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Community owned forests conference
Missoula, June 2005
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A Western perspectiveTransition from integrated forest companies to TIMOs and REITs
accelerating: Boise Cascade, Crown Pacific, Rayonier
Billions rushing into TIMOs -> upward pressure on forestland prices, leading to increased pressure to cut hard and fragment on exit
Conservation transactions emerging, but still relatively small: higher forestland prices, less conservation funding, political resistance to forest conservation finance (exceptions: Pacific Forest Trust, Cascade Land Conservancy, Conservation Fund/TNC, Potlatch/TPL)
Decline of federal forest harvests: impact on diversity of mills and renewed conflict over fire risk & forest health
Continued decline of rotation age & intensification of management on industrial lands
Strong industry resistance to FSC and growing resistance to LEED green building certification
Climate for innovation not good, but some promising dialogue emerging
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Building the Conservation Economy
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Enhancing knowledge and understanding
PublicationsPublications
AnalysisAnalysis& Mapping& Mapping
First mapping ofCoastal Temperate Rainforest
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Investing in the financial infrastructure for the triple-bottom line economy
Venture: EcoTimberVenture: EcoTimber Real estate: The Natural Capital CenterReal estate: The Natural Capital CenterThe first environmental bankThe first environmental bank
Allocation of Natural Capital Fund
Venture7%
Income11%
Partnerships19%Real Estate
63%
Growth of Natural Capital Fund
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
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Pacific Northwest Forests in Decline
Decline inDecline inharvest agesharvest ages
DeclineDeclinein habitatin habitat
Decline inDecline inemploymentemployment
0
0 . 1
0 . 2
0 . 3
0 . 4
0 . 5
0 . 6
0 . 7
0 . 8
0 . 9
1
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
100000
0
10000
20000
30000
40000
50000
60000
70000
1953 1963 1977 1987 1997
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Forest management alternatives
ROADSROADSLOGGINGLOGGING
LANDSCAPESLANDSCAPES
Industrialforestmanagement
Ecologicalforestmanagement
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Two views of the Dickey River
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Trends support transition to ecological forestry• Capital: rise of forestland investing and socially
responsible investing• Land acquisition: forestland is changing hands• Green certification: forest and building certification
systems provide market benefits• Emergence of ecosystem service markets
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Ecosystem services: key to the transition
Industrial Ecological
NPV/acre
timber sales NTFP Easements Carbon other values
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The Strategy• Raise capital into open, perpetual fund• Acquire and manage forestland• Generate competitive returns for investors• Make strategic acquisitions in high-conservation value
watersheds, and restore health and productivity• Develop full range of forest products and services:
timber, non-timber, ecosystem services, recreation• Generate jobs and wealth for local residents
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Status of company• Closed first round of fund
with $10.5 million and 8 investors
• Ecotrust invested $1.3 million
• Purchased 1,100 acre property on Dickey River in Washington
• Harvested 500,000 board feet of lumber
• Raise additional $65 million by year-end
• Place at least $10 million by year-emd
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Structure
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Influenceforest
management
Createjobs & wealth
for local residents
Key elements
Raisecapital
Measureresults
& tell story
Sell forestproducts
& services
Manageforests
Acquireland
Measureresults
& tell story
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Raise capital: an expanding opportunity
Sociallyresponsibleinvesting
Timberlandinvesting
$15 billion$15 billion
Ecotrust Ecotrust Forests, LLCForests, LLC
$45 billion$45 billion
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Target geography
•Significant watersheds with high conservation values
•High level of public ownership•Younger properties•Low-income communities•Potential for tribal/community partnership
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Primary criteria in land acquisition
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Manage forests
planningplanning
logginglogging
loadingloading
replantingreplanting
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Sell certified wood: from niche to mainstream
0
1
2
3
4
5
6
($ b
illio
ns)
800
1000
1200
1400
1600
1800
2000
(thou
sand
s of
uni
ts)
Housing starts Housing starts
Certified wood marketCertified wood market
Market Connections PlacementsMarket Connections Placements
0
2
4
6
8
10
12
2003 2004 2005 (projected)
volu
me
(mill
ion
boar
d ffe
t)
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Sell ecosystem services
0
10
20
30
40
50
60
70
80
1997 1998 1999 2000 2001 2002 2003 2004Fore
st L
egac
y Pr
ogra
m e
xpen
ditu
res
(mill
ions
)
Working forest easementsWorking forest easements
Project-based carbon salesProject-based carbon sales
Non-timber forest Non-timber forest productsproducts
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Cumulative number of conservation banks
05
101520253035
1995 1997 1999 2001 2003
Conservationbanks
Value per acre: $3,000 - $125,000
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$50 million New Market tax credit award to Ecotrust CDE
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investment
income
managingmemberloan
returns
owner
tax credits
controlling entity
equity loan
retu
rns
loan
returns
QE
I
returns
Ecotrust CDE, LLC
ForestHolding 1, LLC
(QALICB)
InvestmentPartnership
Tax CreditInvestor
Economicinvestor
owner
equity equity
managing member
returns
returns equi
ty
retu
rns
Ecotrust Forests, LLC
Investor
Ecotrust ForestManagement, Inc.
EcotrustInvestor
ForestParcel
investment
Combined Ecotrust Forests, LLC and NMTC Structure
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Community forestry potential