In University Forests, Money Does Grow on Trees
North Carolina State University wants to sell off Hofmann Forest for $150 million. Is that such a bad thing?
As far as university forests go, North Carolina State University’s Hofmann Forest is huge. At 79,000 acres, it is about 2,500 acres larger than Arches National Park. Of course, it is nothing like Arches—not just because Arches is a desert and Hofmann is a mixed pine wetland, but because Arches is protected, public land, while Hofmann is in the process of being sold for $150 million to a developer.
Why would NCSU sell the land? NCSU’s College of Natural Resources Dean Mary Watzin says the university just doesn’t need it. University forests are basically outdoor laboratories for college forestry departments, where students learn how to plant, harvest and manage timber products. NCSU’s College of Natural Resources has two other, smaller university forests that are closer to campus and are quite adequate for its teaching needs. So it’s goodbye to Hofmann—or is it?
Some environmental groups fear the massive Hofmann Forest will be lost to development if this sale goes through. Wildlands Network, a wildlife advocacy group that works to prevent habitat fragmentation resulting from just that, is leading a legal effort to halt the sale of the forest to an LLC formed by Jerry Walker of the Walker Ag Group, an Illinois-based developer of agricultural lands.
Opponents are concerned the buyer will convert the land to crops, condos or golf courses, citing a leaked prospectus that says after developing 9,000 acres, a buyer could easily convert the remaining 70,000 acres of “virgin organic soil” to agricultural uses. Wildlands Network says that would irreparably harm local water sources and cut off an important wildlife corridor to black bears and other Atlantic Coastal Plain species. (Hofmann Forest links the nearby Croatan National Forest to other forested lands.)
Watzin says that one of Jerry Walker’s agents put out the prospectus, merely to “gauge interest in the property.” Watzin adds that the school believes the majority of the 79,000 acres will remain in its current use—as managed forest land (a tree farm, basically) under Jerry Walker’s ownership. The university has not included any easement that would ensure this, however.
Many universities started investing in large tracts of forestland 30 years ago, says Joshua Humphreys, president of Croatan Institute, a social and environmental research institute based in North Carolina. Now, because the value of forestland remained largely intact during the recent financial crisis, “institutional investors are hungry for this land.” Universities, for their part, are eager to sell.
“From a financial perspective, it could be a very smart sale,” Humphreys said. Not only are values high, the university’s endowments are nonprofits, so they pay no taxes on the capital gains.
With costs of higher education continuing to skyrocket, universities are looking ever closer at the assets they hold and are considering ways to leverage them in order to grow their endowments. Watzin says NSCU is no exception. “Our absolute responsibility as leaders in academia is to use all of our assets in the best way to provide education and a great environment for faculty,” she says, adding that the school can earn more from the land by selling Hofmann Forest than by continuing to sells off its timber as a managed forest. “Funding for higher education is declining so we certainly have to look at our assets.”
By selling the Hofmann Forest, the school says it can invest the proceeds and well exceed the $1 million annual earnings it is getting from the land now, as a working forest.
NCSU is certainly not alone in looking to leverage its assets to grow endowments—and not all the land for sale is used by forestry schools. The University of Miami recently sold 88 acres of rare rockland forest, which happens to house a number of threatened species, to a developer that wants to erect a Walmart—yes, a Walmart—on the property. The U.S. Fish and Wildlife Service last month put the brakes on the project, for now, by telling the developer it will need a federal permit to proceed.
In fact, universities manage wide-ranging portfolios of investments that may include vast tracts of land all over the world. “Take Harvard,” says Alex Finkral, senior forester for The Forestland Group, a timberland investment group, “as much as 10 percent of its $30 billion endowment is invested in forests.”
And while many schools place an emphasis on sustainability on their own campuses, these investments are not always environmentally friendly. Schools contract with companies such as The Forestland Group to make these investments, which produce money through the sale of forestry goods, but not all timberland investment groups operate by environmental standards. “We deal only in FSC [Forest Stewardship Council] certified land and we get our properties audited by a third party,” says Finkral.
“Universities don’t tell students what they invest in because they don’t have to,” he explains. This lack of transparency is one reason environmental advocacy group 350.org is focusing its divestment campaign on universities. The Responsible Endowments Coalition is also pushing higher education to take a higher road when it comes to investments, by divesting from fossil industries as well as timberland.
If organizations like these—and, importantly, students—grow the pressure they’re putting on universities to act more responsibly, environmentally risky moves like the Hofmann sale may lose their appeal.