A deal between one of the South's largest timberland owners and Wachovia Bank's land speculation division could make it a lot easier to turn the North Georgia mountains into Atlanta's suburbs.
Timber company Bowater Inc. sold more than 82,000 acres of Appalachia country to Wachovia's Evergreen Timberland Investment Management division in May.
The land Wachovia now owns is massive, stretching across 12 counties -- Bartow, Catoosa, Cherokee, Dade, Floyd, Gilmer, Gordon, Murray, Pickens, Polk, Walker and Whitfield.
The land in those counties is prime real estate for speculators hoping to make a buck off the North Georgia development boom. The construction explosion cuts into the area's wilderness -- which naturally forces animals to seek out new homes. And, if the usual pattern is followed, the development will strain the infrastructures -- from schools to cops to sewers -- of rural mountain communities.
The sale includes 10,500 acres of the Coosawattee Wildlife Management Area around Carters Lake, southwest of Ellijay. One of the larger developments planned for that area, named Tranquility, is 3,300 acres, sliced into 219 home plots.
The Wachovia/Bowater deal is the latest in a series of enormous timberland sales. Just two weeks ago, the MeadWestvaco paper company put all of its land in Meriwether County on the auction block, and when it did, 10 percent of the county was up for grabs.
Timber companies, facing the convergence of several phenomena, are dumping their lands at historic levels.
The industry's problems began with the dot-com bubble and its hyper-inflated stock values. To jack up the stock values of regular bricks-and-mortar companies, so they could compete for investors with the tech companies, a massive consolidation wave was generated, according to Bob Izlar, director of the Center for Forest Business at the University of Georgia.
Large timber companies merged into even bigger companies. One of the side effects of mega-mergers is that the new and improved super-companies are ridden with debt.
At the time, large amounts of debt weren't a worry for the timber industry because the price of timber was at an all-time high.
But since 1998, timber prices have dropped by 30 percent, mainly due to a flood of cheaper Canadian lumber, Izlar says.
At the same time the timber market bottomed out, land values in North Georgia rose because of Atlanta's crawl ever north and the explosion of vacation and second-home construction. Facing rising property taxes, mountains of debt and a poor market, timber companies were forced to liquidate the only asset they could move for quick cash: timberland.
Gordon Manuel, Bowater's director of government affairs, explains the Wachovia sale like this: "We sell the timberlands for lands not strategically important for us, take the cash from the sale and put it back into company to put down debt or buy back stock. It's a better use of our assets."
More than 1.2 million acres of Southeastern forest land were sold in 2002, according to Timber Mart-South newsletter. The deals were worth almost $975 million.
So far this year, timber companies have sold about 300,000 acres, worth $157 million, and that's not counting MeadWestvaco's land.
Most of the land went to investment firms such Wachovia's Evergreen division.
The $64,000 question is: What are Wachovia and the other land speculators going to do with all that land?
It's hard to imagine the fourth largest bank in the country setting the land aside for future generations to enjoy. Priority one is to make a buck. Investors are looking for a handsome return and the market in North Georgia right now dictates that the land be developed.
"Whenever timber companies liquidate their land, especially if it goes to a bank, there's only one thing that's going to happen and that's development," says Brent Martin, executive director of Georgia Forest Watch, an activist group working to protect the forests of North Georgia.
"I'd rather Bowater cut a few hundred acres every 20 years than lose 82,000 acres to sprawl. Unfortunately, that's what's going to happen."
But not all of the 82,000 acres is attractive to developers -- much of the land is far from the region's high growth areas.
Wachovia will likely keep large parcels intact for years, let the land value climb, and hold out for the day when timber prices spike again.
And, the bank already has a stable of reliable customers. The timber companies, flush with cash from the sale of their lands, still need wood fiber for their paper mills. "We sign long-term contracts with [the companies that bought Bowater's land] that will be giving us assurance to provide fiber to our operations," Manuel says.
Interpreted: Timber companies sell off their tree supply, and then buy back those same trees at a higher price. That may seem short-sighted, but companies have to please their investors -- by any means necessary.