Practice/Industry Group Overview
Known for our innovative work, Sutherland is the preeminent law firm for businesses and investors active in the timber and forest products industries.
Since our inception nearly 90 years ago, Sutherland has been a legal innovator in the timber and forest products industries. We helped the timberland investment management (TIMO) industry get off the ground more than 30 years ago by securing the first in a series of IRS private letter rulings that opened the door for pension funds, university endowments and other tax-exempt organizations to invest substantial capital in timberlands. In 1999, we obtained one of the first rulings from the IRS that confirmed our analysis that timberlands are appropriate assets for real estate investment trusts (REIT) and that harvesting timber produces qualifying REIT income.
These developments contributed to the migration of commercial timberland ownership from the large forest products companies to institutional investors that has occurred over the past two decades. We were at the forefront of this transformation, representing clients in the largest timberland sales in North America, including the purchasing consortium in the largest private land transaction in U.S. history. As institutional investor interest in timberlands grew, Sutherland assisted clients in the formation and operation of private investment funds that acquire domestic and offshore timberlands, particularly in Latin America, Asia and Oceania. We are also leaders in emerging areas such as conservation easements, mitigation banking, biomass and carbon credits.
Our pioneering practice group is multidisciplinary, including corporate, environmental, finance, real estate and tax practitioners, and takes great pride in providing comprehensive solutions to allow our clients to achieve their business objectives.
Big deals. On behalf of our clients, we have negotiated and closed some of the largest timber deals in the country, in terms of both dollar amount and acreage.
Overseeing large teams. We participate in highly complicated deals that involve numerous players, and we foster a collaborative working environment.
International work. Our scope of experience stretches around the world from Brazil to China, with stops in Canada, Belize, Costa Rica, Fiji and other countries.
Client focused and directed. We go beyond legal issues to partner with our clients to achieve their objectives and resolve their business issues.
Customized approaches. We help fund managers and sponsors create and operate highly specialized timberland investment funds for foreign investors, environmental investors, high net worth individuals and others.
Depth. With more than 400 attorneys, Sutherland provides the full range of services our clients need for timber and natural resources deals, including structuring, securities, tax, financing and real estate aspects.
Nuts and Bolts
Sutherland provides comprehensive services to clients regarding every facet of timber and natural resources:
- Foreign experience
- Clients regularly call upon us to advise on investments in countries throughout the world, including Canada, Australia, Argentina, Brazil, Panama, Venezuela, Chile, Belize, New Zealand, Fiji and China. We have assisted the largest timberland concession holder in Guyana in connection with a dispute with the government over the payment of royalties and other fees.
- An essential part of our approach to major timber transactions is recognizing that timber is a tax-favored asset. We find creative solutions to assure that gains from dispositions of timber will be offset by the maximum allowance for depletion, that taxable investors will receive the benefit of taxation at capital gains rates and that gains to tax-exempt investors will not be treated as unrelated business taxable income. We also work with sellers of timber properties to devise methods to defer recognition of capital gain.
- Pass-through vehicles
- In recent years, we have devised acceptable pass-through vehicles that can provide the benefit of capital gains treatment to the investor without burdening the investment with a corporate level tax, using both REIT and limited partnership or limited liability company structures.
- Environmental issues
- We are very sensitive to environmental laws and regulations that have a substantial impact on timber operations, particularly with respect to storm water runoff and “point sources” of water pollution under the Clean Water Act and conservation easements and mitigation banking.
- Cutting contracts and supply agreements
- We draft and negotiate timber cutting agreements, some extending for as long as three rotations, to provide continued capital gain treatment to the timber owner, with assured access but off-balance sheet treatment to the forest products company buyer. We devise cutting agreements that can provide either immediate cash to the timber owner or an assured cash flow over a period of years.
- Securities law compliance
- We advise TIMO clients in their compliance with federal and state securities laws, including the Investment Advisers Act of 1940 and the Dodd-Frank Wall Street Reform and Consumer Protection Act. We advise clients in evaluating whether to register as an investment adviser under the Advisers Act and, if the decision is made to register, assist in the development of all required compliance policies and codes of conduct. We also counsel clients, in consultation with our Securities Law Enforcement team, in responding to inquiries made by the Securities and Exchange Commission in connection with routine “books and records” examinations or other investigations.
- Fund formation
- We regularly advise in structuring, forming and operating commingled timberland investment funds that acquire domestic and foreign timberlands and timber rights, including funds that invest in Latin America and the People’s Republic of China. We are well-versed in the securities law and income tax issues that arise in connection with timberland investment funds and have particular expertise in structuring funds for foreign investors, tax-exempt investors and conservation/environmental investors. We also advise clients that invest in such commingled timberland investment funds, particularly non-U.S. investors.
- Mergers and acquisitions
- We represent purchasers and sellers of operating businesses that hold timberlands or operate related manufacturing facilities such as sawmills and pulp mills. These transactions implicate the full range of legal issues, including employment, environmental and tax matters. Similarly, we advise clients in the formation of joint ventures to own and operate timberlands, particularly in jurisdictions, such as Brazil, that have legal impediments to foreign control of timberland or other rural property.
- Carbon credits
- We are on the leading edge of advising our clients in the development, marketing and sale of carbon credits derived from their timberlands.
As a leader in the timber and forest products sector, Sutherland is uniquely positioned to help clients achieve their timber investment objectives.
Sutherland represents consortium in $5 billion timberland purchase.
Sutherland represented a consortium of purchasers in acquiring the bulk of timberlands located in 14 states sold by International Paper Company in 2006 for installment notes and cash in excess of $5 billion. We designed the bid package and negotiated the purchase and sale agreement and fiber supply agreements for the deal.
Sutherland advises on sale of nearly 2 million acres of timberland.
Sutherland represented a timber investment management group in its sale of approximately 1.9 million acres of timberland—the size of Delaware and Rhode Island combined—in two dispositions. The properties were spread over Washington, Oregon, Idaho, Louisiana and Minnesota. This brings the total value of transactions handled by Sutherland on behalf of timber clients since 2005 to more than $12 billion.
Sutherland represents CoBank in $212 million, 24-county financing.
Sutherland represented CoBank, ACB in a $212 million mortgage financing to affiliates of a real estate investment trust, secured by timberland.