Wham BAM, thank you TAM

By Briony Penn, February 2011

Corporate mergers raise questions about who really owns BC.

I used to report on the colourful species that inhabit this part of the world, but those articles are diminishing with their populations. Now I’m as likely to report on the colourful CEOs of companies who are doing their best to liquidate these last “distressed assets.” It’s quite a challenge, as one has to be able to follow the ever-changing mergers, selloffs and vertical integrations that the big players concoct through Byzantine-like structures and deals. 

One also has to be able to remember three-word acronyms which often change. To follow the money in this region right now, the most important ones to be aware of are BAM and TAM. Look out your window anywhere from Crofton to Sooke and you’ll be gazing at a piece of real estate owned in some fashion by BAM or TAM.

Mr Martin J. Whitman, the founder of Third Avenue Management (TAM), runs his empire out of New York; a few of its minor assets have included Western Forest Products, Timberwest, and Island Timberlands through  associations with another roving predator of distressed companies, Brookfield Asset Management (BAM) under CEO Bruce Flatt. 

TAM and BAM form a many-headed hydra that has been devouring most of the private forestlands on southeast Vancouver Island. These distressed asset managers live in the skyscrapers of New York and Toronto from which they “manage” thousands of hectares of forest in the Capital Region. We rely on these forests for water and are now having to buy them back from BAM/TAM at great expense.

If you travel around British Columbia, you’ll gaze upon many other TAM assets. In fact, fully one quarter of BC’s public harvesting rights—over 10 million cubic metres of Crown forest—are now under TAM’s controlling interest through their acquisition of huge chunks of BC’s biggest forest and pulp companies, including Canfor and Catalyst. As pressures to privatize crown assets continue, the companies with existing leases to resources will be best poised to secure title to the land underlying those resources.

TAM, working alongside Jimmy Pattison (who is also a board member of BAM), has majority share ownership in Canfor. Pattison and Whitman joined together in 2007 to vote in their own slate of directors, including TAM men like Amit Wadhwaney, an ex-Domtar forest products analyst who heads up the TAM International Value Fund, and Ian Lapey, Whitman’s future successor (they are not on the board now, though Pattison is). The same sort of thing went on with Catalyst. The typical pattern is: close down facilities, consolidate, liquidate assets, avoid taxes (as happened in Crofton), try and exert influence on the political system, wait out the process of privatization and then sell.

Whitman’s investment mantra is “Safe and Cheap.” He coined it after the war when he discovered there was a lot of money to be made buying distressed companies in sectors hit by recession; liquidating and consolidating; then waiting it out for the rising market. The philosophy is stated this way on TAM’s website: “We believe the cheaper you buy, the greater the potential investment reward and the cheaper you buy, the less the inherent risk.” 

What was Whitman’s inspiration? His biography states: “When he encountered a timber company rich with assets [aka forests] but no visible earnings power he realized there was a better way.” One assumes the “better way” is to liquidate the forests prior to selling the land when real estate prices are rising. In southeast Vancouver Island, there has never been so much timber removed from these forests so quickly. 

We shouldn’t be surprised that our province attracts such companies. Who could resist British Columbia, a great little banana republic on the doorstep of America that meets all those great investment criteria? Safe? For sure, there are no Zapatistas here. And cheap? Once you’ve creamed the forest off the top, you have free real estate that can be sold. Moreover, we have a provincial government that seems easily swayed by corporate investors.

Right behind TAM’s Whitman as top man for liquidating our forests is BAM’s Bruce Flatt, now a revered investment guru, even being described in the media as “Canada’s Warren Buffet.”

Recently Mr Flatt was pursued by a courageous young woman from Cortes Island. Zoe Miles is a member of Wildstands, an alliance of Cortes citizens that aims to protect the island’s ecosystems. Wildstands says they asked Island Timberlands to sell 2700 hectares of Cortes forestlands slated for logging back to the community. The lands include clusters of rare old growth giants, shelter many endangered species, and encompass several entire watersheds. 

Zoe Miles decided to go to Toronto to try and have a conversation with the CEO of Island Timberlands’ parent company BAM, Mr Bruce Flatt. 

First, though, she got in touch with Jonnie Penn, a young Victoria man (and also my nephew), who produces and stars in a popular MTV reality show called Buried Life that asks viewers: “What do you want to do before you die?” Zoe wanted to save her island forest, and hoped Jonnie could help her reach Mr Flatt. Penn and his partners thought it was a worthy goal and decided to help. After filming on Cortes this September, they headed to talk with Bruce Flatt at BAM’s headquarters in a towering Bay Street skyscraper defended by a bristling squad of security men. Hundreds of young women dressed in blue to look like Avatars showed up to support Zoe. Flatt, perhaps not surprisingly, failed to appear. (Google “Zoe Miles goes to Toronto.”)

Perhaps it wasn’t such a big surprise, either, that when the Buried Life show aired on MTV this November, there was no mention of BAM/TAM and only clips of a patch of second growth. What happened? Jonnie told me “the powers above became extremely anxious and we were forced to cut all mention of BAM.” 

Because of their immense power, these companies are perverting our landscape, both physically and metaphorically. Their slash and sell behaviour destabilizes both the economy and ecology, making it impossible for local communities to exercise control over their future. The removal and replacement of forests also have far-reaching implications for climate change.

Another Cortes resident, Tzeporah Berman, who is now co-head of the climate and energy program for Greenpeace International, warns us not to be fooled by Island Timberlands’ claim to sustainable logging practices: “The majority of their logging is traditional clearcut logging with devastating ecological implications that results in either a change of landuse or a dramatically weakened and simplified ecosystem. The Sustainable Forestry Initiative (SFI) that Island Timberlands touts does not ensure strong environmental standards and has little support from First Nations or environmental organizations.” In fact, she reports that ForestEthics (an organization she co-founded) has filed complaints about SFI’s greenwashing claims and the legitimacy of SFI’s tax status as a public charity with the US Federal Trade Commission and the US Internal Revenue Service.

Although governments seem reluctant to regulate against the dangerous über-control exercised by the BAM/TAMs of this era, citizens like Zoe Miles are sending out strong signals that BC is not just another banana republic where investors can buy forests cheap and suck the lifeblood from communities.

The negative publicity being generated will, inevitably, concern some would-be investors enough that they will avoid investing in the BAM/TAMs, or, if they already own shares in such companies, motivate them to attend shareholder meetings and demand an end to liquidating forests.

Meanwhile, in the last 24 hours while writing this, TAM has offloaded some BAM shares after a record rise in share prices, having previously hit some bottom lows. Wham BAM, thank you TAM.

Briony Penn PhD is a naturalist, journalist, artist and award-winning environmental educator.