainty in it. One of those surprises was that young teak wasn't worth as much as old teak. They just didn't know that when they started out, and it took years before circumstances revealed it to them. That's why they created Raleo, in an attempt to make the projections they used for early thinnings to be reasonable.
(By the way, I still have the projections they presented in 1993. In their projections, they used a value of $3.00 per board foot for teak, and that it would increase 6% per year. They made no distinction for how old the teak was. The thinning schedule was different then: 8, 12, 16, and 20 years before the final harvest at 25 years. So, at 8 years, for example, they projected that each thinned teak tree would produce 26 board feet and be worth $125.
In today's projections, they assume that seven year old teak is worth $0.65 per board foot, it increases 5% in cost per year, will produce 21 board feet and be worth $18.88.
For my 1993 teak, each thinned tree (33.5% of my 1993 trees) at seven years produced on average 19.2 board feet. The lumber was graded and approximately 25% heartwood, 20% one face heartwood, 25% sapwood, and 30% mixed heart and sapwood. I was told Raleo would pay $4.90, $3.55, $1.10, & $1.00 per board foot for each grade, respectively. On average, each of my thinned seven year old 1993 teak trees was worth $48.26 at Raleo (before subtracting fees).
So, that falls between the projection made in 1993 and the projection used today. Finally, in 1993's projection there was the following disclaimer:
"WHILE WE BELIEVE THESE ESTIMATES OF GROWTH, COSTS AND YIELDS TO BE FAIR AND REASONABLE, WE CANNOT GUARANTEE THE FUTURE VALUE OF YOUR TREES, OR THE NET PROCEEDS YOU WILL RECEIVE FROM THEIR HARVEST. IF YOUR DECISION TO HAVE US PLANT TROPICAL HARDWOOD TREES FOR YOU IS MOTIVATED BY THE EXPECTATION OF FUTURE PROFITS, WE ENCOURAGE YOU TO SEEK THE COUNSEL OF AN INDEPENDENT PROFESSIONAL WHO CAN EVALUATE THE REASONABLENESS AND ACCURACY OF THESE PROJECTIONS."
Today's projection has a similar disclaimer.)
So, based on the post-thinning reports I've received, I don't find the projections to be unreasonable given all the circumstances and inherent uncertainty and variability involved.
However, the delays so far in getting reasonable returns have been huge. TATF has put Raleo in place and they are working on other new companies and value-adding processes. I believe their belief is that (for new tree owners today) in seven years, they will have the ability to process thinnings and make distributions within about one year.
As for the first 17 year thinnings (the 1993 teak in 2010), they hope that it will be suitable for sale directly without the delay of value-adding processes. We will see. We all hope so. We should know within a year (unless they tell us sooner), if the teak is being thinned by TATF on schedule. It might not be because the market may be depressed due to the recession. (Milling and air drying takes months, so even under ideal circumstances I don't expect a payout for at least one year.)
What TATF is trying to do is extremely ambitious. It's much more than they originally anticipated needing to do. From my personal experience, I have learned that pioneering something very ambitious has always led to significant underestimates of the time and resources required. I think that's what's happened at TATF. So, they initially did not know that they would not be able to make distributions promptly, because they thought they could sell milled teak on the open market and get a good price for it.
When they learned young teak had little value on the open market, they created Raleo and gave tree owners the option to wait and let them create value, or to sell immediately on the open market. Creating a new company (Raleo, and now others) is extremely ambitious just by itself. Meanwhile, thousands of people are breathing down their necks (tree owners, employees, government), there have been serious employee problems, cash flow troubles, weather crises, an international economic crises, and the worst recession since the depression. Now some tree owners want to add Costa Rica's FBI, private investigators, and lawyers into the mix.
Am I happy about the delays at TATF? No. Would I like more information from TATF? Yes. But I am giving them considerable slack because I knew going into this whole thing that there was considerable risk in the unknown and a lot of things could go wrong in 25 years. I had the sense that Steve and Sherry would do their best. I believe that they are trying very hard to do so, but boy are things so much more difficult than they could have ever imagined!
As painful as this is for us, don't forget that probably almost all of Steve and Sherry's assets (even their adult lives!) are tied up in this endeavor. By and large, they are in the same boat that we are in, but raised to the nth degree. If we get screwed, they will get wiped out. Throwing lawyers into the boat we are all in just isn't likely to help it stay afloat and reach the destination we all want.
Have we been deceived? Yes. Was the deception intentional? I'm not convinced any was. Are they secretive? Perhaps. That may be partly that they have so incredibly much work to do that they don't have much time to devote to communicating with us. Plus, revealing problems in business is often likely to be a suicidal act. Trust (of investors, customers, employees, banks) evaporates. People start evacuating, and that builds on itself in a feedback loop. Not everyone wants them to succeed.
For example, if a bank thinks a business has a problem, this is what happens: first, they won't loan them any more money. Second, they jack up their interest rates. Third, they call your existing loans in early.
We're in a recession. So, customers stopped buying. Opportunists are like sharks smelling blood: a business in trouble is an opportunity to buy assets below market in forced sales. All this stuff going on at once can force a business under even if it really wasn't that wounded to start with. Do we tree owners really want to start adding lawsuits to all this? That's just like drilling huge holes in the bottom of the boat we're in.
And what good will lawyers do? They can't make trees grow any faster. They can't make the open market pay any more for young teak. They can't make the recession go away. They can't fix anything. And they don't work for free. They take 1/3 of everything without adding anything. That means less for us, plus an end to everything right now. Liquidating young trees that have little value in the middle of a recession. That's what lawyers can bring to our situation. Given that choice, I'd rather give the Brunners more time. My yelling at them won't make their job any easier, so I remain patient, hoping that they will be able to pull off what they're trying to do.
I don't think they are running a scam operation. They haven't done anything remotely like what Bernie Madoff, for example, did. (Madoff paid old investors with new investors' money to make it look like he was making them money.) The Brunners and TATF are not a fly by night outfit. They have a long history. They may not be communicating with us much, but they do invite us to visit them in Costa Rica, and several people have gone there to see their own trees and the farms. That's not being secretive. We know they have a number of tree farms, covered with trees, and I don't believe any have a mortgage (so no bank can foreclose no matter how bad things get). And, it's hard to put a tree farm in a suitcase and run off to Rio with it. There are real assets in TATF, and they're not going anywhere.
When I started writing this, I had no intention of going on for so long. I hope you don't mind. I'm not really just responding to your post, but to other posts other people here have made over a period of time. So, please don't take offense! None was intended, in case it seems like I'm beating up on you.
AI
Market Data 
Markets 
