November 18th 1999

By Jennifer Poole
Ukiah Daily Journal

On Nov. 1, the Georgia-Pacific Corp. announced the likely sale of its 194,000 acres of Mendocino and Humboldt county timberlands to The Campbell Group, a timberland acquisition and management company based in Portland, Ore.

The $397 million deal is subject to final approval by the G-P board of directors, and some financing details are up in the air, but the property is expected to change hands by the end of the year.

The Campbell Group currently managed more than 600,000 acres of timberland in the Pacific Northwest, and has been involved with more than $1 billion worth of timberland acquisitions since its 1981 founding by self-made attorney Duncan Campbell. Campbell sold out to United Asset Management Corp. in 1984, but remains active with the company as chairman and CEO.

The former G-P timberlands, all but 1000 acres of them here in Mendocino County, will be help separately by a limited partnership set up for the deal--the " Hawthorne Timber Company, LLC," which will be partially owned by the Campbell Group.

What wasn't announced Monday was just who was putting up the bulk of the funds to acquire the land.

"We have a policy," said Stan Renecker, managing director of acquisitions for The Campbell Group, Tuesday morning; "we don't disclose the IDs of our investors." But, he immediately added: "All of our investors are looking to hold timberland as a long-term asset."

Local speculation had first focussed on CalPERS, the California state employee retirement fund, as a possible buyer. CalPERS announced in mid-September it was turning over the management of its 222,000 acres of Pacific Northwestern timberland, valued at $439 million, to The Campbell Group.

On Tuesday, Renecker said CalPERS, the nations largest public pension fund with assets of nearly $160 billion, "was not involved" in the Mendocino County purchase.

The Daily Journal, however, has discovered at least on of the likely investors in the deal: the Washington State Investment Board, which manages 28 different funds for the state of Washington.

As of July 1999, WISB was managing a total of $52.4 billion assets, including the 20th largest pension investment fund in the U.S. On Thursday, WISB's Jeffrey Habersetzer all-but-confirmed his board's participation in the Mendocino land transaction, although the deal hadn't closed yet.

"I can tell you," he said, "we have established a partnership with Campbell. We do plan to invest in timberland with The Campbell Group- that's public information."

Habersetzer went on to explain that the way the WISB generally invested in real estate was "rather indirect": "We rely on our partners to make the investment decisions on our behalf," he said. "They're the experts." I know that our partners- the Campbell Group-feel pretty strongly about that (Mendocino) investment,"

Habersetzer continued, "and have been recommending it to their clients, to their investors. We did a long and exhaustive process to pick the Campbell Group…based on their leadership, their stewardship, and a bunch of other things. We think they're just a swell group…It's a pretty easy decision at the end of the day," he concluded, "if Duncan (founder and CEO Campbell) and his group recommend it." Habersetzeer agreed that, in general, a pension fund could be considered an appropriate owner for the kind of longer-term profits returned by properly managed timberland: "We understand sustained yield and that stuff," he said. "We're not in it for a quick return and then move on. It has been designed as a long-term investment."

Mendocino County Forest Council member and timberland owner Henry Gundling characterized The Campbell Group principals as having the kind of "heavyweight" finance backgrounds to be in the position "to get the kind of financing they need to take their time and do a good job."

"They're certainly not your average timberland company," Gundling said Tuesday about Campbell; "that's for sure, and that's food news in itself."

"And if they're trying to use pension money," he explained, "every pension plan has to have maturities out a ways for young employees who are just starting out--they have to have investments that'll go these long distances. It's a hell of a deal; all they've got to do is to take care of it, nurse long, cut a few trees once in a while, and they'll be a fat goose 30, 40 years out."

Local forester Walter Smith, of the Willits office of the Institute for Sustainable Forestry, also thought The Campbell Group, "certainly could be considered an upgrade from he present owner."

"We'll have to wait and see," Smith said, "but the Campbell Group has the capacity to do a good job. It just depends on the pressures they're under for producing revenue. Left to their own devices," he said. "they'd be more environmentally friendly-but they would ultimately follow the wishes of the land owner."

Smith also said any agreement to supply logs to the Fort Bragg Mill, which Georgia-Pacific still owns, would affect how The Campbell Group might ultimately manage the Mendocino timberland.

Renecker said Tuesday that Campbell hoped "to be a subsequent supply of timber for the Fort Bragg mill, and to keep that thing going." One rumor floating around the state Board of Forestry meeting in Sacramento Tuesday was that The Campbell Group had to supply 80 percent of the first year's harvest to the Fort Bragg Mill.

Some observers, however, point out that this agreement is only for one year, and is only for one year, and is perhaps only a "graceful way of winding it down."

Asked about The Campbell Group's forestry philosophy, Renecker said the company was "looking very closely" at the possibility of getting its timberland certified as sustainable harvested, although they would prefer that people "judge us by what we do day in and day out on the ground, not by what kind of ribbon we wear."

But, he said, if "green" forestry certification would allow his company to operate efficiently and effectively, "we certainly would be open to that."

"I think we are as a firm committed to environmentally sound timber management," Renecker said. "We have a good record of responsible stewardship, of balancing the financial goals of our investors with stewardship."

The Washington State Investment Board, itself, according to forester Smith, is currently looking into the possibility of having its lands certified, having its lands certified, having put out a request for proposal for proposal for a scooping session. "Usually people who do a scoping," Smith said, "are trying to understand how closely they might match the Forest Stewardship Council standards, to see if they're in the ballpark to move forwards."

Asked specifically about Georgia-Pacific's on-hold sustained yield plan, which projects an annual harvest 4.4 percent of inventory, Renecker said he couldn't yet comment. "We don't know about the SYP," Renecker said he couldn't yet comment. "We don't now about the SYP," Renecker said. "We do know there's an effort under way to develop an HCP (federal Habitat Conservation Plan), " which he said the Campbell Group was concerned "may not be flexible enough."

"Our objective would be to base harvest rates on good science," he said. "We generally like to make sure we get the science and biology part of it right." In the end, Renecker said, "We think we're buying a fairly well managed, high quality property that suits our clients' long-term investment objectives."

Copyright 1999 Ukiah Daily Journal