CONCERNED POPE RESOURCES UNITHOLDERS Investor Presentation 2019
NEED FOR CHANGE AT POPE • Poor unit price performance • CEO compensation not tied to performance • Almost no open market unit purchase by CEO • Failure (so far) to convert to REIT
POOR UNIT PRICE PERFORMANCE • Under Mr. Ringo’s five - year tenure as CEO, the company’s unit price performed poorly. • Historically, most of the unit price improvement happened during the former CEO’s tenure. THOMAS M. RINGO - CEO SINCE JUNE 01, 2014 DAVID L. NUNES – FORMER CEO (FROM JANUARY 2002 TO MAY 31, 2014) 80 90 70 80 60 70 50 60 40 50 40 30 30 20 20 10 10 0 0 *Unadjusted unit price 01-JUL-14 01-JUL-15 01-JUL-16 01-JUL-17 01-JUL-18 3 Concerned Pope Resources Unitholders | Investor Presentation 2019
BASE SALARY 450 400 350 300 250 200 150 100 50 0 2014 2015 2016 2017 2018 CEO COMPENSATION (In $ thousands) 2014 2015 2016 2017 2018 NOT TIED TO Base salary 225 325 366 395 400 PERFORMANCE Growth 13% 8% 1% Concerned Pope Resources Unitholders | Investor Presentation 2019 4
ALMOST NO OPEN MARKET UNIT PURCHASES BY CEO Total number of units owned by Mr. Ringo 29,868 Open market purchase 7% Exercise of Options 30% Vesting of restricted units 63% Concerned Pope Resources Unitholders | Investor Presentation 2019 5
Failure to convert Pope Resources to a C-Corp / REIT
FAILURE TO CONVERT POPE RESOURCES TO A C-CORP / REIT • The vast majority of investors will not consider investing in an MLP structure • Significant number of MLPs are converting to corporations because the MLP structure has turned out to be a poor source of growth capital. • Pope Resources Board has so far been unwilling to convert to REIT. Concerned Pope Resources Unitholders | Investor Presentation 2019 7
INVESTORS DISLIKE THE TAX COMPLICATIONS OF POPE'S MLP STRUCTURE Investors face tax compliance challenges when investors own MLPs. • Compared to the simpler 1099 form, the K-1 is a complicated form. • Investors that own MLPs often are required to file tax returns in multiple states. • MLP income is taxed in retirement account: When a retirement account earns active business income, it is considered unrelated business income and is subject to its own tax (UBIT tax). Income from MLP distribution is treated as UBIT and is taxable. According to a Forbes article, the maximum tax rate of 39.6% is triggered at just $12,300 from MLP income. Concerned Pope Resources Unitholders | Investor Presentation 2019 8
POPE’S MLP MODEL SCARES INVESTOR WITH TAX COMPLICATION A Forbes article highlights the tax complications in MLP for retirement Accounts. Don’t Run Afoul Of Tax Rules With MLPs In Retirement Accounts However, using retirement funds to make MLP investments can lead to some very unpleasant tax consequences, which generally makes MLP investments somewhat unattractive for retirement account holders because of the high UBTI tax involved when the rules are triggered… The result is that each year many retirement account holders receive an unpleasant surprise in the mail when they receive a letter and completed IRS Form 990-T from their IRA custodian disclosing the UBTI tax bill due on the MLP investment… Triggering the UBTI tax is no laughing matter. The maximum tax rate of 39.6% is triggered at just $12,300. However, the UBTI/UBIT tax rules are not triggered if less than $1,000 of income is generated by the investment at issue… retirement account holders beware when thinking about an MLP investment for your retirement account….. https://www.forbes.com/sites/greatspeculations/2015/11/17/dont-run-afould-of-tax-rules-with-mlps-in-retirement-accounts/#57efd0873f77 Concerned Pope Resources Unitholders | Investor Presentation 2019 9
POPE’S MLP MODEL SCARES INVESTOR WITH TAX COMPLICATION Articles that explains the tax complications faced by US investors and Canadian investors who invest in US MLP. Beware the tax tribulations of U.S. MLPs Tax traps await master limited partnership investors For Canadian investors, the tax treatment is quite different. Investors are now realizing that those tax- free “dividends” are treated as a reduction in their cost Canadian investors in an MLP with U.S. assets are generally basis. Investors holding an MLP long enough have seen their cost basis significantly reduced and considered to be engaged in a business in the United States. nearly eliminated. What makes that reduced basis even worse is the tax treatment of the gain upon The result is that the MLP will withhold 39.6 per cent tax on sale. any distributions paid to non-resident, non-U.S. citizens. The sale of an MLP triggers a recapture of those deductions that allowed the distributions to be tax- "That alone should give a Canadian taxpayer pause before free in the first place. Instead of a capital gain upon the sale of the MLP, that recaptured amount is investing directly in an MLP," says Jamie Golombek, managing taxed as ordinary income, and the cost can be significant. In extreme cases, the entire gain might be director, tax and estate planning, with CIBC Wealth Strategies taxed as ordinary income. Group. The trickiest part of this is that the recapture amount is unknown by the investor until it's reported on https://www.theglobeandmail.com/globe-investor/investor- the K-1 issued in the year the MLP is sold. In general, the bigger the difference between the annual education/beware-the-tax-tribulations-of-us- distributions and the income on the K-1, the more recapture income to recognize. However, the mlps/article35128275/ details needed to accurately calculate the recapture are unavailable to the investor. Concerned Pope Resources Unitholders | Investor Presentation 2019 10
POPE’S MLP MODEL FAILS TO ATTRACT INSTITUTIONAL HOLDERS • MLPs face a smaller pool of potential investors than traditional equities because institutional investors, such as pension funds, are not allowed to hold MLP units without incurring tax liability. Pension funds do not ordinarily pay taxes, so they tend to shy away from MLPs. • Institutional investors represent the majority of investor dollars in the market, so eliminating them reduces the potential demand for MLP units. Concerned Pope Resources Unitholders | Investor Presentation 2019 11
INSTITUTIONAL OWNERSHIP AS % OF TOTAL OWNERSHIP 80 70 POPE’S MLP 60 STRUCTURE HAS CAUSED 50 INSTITUTIONAL 40 INVESTORS TO AVOID INVESTING 30 20 10 0 Pope Resources Weyerhaeuser CatchMark Timber Rayonier PotlatchDeltic Concerned Pope Resources Unitholders | Investor Presentation 2019 12
POPE’S MLP MODEL FAILS TO ATTRACT INSTITUTIONAL HOLDERS Weyerhaeuser Corp. (WY) Rayonier Inc. (RYN) PotlatchDeltic Corp. (PCH) VANGUARD GROUP INC 10.74% VANGUARD GROUP INC 14.8% VANGUARD GROUP INC 12.8% BLACKROCK INC. 7.64% BLACKROCK INC. 13.7% BLACKROCK INC. 7.1% DEPRINCE RACE & ZOLLO INC 6.39% SOUTHEASTERN ASSET MANAGEMENT INC 7.4% PRICE T ROWE ASSOCIATES INC 5.8% PICTET ASSET MANAGEMENT LTD 6.33% WELLINGTON MANAGEMENT GROUP LLP 5.8% FIRST EAGLE INVESTMENT MANAGEMENT, LLC 5.7% RENAISSANCE TECHNOLOGIES LLC 5.44% RENAISSANCE TECHNOLOGIES LLC 4.2% STATE STREET CORP 4.1% RANGER GLOBAL REAL ESTATE ADVISORS, LLC 4.37% PICTET ASSET MANAGEMENT LTD 3.7% INVESCO LTD. 3.2% INVESTMENT COUNSELORS OF MARYLAND LLC 3.61% INVESCO LTD. 3.4% CAPITAL WORLD INVESTORS 2.6% BANK OF MONTREAL 2.80% STATE STREET CORP 3.4% AMERICAN CENTURY COMPANIES INC 2.5% BANK OF AMERICA CORP 2.73% FMR LLC 3.0% GEODE CAPITAL MANAGEMENT, LLC 1.5% IMPAX ASSET MANAGEMENT GROUP PLC 2.04% NORTHERN TRUST CORP 2.3% NORTHERN TRUST CORP 1.4% STATE STREET CORP 1.92% PRICE T ROWE ASSOCIATES INC 2.1% TOTAL 46.7% REAL ESTATE MANAGEMENT SERVICES LLC 1.80% BANK OF NEW YORK MELLON CORP 1.5% PEREGRINE CAPITAL MANAGEMENT LLC 1.67% CatchMark Timber Trust, Inc. (CTT) GEODE CAPITAL MANAGEMENT, LLC 1.3% RUSSELL INVESTMENTS GROUP, LTD. 1.56% BROWN ADVISORY INC 1.2% DALTON GREINER HARTMAN MAHER & COMPANY 1.34% VANGUARD GROUP INC 15.2% 1.1% WELLS FARGO & COMPANY 1.25% JPMORGAN CHASE & COMPANY PRICE T ROWE ASSOCIATES INC 13.3% NORTHERN TRUST CORP 1.20% BLACKROCK INC. 10.2% WESTWOOD HOLDINGS GROUP INC 1.1% GEODE CAPITAL MANAGEMENT, LLC 1.15% JPMORGAN CHASE & COMPANY 6.9% FULLER & THALER ASSET MANAGEMENT, INC. 1.0% RENAISSANCE TECHNOLOGIES LLC 3.1% TOTAL 63.97% STATE STREET CORP 2.6% TOTAL 71.0% CONFLUENCE INVESTMENT MANAGEMENT LLC 2.3% PICTET ASSET MANAGEMENT LTD 2.3% IMPAX ASSET MANAGEMENT GROUP PLC 2.1% INVESCO LTD. 1.9% POPE RESOURCES (POPE) FULLER & THALER ASSET MANAGEMENT, INC. 1.8% • Pictet Asset Management is the only institutional THIRD AVENUE MANAGEMENT LLC 1.6% investor who owns more than 1%. MARATHON ASSET MANAGEMENT LLP 1.3% • NORTHERN TRUST CORP 1.2% POPE MARIA M 13.10% Pictet is based out of Switzerland. BANK OF NEW YORK MELLON CORP 1.2% DAHL JAMES H 11.84% • Overall, no US institutional investors own more than 1% GEODE CAPITAL MANAGEMENT, LLC 1.1% PICTET ASSET MANAGEMENT LTD 7.36% of Pope Resources. TOTAL 67.9% Concerned Pope Resources Unitholders | Investor Presentation 2019 13
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