Belize Teak Plantation

[Henry Clark]

Actually started this venture about 3 years ago.  I might get some activities out of time sequence.  Sit back and grab some popcorn.

I will chop this up into smaller segments, so each one isn't too long of a read and has a central theme.

Both Retiring and doing Self Storage, we hit the mark where we both had the funding and the time to invest overseas.  My wife has never had a specific place in mind, so got to do my choice.  Have always been interested in Aust, NZ, Brazil, India and Belize.  Have travelled to South Korea, Mexico, France, Canada, Maui and Italy. 

Decided on Belize.  Currency pegged $2BZD to $1USD (low inflation issues), Official language is English since it was a British Commonwealth, Property rights and laws are basically the same as the US since English based, 2nd/3rd world thus still Rough which I like (has flavor), 2 hour flight from Houston/Dallas connections, land is relatively inexpensive. These all play into the "type" of investment we wanted to do.

We are in Iowa where December thru March can be cold and windy.  Belize dry season (less humidity) is January thru May.  Great overlap.

Labor for a great skilled worker is about BZD $30 to $50 per day or USD $15 to $25.  Laborer is around USD $25 per day.  This is good pay for them.  Glad to have the work.  They also have an illegal migrant issue.  You could get workers for USD $3 per day to cut brush.

Local produce is relatively cheap.  Rock crab for USD $3 per pound.  Red Snapper, grouper, barracuda for USD $4 per pound.  Anything imported is really expensive.  Gas $10 per gallon.  Can of Spam might be $8.  Yep a Can of Spam can cost more than Rock Crab or Red Snapper.  I actually like Spam though.

Health care is both very inexpensive and for higher end issues, non-existent.  Most US prescription drugs can be bought over the counter from the Pharmacist.  Broken leg $50.  Cancer/heart need to fly home.

Over the course of this post will cover the following Real Estate angles.  Teak, buying property, building house, few buyers, real estate "fronts", preppers, as an Expat "you" will move back at some point, and "Yes" sometimes means "I don't know".

Below is Ramon, checking on Teak trees.  These are 11 months since transplanted, from about 10 inches tall.

[Henry Clark]

Why Teak Trees?

-Myanmar or formerly Burma is the major source of old growth Teak. They have basically shut down harvesting their forests.

- Primary markets are India, China, South east Asian countries. For me, this is a great risk management tools versus US investments.  Both India and China are both growing economically and in terms of people, China is kind of flat.

-  This is a product which is easily raised, harvested and milled in Belize.  But the market in Belize is almost non existent and very low priced.

- Resistant to price fluctuations.  Demand is increasing as India/China economy is growing, while number of Teak trees are diminishing.

- Even if all of you reading this planted a 1,000 acres; that would not but a dent in the demand, and decreasing availability.

- If the world goes into a recession or depression.  A Banana you have to sell.  A Teak tree you keep growing and as it grows, it keeps adding value.

Teak tree overview:  Below is the "Quantity" discussion, will do another post on the "Quality" side of the discussion:

1.  Generally a 25 year investment unless you can buy land already planted and maturing.

2.  For Belize the "delivered" log market is about $500 USD per cubic meter.  Not "Standing Timber".  Teak logs from Myanmar or former Burma might be $3,000 to $5,000 per cubic meter (for several reasons).  Be careful when someone gives you prospective figures to understand what the data represents.

3.  Measurements.  International market usually uses Cubic meters.  US usually will talk in terms of Board feet.  A board foot is 1 foot square by 1 inch thick.  A planed board is not a true 1 inch, it might be 7/8 inches, but still called a board foot.

4.  424 board feet make a cubic meter.

5.  Yield lets say $50,000 per acre.  Most foreign countries talk in Hectares which equals 2.47 acres.  

6.  Make sure you are converting correctly:  Currency, Acres/hectares, Cubic meters/board feet, standing timber/raw logs/finished wood.

7.  How much is a Tree worth?  Use the following as a "Factor" for discussion and not as exact.  This is for "Hardwood and not Softwood".

a.  ($1) Standing Timber.

b.  ($2) Delivered Logs

c.  ($4) Sawn or dimensional lumber

d.  ($8) Kiln dry

e.  ($16) Planed

f.  ($32) Molded   Retail value.

8.  As you can see the actual Standing timber has very little value relative to the Retail board.  There is almost a doubling of value as you move up the Value add chain.  Think of Shipping "Logs" to India, versus "Finished" boards.  The same price per container/pounds either way.  A large difference in Shipping cost versus Sales value.

9.  The Standing timber also has less of a Comparative price to use for the land owner to sale.  A timber buyer is going to adjust for: location to roads, distance to mill, terrain to log, unknown quality of wood, Owner lack of knowledge, etc.

10.  Usually timber gets sold as "Standing Timber".  The land owner wouldn't want to sell, after the trees are cut, because then they need to get to the mill and if the buyer backs out, they are stuck.  Given that the Buyer doesn't really know the quality of the logs until they are cut and sawn.  Thus the buyer won't want to give you the full $1 above.  Because they are gambling.

11.  Why would a Buyer not know what the wood is like until they cut it down?  Lets say two of the exact tree, but on two different properties.  Again this is Hardwood, and not Softwood.  When the buyer looks, Tree 1 and 2 are both 15 inches on the "Small" end.  Tree 1 however has "live wood" or the white growth wood of about 1/2 inch on the outer rim.  Tree 2 has 1 1/2 inch "live wood" on the two outer rims.  Normally this extra Live wood is caused by the tree growing to fast.  They may have kept fertilizing.  Tree 1 might get measured using a width of 14 inches, while tree 2 might be measured with a width of 12 inches.  Now 2 less inches doesn't sound like a lot, but it is a lot less.  Draw two circles with 14 and 12 inches and then measure the volume.  Its a big difference.  Hardwood, the value is in the "Heart" wood and not the "Live" Wood.  Softwood, you use both.

So the buyer might only offer you $.65 on the $1, due to rough terrain, distance from the mill and to cover if the Logs are poor quality.

If you invest in Teak or any timber, you want to reap the rewards as far up the Value Chain as possible.  Your profitability increases and the accuracy of Market Value is easier to determine.