LITTLE ROCK — The Arkansas Teacher Retirement System's trustees on Thursday authorized system officials to submit an initial bid of $11.315 million for 10,000-plus contiguous acres of timberland in south Arkansas.
They also gave system officials the green light to offer up to $13.710 million in subsequent negotiations to purchase the land, which is in Calhoun County between Hampton and Camden. The owner is Edwin Anthony Lumber Co. LLP.
"Overall, this is a very fertile high quality south Arkansas timberland," system Executive Director George Hopkins told the trustees.
Most of the land has mature timber that can either be harvested now or within the next five years, he said.
About 99 percent of the land is available for merchantable timber growth compared with 85 percent or 90 percent in typical tracts in south Arkansas, Hopkins said.
The tract has a public and private road system that was developed by International Paper Co. a few decades ago and is close to the major timber markets and places where timber can be developed into lumber or fiber, he said.
"If there is a concern about the tract, it would be that it probably has a five-month logging window for the majority of the tract, which means that during the winter months muchof the tract would be too wet to log," Hopkins said. "At the same time, that is not a detriment."
System timber investment manager RMK Timberland Group evaluated the value of the timberland conservatively, Hopkins said.
It's estimated by RMK that the initial bid of $11.315 million would make a 9 percent annual investment return on the tract for the system over a 10-year period, he said.
But Hopkins said he expects further negotiations between a broker in Monticello and the top two, three or four bidders for the land to negotiate a final deal.
A $13.710 million bid would reflect an 8 percent annual return for the system over a fiveyear period, he said.
Trustee Paul Fair of Little Rock questioned whether the system is meeting a goal established by the Legislature to place 5 percent of its assets in Arkansas-related investments.
"I don't think we are there, but we are trying to approach it," Hopkins said. "We approach it under the prudent investorrule, which means that we have to look carefully at Arkansas and find investments that are good when we can."
Last year, the system bid $33 million to purchase about 18,000 acres in Clark, Cleveland, Dallas, Grant, Hot Spring, Ouachita, Pulaski and Saline counties. But the system's then-director Paul Doane said the system lost the bidding for the land.
Last week, the trustees for the Arkansas Public Employees System's trustees voted to provide $15 million for timber investment manager Pinnacle Forest Investments to possibly purchase timberland in Arkansas.
Gail Stone, the system's executive director, said Thursday that she doesn't believe that possible deal would close until later this year.
Officials for both retirement systems said it's a good time to purchase timberland.
"Due to reduced demand from the economy, timberland prices are well below the highs 1 of 2/2 to 3 years ago," and current prices for "pulpwood, chip-nsaw and saw logs" are about halfthe prices from three years ago, according to a teacher system staff report to its trustees.
The teacher retirement system's trustees also learned Thursday from Ennis, Knupp & Associates of Chicago that the system earned a 5.6 percent investment return in July.
That's "a very strong month, so we are pleased with the recovery not only in the markets, but also in certain parts of your portfolio such as your fixed income component," said P.J. Kelly of Ennis.
The system's investments were valued at $9.2 billion on July 31, up from $8.8 billion on June 30, according to a preliminary report from Ennis that doesn't include changes in real estate and private equity investments for July.
"Just keep those positive numbers coming in," said Richard Abernathy, chairman of the board and superintendent of the Bryant School District.
The system's investments fell by about $2 billion to $8.81 billion last fiscal year.
Arkansas, Pages 12 on 08/28/2009