Natural Resources

Farmland Investment Thesis

Worldwide Demand and Supply Potential Imbalance

UN estimates food production will increase 70% by 2050; Food for Fuel also driving demand
New supply of productive land is not keeping pace;
Currently 70% of freshwater already used for Agriculture
Farm productivity gains have slowed to 1.3% per year; half of productivity gains 30 years ago

Attractive Yield Characteristics and Negative Correlation with Debt and Equity

4-8% current cash yields and historical IRR of 11% (1970-2009)
Negative correlation with US Equities (-0.17 with S&P 500), T-Bills (-0.24), and Corp Bonds (-0.45)

Numerous Opportunities to Evaluate, Requiring the Right Management Team

Three Strategies: Land Rental: 4-7% IRR, Currently Producing Land: 7-10% IRR, Converting Non-Producing Land: 15-25% IRR
Farm Location: domestic vs. international, and specific country characteristics
Type of Crop: tow croplands vs. permanent croplands
Hedging crop price, improving farm practices, and ‘Network Organizations’ can improve yields
Water scarcity play of only focusing on those pieces of land with the best access to water

If you’d like to learn more about our Farmland Thesis, please contact us at info@canyonroadcapital.com

Timber Investment Thesis

Timber Is An Attractive Long Term Real Growth Asset Class

Timber grows in real value about 7-8% per year; Trees grow ~6% annually and grade changes increase value 1-2%
Domestic Timber Supply constant since 1900 – ~750M acres of forestland, 50% is managed
Domestic demand is down due to US housing market; Lumber accounts for ~40% of timber

Attractive Yield Characteristics and Negative Correlation with Debt and Equity

Long term yields are very attractive: 12% + over last 40 years, 14% over last 30 years
7-8% Annual Real Growth; Annual cash yield requires tract portfolio management, as trees typically harvested every 15-25 years
Negative correlation with US Equities (-0.17 with S&P 500), International Equities (-0.14), and Corporate Bonds (-0.32)

Numerous Approaches to Timber Investment

Significant regional differences in inventory and property management; International opportunities are significant
Better Use Strategies Exist: renewable energy opportunities, real estate development, land use strategies

If you’d like to learn more about our Timber Thesis, please contact us at info@canyonroadcapital.com