By stipulating price ceiling and flooring guarantees for future timber supply, a sales agreement can be crafted to facilitate the transfer of industrial fee lands to institutional investors. This session will show how to design and evaluate such a supply contract.

While forest products companies are willing to cut back their timberland holdings and purchase more wood from outside sources, they worry about the uncertainty of their long-run fiber supply and the price volatility of spot markets. To date, few have made a wholesale separation of their fee land. On the other hand, institutional investors, though eager to take up timberland shed by integrated companies, do not want to commit themselves to providing wood to these companies on a regular basis, fearing a compromise of their asset control and pricing. A timberland sales agreement can be designed to facilitate the transfer of industrial timberland to institutional investors. The question is how. The session will provide a solution to this important question.

The session includes three presentations, each of which will take 25 minutes, with the remaining time for Q&A. After a brief opening statement by the session chair, the first presenter will review recent developments of industrial timberland, and then the second presenter will discuss the current situation and future trends of the institutional investments. Next, the third presenter will show how to design and evaluate a supply contract using financial engineering techniques.

New knowledge, skills, or insights to be gained from the session: 1. Recent developments of industrial timberlands and institutional investments; 2. Designing/evaluation of a supply contract using financial engineering techniques; 3. Key considerations for improved industrial/institutional timberland performance.