Short Takes, Region Focus, Summer 2006
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RF Summer 2006v27 7/24/06 12:52 PM Page 10 SHORTTAKES COMMON GROUND costs, and a changing global environment, IP is scaling back production in the United States. The company has announced Big Business and the its intentions to explore selling an additional 6.8 million acres of Environment Shake Hands its domestic land, expecting proceeds of up to $10 billion from its divestures. recent business deal has married a global paper company’s While the land is “of the highest conservation value,” as Aprofit-maximization goals with conservationists’ environ- The Conservation Fund’s Selzer labels it, it may not be entirely mental objectives. International Paper Co. (IP), one of the suitable for developers’ purposes. The swampiness of land world’s largest private landowners, sold 218,000 acres of forest located along rivers and estuaries can render it unsuitable for land to The Conservation Fund and The Nature Conservancy building, for example. Hence, the mixed quality of the land in what was billed as the largest conservation deal the South has for development could have decreased competition from ever seen. commercial firms interested in bidding for it. The two conservation groups will transfer much of the land As part of the agreement, IP will continue to harvest timber to respective state govern- from the sold land until native ments within several years. The plants regrow, which could be remaining land will be recycled another 20 to 50 years. This is a back into the private market in large benefit that IP likely the form of easements which would not enjoy had they sold require strict abidance to the land to developers. preservation rules. In addition, IP says it has a The $300 million deal genuine interest in environ- encompasses ecologically im- mentalism. The company has portant land stretching across prohibited the harvest of 10 states, including more than endangered forest land and 20,000 acres in Virginia and placed limits on the amount of 116,000 in the Carolinas. In a timber that it harvests from any news release, The Conservation given area. Fund’s president Larry Selzer “Coming to a compromise forecasts that the preserved Linking pre-existing conserved areas, like South Carolina’s like this hasn’t been done land will protect the wildlife Waccamaw National Wildlife Refuge (pictured here), with before and could be a model for habitat, enhance air and water the land acquired from International Paper will better benefit future transactions,” says IP waterfowl and protect water quality. quality, and provide outdoor spokeswoman Amy Sawyer. The recreation opportunities. Moreover, the deal links existing pub- U.S. Department of Agriculture projects some 44.2 million lic and private conservation areas. The groups believe that acres of privately owned U.S. forest land, particularly in the linking these forests and waterways will increase animals’ space East, will be sold by 2030. — CLAYTON BROGA for mobility and further improve water quality. The conservation groups obtained significant financial GOING ONCE backing from two private timber investment funds, Conservation Forestry, LLC, and Forest Investment West Virginia Banks Bid Associates. Public reimbursement is a possible source of fund- for State Deposits ing too. Virginia’s Department of Forestry has expressed interest in purchasing some of the land sold by IP, Brian est Virginia invested $24.8 million via online auctions in Van Eerden of The Nature Conservancy told the Virginian- Wa variety of state and local banks on May 16. The money, Pilot. Funding for the North Carolina lands could flow from any from $2.8 billion in state operational funds, went to banks of the state’s three existing environmental trust funds. North offering the best rates on six-month certificates of deposit. Carolina lawmakers also are considering a $1 billion land-bond Only banks with branches in the Mountain State were eligible issue that could make its way on the November ballot. In South to bid. Carolina, such public funding is not unprecedented, as “As everyone knows, banks are crying for deposits,” says Joe Gov. Mark Sanford recently approved the borrowing of Ellison, chief executive of the West Virginia Bankers $32 million for a separate forest acquisition. Association. “This gives smaller banks the opportunity to par- The deal is part of International Paper’s larger “transforma- ticipate and keep the money invested in West Virginia.” tion plan” in which it is shedding vast swaths of domestic land. That was the idea, according to Glenda Probst, executive Citing North America’s mature markets, rising raw material director of West Virginia’s State Board of Treasury PHOTOGRAPHY: KAREN BESHEARS PHOTOGRAPHY: 10 Region Focus • Summer 2006 RF Summer 2006v27 7/24/06 12:52 PM Page 11 Investments. The board approved $100 million for the auction program. The next auction is in August. Converging markets “Since it was our initial auction we wanted to start small Growth in house prices has slowed in the hotter markets, but is and generate competition for the funds and increase still drifting upward in their less bubbly neighbors. earnings,” she says. “From talking to other states and the 30 auction administrator we understand it takes time to get the banks informed, registered, and trained. It takes awhile to get 25 full participation so we thought $25 million was a good number.” The money is from state agencies with revenues 20 that are allowed to be invested and includes the state’s rainy day funds. The fund does not include pension money. ERCENT 15 The auction was efficient, according to Probst. “For us to P go out and meet with 10 or 15 different banks and negotiate 10 CDs would be much more time-consuming,” he says. The treasurer’s office in 2005 took over the job of managing 5 the state investments. Operational funds previously were invested outside the state. The online auction allowed the 0 05Q1 03Q3 04Q1 03Q1 05Q3 06Q1 03Q2 05Q2 03Q4 04Q3 05Q4 04Q2 state to receive the most competitive rates as well as keep 04Q4 money in the state, and boost the local economy. DC Maryland Virginia The highest bid was 5.16 percent, by United Bank Inc. of West Virginia South Carolina North Carolina Parkersburg, W.Va. The bank got $5 million. “I think that was NOTE: The chart shows year on year growth rates of house price indices for probably more than we could have negotiated on our own,” each quarter. SOURCE: Office of Federal Housing Enterprise Oversight Probst says. There is a $5 million ceiling per parent bank for each auction “so that one large bank couldn’t come in and bid on $25 million.” A closely watched indicator, the Office of Federal Housing Among smaller banks, Capon Valley of Wardensville, W.Va., Enterprise Oversight’s quarterly index, shows that median which just reached $100 million in deposits, got $500,000 for house prices in the United States increased by 12.5 percent in its 4.99 percent bid and Main Street Bank, with about $90 the first quarter of 2006 over the previous year, easing million in deposits, received $500,000 for a 5.15 percent bid. somewhat from the peak of 14.1 percent in the second quarter West Virginia is the 11th state to offer online auctions for of 2005. deposit money. South Carolina began using the online auction But the slowing has been uneven throughout the country. In process in 2000, the second state to do so behind Ohio. the Fifth District, we see a tale of two housing markets — one — BETTY JOYCE NASH that has expanded rapidly in the past three years and the other which has grown at a more modest pace. In particular, it seems ON THE HOME FRONT that the rates of appreciation in house prices between the brisker and the more moderate markets in the Fifth District are Housing Markets Cool Off starting to converge, according to Ray Owens, a regional econ- in Some States but Not in Others omist at the Richmond Fed. “Where house prices have gone up the most, the cooling has been more pronounced. But where n the once-hot housing market of Northern Virginia, a slow- prices have gone up the least, they continue to move somewhat Idown is afoot. Residences in the cities of Alexandria, higher,” Owens says. Fairfax, and Falls Church, as well as the counties of Arlington Median house prices in the rapidly growing markets of the and Fairfax, were sold for only 97 percent of the list price in District of Columbia, Maryland, and Virginia rose by 13 percent May, compared with 101 percent a year ago (though it should be to 18 percent in the second quarter of 2004, peaked at noted that those asking prices were still higher than a year ago). 22 percent to 25 percent a year later, but have since slowed to Sellers are reducing prices as people become more cautious 18 percent to 21 percent in the first quarter of 2006. While about buying a house. On average, a home for sale in this area house prices in these areas are still appreciating at high rates, lingered for 51 days on the market in May, compared with just 15 they have perceptibly cooled down. days a year ago. On the other hand, price increases of homes in North The country’s housing market has indeed begun to cool Carolina, South Carolina, and West Virginia have been drifting down like many analysts predicted. More and more homes are upward, rising by 8 percent to 11 percent in the first quarter of being offered but not enough buyers are willing to take up the 2006 from only 3 percent to 5 percent two years before.