400,000 return?

by | Sep 12, 2001 | Archives

Our recent messages have been looking at investing and business potential in Ecuador. Here is information about an investment in teak that two bankers I know have started there. If the numbers are only half accurate, this has a return that is almost unimaginable.

Dear International Friend,

Here is an excerpt from my latest World reports which I released to eClub members last month. This release shows how phenomenal the potential in Ecuador and wood is now.

“Ecuador Teak

I have finally found an affordable teak investment opportunity in Ecuador. The simple fundamentals have always appealed. Teak is in growing demand. There is diminishing supply, plus a drastic need to stop logging rain forests where old teaks stand. The answer is teak plantations and Ecuador makes a great place to plant with 365 days a year of direct equatorial sunlight, lots of rain and close to the U.S.!

Finding good people and a project are the hard parts. I hope I have as I have known Joe Montgomery and Paul Palacios (both previously of Banco del Pacifico) for over five years. They now have a project called Tall Teaks III LLC. I have a copy of the preliminary information memorandum and though I still have questions, want to share the encouraging news.

The potential is around 20% per annum on a compounded basis for twenty years. That is a lot, about 40 times investment or about $400,000 return on a $10,000 investment! A tax attraction is that the first income does not come in until 2009 when the first thinning begins and though initial capital is expected to be returned within ten years, the big profits are in years 18-through 20 in the first major logging.

The project requires $2,122,000 to cover planting and costs in the first eight years, but is then projected to return $1,364,272 for the next six years or about a 400% return on the investment. In year 20 the return is $75,802,154 or about an additional 40 times return!

This is a long term speculation but suits even baby boomers who want to retire eight years from now. An investment today is tax free until 2009 when at retirement age, it provides about a 50% per annum for eight years. The balance can be set aside for old age or passed onto heirs. Younger investors reap the entire investment. Those with young children or grandchildren may use it to fund their college expenses.

The management company (Manhattan Group, Inc.) has two other plantations (Tall Trees I and II) under their belt. Though teak trees often take 60 to 80 years to reach maturity, in the area of Ecuador chosen they reach an attractive selling size in 18 to 20 years. A 60 to 80 year old tree has more valuable heartwood but economics do not justify waiting 40 to 60 years to obtain about 50% additional girth.

The company has learned to plant a density of 2,500 trees per hectare (2.2 acres) which increases thinning revenues and curtails maintenance costs (less weeding). There are two final benefit. New trees sprout from the stumps and provide another cutting in an additional 10 to 15 years later. This and land values in 20 years have not been factored into the estimated returns. For updates, log onto my website, www.garyascott.com or email Paul Palacios at ppalacios@eolnet.net

These last two messages have shown ideas and projections which I have not verified, but I know come from solid people who have been successful in the past. These ideas are not recommendations but have been shown as examples of how we begin a business or investment and use the business and investing evolutionary cycle which I'll outline in tomorrow's message.

Until next message, good global business and investing!