SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) March 10, 2005
Pope Resources, A
Delaware Limited Partnership
(Exact name of registrant as specified in its charter)
| Delaware | 91-1313292 | ||
| (State or other jurisdiction of | (I.R.S. Employer | ||
| incorporation or organization) | Identification No.) | ||
| 19245 Tenth Avenue NE, Poulsbo, Washington 98370 | |||
| (Address of principal executive of offices) (ZIP Code) | |||
Registrant’s telephone number, including area code (360) 697-6626
NOT APPLICABLE
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (SEE General Instruction A.2. below):
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-(b)) |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
On March 10, 2005 the registrant
provided the attached presentations to certain parties interested in Pope Resources units.
A copy of those presentations are attached hereto as Exhibit 99.1 and 99.2. Pursuant to the requirements of
Section 13 of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
POPE RESOURCES, A
DELAWARE LIMITED
INFORMATION TO BE
INCLUDED IN THE REPORT
Item 2.02 RESULTS OF
OPERATION AND FINANCIAL CONDITION
Item 9.01. FINANCIAL
STATEMENTS AND EXHIBITS
Exhibit No.
Description
99.1
Presentation dated March 10, 2005
99.2
Workshop presentation dated March 10, 2005 SIGNATURES
PARTNERSHIP
DATE: March 10, 2005
BY: /s/ Thomas M. Ringo
Thomas M. Ringo
Vice President and Chief Financial Officer, Pope
Resources, A Delaware Limited Partnership,
and Pope MGP, Inc., General Partner
Exhibit 99.1
Presentation
dated March 10, 2005 Exhibit 99.2
Workshop
presentation dated March 10, 2005
Investing in Timberlands
Investor Presentation – Florida
March 10, 2005
Safe Harbor
This presentation contains forward-looking statements. These forward-
looking statements are subject to a number of risks and should not be relied
upon as predictions of future
events. Some of the forward-looking statements
can be identified by the use of forward-looking words such as “believes”,
“expects”, “may”, “will”, “should”, “seeks”, “approximately”,
“intends”, “plans”,
“estimates”, “projects”, “strategy” or “anticipates” or the negative of those
words or other comparable terminology. Forward-looking statements involve
inherent risks
and uncertainties. A number of important factors could cause
actual results to differ materially from those described in the forward-looking
statements. Some of these factors include, but are not limited to: changes in
forestry, land use, environmental,
and other governmental regulations; risk of
losses from fires, floods, windstorms, and other natural disasters; risk of loss
from insect infestations or tree diseases; changes in economic conditions and
competition in our domestic and export markets;
an unanticipated reduction
in the demand for timber products and/or an unanticipated increase in the
supply of timber products; and other factors described from time to time in
our filings with the Securities and Exchange Commission.
2
Investing in Timberlands - Agenda
Timberland investment thesis
Macroeconomic factors impacting timberland investments
Historical pricing
Investment attributes
Long-term returns
Diversification benefits
Tax efficiency
Risks of investing in timberlands
Ownership trends
Institutional investment performance
Summary
3
3
Summary of Timberland Investment Thesis
Timberland is well suited for high net worth investors
Strong risk-adjusted returns
Attractive portfolio diversification attributes
Multi-generational wealth preservation benefits
Short and long-term tax efficiency
Timberland is timely for the current investment climate
Tangible “hard” asset
Biological volume and value growth allow owners to “store value on the stump”
Attractive risk-adjusted returns relative to other investment alternatives
Opportune time to be getting into the timberland asset class
Long-term market fundamentals still strong
Numerous properties expected to trade over the next five years
4
Macroeconomic Factors Impacting Timberland Investments
Timber and timber-related product demand is driven by:
Population growth
Per capita GDP
Developed countries account for 75% of paper & paperboard consumption
By 2014, developing countries will contribute more to world GDP than
developed countries
Global timber supplies pressured by increasing environmental pressures
and growing rates of consumption
Supply pressures mitigated by
Greater use of technology by both producers and manufacturers of timber
Establishment of Southern Hemisphere plantations
Long-term supply increase, but with heavier hardwoods component
Will not adequately address growing sawtimber needs
5
Global Consumption of Softwood Sawtimber (1961-2001)
Source: FAO
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
Cubic
Meters
(000)
6
U. S. Private Timber Inventory Relative to Demand (1988-2001)
Inventory Trend: -1.3% / Year
U.S. Sawnwood Consumption
U.S. Private Softwood Sawtimber Inventory
1988
1990
1992
1994
1996
1998
2000
0
100
200
300
400
500
600
700
800
900
Inven-
tory
(Billion
Board
Feet)
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Con-
sumption
in
Cubic
Meters
(000)
Source: FAO, RISI
7
Historical Log and Stumpage Prices (1950-2002)
Source: USFS, Log Lines, Timber Mart-South
$1
$10
$100
$1,000
$10,000
$/MBF –
Logarithmic
Scale
50
52
54
56
58
60
62
64
66
68
70
72
74
76
78
80
82
84
86
88
90
92
94
96
98
00
PNW Domestic Douglas-fir
Southern Pine Stumpage
Inflation (CPI)
8
Timberland Investment Attributes
Exceptional risk-adjusted returns
Timberland has outperformed other asset classes while having lower risk
Attractive diversification attributes
Negative correlation to other asset classes
Positive correlation to inflation
Ideal for long-term investment orientation
Unique opportunity to “store value on the stump”
Tax efficient asset class
Grows in value without generating tax liability
9
Risk and Return of Asset Classes (1973-2002)
Long-Term Corporate Bonds
U.S. Treasury Bills
Commercial Real Estate
Large Cap Equities
REITs
Small Cap Equities
International Equities
Timber
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Standard Deviation (% / Year)
Note: For purposes of calculating the Sharpe ratio we use 3.8%, the 10-year Treasury Note rate.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Annual
Rate of
Return (%)
10
Historical Correlations with Timberland Returns (1973-2002)
Commercial Real Estate*
International Equities
Small Cap Equities*
Large Cap Equities
Long-Term Corporate
Bonds
U.S. Treasury Bills
REITs
-18%
-12%
26%
-19%
-40%
-12%
-15%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
*Data for small cap equities and commercial real estate are from 1979-2002
11
Efficient Frontiers (1973-2002)
0%
2%
4%
6%
8%
10%
12%
14%
16%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Risk (%)
Without Timber
With Timber
At a 10% rate of return, an efficient
portfolio with timber is approximately
123 basis points less risky.
Conversely at a 4% level of risk, an
efficient portfolio with timber can gain an
additional 106 basis points of return.
Portfolios optimized with 20% constraint for commercial real estate, REITs, & timber. Optimal timber portfolio at 10% return has 14% timber allocation.
Return (%)
12
Timber as a Tax Efficient Preserver of Wealth
Time-tested technique for passing wealth on to future generations in a tax-
efficient manner
Timber adds volume and value growth without generating near-term tax
liability
Harvest income from timber held in flow through vehicles enjoys
preferential capital gains tax treatment
Potential for arbitrage opportunities by acquiring undervalued younger
stands and passing those on to younger generations
Timber age classes are not valued in a linear manner
13
Risks of Investing in Timber
Timberland is a relatively illiquid asset
Varies by age of timber and size of property
Three factors that have created an increasingly more liquid asset class:
Greater acceptance by the investment community
More monetization of timber assets by integrated forest products companies
Greater number of publicly traded “pure play” timber equities
Cyclical market conditions over long holding period
Selection and conduct of asset manager
Substitution threats
Other species from other geographies
Engineered wood products
Non-wood products
Fire is generally not considered a significant risk
Historically less than 0.5% of commercial timberland owned by institutional
investors is damaged by fire, insects, disease and other natural hazards
14
Investing in Timberlands - Upside Potential and Downside Risks
Upside Potential for Timberlands
Weak dollar
Strong Yen improves U.S. log exports
Strong Euro will impede European
lumber imports into U.S.
Stronger Canadian dollar will put upward
price pressure on lumber prices
Asian economic growth
Improving fundamentals in Japan
China becoming a larger importer of U.S.
logs
Strong underlying demographics
continuing to fuel robust housing starts
and repair & remodel spending in U.S.
Continued growth in acceptance of
timberland asset class will improve
liquidity and values
Downside Risks for Timberlands
Short term spike in interest rates
that would result in significant drop
in housing starts
Significant drop in refinancing
activity could ripple through to
lower repair & remodel spending
Resolution of U.S. Canadian lumber
trade dispute that resulted in
significant increase in Canadian
lumber imports into U.S.
Growing supplies of global
plantation timber that could put
downward pressure on prices
Unforeseen regulatory changes
15
Shift in U.S. Timberland Ownership
Institutions began to invest directly in timberlands in the 1980’s
following the passage of ERISA
Institutional owners control over $12 billion in direct timberland
ownership
Timberland investment attributes better understood with the launch of
the NCREIF Timberland Index in the early 1990’s and the growth of
early Timberland Investment Management
Organizations (TIMO’s)
Publicly traded forest products companies sold significant timberlands
beginning in the late 1980’s
Finance pulp and paper expansion
Pay down debt
Monetize timber not being factored into equity valuations
Vertical integration less of a need
Tax advantaged REIT, MLP, and other private equity structures are
resulting in more timberland transactions flowing to institutional
owners and pure-play timber companies
16
NCREIF Timberland Return - Total Return (1987-2003)
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
1987
1989
1991
1993
1995
1997
1999
2001
2003
EBITDDA
Cap. App.
Annual
Return
17
Future Outlook for Timberland Ownership
Timberland ownership will continue to flow to institutional owners and
pure play timber companies
Timber is still in the process of being “discovered” by institutional investors
Compelling tax advantages of flow-through entities relative to C-Corps
Timberland will become increasingly more liquid asset as these changes occur
Timberland return expectations will evolve (moderate)
Many investors were drawn to asset class based on anomaly of early 1990’s
returns associated with the listing of the Northern Spotted Owl
New investors have more modest return expectations
Global market forces and product substitution will continue to work pricing
inefficiencies out of log markets, lowering pricing volatility and risk
Other species from other geographies
Engineered wood products
Non wood products
As timberland markets evolve, more emphasis will be placed on
management expertise and value added silvicultural investments
18
Summary
Strong underlying supply-demand fundamentals
Timberland is a well-suited asset for most high net worth portfolios
Asset class still relatively undiscovered
Timberland asset markets are becoming more liquid as more financial
buyers enter the market
Timberland is timely for the current investment climate
Afternoon Workshop on Timberland Investing
Investment considerations
Investment options
Pope Resources LP
ORM Timber Fund I LP
19
Investing in Timberlands
20
Investing in Timberlands - Workshop Session
Investor Presentation - Florida
March 10, 2005
Safe Harbor
This presentation contains forward-looking statements. These forward-looking
statements are subject to a number of risks and should not be relied upon as
predictions of future
events. Some of the forward-looking statements can be
identified by the use of forward-looking words such as “believes”, “expects”, “may”,
“will”, “should”, “seeks”, “approximately”,
“intends”, “plans”, “estimates”, “projects”,
“strategy” or “anticipates” or the negative of those words or other comparable
terminology. Forward-looking statements involve inherent risks and
uncertainties. A
number of important factors could cause actual results to differ materially from
those described in the forward-looking statements. Some of these factors include,
but are not limited to: changes in forestry, land use, environmental,
and other
governmental regulations; risk of losses from fires, floods, windstorms, and other
natural disasters; risk of loss from insect infestations or tree diseases; changes in
economic conditions and competition in our domestic and export markets;
an
unanticipated reduction in the demand for timber products and/or an unanticipated
increase in the supply of timber products; and other factors described from time to
time in our filings with the Securities and Exchange Commission.
2
Investing in Timberlands - Agenda
Timberland investment thesis
Timberland investment considerations
How to invest in timberlands
Investment management value drivers
Role of investment manager
ORM Timber Fund I
Pope Resources
Summary
3
Summary of Timberland Investment Thesis
Timberland is well suited for high net worth investors
Strong risk-adjusted returns
Attractive portfolio diversification attributes
Multi-generational wealth preservation benefits
Short and long-term tax efficiency
Timberland is timely for the current investment climate
Tangible “hard” asset
Biological volume and value growth allow owners to “store value on the stump”
Attractive risk-adjusted returns relative to other investment alternatives
Opportune time to be getting into the timberland asset class
Long-term market fundamentals still strong
Numerous properties expected to trade over the next five years
4
Timberland Investment Considerations
Liquidity requirements
Investment time horizon
Total return expectations
Current yield vs. long-term capital appreciation
Portfolio allocation
Geographic diversification
Form of investment
Selection of manager or investment advisor
5
How to Invest in Timberlands
Publicly traded integrated forest products companies
Weyerhaeuser, International Paper
“Pure-play” publicly traded timber companies
Timber REITs - Plum Creek, Rayonier
MLP - Pope Resources
Other - TimberWest (Canadian)
Closed-end private equity timber funds offered by Timberland Investment
Management Organizations (TIMOs)
National presence - Hancock Timber Res., Campbell Group, Forest Capital,
Forest Investment Assoc., GMO
Southern only - Resource Management Service, Molpus Woodlands
Western only - ORM
Other - Forestland Group (hardwoods), Global Forest Partners (offshore)
Direct separate account investment through TIMOs (for pension funds)
Direct investment
6
Timberland Investment Management Value Drivers
Acquisition cost
Has a critical bearing on overall performance
Forest management
Growth and yield modeling critical component of projecting future harvest levels
Forests are a biological factory where wood can be “stored on the stump”
Log marketing
Product price optimization
Flexibility to change harvest levels in response to changes in market cycles
Application of advanced silvicultural treatments
Disposition value maximization
Small tract HBU sales
Final disposition
7
Role of a Timberland Investment Manager
Acquisition Process
Forest Management
Portfolio Management
Disposition Process
- Disciplined approach
- Improve productivity
- Return to holding analysis
- Exit strategy well
- Inventory assessment &
through advanced silvi-
used to guide hold/sell
developed
verfication
cultural practices (being
decisions
- Knowledge of buyers
- Sensitive area set asides
better farmers)
- HBU sale opportunities
- Timing and execution of
- Growth & yield modeling
- Lower management costs
- Opportunistic portfolio
sales process
- Harvest schedule modeling
through economies of
management
- Reputation of property
- Harvesting and manage-
scale
through conduct of
ment cost estimates
- Optimize harvest revenues
timberland manager
- Capital expenditures
through market timing,
- Comparable sales analysis
improved utilization,
- Discount rate assessment
and log merchandizing
- Sensitivity analysis
- Maximize other revenues
- Price forecasting
- Stewardship reputation
8
Olympic Resource Management and Timber
Owner and manager of timberland in the Pacific Northwest since 1853
Parent company, Pope Resources, is a publicly traded partnership (Nasdaq:
POPEZ)
Nationally recognized timberland management firm, having provided turnkey
timberland management services on 1.5 million acres of timberland in Washington,
Oregon, and California
Western region manager for HTRG (1998 to 2002) on 29 tree farms
Business and timberland manager for Pioneer Resources (2000-2003)
Timberland manager for Cascade Timberlands (2005 - )
Experienced management team with proven track record of adding value
Disciplined acquisition and portfolio management processes
Sophisticated in-house planning tools and systems
Geographic reach and expertise of field forestry staff
Economies of scale
Certified with both FSC and SFI third-party certification systems
Extensive real estate experience capturing HBU land values
9
ORM Timber Fund I, LP
Private equity vehicle for investing in Pacific Northwest timberland properties
Target return of 10% to 12% per year
Investment term - 10 years
ORM LLC will act as GP
Fund size - $50 million of equity capital
Co-investment by GP or its affiliates of 10% of equity capital raised
Management co-investment of $150,000 by top five managers
Minimum investment size of $500,000 by accredited investors
Fees:
Annual asset management fee of 1% on committed capital
Back end participation fee
Split 80/20 between LP’s and GP after 8% preferred return
10
Why Invest in Pacific Northwest Timberlands
Structural characteristics of Douglas-fir
More upside potential to participate in Asian export markets
Less substitution risk relative to other species
Main substitution risk for Douglas-fir is high valued engineered wood products
Less susceptible than the U.S. South to impacts of declining competitiveness
of North American pulp and paper production
More upside return potential from management activities
Log merchandizing
Log marketing
Stable regulatory environment relative to other timberland geographies
Highly regulated, but known, regulatory environment
11
Acquisition Philosophy – Timber Fund I
Pursue properties that may be overlooked by others
Property size
Location
Past management
Utilize ORM contacts to surface potential deals
Extensive industry network
Third party management associations
Leverage off our recent acquisition success
Credibility in marketplace
Efficient property review and reasonable contingencies
Financial capacity
Ability to close quickly
12
ORM Timber Fund I - Conceptual Design
Pope
Resources
Pope
EGP
Pope
MGP
ORM, Inc.
Olympic Resource
Management,
LLC
Hood Canal
Tree Farm
Columbia
Tree Farm
ORM
Timber
Fund I LP
New Timber
Properties
Limited
Partnership
Investors
71,000 Acres
Puget Sound, WA
44,000 Acres
SW Washington
LP
GP
13
Pope Resources Overview
Last remaining timber MLP
Established in 1985 as a spin-off from Pope & Talbot
4.6 million units outstanding, with limited public float
22% controlled by GP’s and broader “family” ownership
31% controlled by Private Capital Management
Limited institutional ownership
Over one-third held by retail investors
Thinly traded
Market capitalization of $160 million
Enterprise value of approximately $195 million
2004 revenues of $40 million
2004 net income of $10 million or $2.22/unit
2004 EBITDDA of $19 million
Unit distribution of $0.15/quarter (return of capital)
14
Pope Resources Ownership
General Partners
Two corporate GP’s own collectively
about 1.5% of Pope Resources
Each of GP’s owned 50/50 by Peter
Pope and his cousin, Emily
Andrews
$150,000/year management fee,
unchanged since spin-off
Sliding-scale profit-sharing interest
in third-party service subsidiary
Limited Partners
Private Capital Management at
31% (initial stake in 1993)
“Family” position at 22% (including
GP interest)
Limited other institutional
ownership
Over one-third held by retail
investors
U.S. Trust
3.7%
Rutabaga Cap. Mgt.
2.9%
Royce & Associates
0.7%
Hollencrest
0.5%
Management
0.6%
Outside Directors
0.3%
Private Cap. Mgt.
31.3%
All Other
36.4%
Other Inst.
1.1%
GP Ownership
22.5%
15
Pope Resources Business Segments
Fee Timber
115,000 acres of timberland in western Washington
Produced 60 MMBF of log harvest volume in 2004
Future growth will be through co-investment in ORM Timber Funds
Timberland Management & Consulting
Provide third-party timberland management services to other owners of timber,
leveraging off our timberland management expertise and providing additional
economies of scale
Launch of $50 million private equity fund, ORM Timber Fund I
ORM has managed 1.5 million acres of industrial timberland in the Western U.S. and
Canada for HTRG, Pioneer Resources, and
Cascade Timberlands
Real Estate
3,000 acres of higher and better use properties near population centers
Seeking development entitlements to add value to land
Primary role is as a master developer, selling lands to other developers following
entitlement process
Ownership and management of historic mill town of Port Gamble
16
Pope Resources Growth Strategy
Free cash flow, after debt service and distributions, of $5 to $7 million per year,
depending on log prices
Used for co-investment in ORM Timber Funds
Opportunistically pursue fee (owned) timberland acquisitions
Where appropriate, invest in real estate projects
Potential to increase unit distribution with excess cash
Growth capital
Near-term growth fueled primarily by organic cash flow generation
Debt capacity
Between $50 and $80 million of incremental debt capacity, depending upon the
value of Units and cash flows
Debt to total capitalization covenant of 50% (currently 24% - market equity)
No current expectation for secondary offering of units
Maintain modest unit distribution
Current distribution is $0.60/unit per year, or a yield of 1.7%
17
Fee Timber Strategy
Acquisition of Columbia tree farm in 2001 from Plum Creek filled age-class gap
and leveled off age classes older than 30 years
Recent acquisitions will push 2005 harvest to 79 MMBF
Addition of 12 MMBF in each of years 2004 and 2005 as result of January 2004
acquisition
Addition of 21 MMBF in 2005 as result of November 2004 acquisition
Beginning in 2006, base non-declining harvest level of 53 MMBF for
subsequent decade
Look to add to fee (owned) timberland base
Opportunistic/contrarian approach to timber acquisitions
Acquisitions involving debt likely to be dilutive to earnings initially
Much of fee timber growth will come through co-investment in new ORM
Timber Funds
Will allow Pope Resources to participate in acquisition economies associated with
larger transactions
18
Productive Acres & Inventory by Age Class (1/1/05)
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Clearcut
0 - 4
5 - 9
10 - 14
15 - 19
20 - 24
25 - 29
30 - 34
35 - 39
40 - 44
45 - 49
50 - 54
55 - 59
60 - 64
65+
Age Class
Productive
Acres by
Age
Class
0
20
40
60
80
100
120
140
160
MMBF
Inventory
by Age
Class
Total
Merchantable
Inventory
486 MMBF
Total Productive Acres
99,556 Acres
19
Timberland Management & Consulting Strategy
Manage timberlands for third-party clients
Full-service management, selected forestry consulting services, workout specialist
Focus development of expert processes/tools, and market presence
Ancillary benefits accrue to fee timber properties through management expertise and
economies of scale
Fit with broad ownership trends in industry
Raise capital for investing in timberlands: ORM Timber Fund I, L.P.
$50 million of equity capital
10% co-investment by Pope Resources and affiliates
ORMLLC will serve as GP
20
Cascade Timberlands Assignment
Crown Pacific bankruptcy plan approved in December 2004
ORM served in advisory role to lenders during second half of 2004
ORM hired as timberland manager for newly formed entity, Cascade Timberlands LLC
522,000 acres in Washington and Oregon
Cascade Timberlands has its own Board of Directors
ORM commenced operations in January
Hired 12 new foresters and opened three offices
Conducting detailed inventory assessment to inform hold vs. sell strategy
Duration of contract expected to be 1-2 years
Assignment designed to bridge the ramp-up of ORM timber fund business
Allowing retention of key technical and operational personnel
Providing development opportunities for timberland management personnel
21
Real Estate Strategy
Push real estate properties through entitlement and permitting pipeline
To point where sale opportunity is optimal
May retain selected properties where management is passive and income stream is
steady with upside
Major early-stage entitlement projects
Gig Harbor - 320 acre mixed-use project within city limits
Commercial rezone effort enables future sale to Costco, Walgreen’s, YMCA
New Tacoma Narrows bridge impact
Bremerton - 260 acre mixed-use project with 15 year development agreement
Kingston - 720 acre project subject to urban growth boundary determination
Port Gamble historic mill town is a many-faceted, long-term project
Rural historic town designation under State’s Growth Management Act
Water rights recently secured
Environmental cleanup complete
Sewer system expansion needed for build-out of town site
Long term: development of former mill site and remaining portion of town site
22
Pope Resources - Summary of Investment Opportunity
Still a discount to NAV in spite of 2004-05 rise in unit price
Imputed value of fee timberlands of approximately $1,500 assuming value of HBU
lands of $10K/acre
Enterprise value to EBITDDA multiple of 10
Trading at 16 times trailing 12-month earnings
Highly tax-efficient vehicle for investing in timberland asset class
Positive tax yield
Modest distribution yield
Compelling diversification benefits of timberland asset class
Adding value through use of free cash flow
Co-investment in ORM Timber Fund I, L.P.
Opportunistic acquisitions
Opportunity for increases in distribution level
Improved alignment with insider buying in past few years
Favorable liquidity trends
23
Pope Resources Trading Volume
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
2000
2001
2002
2003
2004
Trading
Volume
-
200
400
600
800
1,000
1,200
1,400
1,600
Non-block
Trades
Annual Non-Block
Trading Volume
(left axis)
Number of
Non-Block Trades
(right axis)
24
Tax Advantages of Investing in Pope Resources Units
A
B
C
Pope Resources 1065
Resultant
Aggregate
Per
Applicable
Tax (Liability)/
Amounts
Unit
Tax
Benefit
Reported
Amounts
Rate
(
B
times
-C
)
28.00
$
32.00
$
36.00
$
40.00
$
New Tax Rates:
K-1 Taxable Income
4,600,000
1.00
$
1231 gain
14,000,000
3.05
$
15.0%
(0.46)
$
Int income
200,000
0.04
35.0%
(0.02)
Ord loss
(9,600,000)
(2.09)
35.0%
0.73
4,600,000
1.00
$
0.26
$
0.9%
0.8%
0.7%
0.6%
Note: Income amounts provided are representative examples only and should not be interpreted as pro forma results. As such, the amounts shown in
this worksheet represent management's estimates based on general tax principles. Individual tax consequences will vary from investor to investor,
and you should consult with your own tax advisor about the specific tax consequences in light of your own investment and income profile.
Tax "Yield" at Various Unit Prices
25
Summary
Timberland is a well-suited asset for most high net worth portfolios
Asset class still relatively undiscovered
Timberland asset markets are becoming more liquid as more financial buyers
enter the market
Timberland investment can take different forms
Publicly traded equity
Private equity fund
Direct investment
Form of timberland investment is dependent on numerous factors
Investment time horizon
Liquidity requirements
Return expectations
Portfolio allocation
Selection of timberland investment manager
26
Investing in Timberlands