The New Mexico State Investment Council is to redeem $50 million of its $127.7 million holding in Resource Management Services’ Evergreen US Forestland Fund.
“The investment has not performed in-line with original expectations at the time of the commitment due to the overall timberland market,” said the sovereign wealth fund’s real assets consultant Townsend Group.
In a memo to the SWF’s investment committee on June 25, Townsend said: “Remaining in the fund with a $75 million commitment allows NMSIC to maintain its advisory board seat, which will be valuable during the parcelization process. Although we still like timber as an asset class, going forward a few concerns exist regarding Evergreen.”
NMSIC spokesman Charles Wollman told Agri Investor full redemption was “not currently being contemplated. For us, this is simply rebalancing of the geographic composition of our timber holdings.”
He declined to address the referenced “parcelization process” or estimate how many redemption periods the SWF’s executives expect it will take for the $50 million redemption to be completed.
NMSIC, which has $24.6 billion in assets under management, made a $125 million commitment to the Evergreen US Forestland Fund in 2016, when fund documents suggested the vehicle would target low single-digit returns through a strategy focused on sales to sawmills and pulpmills.
According to Townsend, the fund was established in 2015 with a $3.9 billion portfolio of US South timber assets the Birmingham, Alabama-based firm had held in a private REIT called Red Mountain Timberlands.
As of the fourth quarter, total net assets within the vehicle totaled $706 million from 40 LPs, according to Townsend. In January 2017, the $18.5 billion Kansas Public Employees Retirement System committed $75 million.
NMSIC lowered its timber allocation target from a maximum of 40 percent to a maximum of 20 percent soon after its 2016 investment into Evergreen, making the $125 million commitment to RMS oversized relative to other timber commitments, according to Townsend.
NMSIC’s other timber investments include a $100 million commitment to Hancock Timberland XII in 2014; $50 million to FIA Timber Growth and Value Partners Fund in 2015; and a $35 million commitment to Brookfield Timberlands Fund V in 2013.
RMS Evergreen US Forestland Fund offers bi-annual liquidity with redemptions and deposits made during the last 10 days of December and June, according to Townsend, which added that RMS is actively fundraising.
“However, it is unknown at this time how much new capital will be committed to Evergreen as well as how much in redemptions Evergreen will receive from other investors; therefore, NMSIC’s redemption is anticipated to be paid out over multiple redemption periods,” the consultant said.
Thomas Goodrich, executive vice-president at RMS, told Agri Investor compliance concerns keep the firm from commenting directly on the structure of, or fundraising for, Evergreen US Forestland Fund.
“RMS believes that open-ended structures provide a superior timberland solution as they can provide institutions with the flexibility to increase or decrease exposure to the asset class on their terms,” Goodrich said.