PDER - Pardee Resources

[oddballstocks]

I wonder if the question around timber is twofold:  a) is the timberland actually worth the valuation that was done last year;  b) if it is, what is the company doing to realize that value? 

 

I think it's more the latter.  The land is only worth that valuation to Pardee if it's sold.  Sitting on the books it earns a horrible return.  And they haven't shown any indication of wanting to realize the value.  If they actually sold some of that land off at values anywhere near the appraisal they might get more credibility in the stock price.

 

I asked something similar at the meeting.  The answer is this, some (a lot?) of their mineral rights on on their timber land.  They are in essence double dipping on some of the assets.  They've redeveloped a number of parcels in Virginia for home development.  I don't know if those pieces have been sold or not.  They showed pictures of the redevelopment at the meeting.

 

I'm not sure why they'd sell it though?  This board is funny.  Everyone is in praise of these buy and hold and compound forever investments (like the timber), yet if a company like Pardee owns one investors want them to sell it.

[TwoCitiesCapital]

I wonder if the question around timber is twofold:  a) is the timberland actually worth the valuation that was done last year;  b) if it is, what is the company doing to realize that value? 

 

I think it's more the latter.  The land is only worth that valuation to Pardee if it's sold.  Sitting on the books it earns a horrible return.  And they haven't shown any indication of wanting to realize the value.  If they actually sold some of that land off at values anywhere near the appraisal they might get more credibility in the stock price.

 

I asked something similar at the meeting.  The answer is this, some (a lot?) of their mineral rights on on their timber land.  They are in essence double dipping on some of the assets.  They've redeveloped a number of parcels in Virginia for home development.  I don't know if those pieces have been sold or not.  They showed pictures of the redevelopment at the meeting.

 

I'm not sure why they'd sell it though?  This board is funny.  Everyone is in praise of these buy and hold and compound forever investments (like the timber), yet if a company like Pardee owns one investors want them to sell it.

 

+1

 

Would be adding at these prices if Altius wasn't competing for my funds.

[mjohn707]

Has anyone actually been able to purchase shares at these prices?  It seems like my buy orders just sit around until they expire

[TwoCitiesCapital]

Has anyone actually been able to purchase shares at these prices?  It seems like my buy orders just sit around until they expire

 

That's how it's been for me at any price. Even back when it was at $260. It's thinly traded. You need to sit on limit buy orders for days to get it filled in any appreciable amount.

[mjohn707]

Has anyone actually been able to purchase shares at these prices?  It seems like my buy orders just sit around until they expire

 

That's how it's been for me at any price. Even back when it was at $260. It's thinly traded. You need to sit on limit buy orders for days to get it filled in any appreciable amount.

 

I guess I'll just have to be patient and keep putting in limit orders each morning

[TwoCitiesCapital]

http://www.prnewswire.com/news-releases/pardee-resources-company-curtin-sawmill-sale-300190528.html

Sold sawmill and some timber rights

 

http://www.prnewswire.com/news-releases/pardee-resources-company-restructuring-300193132.html

Restructuring to save 1.4M per year.

[60North Investments]

More news, bought solar stuff for about $8.4m, out of which $7.7m with credits and rest with cash. Don't really know how these deals work from returns perspective, probably a lot of the benefits come still in the form of tax credits/benefits.

 

http://seekingalpha.com/pr/15714776-pardee-resources-company-solar-acquisitions

[oddballstocks]

More news, bought solar stuff for about $8.4m, out of which $7.7m with credits and rest with cash. Don't really know how these deals work from returns perspective, probably a lot of the benefits come still in the form of tax credits/benefits.

 

http://seekingalpha.com/pr/15714776-pardee-resources-company-solar-acquisitions

 

They said at the meeting last year almost all of the returns are from the tax credits.  I don't remember the number, but it was 15-20% IRR type returns from the credits.  They said all credits can be used immediately. 

 

Management said the economics of solar don't make sense without the credits.  With the credits the returns are excellent.  I believe they're one of the few operators who are looking at this from a financial vs operational perspective.

[bizaro86]

I wonder how much taxable income they'll have with the decline in coal and natural gas income though?

 

Interesting to see them really start to use their credit facility. I think on balance that's probably a good thing. Their AZ solar investments were partially paid for with a non-recourse loan, so seeing them fully fund using their LOC is interesting. I'd be pretty happy if the power division can take over the role coal used to have, of providing relatively high immediate cash-flows, while the timber/land division builds value for the future.

[writser]

Is it just me or is this starting to trade at ridiculous levels? Today some shares traded at 135, implying a market cap of ~93m. As far as I can see the timber assets by themselves should be worth roughly 1.5x more so you get the rest for free (ignoring corporate overhead). Sure, fossil fuels aren't exactly booming business right now but you don't pay anything for these divisions. And as far as I can see the royalty business model should be relatively crisis-proof. I bought more the past few weeks. What am I missing?

[60North Investments]

Don't know what you might be missing writser, but I would think that the timber assets aren't and won't be valued by the market at $150m or so, the level they were appraised at in 2014 + the lots they've bought since (if I haven't missed any purchases). Since the timber doesn't really earn a great ROE and doesn't bring in much sales or earnings (unless lots are sold more often), so I guess the market doesn't give it much love. It is a somewhat difficult thing to value, as it surely grows in value every year at least by the amount of timber growth. But are shareholders going to see that $150m value being realized in some sense in some year? Or will they sell occasional lots to some development projects, harvest, and get something like a mid-single digit return on the timber assets? Not sure it'd be valued at 1x appraisal value by the market if it means the asset would then be giving a mid-single digit return.

 

Not sure how much sense the above made. Also think it's cheap now, and could become still cheaper. If I have excess cash at some point I might add as the coal and O&G assets have value in the tens of millions.

[TwoCitiesCapital]

Is it just me or is this starting to trade at ridiculous levels? Today some shares traded at 135, implying a market cap of ~93m. As far as I can see the timber assets by themselves should be worth roughly 1.5x more so you get the rest for free (ignoring corporate overhead). Sure, fossil fuels aren't exactly booming business right now but you don't pay anything for these divisions. And as far as I can see the royalty business model should be relatively crisis-proof. I bought more the past few weeks. What am I missing?

 

All commodity companies are basically trading at distressed level - even those not in distress. I'd appreciate you not pointing it out. It's hard enough to get shares ;)

 

Happy Hunting!

[TwoCitiesCapital]

Also, I'd add, that the appraisal suggests that the hardwood timberland was worth just under $1,000 per acre. Their recent sale valued the timber in WV at about $410 per acre.

 

Pardee Resources Company (OTC: PDER) announced today that its subsidiary, Pardee & Curtin Realty LLC, recently closed on the sale of 39,945 acres of surface and timber located in Kanawha and Fayette Counties, West Virginia to Quercus West Virginia, LLC for $16,500,000.

 

So, either what they sold was lower quality, less mature timberland OR the market price available for the remainder of the hardwood assets is not near the appraisal price. If anyone has any insight to the specific quality of this timberland relative to the remainder of their holdings it would be appreciated.

 

Also, I'd appreciate any feedback people may have on how these appraisal processes are done. Is it as simple as taken the expected board ft. of timber available at the expected time of maturity/harvesting multiplied by current timber prices and then discounted back to today at some reasonable rate?

[bizaro86]

Also, I'd add, that the appraisal suggests that the hardwood timberland was worth just under $1,000 per acre. Their recent sale valued the timber in WV at about $410 per acre.

 

Pardee Resources Company (OTC: PDER) announced today that its subsidiary, Pardee & Curtin Realty LLC, recently closed on the sale of 39,945 acres of surface and timber located in Kanawha and Fayette Counties, West Virginia to Quercus West Virginia, LLC for $16,500,000.

 

So, either what they sold was lower quality, less mature timberland OR the market price available for the remainder of the hardwood assets is not near the appraisal price. If anyone has any insight to the specific quality of this timberland relative to the remainder of their holdings it would be appreciated.

 

Also, I'd appreciate any feedback people may have on how these appraisal processes are done. Is it as simple as taken the expected board ft. of timber available at the expected time of maturity/harvesting multiplied by current timber prices and then discounted back to today at some reasonable rate?

 

I don't have any insight to that land specifically. Maybe they're high-grading the portfolio? That is a lot less per acre than the land they just purchased: http://www.fauquiernow.com/index.php/fauquier_news/article/fauquier-southern-fauquier-timber-land-brings-4.3-million-2015

 

The lands they bought are softwood though. It looks to me like they are more intensively managed, so maybe will produce more regular income?

[TwoCitiesCapital]

Also, I'd add, that the appraisal suggests that the hardwood timberland was worth just under $1,000 per acre. Their recent sale valued the timber in WV at about $410 per acre.

 

Pardee Resources Company (OTC: PDER) announced today that its subsidiary, Pardee & Curtin Realty LLC, recently closed on the sale of 39,945 acres of surface and timber located in Kanawha and Fayette Counties, West Virginia to Quercus West Virginia, LLC for $16,500,000.

 

So, either what they sold was lower quality, less mature timberland OR the market price available for the remainder of the hardwood assets is not near the appraisal price. If anyone has any insight to the specific quality of this timberland relative to the remainder of their holdings it would be appreciated.

 

Also, I'd appreciate any feedback people may have on how these appraisal processes are done. Is it as simple as taken the expected board ft. of timber available at the expected time of maturity/harvesting multiplied by current timber prices and then discounted back to today at some reasonable rate?

 

I don't have any insight to that land specifically. Maybe they're high-grading the portfolio? That is a lot less per acre than the land they just purchased: http://www.fauquiernow.com/index.php/fauquier_news/article/fauquier-southern-fauquier-timber-land-brings-4.3-million-2015

 

The lands they bought are softwood though. It looks to me like they are more intensively managed, so maybe will produce more regular income?

 

Softwoods grow faster and can be harvested more quickly and have more uses which is likely the premium on the softwoods. I noticed that as well, but am more concerned with the discrepancy of the sale price vs the appraised price for the hardwoods as that is the bulk of the value - though with recent sales/acquisitions, softwood is quickly growing to be a significant portion of timber assets.

[DTEJD1997]

Also, I'd add, that the appraisal suggests that the hardwood timberland was worth just under $1,000 per acre. Their recent sale valued the timber in WV at about $410 per acre.

 

Pardee Resources Company (OTC: PDER) announced today that its subsidiary, Pardee & Curtin Realty LLC, recently closed on the sale of 39,945 acres of surface and timber located in Kanawha and Fayette Counties, West Virginia to Quercus West Virginia, LLC for $16,500,000.

 

So, either what they sold was lower quality, less mature timberland OR the market price available for the remainder of the hardwood assets is not near the appraisal price. If anyone has any insight to the specific quality of this timberland relative to the remainder of their holdings it would be appreciated.

 

Also, I'd appreciate any feedback people may have on how these appraisal processes are done. Is it as simple as taken the expected board ft. of timber available at the expected time of maturity/harvesting multiplied by current timber prices and then discounted back to today at some reasonable rate?

 

Hey all:

 

I've been traveling through WV a lot lately and have noticed something about the state....

 

A lot of the land is low quality or not easily developed, as the state is very hilly.  Perhaps PDER's land was bad terrain for ANYTHING other than timber growing? (can NEVER be developed?)  Thus, the low realized price?

[oddballstocks]

Also, I'd add, that the appraisal suggests that the hardwood timberland was worth just under $1,000 per acre. Their recent sale valued the timber in WV at about $410 per acre.

 

Pardee Resources Company (OTC: PDER) announced today that its subsidiary, Pardee & Curtin Realty LLC, recently closed on the sale of 39,945 acres of surface and timber located in Kanawha and Fayette Counties, West Virginia to Quercus West Virginia, LLC for $16,500,000.

 

So, either what they sold was lower quality, less mature timberland OR the market price available for the remainder of the hardwood assets is not near the appraisal price. If anyone has any insight to the specific quality of this timberland relative to the remainder of their holdings it would be appreciated.

 

Also, I'd appreciate any feedback people may have on how these appraisal processes are done. Is it as simple as taken the expected board ft. of timber available at the expected time of maturity/harvesting multiplied by current timber prices and then discounted back to today at some reasonable rate?

 

Hey all:

 

I've been traveling through WV a lot lately and have noticed something about the state....

 

A lot of the land is low quality or not easily developed, as the state is very hilly.  Perhaps PDER's land was bad terrain for ANYTHING other than timber growing? (can NEVER be developed?)  Thus, the low realized price?

 

I live in Western PA, about two hours north of Pardee's land off 19 and 79.  I have a season pass to Snowshoe, which is in the heart of WV.  We camp down there a lot as well, I'm very familiar with the state, terrain, and Pardee's tract.  If you travel from Pittsburgh to North/South Carolina and take the shortcut on 19 the majority of the trip will be through Pardee land.

 

I have a few thoughts on this.  I don't think development is really the endgame.  There isn't much of any activity down in that part of the state.  Could it be developed?  Absolutely.  Come spend some time in Pittsburgh and you'll see how even the oddest lots on a hillside end up with houses or buildings on them.  Where there's a will there's a way.

 

The problem isn't the ability to develop the land or sell it for higher use, there just isn't a higher use there.  I believe some of their lots in VA are near a city and can be resold.  But the majority of their land is indistinguishable from the Monongahela National Forest.  The value is really the resources, timber, coal, gas.

 

An impression someone driving through WV might have is that the land is worthless.  It's a mostly empty state with a lot of empty land.  I've looked on and off for good deals on land in the northern half of the state.  Impressions and reality don't match up.  Land is cheap if you want a plot with a trailer in a city, or near a city.  Areas near Huntington are cheaper.  If you want something in the mountains, regardless of how remote it is, and how undeveloped it is there's a premium to pay. 

 

Surf Charleston or Morgantown craigslist for a bit on raw land.  As an example, here's 99 acres outside Morgantown.  You get gas rights on 18, $450k: http://morgantown.craigslist.org/reo/5350144071.html

 

Right now the company has a market cap of about $110m (roughly).  They have 154,000 acres of land, just the land alone is being valued at $710 an acre.  I think a strong argument could be made that this is extremely undervalued on the land alone, even if they never pull another dime of revenue from the resources.  Try to find land in WV and VA for $710 an acre.  If you can I'd be a buyer today.  An acre of land with standing timber is worth about $1500 if you harvest the entire acre.  If you were to clearcut Pardee's land and sell the timber they'd realize close to double their market cap (assuming some expense).

 

The argument to be made here is they make their money from their land, so you can't double count it.  It's either valued on the land, or valued on their revenue stream.  On a land basis they have something worth double, or potentially a lot more and it's costless.  The resource extraction is paying the carry cost on the land.  In a good market you have those revenue streams to drive earnings.

 

I don't think it's unrealistic to say the downside of this is the land's liquidation value, and the upside is what they could earn in a good market.  I think the price is crazy right now, and I purchased more shares yesterday.

[oddballstocks]

Found 850 acres for $860k.  Can probably deal and get this down to around $1k an acre: http://www.landwatch.com/Lincoln-County-West-Virginia-Land-for-sale/pid/323273410

 

That's still ~30% higher than the current market cap.

[TwoCitiesCapital]

Also, I'd add, that the appraisal suggests that the hardwood timberland was worth just under $1,000 per acre. Their recent sale valued the timber in WV at about $410 per acre.

 

Pardee Resources Company (OTC: PDER) announced today that its subsidiary, Pardee & Curtin Realty LLC, recently closed on the sale of 39,945 acres of surface and timber located in Kanawha and Fayette Counties, West Virginia to Quercus West Virginia, LLC for $16,500,000.

 

So, either what they sold was lower quality, less mature timberland OR the market price available for the remainder of the hardwood assets is not near the appraisal price. If anyone has any insight to the specific quality of this timberland relative to the remainder of their holdings it would be appreciated.

 

Also, I'd appreciate any feedback people may have on how these appraisal processes are done. Is it as simple as taken the expected board ft. of timber available at the expected time of maturity/harvesting multiplied by current timber prices and then discounted back to today at some reasonable rate?

 

Hey all:

 

I've been traveling through WV a lot lately and have noticed something about the state....

 

A lot of the land is low quality or not easily developed, as the state is very hilly.  Perhaps PDER's land was bad terrain for ANYTHING other than timber growing? (can NEVER be developed?)  Thus, the low realized price?

 

I live in Western PA, about two hours north of Pardee's land off 19 and 79.  I have a season pass to Snowshoe, which is in the heart of WV.  We camp down there a lot as well, I'm very familiar with the state, terrain, and Pardee's tract.  If you travel from Pittsburgh to North/South Carolina and take the shortcut on 19 the majority of the trip will be through Pardee land.

 

I have a few thoughts on this.  I don't think development is really the endgame.  There isn't much of any activity down in that part of the state.  Could it be developed?  Absolutely.  Come spend some time in Pittsburgh and you'll see how even the oddest lots on a hillside end up with houses or buildings on them.  Where there's a will there's a way.

 

The problem isn't the ability to develop the land or sell it for higher use, there just isn't a higher use there.  I believe some of their lots in VA are near a city and can be resold.  But the majority of their land is indistinguishable from the Monongahela National Forest.  The value is really the resources, timber, coal, gas.

 

An impression someone driving through WV might have is that the land is worthless.  It's a mostly empty state with a lot of empty land.  I've looked on and off for good deals on land in the northern half of the state.  Impressions and reality don't match up.  Land is cheap if you want a plot with a trailer in a city, or near a city.  Areas near Huntington are cheaper.  If you want something in the mountains, regardless of how remote it is, and how undeveloped it is there's a premium to pay. 

 

Surf Charleston or Morgantown craigslist for a bit on raw land.  As an example, here's 99 acres outside Morgantown.  You get gas rights on 18, $450k: http://morgantown.craigslist.org/reo/5350144071.html

 

Right now the company has a market cap of about $110m (roughly).  They have 154,000 acres of land, just the land alone is being valued at $710 an acre.  I think a strong argument could be made that this is extremely undervalued on the land alone, even if they never pull another dime of revenue from the resources.  Try to find land in WV and VA for $710 an acre.  If you can I'd be a buyer today.  An acre of land with standing timber is worth about $1500 if you harvest the entire acre.  If you were to clearcut Pardee's land and sell the timber they'd realize close to double their market cap (assuming some expense).

 

The argument to be made here is they make their money from their land, so you can't double count it.  It's either valued on the land, or valued on their revenue stream.  On a land basis they have something worth double, or potentially a lot more and it's costless.  The resource extraction is paying the carry cost on the land.  In a good market you have those revenue streams to drive earnings.

 

I don't think it's unrealistic to say the downside of this is the land's liquidation value, and the upside is what they could earn in a good market.  I think the price is crazy right now, and I purchased more shares yesterday.

 

Thanks for the additional color Nate! I always appreciated your input on these kinds of companies.

 

Just a quick question for you regarding your valuation of their land at $710 per acre - how does that sync with their recent sale at $410/acre back in 2013? I'm no resource expert and the price I see is generally a good one, but I'm just trying to temper my expectations with realized sales. I get that 2013 isn't 2015 so the sale is a little dated, but I also know that land doesn't appreciate that fast even if the trees growing on it are appreciating in value. Hardwood timber prices also haven't risen substantially from 2013 either. So was this just a botched sale where Pardee didn't get a particularly good deal because they didn't understand the value of the land (and hence the appraisal) or is there some other reason for the the 75-100% premium that you and the appraisal are putting on their current landholdings?

 

[Tim Eriksen]

 

Thanks for the additional color Nate! I always appreciated your input on these kinds of companies.

 

Just a quick question for you regarding your valuation of their land at $710 per acre - how does that sync with their recent sale at $410/acre back in 2013? I'm no resource expert and the price I see is generally a good one, but I'm just trying to temper my expectations with realized sales. I get that 2013 isn't 2015 so the sale is a little dated, but I also know that land doesn't appreciate that fast even if the trees growing on it are appreciating in value. Hardwood timber prices also haven't risen substantially from 2013 either. So was this just a botched sale where Pardee didn't get a particularly good deal because they didn't understand the value of the land (and hence the appraisal) or is there some other reason for the the 75-100% premium that you and the appraisal are putting on their current landholdings?

 

The 2014 annual meeting notes give more color.  PDER retained coal oil and natural gas rights after the sale.  The property was acquired in 2003 primarily for the coal oil and natural gas.  The land portion was carried on the books for $8 million, and sold for $16.5 million.  In 2013 they earned $8.1 million in non-timber revenues from the Powellton property.  PDER decided to sell the surface and timer because the property has a very steep grade, difficult access, very high harvesting costs, and lacks the potential to contribute meaningfully to future timber cash flows.    Their historical record on acquisitions is outstanding, even though the timing of the recent oil and gas purchase has so far been bad. sinc eit is long lived access they will probably still come out okay.

[TwoCitiesCapital]

 

Thanks for the additional color Nate! I always appreciated your input on these kinds of companies.

 

Just a quick question for you regarding your valuation of their land at $710 per acre - how does that sync with their recent sale at $410/acre back in 2013? I'm no resource expert and the price I see is generally a good one, but I'm just trying to temper my expectations with realized sales. I get that 2013 isn't 2015 so the sale is a little dated, but I also know that land doesn't appreciate that fast even if the trees growing on it are appreciating in value. Hardwood timber prices also haven't risen substantially from 2013 either. So was this just a botched sale where Pardee didn't get a particularly good deal because they didn't understand the value of the land (and hence the appraisal) or is there some other reason for the the 75-100% premium that you and the appraisal are putting on their current landholdings?

 

The 2014 annual meeting notes give more color.  PDER retained coal oil and natural gas rights after the sale.  The property was acquired in 2003 primarily for the coal oil and natural gas.  The land portion was carried on the books for $8 million, and sold for $16.5 million.  In 2013 they earned $8.1 million in non-timber revenues from the Powellton property.  PDER decided to sell the surface and timer because the property has a very steep grade, difficult access, very high harvesting costs, and lacks the potential to contribute meaningfully to future timber cash flows.    Their historical record on acquisitions is outstanding, even though the timing of the recent oil and gas purchase has so far been bad. sinc eit is long lived access they will probably still come out okay.

 

Thanks!

[NeverLoseMoney]

Talking about bad timing: their tender offer in May-June 2014 at $265.50 also looks bad in hindsight. This week they announced solar investments of $8.4mn. Wouldn't it make more sense to just buy back shares at these prices?

[Hielko]

Talking about bad timing: their tender offer in May-June 2014 at $265.50 also looks bad in hindsight. This week they announced solar investments of $8.4mn. Wouldn't it make more sense to just buy back shares at these prices?

Value isn't static. The company is now simply also worth a lot less since they have (or had depending on how you see it) significant gas and coal assets. They relevant question is whether or not the company is now trading at a bigger discount to intrinsic value than it was then.

[wachtwoord]

I managed to pick up a full position today @ $150 and am pretty happy about that :)

[60North Investments]

Q4 out, haven't thought much about it yet. @160 it's still real cheap if you believe timber is worth +$100m. Will probably buy and forget some after raising a little more cash from some sales.