The Molpus family turned tragedy into triumph to hit the 100-year milestone of business in the robust timber industry.
“It’s so significant to our family that we’re celebrating a century of business because it’s been quite a roller coaster ride,” said Dick Molpus, president of Molpus Woodlands Group (MWG), the largest timberland investment management organization (TIMO) in the Deep South, and one of only a dozen in the nation.
In 1905, Molpus’ grandfather, Richard Hezekiah “Dick” Molpus, established a mercantile store on the square in the family’s hometown of Philadelphia, selling sundry items from ladies’ hats to horse collars to lumber.
Five years later, with the lumber business prospering, the elder Molpus opened a lumberyard nearby. There, he would dry the lumber, plane it, and sell it to companies in the Great Lakes states. Before the Depression era, he expanded the operation to a full-fledged sawmill business.
Molpus’ father, Richard Henderson Molpus, re-joined the family business after serving in World War II. But in 1963, tragedy struck. The timber plant was destroyed by fire and the Molpus family “seriously teetered on financial disaster and lived strictly hand-to-mouth,” recalled Molpus, until his dad received the nation’s first U.S. Small Business Administration loan and rebuilt the plant in 1965. His dad remained involved in the company until his death in 1988.
In 1996, after serving three consecutive terms as secretary of state and running unsuccessfully to unseat incumbent Republican Gov. Kirk Fordice the year before, Molpus founded MWG, and ended the first year of operation “with zero acres purchased and zero acres under management and zero revenue,” he said.
In June 1997, MWG signed its first client and acquired 8,000 acres valued at $12 million. By year-end, the company had 9,000 acres under management in Mississippi.
Between 1998 and 2000, MWG broke records by acquiring 545,000 acres in Mississippi, Alabama, Tennessee, Louisiana and Texas. Even so, timberland as an investment was a tough sell, said Molpus.
“Back in 1999, when I’d sit down with potential investors, they’d tell me they’d made 40% the year before in small-cap tech stocks,” he said, with a chuckle. “They’d ask me why they should invest in anything as boring as timberland. I told them it was a low-risk, low-volatility investment for the long term. That moderate rate of return looks a lot sportier today than it did then, not quite as dull.”
In 2001, MWG began working with large institutional clients, including insurance companies, pension funds and college endowments. By the end of 2004, MWG had more than 900,000 acres valued at $850 million under management, employed 100 people in 12 offices scattered from Alabama to Texas. Executive headquarters moved to Jackson, with the main operating office in Hattiesburg and the administration office in Philadelphia.
“I cannot emphasize enough how being based in Jackson has been a real asset to us,” said Molpus.
Revenues for 2004 totaled $133 million, moving the company into the largest southern-based TIMO.
In 2005, MWG and two investment partners began the first national commingled fund, Sustainable Woodlands Partners.
“In the past, our minimum investment was $50 million, and it was a pretty rarified atmosphere,” said Molpus. “We had a huge demand from college endowments to invest smaller amounts, so we set the minimum investment at $5 million. So far, we’ve signed Harvard, Princeton and Yale, and smaller endowments are following their lead. We’ll close out the year with $150 million in the fund, most likely with 15 investors.”
Southern timberland has averaged 8% to 12% return on investment over a 15-year period.
“The magic of timberland investing is that the return comes not from price appreciation, like it does for most natural resources such as gold, silver, oil and gas, but from biological growth, buying small trees and giving them time to grow into more valuable trees,” said Molpus.
Expansion in 2005 includes a planned purchase of 165,000 acres of timberland in the South for the new fund. “We don’t take people who want to buy timberland in a speculative fashion, say for two to four years,” he said. “If you’re going to do that, you might as well play Black Jack because the prices go up and down depending on a number of things, such as the strength of the dollar or housing starts. If you hold on to it for a 15-year period, biological growth drives the investment.”
By the end of the year, MWG should have well over a million acres of timberland under management, said Molpus.
“We’ve had a splendid ride,” he said. “We’re very proud of what we’ve achieved for our clients.”
Contact MBJ contributing writer Lynne W. Jeter at firstname.lastname@example.org.