Our Clients: The Consumers of Mensurational Tools Strengths, Gaps, and Limitations Mike Clutter Vice President of North American Operations and Investments

1 Rules of Engagement First, Thanks to Reggie Fay, Dave Walters, and Donald Gagliasso for inviting me to speak today. Many say I have a tortured background – 20 years in industry and 15 in the academic sector. I have been an industry researcher, a professor, a dean, a harvest planner, and a procurement forester during different phases of my career... Can’t seem to hold a job. Also, our collective objective is to have some fun... So I will apologize ahead of time for my bad jokes and quotes

2 Who We Are: Forest Investment Associates (The Other FIA) |

3 The areas highlighted represent counties / countries in which FIA’s existing clients own timberland. As of December 31, 2014 Forest Investment Associates Founded in 1986, headquartered in Atlanta, GA with investments in 20 U.S. states and Brazil Managing 2.7 million acres valued at $5 billion 5 funds and 21 separate account relationships Employee ownership with long-term succession plan matches asset duration and aligns interests Investment experience: management team has average experience of 30 years Portfolio management emphasizes value-add, market knowledge, operational scale and low cost Organizational Snapshot | Funds Managed FIA Timber Partners$390mm (2005) Special Situation Fund$280mm (2006) FIA Timber Growth Partners $320mm (2009) FIA Timber Partners II$150mm (2011) FIA Timber Growth and Value Partners $385mm (2016) Timberland AUM (5 Funds and 21 Separate Accounts)Updated:2015_03_18 LocationAcres AL122,412 AR118,537 CA43,725 FL206,943 GA320,932 LA7,155 ME61,898 MO2,691 MS202,764 NC223,907 NH750 NY4,205 OR70,236 PA90,689 SC275,846 TX199,601 VA177,178 WA42,752 WI63,343 WV21,670 Brazil144,595 Grand Total2,401,829

4 Mensurational Tools FIA manages timberland on behalf of our investors in many regions of the U.S. and Brazil. We employ a distributed forest management model that involves FIA regional investment foresters, FIA portfolio managers, field service providers, and data service providers. We believe this business model provides flexibility, cost advantages, and local forestry knowledge. We use a wide variety of tools in the process of managing our 2.7 million acres – these tools fall into several groups. Inventory Growth and yield prediction / projection Geographical Information systems and spatial analysis Forest planning / valuation Acquisition and divestiture analysis Appraisals Obviously the groups are not mutually exclusive

5 Inventory Pretty similar in all regions – dictated by (1) the investment management agreement and (2) inventory estimates to support appraisals and stand-level forest management decisions Appraisals are dictated by the IMA – usually on an annual basis rotated between appraisers every three years Inventory data are collected about every three to six years to support the appraisal process. Some of the inventories are age driven while others are IMA driven Plot / point intensity is not as great as desired and stand average estimates are stored in our forest management information system We consider volume / weight / taper estimation to be part of our inventory system. We use Flewelling’s volume and taper models 5

6 Growth and Yield Systems These differ by who might be providing the service. Our data service provider (MBG) uses a set of models for annual updates and as a basis for some of our forest planning work. This is primarily FVS-based. We project tree lists on a stand level basis that are managed in our forest management information system Individual appraisers use a wide variety of different models when performing their DCF based valuation work We generally do not provide harvest plans to appraisers To my knowledge none of the growth and yield systems explicitly use silviculture treatments as inputs – different from the systems we employ in the south. There exist opportunities for improvement here. Most concerned about dominant height development in plantations where good competition control has been achieved through the repeated use of chemicals. Models do not reflect treatments like fertilization 6

7 Harvest Plannning / Valuation Again, based on the service provider, we use an array of forest planning / harvest scheduling models. Most are Woodstock based in the PNW and yield tables are generated from a variety of models. We find the yield table based methodology somewhat cumbersome when large numbers of silviculture treatments are part of the simulation. In the south we use a matrix generator approach that helps with regime generation and yield prediction. We prefer a model 1 formulation to a model 2 formulation in most situations if possible. It allows us to evaluate at a stand level the regime(s) chosen and provides increased spatial information in most instances The matrix generator approach also allows us increased flexibility in terminal value calculations over standard Woodstock methodology. We prefer this method when available. 7

8 Spatial Analysis / GIS capabilities We employ a wide range of tools – most are various tools offered by ESRI Our forest management information system does not link the spatial data with the tabular data in a seamless manner. We need modify how our system currently works in this regard. It is a challenge to keep GIS acres and forest information system acres consistently updated. Most spatial analysis is in ArcInfo but lots of spatial editing is done in a variety of tools across the U.S. 8

9 Appraisals We contract between 100 and 200 appraisals annually We are moving to a policy where we provide a consistent set of property data, inventory data, and silviculture history data to all appraisers. We expect the appraisers to be able to use these data in their estimation of value. I.E. we hope that appraisers can use inventory and silviculture history information in their DCF analysis – an area where we have some concerns It is interesting to compare wood flow and cash flow estimates from different appraisal firms. At times the differences can be substantial. Our view, in general, is that appraisers are fairly slow to substantially alter their growth and yield systems 9

10 Thanks

11 Questions ??