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Investment option proves you can grow money on trees

Molpus turns attention from politics to TIMOs

Money does grow on trees if you invest in timber.

“More people are investing in timber, especially in the South, where timber is primarily privately owned,” said Dick Molpus, owner of Molpus Management in Philadelphia.

Molpus Management is the newest of only eight timber management investment organizations in the U.S. and the only one in Mississippi. Referred to in investment circles as TIMOs, most have been in existence only since the 1980s.

“A TIMO is totally different from a REIT,” said Molpus. “REITs have stock in companies, where people can buy individual shares. We acquire property for investors and manage that property for maximum yield.”

The only timberland REIT in the U.S. is the result of a merger with Potlatch and Anderson Tully, a company whose holdings include land in Mississippi, Louisiana, and Arkansas, Molpus said.

After an unsuccessful bid for governor in 1995, the former secretary of state devoted his time to the Molpus Woodlands Resource Management Group. With 38,000 acres valued at $80 million from the Alabama-Georgia line to east Texas, investments have doubled in the last year, partly because of the acquisition of a large tract of land in Texas. Offices in Lufkin, Texas, and in Jackson will open later this year, Molpus said.

About 80% of land in the Northwest is federally owned, while 70% of land in the South is privately owned. “The worldwide demand for timber is going straight up, putting more pressure on us to manage well. The long-term price projections for southern timber land are very rosy because of the reduced volume in the Northwest,” he said.

“Because the northwest part of the U.S. was the last section settled, much of the land was given to the Bureau of Land Management or national parks,” Molpus said. “Recently, because of the spotted owl controversy and other matters, there`s been a switch from growing timber to straight recreation. The Northwest will never be the major source of timber again. The same shift is occurring on national forest land in the South, but percentage-wise is significantly less.”

The timber management group combines smaller tracts ($250,000 to $1 million) with larger tracts, depending on the needs of particular investments. After-tax returns are about 12%. “Some want cash flow on the front end, others on the back end. We mix and match to achieve financial goals of the investor,” he said.

About 30 employees are on staff; 15 are timber buyers, foresters, and forest economists. “We look at 50 different tracts before we find one that meets our criteria of strong cash flow and high return on investment. We discard those 49 because of environmental hazards, access problems, low volumes, poor site index, or other reasons,” Molpus said.

With long term goals in mind, the group usually buys a mixture of mature soft timber to carry the note and younger timber to have a high yield, he said.

“Our forest economists take raw data and enter it in the computers,” Molpus said. “From those computers, we know exactly when to plant, thin, fertilize, etc., to achieve maximum yield. We are very precise about how we manage timberland property because we have to look at investors for years to come.”

Molpus` grandfather opened the first sawmill in Philadelphia in 1905 to establish the Molpus Company. Dick Molpus` father died in the mid 1980s, and lumber manufacturing plants were sold to International Paper and Louisiana Pacific soon after.

“With 93 years of experience, we`ve just about learned what`s a good buy and what`s a bad buy in this part of the world,” Molpus said.


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