VARDAMAN VIRTUAL FORESTRY COMPANY

WHAT’S A PPIC®

A PPIC is a Pine Plantation Investment Contractâ . It was designed for investment purposes; a typical tract of land was not shoehorned into a contract for this purpose. All PPICs contain nothing but planted loblolly pines because the species has been studied by scientists more than all others combined. Although PPICs may have many shapes and sizes, each is homogeneous throughout and very easy to analyze. Here are the characteristic features of PPICs.

A PPIC is an installment purchase contract whereby a landowner sells the right to grow and harvest timber from existing plantations or on cutover or cultivated land in exchange for payment of one lump-sum or a series of annual, fixed sums for the term of the contract. It is like the contract used when buying or selling a home or a car.

A PPIC allows owners of existing plantations to obtain cash flows long before their trees are large enough to sell.

A PPIC transfers ownership immediately so that risks of loss from casualties or price changes are transferred to the investor. The investor must make his payments no matter what happens to the trees.

A PPIC or parts of it can be bought back by the seller by payment of all investor’s costs plus interest at 10% annually plus the inflation rate as measured by the CPI-U, both compounded monthly. Most of the investor’s costs can be predicted in advance and are listed in the contract.

A PPIC provides a pure timber investment for the buyer. No funds are tied up in the land under the trees. It is also highly efficient. No funds are tied up in portions of a tract not entirely in planted pines. A PPIC must contain a minimum of 40 acres and must have access to a public roads on sites that can be logged at all times, so timber on them can be sold when bad weather prevents operations on average tracts.

A PPIC that starts the plantation from scratch usually produces incomes from a thinning at age 12 and a harvest at age 22, but the length of investment is shorter with an existing plantation.

A PPIC that starts the plantation from scratch allows the buyer to employ the most modern technology. Except for special uses of fertilizer, this is not possible with other timber investments.

A PPIC enables buyers to obtain considerable diversity. By spreading purchases over many age classes and from North Carolina to Texas and by avoiding areas with poor timber markets, unsuitable soils, and high hurricane or ice-storm incidence, they can minimize losses from local price changes and casualties.

A PPIC increases the liquidity of timber investments for all parties because it:

1) requires a land title that can be insured,

2) provides annual cash payments that have qualified tracts for loans from banks that never looked at them,

3) requires guaranteed access to a public road, and

4) enables potential timber buyers to determine volumes easily.

A PPIC is based upon PTAEDA2V, the best available computer model for predicting future annual flows of timber and cash through a loblolly pine plantation, thereby simplifying calculation of return on investment.

PINE PLANTATION MANAGEMENT COMPANY

Pine Plantation Management Company (PPMC), is the permanent link between landowner and investor. It locates the land, appraises its productivity, negotiates its purchase, prepares its management plan, and arranges tree planting if necessary. Its foresters inspect the tract each December and send reports to both parties. It receives and disburses all funds, keeps detailed accounting records, and files required reports with government agencies. It is readily available to handle requests from landowners or investors.

Pine Plantation Management Company, L.L.C., a Mississippi limited liability company, is managed by its five members as follows:
James M. Vardaman, Jackson, Mississippi, aged 78, is Member-Manager. He is Chairman of the Board and Founder, James M. Vardaman & Co., Inc., Forest Management Specialists. JMV&CO, founded in 1951, is the largest independent forest-management company in the Southeast with 18 offices and 70 foresters in states from North Carolina to Texas. It maintains a computerized data base covering all aspects of timber management and sales in the Southeast, including a list of corporate and individual landowners, daily variations in timber prices, timber buyers and profiles, location of all processing facilities, and names, addresses, and specialties of industry sub-contractors. To maintain contact with the landowning and professional base it serves, since 1974 JMV&CO has published "Vardaman's Green Sheet", a quarterly, in-house newsletter with 125,000 subscribers. Vardaman is the author of "How To Make Money Growing Trees," (John Wiley & Sons, New York).
Glenn A. Chancellor, Houston, Texas, aged 59, recently retired Vice President of Forests, Temple Inland Inc. Chancellor served 36 years with this company and, as Group VP, had full responsibility for all forest management activities on 2,100,000 acres of southern timberland and the annual delivery of 4,500,000 cords of wood fiber. He is past chairman of Texas Forestry Association and American Pulpwood Association and a Fellow of the Society of American Foresters.
Ricky G. Goforth, Meridian, Mississippi , aged 45, Executive Committee Member, Vice President, and District Manager of JMV&CO.

Lenward E. McCombs, Jr., Hattiesburg, Mississippi, aged 42, Vice President, and District Manager of JMV&CO.

Clay L. Bartlett, Jackson, Mississippi, aged 64, Investor.

Vardaman is now a fulltime employee of JMV&CO. As PPMC's workload increases, he will gradually become its fulltime employee. The other Members will serve in their fields of expertise as PPMC requires and will be responsible for choosing successors if Vardaman or other members become unable to serve.