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An investment in preservation

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SNOQUALMIE VALLEY - Should the deal to acquire 99,000 acres of the Snoqualmie Tree Farm go through, it will be left to one company, Portland-based The Campbell Group LLC, to manage the huge swath of land that stretches from the Valley north into Snohomish County.

Managing forests is old hat to The Campbell Group, which has been doing it since the 1980s. What's different about the Snoqualmie Tree Farm is the intent.

The Campbell Group has built its business on managing forests as investments. Now when it looks at the Snoqualmie Tree Farm, the company must envision a different kind of investment - one that doesn't necessarily have a profitable outcome.

It is an investment in preservation, so that as King County continues to increase in population, it will still have some areas left wild. And while preservation efforts aren't new, the proposed Snoqualmie Tree Farm purchase could serve as an example for future deals.

"There's no model. There's no template out there. That's why this is exciting to do," said Jim McCauley, manager of environmental affairs and communication for The Campbell Group.

The Campbell Group was chosen to manage the Snoqualmie Tree Farm by the Evergreen Forest Trust, whose members announced in January that they planned to acquire 99,000 acres of the tree farm from owner Weyerhaeuser Co. for $185 million. The deal would prevent development from encroaching on the tree farm, while maintaining critical animal and fish habitat.

The deal is to be financed by selling tax-exempt Community Forestry Bonds. To pay back the bonds, the tree farm, which would be renamed the Evergreen Forest at Snoqualmie, would be logged, like it has been for much of the past century by Weyerhaeuser.

The Evergreen Forest Trust needs permission from the Internal Revenue Service to sell the revenue bonds. If granted, it would mark the first time in the United States that revenue bonds could be used for forest preservation.

The Campbell Group was founded in 1981 by Duncan Campbell, who hit upon the idea of buying and managing forest lands for investors as a way to diversify their investments. Since then, the company has grown to manage 12 tree farms totaling about 800,000 acres in Washington, Oregon and California. Together, they are valued at more than $1.6 billion.

One of the company's biggest clients is the California Public Employees' Retirement System (CalPERS). The two partnered in 2000, with The Campbell Group managing more than 200,000 acres - or $458 million - of CalPERS' $1.2 billion timber investment portfolio.

Alan Cain, senior forest manager for The Campbell Group, said investing in timber is a good alternative to buying more traditional stocks and bonds, and it helps reduce the risk involved. If the stock market is down, a company's or institution's investment in timber could help offset the decline, although timber investments typically make up a small percentage of the overall portfolio.

In the past 10 years, the 12 tree farms have an average annual rate of return of more than 19 percent.

"We like the diversity this provides the investment fund," Cain said.

It has made for good business for The Campbell Group. The company has close to 150 employees located in 10 offices, including its Portland headquarters. Cain said the company should continue growing, given the number of investment portfolios, like CalPERS', in existence.

"There's an unlimited number of them and a lot of money, and we're just ecstatic if we can get a small percentage" of that, he said.

One of the tree farms The Campbell Group manages is the Kapowsin Tree Farm in eastern Pierce County, neighboring the Mount Baker-Snoqualmie National Forest and Mount Rainier National Park.

The company logs the 130,000-acre tree farm, while keeping it open to the public with a fee-access program much like the program Weyerhaeuser has for the Snoqualmie Tree Farm.

Of The Campbell Group's 12 tree farms, Kapowsin is the only one with a fee-access program.

"Champion [International] started a fee-access program here in 1987. We've kept that pretty much intact," said Brian Prater, the area manager at Kapowsin Tree Farm. He added the company works closely with the state Department of Fish and Wildlife on the program and has a 12-member advisory council.

The Kapowsin Tree Farm recently took part in an audit to earn Sustainable Forestry Initiative certification. McCauley said that follows The Campbell Group's history of exceeding established forestry management practices.

"It's just another added level of assurance for [clients] that we do what we say we do," he said of the certification, adding that company guidelines can be even more stringent.

For example, under state of Washington regulations, The Campbell Group is allowed 240 acres for a clear cut. With the Sustainable Forestry Initiative, it's 120 acres. Under The Campbell Group guidelines, it's about 60 acres.

If the Snoqualmie Tree Farm purchase is finalized, The Campbell Group plans to keep the tree farm's fee-access program, with Cain adding, "We want to improve that as time goes on."

But that would take a back seat to the company's most important obligation, which is to harvest enough timber to pay off the Community Forestry Bonds. Even though it won't be part of an investment portfolio, The Campbell Group would stick to what it knows for the Snoqualmie Tree Farm.

"It will be very similar to how we manage the other tree farms," Cain said.

When the Snoqualmie Tree Farm deal was announced, proponents said the amount of timber harvested could be adjusted to pay back the bonds at a faster rate or to generate money for other preservation efforts by the Evergreen Forest Trust.

Cain said he would urge a more conservative approach because it's difficult to manage a tree farm for the short-term.

"It's going to take a long time to pay off the bonds. It's not going to be a year or two," he said.

If The Campbell Group is able to manage the Snoqualmie Tree Farm in a manner that pays back the bonds, conserves wildlife habitat and keeps the tree farm open for hunting and outdoor enthusiasts, other groups will surely take notice to see whether that approach can be copied elsewhere.

"The beauty of this is that it is going to set an example that, by golly, you can do that," Cain said.

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