TREE OWNERS NEWS

Spring 2002

Thank You!

    Sherry and I can never thank you, our wonderful tree owners, enough! 

    With your wonderful enthusiasm and support, we are together protecting thousands of acres of precious rainforest and uncountable birds and animals, allowing thousands more acres of previously cleared areas to begin regenerating into forest, creating employment for hundreds of fine Costa Rican men and women, and producing the first of millions of board feet of tropical hardwoods that won't be taken from the world's tropical rainforests.

    With your wonderful support and enthusiasm, together we:

• have grown to nine farms covering more than 10,000 acres

• have planted nearly 1.5 million tropical hardwood trees of more than 50 species on more than 3,700 acres of previously deforested land

• are protecting nearly 4,000 acres of tropical rainforest and uncountable birds and animals

• are allowing 2,200 acres of previously deforested hillsides and stream corridors to regenerate into permanent forest

• have created employment for nearly 300 wonderful Costa Rican men and women

• have given away thousands of little tropical hardwood trees to local Costa Rican school children to take home to plant so they can begin to learn of the value and importance of planting trees

• have produced our first 1 million board feet of tropical hardwoods, which is now either already dried or air drying and waiting to go into the dryers - and not one inch of it was taken from the rainforest 

    We thank you profoundly!  Some day the whole world may thank you!

It is a joy when tree owners come to see their trees and
 enjoy the incredible beauty of the farms.  So far this
 year more than 30 tree owners have visited!
  Above are two tree owners with 1993 teak.

2001 Another Wonderful Year!

    Apart form the tragedy of September 11, which we can never forget, 2001 was indeed a wonderful year.

    With your support and enthusiasm, in 2001 we:

• acquired Sierpe, the wonderful farm in an environmentally important area of Costa Rica that we wrote about last fall, and are now protecting more than 1,000 acres of beautiful rainforest on that farm.  And by buying the Sierpe farm we were able to save the more than 300 huge, magnificent rainforest trees that the former owner had obtained permits to log.  We hope to have time to write more about Sierpe and its magnificent rainforest in a subsequent issue of Tree Owners News.  Even better, we invite you to come to Costa Rica and enjoy Sierpe in person. 

• planted 214,000 tropical hardwood trees on the Sierpe farm, and planted all of the remaining areas on all of our other farms, for a total planting last year of nearly 300,000 tropical hardwood trees

• completed the first early thinning of our 1993 teak, producing more than 600,000 board feet of beautiful young teak lumber from that one thinning

• completed construction of the 25 additional solar dryers at our Matapalo drying yard

• hosted our Raleo™ marketing team, who came to Costa Rica from New York, Los Angeles and Denver in December to review our facilities and assist in deciding on our main design themes for our first collections of Raleo™ furniture 

Coming Up in 2002

    2002 will be a landmark year for both Tropical American Tree Farms™ and for Raleo Design™. 

    Sherry and I are thrilled to announce that we expect to make our first Tropical American Tree Farms™ distributions, from the first early thinning of our 1992 teak beginning early in the third quarter of this year, and distributions from our subsequent thinnings in sequence after that.

    Our Raleo™ production facility in San José is up and running.  By the time you read this, we will have completed our final review of the Raleo™ prototypes and selected our first offerings of beautiful upscale contemporary furniture made from the lumber from our first early thinnings.  We have received enthusiastic compliments from private early viewings and are very excited to enter the market in late June or early July.

    We are about to begin the first early thinning of our 1994 and 1995 teak, and right after that, our 1992 and 1993 nargusta, 1992 suradan, 1992 Santa Maria, 1992 lapacho or ipe, and 1992 trebol.  We will shortly be sending out pre-thinning reports to those of you who own these species.

    This year we will plant approximately 80,000 tropical hardwood trees on the balance of our Sierpe farm, and if we are fortunate enough to add the contiguous farm we are working to acquire, another 120,000 trees on that farm as well.  

    In June, at the Pacific Coast Builders Conference in San Francisco, we will debut a new line of unique specialty surfaces that we have been hard at work developing that will also be made out of the wood from our first early thinnings. 

Thinnings

    We have now completed the first early thinning of all of our 1993 teak, and milled and measured all of the lumber.  The yield was again incredible - more than six hundred thousand board feet of beautiful young teak from that thinning alone.  We have transported all of the lumber to our Matapalo drying yard and the lumber is now either already dried, in the new solar dryers, or air-drying and waiting to go into the dryers.

    We were very happy to send post-thinning reports to all of you who own the 1993 teak, reporting that based upon what we calculate Raleo™ can support paying for the lumber from the first early thinnings, the expected economic yield will be on average nearly 60% greater than we had projected in our pre-thinning reports.

    Our clear goal is to keep those pleasant surprises coming.

    Beto has now moved the sawmills to our Rio Blanco farm and is set to begin the first early thinning of our 1994 and 1995 teak there.  Immediately after that, he will thin the 1995 teak at Capital, and then will move to the first thinning of several of our native species at Campo Real  - 1992 and 1993 nargusta, 1992 suradan, 1992 Santa Maria, 1992 lapacho or ipe, and 1992 trebol. 

    We will be very excited to see the first lumber from these native species.  We test-cut two trees of each of these species last year and the lumber was just beautiful.  We anticipate that it will be even more beautiful now that the trees are one year older.

    We will soon be sending out pre-thinning reports to all of you who own the above species. 

Raleo™

    Raleo™ is another thrilling and deeply satisfying experience.  Jorge Vargas, whom we wrote about in our last Tree Owners News, has done a wonderful job of getting Raleo™ up and running. 

    We congratulate Jorge for creating a clean, bright, well-organized and worker-friendly production facility, and attracting our bright, talented, motivated and proud Raleo™ team, drawing talent from as far away as Peru.  Those few of you who have already had the opportunity to visit Raleo™ have commented about how clean, bright and crisp Raleo™ is.

    In December, our marketing team from New York, Los Angeles, and Denver all came to Costa Rica to tour our Raleo™ facilities, and see and feel the first prototypes we were beginning to build.  They even came on down to the farms to really know their product from beginning to end.  Together we defined our target market, and set a course of selecting the designs, making the prototypes, refining the remaining details, choosing the most outstanding from among them, creating the marketing materials, and going to market.

    We are now nearing the end of that process.  As you read this, we will have reviewed all of the prototypes and selected our very best designs.  Our team in the U.S. will then prepare our marketing materials.  We hope to have the materials produced and ready to enter the market in late June or early July. 

    Our designs for Raleo™ are all new and wonderful.  They are graceful, warm, and elegant.  And our Raleo™ craftsmen and women are executing them nearly to perfection.  Each piece is hand rubbed, and looks and feels wonderful.  We believe they will be very well received.

    I wish we could share our Raleo™ designs with you right now, but we need to keep them under wraps until we go to market. 

    Once we have the Raleo™ marketing materials finished, we will make them available to all of you who are interested.

    In the meantime, we have included two small photos for you to enjoy. 

    Several of you have asked if tree owners will be able to buy Raleo™ furniture, and the answer is yes!  We still have to refine the details, but our feeling is that we will be able to make our Raleo™ furniture available to our tree owners at a substantial savings from the suggested list.

    It is incredibly satisfying to see and touch gorgeous furniture beautifully crafted from tropical hardwoods from trees that were only seeds in the palms of our hands not too many years ago.  We thank God, and thank all of you, for making all of this possible.

Steve with Raleo™ foreman reviewing
 prototype design

Surfaces

    Something that we have mentioned in our earlier newsletters but not written much about, is that in addition to Raleo™ furniture, we have also been developing a line of specialty designer tropical hardwood commercial and residential "surfaces" for walls, ceilings, counters, floors, and furniture.  They will be unique in the market, and specifically designed and crafted from the young tropical hardwoods from our early thinnings.

    We haven't settled on a marketing name yet (we may choose to reserve the Raleo™ name only for our fine furniture and accessories), so for now we just refer to them as "surfaces."

    As Sherry and I have traveled around the U.S. and participated in the many building and trade shows over the last two years we have displayed cabinet doors, molding, turnings, and other items to show the beauty of our Tropical American Tree Farms™ hardwoods.  Everyone has especially loved the cabinet doors because they were our largest examples of our beautiful hardwoods. 

    As a market test, at each show we also set out on the tables a few small samples of our preliminary "surfaces" designs.  At every single show where our "surfaces" samples were visible, even if they were on the back table and out of reach, they always drew attention and compliments, among them "stunning" and "beautiful."  Many times, architects or designers told us that there was an incredible market for our unique "surfaces."  Some nearly begged us to make them available right then.  The possibilities are endless.

    Our decision was that we would first develop our Raleo™ furniture, and work on "surfaces" in the background.  We chose to move forward with Raleo™ furniture first, because we felt that fine furniture would better demonstrate the beauty and feel of Tropical American Tree Farms'™ beautiful hardwoods to more people, and that is a primary objective for Raleo™ - to help Tropical American Tree Farms™ become known as a source for beautiful and unique tropical hardwoods that have not been taken from the rainforest.

    Now that our Raleo™ production facility is established and Raleo™ is moving strongly forward, we will shortly be ready to debut our "surfaces" as well.  Our present plan is that we will produce "surfaces" in the 9,000 square foot production facility we had built here on Campo Real.

Raleo^™ craftsmen at work in our production facility

    Once we have our "surfaces" marketing materials prepared, we will be happy to make them available to you.

    Our first public showings of "surfaces" will be at two upscale building trade shows - PCBC, the Pacific Coast Builders Conference, in San Francisco, the 26th through 28th of June, and SEBC, the Southeast Building Conference, in Orlando, the 25th through 27th of July - and at IWF, the International Woodworking and Furniture Supply Fair, a huge international professional exposition in Atlanta, the 22nd through 25th of August.

    Once you see both Raleo™ furniture and "surfaces" we think you will be amazed at the beauty of the wood from our young trees.

It All Fits

    Clearly a very important objective for both Raleo™ and "surfaces" is to create value directly for the hardwoods from our earliest thinnings, and our internal projections show that the potential for either Raleo™ or "surfaces" alone will be sufficient to utilize all of our annual lumber production from all of our early thinnings.  It is very gratifying to be creating excellent uses and values for this young lumber.

    But an equally important objective for both Raleo™ and "surfaces" is to create a market awareness and demand for our Tropical American Tree Farms™ hardwoods by allowing top specifiers and upscale consumers to see and feel first-hand how beautiful our unique tropical hardwoods are in our beautiful Raleo™ and "surfaces" products. 

    This approach clearly requires much more time and effort, and capital, but our experience has always been that additional diligence, patience, and investment at the front end always yield much greater rewards.

    And it all just fits.

Timing

    Once our trees have gown a bit larger and are more mature, there will likely be no need to have the lumber from subsequent thinnings pass through either Raleo™ or "surfaces."  We should then be able to very quickly mill and dry the lumber from the subsequent thinnings, and sell it directly on the wholesale import/export market, resulting in a much shorter turnaround time from thinning to economic yield. 

    In the meantime, as we employ Raleo™ and "surfaces" to create the market and value for the lumber from these first early thinnings, our thinking is that Raleo™ and "surfaces" will pay for the lumber at the time it is moved from the farms to the production facilities, or in other words as the lumber is utilized, and further, that it will be most fair for Raleo™ and "surfaces" to utilize, and pay for, the lumber from the thinnings in the order that the trees were thinned - the first early thinning of the 1992 teak first, then the 1993 teak, and so on with each early thinning.  That is our plan.

    Our present estimates are that as we build the Raleo™ and "surfaces" sales channels and volumes, they will be able to utilize and pay for the lumber from the first early thinning of the 1992 teak during the third and fourth quarters of this year, and then the lumber from the first early thinning of the 1993 teak beginning early next year and, because of the huge volume, continuing for most of the year.  Our subsequent thinnings will follow in sequence.

    If both Raleo™ and "surfaces" take off as strongly as we think they might, we may be able to speed this timetable up.

    Our early thinnings have produced much more lumber than we anticipated, and our concepts and planning for Raleo™ and "surfaces" have grown accordingly.  This has all taken a good bit of time to conceive and create, and Sherry and I very much appreciate your continuing enthusiasm, support, and patience as we grow.

The Lumber Is Yours

    Having said, or written, all of the above, Sherry and I want to reemphasize that the lumber from your trees is yours alone.  You are free to make any decisions about your lumber that you choose.  We have created Raleo™ and "surfaces" because we feel that they offer the best use and value creation for the lumber from all of our early thinnings.  They exist only as an opportunity for you, and not an obligation at all.

    We want you to be completely comfortable in knowing that we will allow Raleo™ or "surfaces" to utilize your lumber only if you have not instructed us that you would like to have us do something else with your lumber, and even then, only if Raleo™ or "surfaces" can support paying as much or more for your lumber than what it would bring on the wholesale import/export market.

    If at any time you prefer that Raleo™ or "surfaces" not utilize your lumber, simply drop us a note or e-mail.  You may for example, instruct us to ship your lumber wherever you would like, or use or sell it yourself. 

    Your lumber is yours to do with as you choose. 

Older Teak

    Before we planted our first teak tree, to confirm the beauty and characteristics of teak growing in the area of our farms, we had some older teak milled that had been planted in fence rows in the area.  It was beautiful.

    As we brought in our own sawmills, we also bought a number of older standing teak trees from farmers who had planted the trees in some of their fence rows from 15 to 20 years ago.  The trees had never been pruned or otherwise cared for and so they were not as tall and straight as our trees, but their lumber is still beautiful.

    We hadn't yet developed our Raleo™ designs and were thinking that we may want some older teak to use as accent points on our Raleo™ furniture, or if not, we could mill the logs and sell the lumber for a profit.  And in buying the trees, we also wanted to help local farmers discover that there is excellent profit in planting tropical hardwood trees.

    We often receive requests for quotes on lumber, and several weeks ago we were contacted by a manufacturer in the U.S. whom we had met at a trade show.  They had seen our samples of the older teak at the show and were now requesting a quote for 10,000 board feet of that same older teak for outdoor use. 

    Since we have now chosen our Raleo™ designs and will be using only lumber from our early thinnings, we agreed to send them a quote.

    They were interested in smaller dimensions, ranging in rough sizes from 1 to 2-1/2 inches thick x 1-1/2 to 9 inches wide, and 5 to 10 feet in length. 

    To test the market, we quoted $6.41 per board foot.  They accepted by return e-mail and wired a deposit.  We promptly milled their wood and will ship it in the next two weeks.

    Our reason for including this in this newsletter is that it directly supports our conclusion that once our trees get a little older and are past the stage where Raleo™ or "surfaces" is necessary to help create value, our turnaround time from thinning to distributions can be very short.  It also illustrates that the wholesale import/export teak prices in our projections are quite conservative.

Sierpe

    As we mentioned above, with your wonderful participation and support, we were able to acquire the Sierpe farm that we wrote to you about last fall.  It's precious rainforest, more than 1,000 acres, is now completely protected, and the 300 magnificent trees that were slated to be cut out of the forest are now safe from the saw, all because of you.  Sherry and I thank you!

    Immediately after we closed on the farm, Beto moved into action.  He had already lined up more than 80 workers to prepare the fields and plant the little trees.  He moved one of our tractors to the farm to haul the little seedlings.  In only a few days he had miles of white cord stretched as far as you could see, marking the lines where he would shortly plant the little trees.

    Almost before we knew it, he and his team of grateful workers had carefully hand-planted more than 214,000 trees in neat rows throughout the farm.  Nearly one thousand acres of hot, dry cattle pasture now have row after row of little trees of 24 species, including our Premium Mixture, vigorously growing.  It will be thrilling to watch this farm transform and become more cool from the shade of the trees over the next years, as have all of our farms before.

Tree owners riding in the Sierpe rainforest

    We invite you to come to Costa Rica to see your trees, and enjoy this beautiful farm and its magnificent rainforest.

Abel Pacheco

    Costa Rica has just completed its quadrennial national elections for president, and Sherry and I have had the unusual privilege of having met and spent time with two of the three presidential candidates, both very fine men.  Abel Pacheco, who just won in a runoff election, will be Costa Rica's president for the next four years.

    We couldn't be more pleased.  Don Abel is a very honorable man who loves his country and his fellow countrymen.  He is also very clear in his values and very comfortable articulating them.

    Back in 1994, when Sherry and I were still living in Ohio and commuting to our tree farms, we received a fax telling us that "Abel Pacheco, the most respected man in Costa Rica, just mentioned you and Sherry and your tree farms on his television commentary."  He had cited us as excellent examples of combining profit with a love for the environment and thanked us for planting trees in his country.

    We sent him a note, thanking him for his kindness.  In response he asked to meet us.  At the time he was president of his political party, the Social Christian Unity party, and very busy.  But he took more than an hour of his time to meet with us.  He was very clear about the importance of planting trees and thanked us personally for what we and our tree owners are doing for his country.

    We haven't met with don Abel since then, but occasionally exchange notes.  He wrote again recently as we celebrated the planting of our one-millionth tree, congratulating us and thanking us again.

    Sherry and I are very pleased that this fine man will lead Costa Rica for the next four years. 

Happy tree owners with their teak!

Rainy Season

    Our rainy season is just beginning, and it is beautiful.  We love the rainy season because everything is green and fresh, and because the rain makes our trees grow.

    The dry season just now ending was a little greener than usual this year.  We normally average an inch of rain a month during the dry season, but this year we have had a few inches each month.  

    As we read about how dry parts of the U.S. are right now, we wanted you to know that everything is beautiful here and your trees are all fine.

Memorial Gardens

    Our plans are moving forward on establishing our memorial gardens in honor of those innocent men, women and children whose lives were tragically taken, or heroically given, in the terrible events of September 11. 

    We have asked Beto to select the areas on the farms where we will plant the approximately 3,000 flowering and fruiting trees, like guava, cashew, breadfruit, star fruit, pink and golden shower cassia, royal poinciana, poro, wild fig, wild plum and mango. 

    We will soon review the areas that Beto has chosen and he will then begin preparing for the planting.

    The gardens will total a little more than twenty acres and are intended to not only honor those lives lost but to also celebrate life.  We will leave them largely natural with a few walking trails, rather than keeping them mowed like a park, so that they can also be a source of additional food and shelter for birds and animals.

The Flag

    Several of our wonderful tree owners and family members of tree owners are serving in Operation Enduring Freedom and other related operations.  We pray for their safety and their success, and the safety and success of all of the men and women, of every country, who are working and fighting to defend freedom and democracy. 

    We recently received an e-mail from one of our tree owners serving in the Afghanistan area, saying that he was going to send us an American Flag that had flown in support of Operation Enduring Freedom there, and that maybe we would find some way to display the flag and certificate among the trees in our memorial. 

    Sherry brought me the e-mail with tears in her eyes.  We both wept, out of sadness for the lives lost, out of admiration and gratitude for the people who are sacrificing to defend our freedom, out of pride for our men and women in uniform, and out of love for our country.  It is true that we live in Costa Rica, but we will be forever Americans.

    We wept again several days later when the flag arrived, neatly folded in a big brown envelope, with a certificate that read in part,

"Presented to T.A.T.F., S.A.  Certification that this American flag was flown on the 26th of January 2002, aboard a U-2S high altitude reconnaissance aircraft serial number - - - - -.  Old Glory flew to an altitude greater than 70,000 feet with Captain - - - - , a U-2 Pilot assigned to the 9th Expeditionary Reconnaissance Squadron in support of Operation Enduring Freedom."

    We will make a place of honor for that U.S. flag and certificate in our memorial.

    Thank you so very much Patrick!

    We so much appreciate the good people in this world.

Articles on Investing

    Two very kind people, one an investment advisor and the other an attorney, took the time recently to send us two articles, both written by investment professionals, on the wisdom of investing in trees for harvest.  We found the two articles very interesting.  They parallel our thinking exactly. 

    The first article, titled "Timber!" appeared in the November 2001 issue of Smart Money Magazine. 

     A few excerpts will convey the gist of the article. 

• "The track record of early investors - and a slew of recent academic research - indicate that timber is a near perfect asset."

• "As trees get larger, their value increases."

• " . . . research indicates that real prices for timber have steadily risen for more than 100 years - better performance than any other commodity . . ."

    The second article, "The Growth in Trees, Timber's New Place in the Diversified Portfolio" appeared in the December 2001 / January 2002 issue of the Bloomberg Wealth Manager.  This article is more technical, but just as positive.

• "Now individual investors have begun exploring timber more aggressively as a source of almost assured growth in tumultuous times."

• "How can investors be so certain of returns?  'One key factor that drives the investment is biological: trees grow.'"

• ". . . compared with oil and gold, for example, whose value can be affected by new finds, 'we know where all the world's forests are.'"

• "Indeed, as an asset class, timber - a renewable resource with constant product demand - stands out as a remarkably stable investment."

• "Clients inclined toward socially responsible investing will find even more to like in timber . . .  Forests take greenhouse gasses out of the atmosphere as they grow and replenish the earth's supply of oxygen."

• "Timber's qualifications as a solid alternative investment are too impressive to dismiss."

    We did most of our research long ago, before we started Tropical American Tree Farms™, but it is always nice to see such current, and professional, affirmation of what we found.

Tell Your Friends

    Sherry and I always appreciate when you tell your friends, family, and associates about Tropical American Tree Farms™ because word of mouth is our only form of advertising.  The more people who know about Tropical American Tree Farms™, the more tropical hardwood trees we can plant and the more rainforest we can protect.  So please continue to spread the word.  Thank you very much!

E-mail Addresses

    Please make sure that we always have your current e-mail address.  E-mail is our quickest and most efficient way of staying in touch, and letting you know when we have the latest issue of our Tree Owners News on-line.  Thank you.

Thank You!

    We genuinely cannot adequately thank you, our tree owners, enough.  Everything that we do, and all that we write about, are only possible because of your continuing, wonderful support and enthusiasm.  We warmly and sincerely thank you all!!