Massive timberland sale raises questions for Deschutes and Klamath projects

            The mammoth sale of nearly 200,000 acres of Timberland in Deschutes and Klamath counties has created concern over  conservation-oriented initiatives by the Klamath Tribes and the Deschutes Basin Land Trust.

            In a Feb. 18 statement, Cascade Timberlands, a subsidiary of Fidelity National Financial Ventures, announced the sale for $63 million to Whitefish  Cascade Forest Resources LLC. The buyer is registered in Oregon but with a Singapore address as its principal place of business.
            The mailing address is the Seattle law firm of Wilson Sonsini Goodrich & Rosati, attention Peter Mostow.

            The acreage includes the 90,000 acre Mazama Tree Farm along highway 97 between Chiloquin and Chemult  that  the Klamath Tribes had foreseen acquiring for reservation land.

            Also involved is approximately 33,000 acres south of Highway 20 between Bend and Sisters that the Deschutes Basin Land Trust has for nearly a decade hoped would become part of a purchase to protect the important view corridor to the Cascades and be managed for sustainable forest harvest.

            Cascade Timberlands acquired the property from previous investors who had assumed control of the former Crown Pacific timber company which had entered bankruptcy.

            Initially Cascade Timberlands announced it would seek to develop large estate size lots on the property between Sisters and Bend. State law restricts the size of partitions within forest zoned land.

            The company then went to the Oregon legislature in an attempt to reserve a portion for residential development while also discussing the possibility of selling most of the tract  to the Land Trust, which the organization has called Skyline Forest. The land was previously known as the Bull Springs Tree Farm.

            The conservation group has consistently promoted the possible purchase from Cascade Timberlands in its newsletters to supporters, and has encouraged bike riding and hiking in the area. 

 Tax records show Deschutes land valued at approximately $330 per acre

            Deschutes County property records show there were 41 tax accounts related to the Skyline Forest timberland with the assessor's estimated real market value of approximately $330 per acre, or $10,890,000 for 33,000 acres. The county clerk's office reports the deed was transferred to Whitefish Cascade on Feb. 17. The deed does not give a sale price but references an "asset purchase agreement" dated Oct. 19, 2014, although that document is not found in the clerk's records.

            In 2010 the Rooster Rock wildfire burned through more than 6,000 acres starting at the western boundary of the land.  The Two Bulls fire in the summer of 2014 burned nearly 7,000 acres and forced the evacuation of subdivisions on Bend’s west side.

A section of Bull Springs Tree Farm in distance

            In an Associated Press report, Klamath Tribal chairman Don Gentry raised the prospect that the inability of the Klamath Tribes to acquire the timberland in Klamath County could affect a provision in the  Klamath Basin Restoration Agreement intended to resolve issues related to water rights allocated for fish habitat and irrigators. 
           The tribe reportedly agreed in late 2008  to purchase 90,000 acres of the timberland that was formerly part of the reservation for $21 million.

           Gentry was quoted by the AP  that the option the tribe had to purchase the land, known as Mazama Tree Farm, had expired.  A notice regarding the option coming due was overlooked when emailed to a tribal member who was no longer involved in tribal government, he said.

Buyers are connected through a Chinese interactive internet company

            Both principals recorded as members of the new timberland LLC appear to be, or have been, associated with companies that were part of the Shanda Group, a Chinese interactive entertainment and online gaming conglomerate.

            The managing member of the Whitefish Cascade LLC is recorded as Ting Kong Lee, who Bloomberg Business reports was or is senior vice president and chief tax officer for Shanda Group.

            The other member is Quian Quian Chrissy Luo. In November of 2011 Reuters reported that Luo’s husband, Tianquia Chen, at the time chief executive of Shanda Interactive, led an effort to take the company private in a transaction valued at $2.3 billion. Chen, his brother, David, and Luo became the new owners.

            At the time of its SEC 13D filing for companies traded on US exchanges through ADRs, or American Depository Receipts, the new company was listed as having a Hong Kong address.

The Two Bulls Fire as seen from Awbrey Butte in Bend

            Reuters said that Shanda Interactive had in 2009 spun off Shanda Games, its online games operation.

            According to SEC filings in August of 2013,  Luo also owned nearly 5 million shares, or about 6% of the stock, in Millenial Media, a Boston-based company providing  mobile advertising and data platform for apps. It is traded on the NYSE under the symbol MM and recently closed at $1.60 per share.

            Fidelity sought to find "another use" for cash in the timberland

  The seller, Cascade Timberlands, is one of numerous entities controlled by Financial National Financial, a Fortune 500 company  whose holdings also include Fidelity National Title Co., the nation's largest title insurance company.

            Fidelity Chairman William Foley has diversified FNF into a broad range of holdings, including a group of branded chain restaurants. Through his personal ventures in a spectrum of other companies he acquired  Whitefish Mountain Resort in Whitefish, MT (formerly Big Mountain ski area) and developed the Rock Creek Cattle Company, an exclusive gated working residential estate ranch with a golf course near Deer Lodge, MT.

            Foley’s personal holdings also include the Foley Wine Group, which owns vineyards and more than a dozen wine labels including Firestone and Sebastiani in California and Three Rivers in Walla Walla, as well as in Italy and other countries.
          "We are excited to monetize the value of Cascade for our shareholders," Foley said in a statement posted Feb 18 on the FNF's web site.
          "We have been owners of Cascade for approximately eight years and believe it is in the best interest of our shareholders to monetize the value of this land at this time and seek another use for this cash in the hopes of maximizing the value of our FNFV assets."
            It is not clear from company annual reports and other documents how much it paid for the timberland. However, the 2013 annual report notes it recorded a "$6 million impairment" in 2012 related to Cascade Timberlands.
           FNF's core business is a collection of title companies including Fidelity National Title, Chicago Title, Commonwealth Land Title and Alamo Title, which the company says lead the nation in the number of title insurance policies issued. Fidelity National Financial Ventures, the holding entity for Cascade Timberlands, trades on the New York Stock Exchange as what the company identifies as a "tracking stock" under the symbol FNFV.  Company statements say the stock performance is intended to  "highlight the inherent value of the portfolio company investments of Fidelity National Financial Inc."

--photos by Lee Hicks

Previous posts - relevant issues
Bend and Whitefish...distant cousins in real estate investment

Scenic forest between Bend & Sisters spurs conservation effort

 

Real estate or stocks - Balancing asset classes

            GDP up-- then down-- job growth steadily rising, retail sales and consumer confidence up, wages lagging, but gas prices lower, interest rates staying down, inflation not a worry for now, and the stock market continuing a more than six-year mostly uninterrupted climb.

            But that’s in the domestic picture. Europe is not so healthy and much of the Middle East is still a cauldron of volatile politics and religious fanaticism.

            So how do the macro economic-financial indicators relate to the local real estate market?

            In an overly-simplistic investment scenario if you bought a Bend single family home at the median price at the end of 2009, and at approximately the same time purchased shares in the S&P 500 Index you’d be considerably more pleased with the latter’s appreciation.

            And if you’d bought stock in Apple at the same time there would be even more reason to break out the champagne and book that around the world cruise.

            As the charts below illustrate, the median price of a Bend single family home in early 2010 was $221,000, which climbed to $304,000 at the end of 2014. That was a 38% increase.

            *In roughly the same period the S&P Index -- a broader view of stock performance than the Dow Jones Industrial Average -- increased from 1,104 to 2,052, an 85% climb. 

            And Apple stock recorded a whopping 313% increase, closing the period at 93.70 after a 7 for 1 split on June 9, 2014 when the stock was trading at $645.

            Of course some housing investments in Bend would have outperformed the median. And an investor might have the added return of rental income, or an owner-occupant the privilege of enjoying the property--after all you can’t live inside a stock portfolio.

            Perhaps most surprising is that housing continues to recover with some areas such as Bend that were especially hard hit in the recession outpacing the country, while stocks concurrently are reaching new highs.

            Whether or when one or the other asset class will jump ahead or fall behind is a good subject for party talk or office chatter.

*The S&P Index and Apple stock prices were recorded the first week of February, 2015

Bend-Central Oregon - $1 million plus sales a small part of market

            Bend-Central Oregon is experiencing more sales in the higher end housing market of $1,000,000 or more across the region. But the area is not even close to other locales with similarly strong appeal for buyers in the recreation and retirement segment.

            The comparison often arises to such enclaves as Jackson Hole and Sun Valley, and even Aspen, where in the latter case condominiums have sold for an average of nearly $1,200 a square foot, according to recent reports. The simple math--$1.2 million for a 1,000 square foot condo.

            In 2014 there were 54 sales at prices above $1,000,000 of single family homes on all lot and land sizes recorded with the MLS of Central Oregon, and a single townhome on the Deschutes River near the Old Mill District.

            The sales were a minuscule 1.20% of the total 4,507  sales in all seven Central Oregon sub-markets and 1.75% of the 2,511 sales in Bend and nearby outlying areas. However, the $1 million and above sales represented an increase of approximately 29% in all areas and a nearly identical jump in Bend itself over 2013.

            A look at the Aspen market provides a quick study of just how distant the Bend-Central Oregon market is from much tonier areas of the country.

            A late December report in the Aspen Business Journal noted that  2014 prices had risen in all price categories, “with a major spike in activity in Aspen home sales above $7.5M.”

            But the $1 million to $2 million category fell 42%, “because so little home inventory is for sale at this price point,” the business journal reported.

            Although there were only 453 total sales at all prices in Aspen and Snowmass Village in 2014, just 10% of Bend-Central Oregon sales, the Aspen volume of $1.282 billion was only slightly less than the $1.418 billion logged on the MLSCO database.

            A report from Jackson Hole through the third quarter of 2014 shows there were 73 sales of more than $2 million, 11 of those at $5 million and 5 at more than $10 million.

            The report by brokers at Re/Max Obsidian said the $2 million plus unit sales were only 14% of the market but the dollar volume was 52% of all sales.

            To put the high-end market in perspective with Bend-Central Oregon, the Jackson Hole Luxury Report  by broker David Viehman defines the luxury category as $3 million or greater. By contrast, Bend-Central Oregon had only a single non-farm/ranch sale of more than $2 million in 2014 and 2  in 2013.

            Breaking down the Bend-Central Oregon sales by area, 44 were in the Bend-Tumalo-Alfalfa sub-market and another 10 spread across the other 6 sub-markets tracked in the MLS.

            Of the 54 total, 10 were in Bend’s Broken Top golf community, 6 in Awbrey Butte and North Rim on Awbrey Butte, and 2 each in Deschutes River Ranch, Pronghorn, River Glen,  Pinelyn Park, Tetherow, Shevlin Commons and Vandevert Ranch. (link below to overall market report)

2014 into 2015: more "normal" but prices creeping up with continued tight inventory