Farms and Forests Get Exposed

Transcription

1 Farms and Forests Get Exposed New Orleans, LA November 2

2 Agenda Dan Dierking NCREIF overview of farmland and timber indexes Kevin Rivchun Townsend Group a consultants perspective Devon Olson Utah Retirement asset allocation decisions Anatole Pevnev US Agriculture farmland investments Ryan Reddish Forest Investment timber investments Panel discussion Audience questions

3 Annualized Returns by Index 16% 14% 12% 10% 8% 6% 4% 2% 0% Total Returns 1 Year Return 5 Year Return 10 Year Return 15 Year Return Timberland Farmland NPI NFI ODCE Index Name Properties Managers MV/Gross RE Assets Begin Date Timberland ,455,424, q4 Farmland ,835,582, q4 NPI 7, ,392,733, q4 NFI ODCE ,310,449, q4

4 Index Market Value 30,000,000,000 25,000,000,000 20,000,000,000 15,000,000,000 10,000,000,000 5,000,000, TimberLand Farmland

5 Index Manager Counts Timberland Manager Count Farmland Manager Count

6 Index Property Counts Timberland Farmland

7 Regions by Index Timberland Property Index Farmland Property Index NCREIF Property Index

8 Why Real Assets New Orleans, LA November 3

9 Why Real Assets? Attractive Returns Real Assets Have Generated Attractive Returns Relative To Equities HISTORICAL RETURNS TRAILING 10 YEARS 20% 17.5% 15% 12.3% 10% 7.8% 6.5% 6.3% 10.3% 7.3% 6.9% 8.0% 8.4% 7.3% 9.2% 5% 4.5% 1.9% 0% Source: Bloomberg, Preqin and NCREIF. Data as of 4Q15. *Partial period performance beginning 1Q08. Townsend s views are as of the date of this publication and may be changed or modified at any time and without notice. Past performance is not indicative of future results.

10 Why Real Assets? Lower Volatility Real Assets Have Exhibited Lower Volatility Relative To Equities 30% 25% 26.5% HISTORICAL VOLATILITY TRAILING 10 YEARS 20% 15% 15.2% 14.4% 16.5% 10% 8.8% 11.1% 9.4% 8.5% 8.7% 5% 6.1% 4.9% 3.9% 3.3% 1.6% 0% Source: Bloomberg, Preqin and NCREIF. Data as of 4Q15. *Partial period performance beginning 1Q08. Townsend s views are as of the date of this publication and may be changed or modified at any time and without notice. Past performance is not indicative of future results.

11 Why Real Assets? Diversification Benefits Real Assets Have Exhibited Lower Correlations Relative To Equities Source: Bloomberg, Preqin and NCREIF. Data as of 4Q15. *Partial period performance beginning 1Q08. Townsend s views are as of the date of this publication and may be changed or modified at any time and without notice. Past performance is not indicative of future results.

12 Why Real Assets? Higher Income Return Real Assets Have Generated Stronger Cash Yields Relative To Equities 10 YR INCOME RETURN 8% 7.4% 7% 6% 5.5% 5% 4% 4.2% 3% 2% 2.7% 2.2% 2.4% 1% 0% Farmland ODCE Timber S&P Listed Infra US Bond Index Source: Bloomberg, Preqin and NCREIF. Data as of 4Q15. Townsend s views are as of the date of this publication and may be changed or modified at any time and without notice. Past performance is not indicative of future results.

13 Why Real Assets? Income Tends to be Very Stable 25% NCREIF ANNUALIZED TOTAL TIMBERLAND RETURN 20% 15% 10% 5% 0% 5% 10% Income Appreciation Total Return Source: NCREIF. Data as of 2Q16.

14 Why Real Assets? Income Tends to be Very Stable NCREIF ANNUALIZED TOTAL FARMLAND RETURN 40% 35% 30% 25% 20% 15% 10% 5% 0% 5% Income Appreciation Total Return Source: NCREIF. Data as of 2Q16.

15 NCREIF URS Agriculture/Timber Asset Classes New Orleans, LA November 3

16 Portfolio Objectives Crises spur changes Inflation protection Capital Preservation Competitive returns Act as diversifier

17 Farmland Demand Drivers World Population Increasing Growing affluence, particularly in developing countries Biofuel consumption project to increase

18 URS Agricultural Strategy and Vision Risk mitigation: diversify by Geography Crop

19 Investment Philosophy for Real Assets Agriculture and Timber Direct and Separate Account Approach to Investing where sensible, discretion and control otherwise with a good exit Expect Long Term Hold (20 30 years) but flexible

20 Investment Criteria for Agriculture Highest Quality Soils Multiple Sources of High Quality Water Strongest Tenants/ Operators Proximity to Value Chain

21 Building on Existing Experience URS has been actively managing direct real estate investments for over 30 years Existing processes in place Staffed up Use outside agriculture and timber consultants Slight adaptations have been and will be made for Agriculture

22 Agriculture Due Diligence Structure Row Crops: Strategic relationships with farm managers Manage tenant relationship Oversee farm properties Provide reporting Deal flow Permanent Crops: Joint venture with top operators Custom farming Deal flow

23 Investment Oversight Site Visits Independent Generalist Consultants Outside Experts, Specialists, and Consultants Budgeting, Accounting, and Auditing Valuation and Reporting

24 Burns Tract Purchased in August ,701 Acres Wholly Owned, Unlevered Leased to Paramount Citrus (Grapefruit) Year 1 Cash on Cash Return: 6.5%

25 Burns Tract

26 Burns Tract Before and After

27 Cropland Investable Universe NCREIF versus US Department of Agriculture New Orleans, LA November 3, 2016

28 Understanding the Investable Universe NCREIF Farmland Index at September 30, 2016 Total Market Value: $7.8 billion Annual Cropland Market Value: $4.3 billion Excludes permanent cropland Represents 0.6% of the $692.6 billion investable cropland universe defined below Estimated USDA Values in 2015 All US Farm Real Estate: $2.34 trillion All US Cropland: $1.32 trillion Excludes structures, permanent crops, and pasture lands Cropland in Non Prohibited States: $808.3 billion Excludes Iowa, Kansas, Minnesota, Missouri, North Dakota, Oklahoma, and South Dakota Water Accessible Cropland in Non Prohibited States: $692.6 billion Excludes non irrigated land in the Delta States, Mountain, Northern Plains, Pacific Northwest, Pacific West, Southeast, and Southern Plains Regions Sources: U.S. and State Level Farm Income and Wealth Statistics, February 9, 2016; USDA Economic Research Service National Agricultural Statistics Service, USDA 2012 National Resources Inventory, August 2015; Natural Resources Conservation Service, USDA NCREIF Farmland Property Index, Quarterly Detail Report, October 20, 2016; National Council of Real Estate Investment Fiduciaries

29 Distribution of NCREIF Farmland Index Annual Crops, Market Value Weights: September 30, 2016 Source: NCREIF Farmland Property Index Quarterly Detail Report, October 20, 2016; National Council of Real Estate Investment Fiduciaries

30 Distribution of Cultivated Cropland Values 2015 USDA Estimate Weights Sources: National Agricultural Statistics Service, USDA 2012 National Resources Inventory, August 2015; Natural Resources Conservation Service, USDA

31 Distribution of NCREIF vs. USDA Q NCREIF Market Weights / 2015 USDA Estimate Weights Sources: National Agricultural Statistics Service, USDA 2012 National Resources Inventory, August 2015; Natural Resources Conservation Service, USDA NCREIF Farmland Property Index, Quarterly Detail Report, October 20, 2016; National Council of Real Estate Investment Fiduciaries

32 Introduction to Timberland New Orleans, LA November 3, 2016

33 Growth of the Asset Class

34 Understanding the Investable Universe NCREIF Timberland Index as of September 30, 2016 Total Market Value: $24.2 billion Estimated Institutional (TIMO) Universe Total Domestic Market Value: ~$35 billion Additional Investable Universe Private Landowners (Families and Individuals), Publicly traded REITs (WY, RYN, etc.) & other Industrial Owners (Mills) This bucket is harder to estimate, especially on the private landowner side, but is somewhere in the range of $40 50 billion Total investable universe in the $ billion range

35 Disclosures and Definitions Disclosures: This document has been prepared solely for informational purposes and is not to be construed as investment advice or an offer or solicitation for the purchase or sale of any financial instrument. While reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of preparation, The Townsend Group makes no representation that it is accurate or complete. Some information contained herein has been obtained from third party sources that are believed to be reliable. The Townsend Group makes no representations as to the accuracy or the completeness of such information and has no obligation to revise or update any statement herein for any reason. Any opinions are subject to change without notice and may differ or be contrary to opinions expressed by other divisions of The Townsend Group as a result of using different assumptions and criteria. No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Statements contained in this Presentation that are not historical facts and are based on current expectations, estimates, projections, opinions and beliefs of the general partner of the Fund and upon materials provided by underlying investment funds, which are not independently verified by the general partner. Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. Additionally, this Presentation contains forward looking statements. Actual events or results or the actual performance of the Fund may differ materially from those reflected or contemplated in such forward looking statements. There can be no assurance that any account will achieve results comparable to those presented. Past performance is not indicative of future results. Investing involves risk, including possible loss of principal. Index DEFINITIONS The NCREIF Property Index (NPI) is a quarterly time series composite total rate of return measure of investment performance of avery large pool of individual commercial real estate properties acquired in the private market for investment purposes only. All properties in the NPI have been acquired, at least in part, on behalf of tax exempt institutional investors the great majority being pension funds. As such, all properties are held in a fiduciary environment. The NFI ODCE Index is a capitalization weighted, gross of fees, time weighted return Index with an inception date of 1/1/1978. Published reports may also contain equalweighted and net of fees information. Open end Funds are generally defined as infinite life vehicles consisting of multiple investors who have the ability to enter or exit the fund on a periodic basis, subject to contribution and/or redemption requests, thereby providing a degree of potential investment liquidity. The term Diversified Core Equity style typically reflects lower risk investment strategies utilizing low leverage and generally represented by equity ownership positions in stable US operating properties (as defined herein). The NFI ODCE is a quasi managed Index based on the periodic review by the Index Policy Committee ("IPC") of the Index's criteria thresholds. The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. The CPI is calculated by taking price changes for each item in the predetermined basket of goods and averaging them; the goods are weighted according to their importance. Changes in CPI are used to assess price changes associated with the cost of living. The S&P 500 Index is an unmanaged market capitalization weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. The Barclays U.S. Aggregate Bond Index is a broad based benchmark that measures the investment grade, US dollar denominated, fixed rate taxable bond market. The index includes Treasuries, government related and corporate securities, MBS (agency fixed rate and hybrid ARM pass throughs), ABS and CMBS (agency and non agency). Index figures do not reflect deduction of fees, expenses or taxes. One cannot invest directly in an index.