Tropical Tree farms as an investment

[dougdo]

Ok, this Google Ad for Tropical Tree Farms kept showing up on my Costa Rica Travel Blog page and so I had to check it out.

It sounds like an interesting idea. You give them a chunk of cash to plant 100 trees ($3-4000 depending on the type of trees) in Costa Rica and then you get a steady income at the various harvest points (7, 10, 13, 17, 21 and 25 years). Based on one projection of the increase in tropical hardwood lumber prices, your initial investment pays off a total of $118,000. The income stream if it's real sounds pretty amazing. And they are claiming a very environmentally sensitive operation. Sounds really good. Can even do investment in your IRA.

Has anyone had any experience with this type of investment or this company? I'd love to hear feedback, experiences.

[maddythebeagle]

Sounds like a scam. If you are interested in lumber, why dont you look at a timber reit.

[BUM]

Sounds just peachy. But orange you being a little bit gullible? Don't be a sap. But then again I'd have laughed at the hula hoop.

[JPatrick]

Didn't read everything, but it sure sounds like it could be something of a "woody ponzi scheme."
These things are generally designed to stand up to initial inspection, but it's later that reality sets in.
Could be wrong of course.

[MooreBonds]

Quote:

Originally Posted by dougdo Ok, this Google Ad for Tropical Tree Farms kept showing up on my Costa Rica Travel Blog page and so I had to check it out.

Hmmm....so they had an ad on Google? Interesting....

I suppose I should be bold enough to admit that I did a Google search a while back on investing in trees, and they came up as on of the search results (not a paid search, just a free search result)...after reading it and doing a little (admittedly, not much) investigation, I sent them a little money ($3,400). So, I hope it's legit.

If it's a scam, I'll just have to give Uncle Vito a call.

I know, sometimes I have more money than sense, but I considered it equivalent to a 'junk bond' investment. Also, it's a small portion of my net worth, so if it's a scam, I can handle the hit.

[Brat]

When hubby and I went to NZ we found that someone convinced folks to invest in pine tree farms for retirement income.* There they stood in neat rows, like a corn field.* The same species and variety. They were delighted that the trees grow quickly.

We are from the northwest with sap in our veins.* We know that it is not smart to invest in only one tree species.* When I remarked that this was risky they told us that the forestry professionals from a Oregon State University told them the same thing (dah!!) and they were planting other species under their guideance.

So, if you want to invest in forestry consider the firm headquartered in Seattle, or in NZ where they are starting to figure this out.

The reason why forestry has potential is that the developing world needs wood products, and if the forrest burns down you at least have the land.

[preben]

I am sure there are scams out there but there are several legit companies doing this. Also in Thailand. It can also give further advantages such as investor-visa status and residency permits Etc.

Whether it is a good INVESTMENT is however hard to evaluate for lay men like most of us.

Cheers!

[dougdo]

Quote:

Originally Posted by Peter76 I sent them a little money ($3,400). So, I hope it's legit.*

Ah, so someone else has invested. I must admit it does occur to me that it's a ponzi scheme. But I would like to believe it and I would like to find an ethical investment for some money since I'm soon reducing my risk to the real estate market.* But I do wonder how much of their money is going to promotion which makes me wonder about the financial models.* *

Peter, have you visited your trees? Have you got any reports from them yet? I'm probably heading back to Costa Rica this winter so if I decide to do it hopefully I can check them out in person.*

Costa Rican legal protections are another question mark.

Quote:

Originally Posted by Peter76 I* know, sometimes I have more money than sense, but I considered it equivalent to a 'junk bond' investment. Also, it's a small portion of my net worth, so if it's a scam, I can handle the hit.

Another good point Peter--the people who you hear about getting burned by these schemes are the ones who sink more than they can afford to lose.

[MRGALT2U]

Quote:

Originally Posted by dougdo Ah, so someone else has invested. I must admit it does occur to me that it's a ponzi scheme. But I would like to believe it and I would like to find an ethical investment for some money since I'm soon reducing my risk to the real estate market.* But I do wonder how much of their money is going to promotion which makes me wonder about the financial models.* * Peter, have you visited your trees? Have you got any reports from them yet? I'm probably heading back to Costa Rica this winter so if I decide to do it hopefully I can check them out in person.* Costa Rican legal protections are another question mark. Another good point Peter--the people who you hear about getting burned by these schemes are the ones who sink more than they can afford to lose.

Ponzi was a smart guy. If it walks like a duck, quacks like a duck etc................

JG

[MRGALT2U]

Quote:

Originally Posted by ben I am sure there are scams out there but there are several legit companies doing this. Also in Thailand. It can also give further advantages such as investor-visa status and residency permits Etc. Whether it is a good INVESTMENT is however hard to evaluate for lay men like most of us. Cheers!

I used to be a "lay man" . Long time ago now.

JG

[BUM]

Quote:

Originally Posted by MRGALT2U I used to be a "lay man" . Long time ago now. JG

Should have invested in the wood.

[MRGALT2U]

Quote:

Originally Posted by BUM Should have invested in the wood.

I was, in a sense...

JG

[Lazarus]

Working on the railroad in Thailand?

[BUM]

I'm with Brat. Talked to a forrestry expert years ago when the oaks and maples were being chewed alive by gypsy moth's. We were planning to landscape our lot which already had 20+ white pines in a row. We wanted to complete the boarder all round. He advised against it. Mono-spiecie, he called it. If anything seriously harms those pines you'll lose everything.

Investment correllation: Its like putting all your money in one stock. And if the bugs dont get you the weather might.

[unclemick]

I'm with Brat also - I think it's like comfort food to some - born in the PacNW - got a woodlot - 20 acres in MS.

Need it like a hole in the head.

Emotionally - it's just nice to own some timber.

Longshoremen and Docters were the main investors/suckers?? when I was growing up.

[MooreBonds]

Quote:

Originally Posted by dougdo Ah, so someone else has invested. I must admit it does occur to me that it's a ponzi scheme.

Somewhere on their site they have links to a few newspaper articles about the couple that started the business back in the 80s when they retired from the US (I think they used to live in Ohio...or was it Colorado?). Of course, as I learned (the hard way ), just because a newspaper (St. Louis Post Dispatch) puts something on the front page or a tv show (Inside Edition, Good Morning America) broadcasts something doesn't count a single bit towards its authenticity.

Quote:

Originally Posted by dougdo Peter, have you visited your trees? Have you got any reports from them yet? I'm probably heading back to Costa Rica this winter so if I decide to do it hopefully I can check them out in person.

I just sent them the money a few months ago for their 2005 planting (note: they do accept credit cards. Not that it's supposed to be a sign of their legitimacy, since there was thought a while back of giving homeless people in San Francisco credit card chargers to accept handouts from people....). I haven't been down there yet. However, I was seriously thinking of sending them an order for 100 Teak trees in 2006 (I did the Supra Mixture for 2005). If I do think about the 2006 order, then I'll definitely buy a $600 plane ticket to fly down there for a weekend to inspect the place and make sure it's legit before I send them any more money.

As a side note, there are several legitimate companies in New Zealand that do pine tree co-ops, but as I dug around I found out that a US resident apparently CANNOT deduct any expenses for their tree investments in New Zealand, and they have to pay something like a 30% (?) tax on the GROSS proceeds of selling the trees. This was significant because some tree co-ops have you pay an annual fee each year of varying (relatively significant) amounts, and New Zealand requires you to post income tax returns each year even if you have no gross proceeds/income. You could take a loss equal to your annual payments, but I thought that I discovered that a US resident can't carry over the losses for that long...or something to that effect.

Yes, I did a booboo by not researching Costa Rica tax/property law...but compared to some of the one-hit wonders of my stellar investment career, it's a mere 5 on the "Stupidity Scale".

I even found a place in Hawaii that has a tree farm, but it appears that they simply copied the entire webpage of tropicaltreefarms.com and merely changed a few numbers (like the percentage fees that they collect).

--Peter

[JPatrick]

PCL is another way to have your timber. Real nice 2 year run and decent div.
Fresh earnings coming out soon.

[wildcat]

I ran some numbers on PCL's returns and compared it to the S&P and REIT index. The correlation is fairly low when compared to the S&P. However, it seemed to move largely with the REITs (probably b/c it is structured as REIT) and it doesn't seem to provide the true benefit of holding timber in a portfolio. Probably be just fine with a REIT index in that case. Timber in itself has very low to negative correlation, returns slightly lower than equities (around 12% over a 19 year time horizon) and lower std dev than equities. A nice addition but hard to find good plays on it. I am hoping that an ETF comes out that tracks the price of timber.

[LEX]

I have traveled and spent time in latin america, including Costa Rica, developing mines and related operations. If you want to invest in lumber, buy the timbered land outright, sell the timber, and then develop it as cleared pasture or replant it for horticultural or similar use, and you have control of your investment. You may also be able to apply for Costa Rican residency or citizenship with enough investment.

There are no secure legal forums for commercial dispute resolution in most of latin american. Costa Rica claims to have a stable legal system, but I would still not rely on it to give a foreign investor an even playing field before a native in a San Jose court proceeding. However, Costa Rica has a fairly stable and reliable set of laws as to the rights to own and develop land. That would be where one should focus their investing due dilligence.

[MooreBonds]

Quote:

Originally Posted by JPatrick PCL is another way to have your timber. Real nice 2 year run and decent div. Fresh earnings coming out soon.

Just DRIPed $2,000 into PCL (www.equiserve.com). They offer initial purchases as well as purchasing on-line with electronic debit from your bank account. I thought about also doing RYN, but their DRIP either didn't exist or didn't look attractive enough, so I'll stick with the Tropical Tree Farms scam investment and the PCL DRIP for now (with perhaps another $1,000 in PCL next year if I can scrounge up any between B-school tuition payments).

I didn't do any comparisons with S&P, etc. - I saw they had a fairly decent return, the current yield wasn't too shabby, and I wanted to diversify a little into some more natural resources (currently, nat'l resources are only
2.1% of my total net worth, if you include the $3,000 that I sent to Costa Rica), although I need to put a little bit more into nat'l resources. I never felt comfortable with mining stocks (probably because I saw my dad lose his shirt with a gold company he fell in love with), and will put some into the Oil ETF that is supposedly coming soon to a broker near you.

--Peter