It’s a safe bet that when a hiker winds their way through the pristine forests of Puget Sound, they’re not thinking about financial collapse, raids on Brazilian investment firms or dubious financial lending.
Twenty (20) years ago if someone were to ask who owned large working forests in King County, the answer was probably a company within a couple hours’ drive, and it was probably Weyerhaeuser. But over the last four decades, ownership of private forestlands across the country has shifted away from large companies that owned everything from tree to mill and towards private investment companies with large chunks of property. And forests in King County are no exception.
While much of the forestland in the county is state or federal land and smaller owners, there are some bulls wandering the forest. The largest is Campbell Global (and its subsidiary Snoqualmie Timber, LLC) which purchased about 100,000 acres of forestland from Hancock Timber Resource Group in 2015 for $400 million, according to the Puget Sound Business Journal. Hancock had purchased the King County portions of the land from Weyerhaeuser for about $175 million in 2003.
However, King County in 2004 bought the development rights for nearly $22 million on the property, protecting it from being subdivided and sold off to developers, according to county GIS data. The forest sits east of Carnation and north of Snoqualmie in a contigious chunk.
“It serves as a pretty significant buffer between the rural areas of the county and the large expanse of federal lands to the east,” said Richard Martin, King County’s environmental programs supervisor.
The county’s easement will preserve the property as a working forest. Martin said once a year, as part of the conservation easement, they are allowed to monitor the forest to ensure Campbell Global is in compliance. Martin said there haven’t been problems with the new owners, and a representative from the company sits on the county’s Rural Forest Commission.
“What we’re seeing in King County is really kind of a model example of land use planning where you have intensively developed urban areas and rural areas with lesser intensity of development, and that grades into working forest-lands and smaller private forest-lands,” Martin said.
A spokesperson for Campbell Global declined to comment for this story.
Other major players in the county include Weyerhaeuser, which still owns tracts in the heavily forested mountains in southeast King County.
Weyerhaeuser is a Seattle-based real estate investment trust (REIT) which moved toward its current model after selling off much of its production assets. Before that, it had been a fully-integrated timber company which not only owned the land, but mills and production facilities too. Its old campus in Federal Way is a bit of a local landmark.
Nationally, Weyerhaeuser is still the largest owner of private forestland, according to Forisk, a website which tracks REITs and timber investment management organizations (TIMOs). According to Forisk’s 2018 report, Weyerhaeuser (a REIT) owned a total of 12.4 million acres in the U.S. and Canada. Campbell Global (a TIMO) owned 2.3 million acres in the same countries.
Another notable company in King County is BTG Pactual, a Brazilian bank which Forbes dubbed the largest investment bank in Latin America. It owns significant portions of forestland near and adjacent to Weyerhaeuser properties. BTG Pactual’s headquarters recently was raided on corruption charges by Brazilian police.
But there are other international ties too. Campbell Global is owned by BrightSphere Investment Holdings, a company registered in the UK. According to the Financial Times, BrightSphere’s top holders include Paulson & Co which owns 22 percent. Paulson & Co is owned by billionaire John Paulson, who made some $20 billion by betting against financial companies and risky mortgages ahead of the Great Recession.
Other notable investors include Fidelity Management & Research Comany with nearly 9 percent ownership, and BlackRock Fund Advisors with about 5 percent. BlackRock owns roughly the same amount of Weyerhaueser stock, and has been described as a shadow bank. Shadow banks provide unregulated credit to other institutions outside of the traditional banking systems.
Smaller commercial owners in the county include EMF Enterprises, which is based out of Black Diamond and Palmer Coking Coal Company.
The main difference between the two, according to the James W. Sewall Company, is REITs generally retain ownership of the same land and periodically allow shares to be purchased in their organization. TIMOs on the other hand manage the land on behalf of parent companies and investors.
There are 334 private organizations in the U.S. and Canada that each own or manage 10,000 acres of forestland or more. Of the 97 million acres of private timberland tracked by Forsik, nearly 90 million are held by 120 organizations that each own or manage 100,000 acres or more.
Five of the top 10 timberland owners were either REITs or institutional investors, and seven of the top 10 timberland managers were TIMOs.
The economics of forestland
A 2011 Forest History Today article outlined the course of forestland history. In 1981 all of the 15 largest forestland owners in the U.S. were forest product companies, meaning they owned everything from seed to mill. But by 2010, only one of the top 15 forestland owners followed that business model. Ten were TIMOs and the remaining four were REITs.
There are many reasons for the change, including businesses realizing they could make more money focusing on one aspect of production. Hostile takeovers and changes in accounting leading to the undervaluation of timberland contributed. Crucially, forest product companies were taxed twice, “once at the company level and again at the investor level.”
TIMOs are structured differently and taxes are passed straight to investors who pay once. Timberland also was discovered by institutional investors. Timber provides “a relatively low-risk investment because it correlates negatively with other markets and provides reduced volatility.”
Greg Ettl, director of the University of Washington’s Center for Sustainable Forestry, said it started to make sense for companies to switch their business model.
“The questions start to come up like, wait, why do we have these mills,” Ettl said.
TIMOs tend to be traded frequently — often every 10 to 15 years — to generate revenue for their parent companies and investors.
While the Campbell Global lands are protected by the King County easement, other areas of the state and around the country don’t have that level of protection. Max Webster, the Evergreen forest program manager with Washington Conservation Voters, said about half of timberland profit can be realized through tree harvest. The other half comes from real estate sales.
“It is really, really quick turnover of the land in terms of the timber inventory, and then selling the land on to the next owner to keep the profits going,” Webster said.
Ettl said the most common forestry practice across Western Washington’s Douglas fir forests is to harvest every four decades or so. Growing forests also suck more carbon from the air, which could help climate change, but Douglas fir forests grow “really well” from between 40 to 100 years of age. Growing forests, however, suck up more water. That can impact steam flows and salmon runs as growing forests take more water than mature ones.
Across the state, Webster said there are about 8 million acres of private land, and about half of that is small landowners and other private industrial ownership. Most of the rest is owned by TIMOs or REITs.
One of the economic impacts, Webster said, is that as fully-integrated timber production companies sold off assets, mill and processing jobs were lost. And since much of the money is going to investors or to fund pension or retirement accounts, most of the revenue from the forests are leaving.
“That is value that otherwise would be captured by the state that is leaving to service investor needs somewhere else,” Webster said.
It’s important to note however, that even with international investors, TIMOs and REITs in Washington state are still required to manage forestland within state guidelines. Webster said there hadn’t been any incidents in King County that had prompted community organizations or the county to get involved with Campbell Global properties.
However, conservation organizations and government organizations are looking to a public future.
King County launched its Land Conservation Initiative in 2018. It has also used funding from its Conservation Future Property Tax Levy which was created in 1982 for preservation. The county has protected some 190,000 acres since 1970, and this year announced it would be increasing efforts to secure another 65,000 acres.
In June, county executive Dow Constantine announced he would seek to triple investments in the following two years to promote green space conservation, netting $63.8 million for 61 open space projects. This won’t all go to forestland, but some will, including purchasing properties along the Cedar, Green and Tolt rivers for conservation.
Elsewhere in the state, other models are being tried. One model is the Nisqually Community Forest. The forest stemmed from grants in 2011 from the National Park Service, and was guided by an advisory committee from the Nisqually Indian Tribe and conservation trusts and organizations.
In 2018, the forest purchased nearly 1,380 acres, bringing the total to around 1,920 acres, all purchased from Hancock for $9 million. The Nisqually Land Trust as a whole protects nearly 7,200 acres. It has a goal of creating a forest of up to 30,000 acres which would be managed locally and benefit local communities.
Another project called the Northwest Community Forest Coalition also is working to create community forests across the state.
Ben Dair is the senior manager of conservation finance for Sustainable Northwest, which is part of the coalition. While there are no projects in King County, Dair said the coalition is made up of 30 community organizations working across Washington and Oregon. Community forests can prevent forest loss or conversion and implement long-term harvest and conservation plans.
“Locally owned and managed forestland is good for communities, and it’s good for local economies,” Dair said.
Often times community forests are partnerships between landowners, nonprofits or government agencies. The coalition has also started working with Weyerhaeuser, and Dair said he sees the coalition as a facilitator for the varying interests working in Northwest forestland.