Property Management Services Case Studies
Lease Analysis & Property Management
A family retained FRC to evaluate a long-term lease offer received from a major forest products company. While the offer of consistent annual payments was attractive, the family owners were skeptical of lease terms and unsure of the agreement’s true value. After we completed a comparison of lease payments revenue versus the potential income from wise and sensible forest management, the family declined the long-term lease option. At the client’s request, we then assisted in the development and implementation of an initial property management plan. Execution of the management plan created a well-managed forest over time that produced a reliable income stream and healthy return. Eventually, the two estates were successfully transferred to third and fourth generations who continue to manage the property as an investment today. With FRC’s assistance, the family avoided unwise decisions and implemented plans with lasting effects and created value for the generations that followed.
Salvage Timber Harvest & Property Management
A private landowner found himself in a difficult situation after a tornado damaged a significant portion of his mature timber. He knew several timber buyers and loggers and assumed they could assist in the cleanup. After the timber buyers and loggers looked at the property, they were unwilling to make an offer for the damaged timber. The landowner then contacted FRC, and we were able help the landowner successfully salvage the damaged timber. Proceeds from the sale provided enough income for site preparation and replanting with cash remaining. FRC then provided several management options on the unaffected portions of the property. After several years of wise and sensible forest management, the landowner is enjoying the benefits of a sustainable, healthy forest.
A major forest products company decided to liquidate their timberland assets and engaged two well-known investment-banking firms for representation. The company also retained FRC to complete a comprehensive investment analysis and develop a total value estimate of their timberland ownership. FRC’s valuation analysis allowed the owner to set reasonable asset values and sale expectations for the company’s senior management and directors. Once the sale process was complete, all bids were within FRC’s projected value range with the top two bids being within 3% of the predicted selling price. The company successfully avoided overstating value and expectations, and the transaction closed within the projected timeline and budget.
Family Limited Partnership Valuation
Owners of a timberland property were completing some estate planning and considering alternatives for transferring ownership to their children. They asked FRC to provide valuation services associated with creation of a family limited partnership (FLP). We determined the market value of the timberland asset as well as the market value of the partnership shares. These values formed the basis of the FLP’s share values, and FRC provided annual updates of share values for gifting purposes as well. The family gradually transferred ownership to the next generation in the most tax efficient manner. More notably, they were successful in creating a business model that promotes generational stewardship of the asset while developing a cohesive working relationship between family members.
Real Estate Services
Land Sales Strategy & Sellout
A British family engaged FRC to help acquire and actively manage a large timberland portfolio. The untimely death of the patriarch and requisite division of assets prompted an evaluation regarding the ownership’s future. Working alongside the family and its advisors, FRC completed a financial analysis to determine the optimum “keep” verses “sellout” strategy under various sets of assumptions. This gave the family the ability to formulate and implement an informed management and sales strategy that aligned with their long-term investment objectives. The property sold in smaller parcels over several years, which maximized property sale values and reduced tax impacts. Under this disposition strategy, family members were able to reallocate proceeds in a more controlled and efficient manner, and generate long-term value for the family and its successors.
Real Estate Market Study
A multi-county timberland owner wanted to liquidate a portion of his assets but was unclear on the best disposition strategy. He requested FRC complete a full appraisal to assist in discovering the best approach. After consultation, we recommended he avoid a full appraisal and its cost. We suggested FRC complete a comparable sales study, market analysis, and a sellout plan. This approach helped clarify the market and its nuances and helped him identify the best tracts to liquidate. FRC helped him successfully navigate the market and accomplish his objectives, while saving money at the same time.
Acquisition Inventory and Valuation
A timberland investor identified a property of interest and made an initial offer. After visiting the property several times, the investor began to feel the asking price may be unreasonable. He retained FRC to develop an estimate of the property’s timber value. Our timber cruise and valuation uncovered significant overstatement errors in the seller’s published timber volume. After reviewing our analysis, the investor cancelled the purchase and avoided a sizeable overpayment.
Division of Property
After the death of a family matriarch, the two heirs were interested in dividing the family timberland ownership. FRC represented one of the principals in the division process. We worked with both parties to hire an independent third party forester to complete a timber inventory and appraisal of the properties. We provided audit and oversight in the inventory and appraisal process as well as consulting and negotiating services that assured an equitable division of the property. Both heirs met their specific objectives with the property division, and moved forward with management of their assets independently.
Property Tax Assessment Appeal
After a countywide re-assessment of property values, a client’s property assessment increased tremendously as compared to previous years. Increased property assessments lead to higher property taxes. FRC represented the client and developed a market-based value, then appealed to the County Board of Equalization, and ultimately provided expert testimony at the hearings. Our client prevailed in the appeal and avoided a tremendous increase in property taxes.
Management Practices/Timber Theft/Accounting Analysis
A large family owner’s property was under a long-term wood supply agreement with a major forest products company. The agreement required the company manage the properties, as well as harvest timber and make payments on a per ton basis with full transparency and accounting. The family became concerned about the company’s adherence to the terms of the agreement. FRC assisted the family in evaluating performance of the ongoing contract. Our analysis included a detailed review of management practices, inventory design, growth rates, timber accounting, and correlation of expected results to actual results. The study isolated and identified inaccuracies and problems, which led to significant process improvements, including identification and elimination of timber theft. FRC’s analysis helped validate the owner’s concerns, and they decided to litigate. In the course of litigation, the parties eventually agreed to terminate the contract with significant payment to the family for damages incurred.
Disposition Analysis/Property Data Development & Valuation
A large multi-generational timber family wanted to expand their business operations. To do this, they needed additional funds for the initial capital investment and planned to leverage a portion of the family’s timberland ownership. The principal family members managed family holdings and were very familiar with the ownership, tract locations, access, etc. However, lenders could not commit to the loan due to the lack of current and credible property data. The family and lenders retained FRC to complete an inventory and map the property – including all relevant timber information and acreages. This information formed the basis of a comprehensive appraisal report that met the lender’s requirements and allowed the family to acquire the loan and expand their family business.
Acquisition Due Diligence
An institutional owner reached an agreement to sell a large property to a private buyer. The negotiations and price were based on the seller’s recent timber inventory and property information. The buyer needed confirmation of the data’s accuracy and engaged FRC to assist in the due diligence process. FRC’s responsibilities included a review of seller property data, inventory design, data collection and processing, volume equations, etc. FRC completed additional analysis that included growth and yield modeling, harvest scheduling, and a discounted cash flow. FRC’s analysis confirmed the accuracy of the seller’s data, allowing the buyer to successfully close the transaction.