CalSTRS committed $250 million to Twin Creeks Timber, a two-year old joint venture formed by Silver Creek Capital Management to invest in timber assets alongside a timberland operator, said Michelle Mussuto, spokeswoman for the $213.7 billion pension fund.
CalSTRS' commitment brings total commitments to the joint venture to $1 billion, said Bob Ratliffe, president of Silver Creek and the co-portfolio manager of Twin Creeks, in an interview.
Separately, Twin Creeks will repurchase the 21% equity interest of the joint venture's timberland operator Weyerhaeuser Co., effective Jan. 1, and replace it with a new timberland operator, Green Diamond Resource Co.
Weyerhaeuser became the timberland operator after acquiring timber manager Plum Creek Timber Co. in 2016, which managed Twin Creeks with Silver Creek at the time.
Twin Creeks is also purchasing 100,000 acres of timberland located in the southern U.S. from Weyerhaeuser and is receiving a contribution of 21,000 acres located in the Pacific Northwest from Green Diamond. The timberland transactions are expected to close by the end of the year.
The deal will give Green Diamond exposure to timberland in the South, which the 127-year-old company has wanted for several decades, as well as an opportunity to partner with institutional capital, said Douglas Reed, president of Green Diamond, in an interview.
"I think there is a very strong case to be made for increasing cash flow returns from timber ... although this prediction has been slow to materialize," Mr. Reed said. "We believe cash flow will increase."
Factors such as housing-starts just beginning to rise again and the use of wood pellets for energy is expected to increase demand for timber, boosting timber prices, Mr. Ratliffe said.
The California State Teachers' Retirement System, West Sacramento, joins other investors in the joint venture, including the $116.5 billion Washington State Investment Board, Olympia; $73.1 billion Oregon Public Employees Retirement Fund, Tigard; $61.4 billion Alaska Permanent Fund Corp., Juneau; and the $13.6 billion Maine Public Employees Retirement System, Augusta.
The joint venture is aimed at long-term investing — 15 years with the possibility of extensions, said Mr. Ratliffe. It does not charge carried interest, he added.
