Update on timberland markets in the Western U.S., presented at the Who Will Own The Forest 8 Conference in Portland in September

1. Western Timber & Timberland
Market Update
Roger Lord
Mason, Bruce & Girard
www.MasonBruce.com
Presented at
Who Will Own the Forest
Sept. 19, 2012
Portland, Oregon
Natural Resource Consultants Since 1921
Natural Resource Consultants Since 1921

2. Outline
• Log Markets
• Timberland Markets
Natural Resource Consultants Since 1921
2

3. Log Markets
3
Natural Resource Consultants Since 1921
Natural Resource Consultants Since 1921

4. Log Markets
• Harvest volume back above 2008 levels
• Log prices drifting downward with slack export
demand from China
• Slowdown in chip wood demand redirects
small logs back to sawmills
Natural Resource Consultants Since 1921
4

5. Harvest Volume Back
2011 Harvest % Change % Change
Region
(Bbf) from 2010 from 2008
Western Oregon 3.42 +15% +5%
Western Washington 2.65 +4% +14%
Westside Total 5.90 +10% +9%
Eastern Oregon 0.41 +2% +12%
Eastern Washington 0.44 +20% +2%
California 1.29 +11% -6%
Idaho 1.07 +13% +12%
Montana 0.35 0% -23%
Eastside/CA Total 3.55 +10% -1%
Total 9.44 +10% +5%
Natural Resource Consultants Since 1921
5

6. Log Prices Stabilizing
Westside Domestic Log Price Trends, 2005 - July 2012
Doug-fir #2 Sawmill Whitewoods #2 Sawmill
800
700
600
500
$/Mbf
400
300
200
Doug-fir: 2012 is 74% above low and 98% of 2007 prices
100
Whitewoods: 2012 is 79% above low and 113% of 2007 prices
0
1/1/2005
4/1/2005
7/1/2005
1/1/2006
4/1/2006
7/1/2006
1/1/2007
4/1/2007
7/1/2007
1/1/2008
4/1/2008
7/1/2008
1/1/2009
4/1/2009
7/1/2009
1/1/2010
4/1/2010
7/1/2010
1/1/2011
4/1/2011
7/1/2011
1/1/2012
4/1/2012
7/1/2012
10/1/2005
10/1/2006
10/1/2007
10/1/2008
10/1/2009
10/1/2010
10/1/2011
Log Lines Columbia River
Natural Resource Consultants Since 1921
6

7. Softwood Log Export Trends
Total Log Exports: From Columbia-Snake &
Seattle Customs Districts (MMBf)
• 1H2012 export volume 1,400
from WA, OR, CA, AK of
China South Korea Japan
1,200
736 MMBF, down 25% 1,000
from 1H2011 800
• Value off by 32% 600
• 1st half log exports to 400
China off 38% y-o-y
200
• Somewhat offset by -
increases to Japan
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
1H2012
Sources: PNW Res. Sta., USITC
Natural Resource Consultants Since 1921
7

8. Declining Chipwood Prices
Northwest Tonwood Prices
Conifer Pulpwood Doug Fir Chip and Saw Hardwood Pulpwood Whitewood Chip and Saw
80
70
60
50
$/Ton
40
30
20
10
0
Forest2Market Northwest Averages
Natural Resource Consultants Since 1921
8

9. Timberland Markets
9
Natural Resource Consultants Since 1921
Natural Resource Consultants Since 1921

10. Timberland Markets
• A few more regional sales, but expected rush
has not materialized
• One mega-sale
• Plenty of competition in auctions
• Many buyers waiting on opportunities
Natural Resource Consultants Since 1921
10

11. Westside Timberland Sales
Timberland Sales in Westside Oregon & Washington, 1996 - 2012
Sales > 5,000 acres, size of bubble is proportional to sale acreage
5,500
5,000
4,500
4,000
3,500
$/Acre
3,000
2,500
2,000
1,500
1,000
500
-
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
70 transactions: Source RISI, MB&G files. Excludes 2012 Forest Capital Sale
Natural Resource Consultants Since 1921
11

12. Recent Westside Sales
Eden Olympic Olympic Davidson Tree Forest Capital
Ridge Tree Farm Tree Farm Farm Partners
Date Nov-11 May-12 Jun-12 Jun-12 Jul-12
Davidson
Seller Plum Creek GMO RR GMO RR Forest Capital
Industries
Forest Investment
Buyer Campbell Campbell Makah Tribe Hancock
Associates
WA-Olympic WA-Olympic OR-Will. Valley &
Location OR-Coast OR-Coast
Peninsula Peninsula Southwest
Acreage 18,200 50,400 3,000 12,800 270,000
Price (Million $’s) $59.9 $149.6 $12.5 $59.9 ??
Price/Acre $3,300 $2,968 $4,171 $4,688 ??
Seller Type REIT TIMO TIMO Private Co. TIMO
Buyer Type TIMO TIMO Tribe TIMO TIMO
Sources: RISI, public records
Natural Resource Consultants Since 1921
12

13. Recent Inland/California Sales
Forest Capital
Kahn Jeld-Wen Green Diamond
Partners
Date Jul-12 4Q-11 4Q-11 Apr-11
Seller Forest Capital Kahn Private Co. Green Diamond
FGF, Sierra Pacific &
Buyer Hancock/Molpus Private Co. Yukor Tribe
family member
NE Oregon, NE
Location N California S Oregon N California
Washington, N Idaho
Acreage 840,000 11,300 50,000 22,200
Price (MM $’s) ?? ?? $23.5 MM $18.8 MM
Price/Acre ?? ?? $470 $843
Seller Type TIMO Private Co. Private Co. Forest Industry
European fund,
Buyer Type TIMO(s) Private Co. Tribe
forest ind., family
Sources: RISI, public records
Natural Resource Consultants Since 1921
13

14. Forest Cap
Olympic Tree Farm Forest Cap
Forest Cap
Forest Cap
Davidson
Eden Ridge
Forest Cap
Jeld-Wen
Green Diam. Westside
Kahn Inland/CA
Natural Resource Consultants Since 1921
14

15. 2013 Outlook
• Log prices have largely recovered thanks to log
export growth
• Expect continued improvements as domestic
housing market regains strength
• Expect land sales pace to accelerate as closed-
end funds reach expiration dates
• Economic uncertainty abounds
Natural Resource Consultants Since 1921
15

16. About Mason, Bruce & Girard
• Full service natural resource consulting firm
– Forestry Services
• Forest management responsibility on 300,000 acres
• Inventory & Biometrics
• Planning & Economics
• Appraisal & Valuation Services
– Environmental Services
– Geospatial Services
• Appraisal & Valuation
– Over the last five years, MB&G has appraised 5.0 million acres of
timberland valued at nearly $15 billion
– Other valuation services include:
• Acquisition/Divestiture Due diligence
• Conservation easements
• Litigation Support & Expert Witness www.MasonBruce.com
Natural Resource Consultants Since 1921
16

17. About Mason, Bruce & Girard
MB&G began as a forestry consulting business in 1921 under David
Mason. Mason began his first forestry consulting firm soon after the
1920 publication of his research on the timber industry and lumber
production in the Pacific Northwest.
As a result of his efforts to move the timber industry toward a more
professional and sustainable approach to forestry, he became widely
known as one of the nation’s first leading advocates of sustained
yield forest management.
In 1936, Mason created a partnership with Donald Bruce — Mason &
Bruce. Not long thereafter, James Girard joined the group, and in
1948 the firm adopted its present name — Mason, Bruce & Girard.
By the middle of the 20th Century, David Mason’s and MB&G’s
influence on the forestry industry was second to none. In fact, in
1952 F.K. Weyerhaeuser said of David Mason: “No single person has
been more influential in promoting sound forest management on David Mason
private forest lands than he.”
Over the years, MB&G has expanded its range of services, and today
has diversified into a full-service natural resources consulting firm,
with expertise in environmental services, forestry and geographic
information systems (GIS).
Natural Resource Consultants Since 1921
17