Summary Update. Contents

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1 Contents Summary Update Timber Prices Product Prices Timberland Markets International Update Economic News The FIA Quarterly Dashboard Forest Investment Associates 15 Piedmont Center Suite 1250 Atlanta, Georgia TEL: FAX: Summary Update Timber and Product Prices Pacific Northwest markets continue to perform positively thanks to strong export and domestic demand. Northeastern hardwood markets have experienced upward movement in many key species, including slight demand increases for black cherry. Timber markets in the Lake States continue to trend upward partly due to an unusually wet summer. Demand for solid wood in the Southeast diminished over the quarter, while pine pulpwood markets remained stable. During the month of May, housing starts retracted to a seasonally adjusted annual rate of million units. This rate was 5.5% below the revised April rate of million units and 2.4% below the May 2016 rate of million units. The average interest rate for 30-year fixed rate mortgages declined over the quarter from 4.2% in March to 3.9% in June. Timberland Markets Only a few transactions closed in the second quarter, all in the Southeast. Rayonier closed on its previously announced acquisition of 91,000 acres in Georgia, South Carolina, and Florida from Forest Investment Associates (FIA) for $210 million. FIA also sold of 6,600 acres in South Carolina to ZF US Timber Properties for approximately $19.7 million. CatchMark, a publicly traded REIT, teamed up with a Missouri public pension fund to acquire 11,031 acres in north Georgia from Forestar for a reported $20 million. In Tennessee, the Conservation Fund purchased 14,900 acres from Timberland Investment Resources for $15 million. On the international front, BTG Pactual reached an agreement to purchase Weyerhaeuser s timberlands and manufacturing facilities in Uruguay for $402.5 million. Investors continue to await announcements on several pending international transactions. Forest Investment Associates 1 2 nd Quarter 2017

2 Timber Prices Southeastern In the Southeast, demand for solid wood decreased over the second quarter. According to Forest2Market, the south-wide average price for pine sawtimber decreased 5.0%, ending the quarter 13.6% beneath year-ago levels. Pine pulpwood prices were basically flat, increasing a meager 0.3% in the second quarter, while pine chip-n-saw prices decreased 6.8% over the quarter. Hardwood markets also softened over the quarter, causing both hardwood sawtimber and hardwood pulpwood to decrease 5.0% and 12.6%, respectively. On April 24, the United States Commerce Department announced an initial ruling and countervailing duties (CVD) associated with Canadian softwood lumber imported into the U.S. The CVD policy will likely spur additional lumber manufacturing in the U.S. particularly in the U.S. South. Southern U.S. softwood sawtimber stumpage prices will be marginally, but positively, impacted in the medium term due to increased demand for logs. Southeastern Timber Prices Source: Forest2Market Northern Hardwoods Northeast timber markets continue to be very robust. Hardwood lumber and log export demand have continued their upward climb. An unusually wet summer and increased log exports have created low inventories levels at many sawmills. According to the Pennsylvania Woodlands Timber Market Report, black cherry prices improved 2.2% during the first quarter (the most recent publicly reported pricing), ending 8.6% ahead of yearago levels. Northern red oak prices increased 13.8% last quarter, ending a whopping 30.7% above year-ago prices. Hard maple prices declined 5.8% over the quarter, ending down 2.4% year-over-year. Soft maple prices remained flat improving only 0.4% and ended 24.9% ahead of year-ago levels. White ash prices increased 5.4%, ending the quarter 19.9% above last year s level. Wisconsin timber markets continue to perform well. An unusually wet summer has left sawmills with low inventories, which is expected to lift prices for all species in the third quarter. Forest Investment Associates 2 2 nd Quarter 2017

3 Northeastern Hardwood Timber Prices Source: Pennsylvania Woodlands Timber Market Report - Northwest Region Pacific Northwest According to Log Lines, Pacific Northwest (PNW) average delivered prices for Douglas-fir #2 logs increased 3.4% over the second quarter, ending the quarter 9.3% above year-ago levels. Whitewoods (i.e., true firs and hemlock) average delivered log prices improved 1.3%, and concluded the quarter 13.9% ahead of year-ago levels. Chinese and Japanese export demand continues to trend upward, creating strong competition between export buyers and with domestic mills in nearly all markets within reach of ports. Many local mills continue to aggressively purchase logs, while also quickly processing log inventories. These demand factors have kept log prices high in many domestic market areas. Pacific Northwest Log Prices Source: Log Lines Forest Investment Associates 3 2 nd Quarter 2017

4 Product Prices Lumber and Panels Lumber prices spiked at the start of the second quarter, eventually retracting from highs not seen since 2013 and The Random Lengths Framing Lumber Composite Price dropped slightly by 1.2% over the second quarter and ended 14.4% above year-ago levels. The Structural Panel Composite Price increased 4.2% over the quarter, ending the year 12.6% ahead of year-ago levels. Lumber and Panel Prices Source: Random Lengths Pulp and Paper The benchmark NBSK (northern bleached softwood kraft) pulp price index continued its back-to-back quarterly increase, rising 3.8%, ending the quarter 10.0% above year-ago levels. U.S. Newsprint (30 lb.) remained flat for the third consecutive quarter, however prices ended the quarter 2.7% above of year-ago levels. Uncoated freesheet (20 lb.) prices stayed relativity stable, dropping 0.5% over the quarter. Boxboard prices increased 2.0%, ending the quarter 2.0% above last year s level. Pulp and Paper Prices ($/short ton) Source: FOEX Indexes, Ltd., RISI Pulp & Paper Week Forest Investment Associates 4 2 nd Quarter 2017

5 Timberland Markets Transactions In the South, Rayonier closed on a 91,000-acre package in Georgia, South Carolina, and Florida from Forest Investment Associates (FIA) for $210 million ($2,308 per acre). FIA also completed the sale of 6,600 acres in South Carolina to ZF US Timber Properties for approximately $19.7 million (2,985 per acre), continuing the recent theme of high quality properties selling for premium values. In north Georgia, Forestar sold 11,031 acres to a joint venture team of CatchMark (CTT) and the Missouri Department of Transportation & Patrol Retirement System (MPERS) for a reported $20 million. The deal marks CTT s first foray into partnering with institutional capital. Finally, Timberland Investment Resources sold 14,900 acres in Tennessee to the Conservation Fund for $15 million. Internationally, Weyerhaeuser reached an agreement to sell its Uruguay timberlands and manufacturing facilities to BTG Pactual for a reported $402.5 million. The planted area in the deal is approximately 195,000 acres. Transactions in Progress There have only been a handful of closed transactions thus far in 2017, but many offerings remain on the market. The largest offering currently on the market is a 1.1-million-acre package in east Texas from Campbell Global. Investment banker Perella Weinberg is taking third quarter bids on the massive property, held by CalPERS. Also in the South, investors continue to monitor a 317,000-acre Southern hardwood package from Forestland Group covering four states. In Oklahoma, Molpus Woodlands Group is taking bids on a 14,800-acre package. In the Northwest, Molpus is also marketing 23,800 acres in Idaho and a private seller is taking bids on a 15,000-acre package in Washington. In the Lake States, Keweenaw Land Association is selling its 182,000-acre footprint in Michigan and Wisconsin in an investment banker-led process. The first half of 2017 was relatively slow, but several offerings are still on the market. Deal flow is expected to pick up throughout the second half of the year, and investors will keep a close eye on current offerings. Forest Investment Associates 5 2 nd Quarter 2017

6 International Update General International timber markets remain stable. Chinese demand for logs, wood chips and other wood products continues to drive the pacific rim trade and support stable pricing for export logs out of New Zealand and export wood chips out of Chile. Inventories for a variety of wood products at Asian ports are reported to remain tight. Chilean wood consumers continue to assess the impact of the 2017 fire season. Wood supply in certain micromarkets could be constrained in the coming years and mills are adjusting their procurement strategies accordingly. Early preparations for the 2018 fire season are the focus of public and private institutions with hopes of reduced response time with a greater array of tools and heavy equipment at their disposal. Late in May, the Chilean supreme court passed a final ruling authorizing Arauco to proceed with an ambitious expansion to one of their oldest cellulose plants which would raise the mill s production capacity from 800 thousand tons per year to 2.1 million tons per year. Arauco is Chile s largest forest products company (controlled by Empresas Copec S.A.) and has not yet announced when the expansion will start. In Brazil, the active discussion regarding the 2010 AGU ruling limiting the ownership of rural properties by foreigners has been pushed to the backburner. The potential to implicate President Michel Temer in the wide-ranging Brazilian corruption dragnet has all but stalled legislative reforms. Labor reforms were recently passed; however, the prospects for holistic pension and tax programs are stalled. Turning to the Brazilian forest industry, the J&F Investimentos controlled Eldorado pulp mill in Três Lagoas, Mato Grosso do Sul will likely be sold by year end. The Chilean forest products company Arauco is reported to be the frontrunner; however, the Brazilian pulp producers Fibria and Suzano should not be discounted. In other news from Três Lagoas, Fibria is conducting production tests on their newly installed Horizonte II pulp line (1.75 million tons per year) and is targeted to be operational in September. Forest Investment Associates 6 2 nd Quarter 2017

7 Economic News Housing Housing starts fell 5.5% in May to a seasonally adjusted annual rate of 1.09 million units. This comes after a 2.7% monthly decline in April and a 7.7% drop in March. Home construction is still 3.2% higher year-to-date, but that increase has been too modest to address the dwindling supply of homes. Mortgage Rates 30-year fixed mortgage rates ended the quarter around 3.9%. Jobs The June jobs report showed an excellent gain of 222,000 jobs and upward revisions in the prior two months results. Consumer Confidence The Consumer Confidence Index rose in June to 118.9, a nearly 16-year high. Inflation As of the end of the quarter, the Commerce Department reported the personal-consumption expenditures price index, the Fed s preferred inflation gauge, rose 1.4% in May from a year earlier. That was a slowdown from a 2.1% annual increase in February, the only month since 2012 the index s annual increase exceeded the Fed s target. Trade Deficit The deficit in the trade of goods and services fell 2.3% in May to a seasonally adjusted $46.5 billion. U.S. exports rose modestly to $192 billion highest since April 2015 on rising shipments of cars and consumer goods, including cellphones. Imports fell slightly. Interest Rates Rates on the 10-year note ended the quarter around 2.3%. Oil Prices Oil prices ended the quarter in the mid $40s, reflecting significant over supply dynamics in the current market. U.S. Dollar The U.S. dollar index, which measures the greenback against a basket of six major currencies, declined about 4.6% for the second quarter to mark its steepest quarterly percentage drop since the third quarter of The euro accelerated more than 7% against the dollar for its biggest quarterly percentage gain since the third quarter of Forest Investment Associates 7 2 nd Quarter 2017

8 The FIA Timber Economics Quarterly Dashboard Southeastern Timber Prices Northeastern Hardwood Timber Prices Source: Forest2Market Source: Pennsylvania Woodlands Timber Market Report - Northwest Region Pacific Northwest Timber Prices Pulp and Paper Source: Log Lines Source: FOEX Indexes, Ltd., RISI Pulp & Paper Week Forest Investment Associates nd Quarter 2017

9 Index (1982 = 100) 000's in thousands The FIA Timber Economics Quarterly Dashboard Housing Starts 30 yr. Mortgage % % % 600 4% 400 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16 May-17 3% Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Source: NAHB.org Source: The Federal Reserve Lumber Inflation (CPI) $260 $240 $220 $200 $180 $160 $ % 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% $120 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Source: U.S. Department of Labor, Bureau of Labor Statistics -5.0% Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Source: Forest Investment Associates nd Quarter 2017