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Scooped by
Prentiss & Carlisle
August 6, 2018 11:54 AM
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The Financial Times reports that CalPERS lost over $400 million on Lincoln Timber, a failed 2008 purchase of $2.38 billion of timberland in the southern part of the US. CalPERS exited the remainder of this investment in June, for $1.39 billion, a loss of $355 million on the purchase price. Combined with losses on disposals of previous portions of this holding, the total loss was over $500 million. From the Financial Times: Combined with previous disposals, it appears that total sales of the forestry land netted $1.85bn, leaving Calpers and its partners with a $534m loss before taking into account lumber revenues, inflation, management fees and debt servicing costs. The article later states that the giant fund paid $52 million in fees. And of course, there were opportunity costs. Again from the pink paper: According to Calpers documents, its return on the investment was a negative 0.5 per cent over 10 years, underperforming its benchmark, the NCREIF Timberland Index, by 497 basis points over that time. “Leverage has exacerbated cash flow issues,” said a Calpers external audit last year. “Assets that would otherwise have been allowed to grow and appreciate, have been harvested to manage the debt.” It also appears that CalPERS, as it is sometimes wont to do, timed its sale badly. The Financial Times points out CalPERS was in haste to exit its holdings: After starting 2018 with the seventh-largest holdings of forestry land on the continent, the Texas sale all but takes Calpers out of the asset class. “They made a decision to get out and they wanted to get out fast,” said Brooks Mendell of Forisk Consulting. “They’ve basically accomplished that objective. *** In the 1990s, CalPERS had been an early entrant into timberland investing, along with Harvard, and had done well with this investment strategy. JJ Jelincic said the Lincoln investment was intended to be the first of a new program, but that a timber portfolio with holdings only in the South, and nothing in the Pacific Northwest, “made no sense”.
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August 26, 2016 1:18 PM
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Both the NCREIF Timberland and Farmland indexes have historically provided investors with consistent positive returns with less downside risk than equities. The NCREIF Timberland index has produced positive quarterly returns 91% of the time since 1990 and the Farmland index 99% of the time. The only negative quarter for the NCREIF Farmland index was the fourth quarter of 2001 when it returned -0.01%.
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July 28, 2015 9:43 AM
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The NCREIF Timberland index returned 0.51% in the second quarter, its lowest quarterly return since the first quarter of 2012. It was also the lowest second-quarter return since 2002.
The quarterly return was 57 basis points lower than the median second quarter return since the index's inception in 1987.
According to NCREIF, the appreciation return was -0.05% in the quarter.
Ryan Reddish, chair of the timberland committee and acquisitions analyst for Forest Investment Associates, commented in a news release that, “timberland returns were relatively flat this quarter. Seasonal downward movement in product prices led to reduced harvest activity, especially in the South and Northwest markets.”
The index consists of 451 investment‐grade timber properties with a market value of $24.3 billion. This includes 319 properties in the South, 83 in the Northwest, 28 in the Northeast, and 16 in the Lake States.
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March 9, 2015 5:08 PM
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Timberland investment vehicles, while continuing to generate positive returns, lagged both the S&P 500 and the publicly traded real estate sector. The National Council of Real Estate Investment Fiduciaries (NCREIF) reported 2014 total returns for private U.S. timberlands of 10.48%, which marks the fourth consecutive year of improved returns. The figure below compares by year, for 2012 through 2014, the performance of indices tracking the S&P 500, all publicly traded real estate investment trusts (NAREIT), private timberlands (NCREIF) and publicly- traded timberland-owning REITs (Forisk Timber REIT Index (FTR)). Timber REITs in the FTR Index for 2012 and 2013 include Plum Creek (PCL), Potlatch (PCH), Rayonier (RYN) and Weyerhaeuser (WY). The 2014 figures also include CatchMark Timber Trust (CTT).
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October 30, 2014 10:48 AM
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Timberland has, for the first time in four years, proved a better investment than farmland, as the improved world economy drives demand for wood for both construction and energy.
US timberland returned 1.47% in the July-to-September quarter, the best performance for the period in seven years, according to the National Council of Real Estate Investment Fiduciaries (Ncreif).
It also, narrowly, outstripped the 1.45% returned by farmland – a rare occurrence.
In the past decade, only on two previous occasions– the first quarter of 2007 and the second quarter of 2010 – has timberland returned more than farmland, on Ncreif data.
The outperformance in the latest quarter was driven by value appreciation, which came in at 0.74% for timberland compared with 0.48% for farmland.
On income, the other factor incorporated in the Ncreif data, farmland fared better, returning 0.97%, compared with 0.73% for forestry.
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July 30, 2014 6:47 PM
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Timberland in the US accelerated its price growth, despite some lumber market concerns centered on China and the domestic market, which prompted one of the top forestry groups to warn on profits.
US timberland prices were 7.2% higher in the April-to-June quarter than a year before, nudging 0.2 points higher than the rate of annual appreciation recorded for the January-to-March period, the National Council for Real Estate Investment Fiduciaries (NCREIF) said. Factoring in income of 2.6%, the total return from forestry land over the year was 9.9%, the highest figure in nearly six years, although still behind the 17.2% achieved from farmland.
The performance "reflects a combination of strong export demand from China for logs and lumber and a healthy domestic demand in the US for timber products", said Mary Ellen Aronow, chair of the Ncreif timberland committee. However, Ms Aronow, a senior forest economist at Hancock Timber Resource Group, acknowledged some challenges to these factors, saying noting "some hurdles still facing the recovering US housing market, and a cloudy outlook for Chinese demand".
Earlier this week, Plum Creek Timber, which controls 6.7m acres of US forestry, cut its forecast for full-year earnings to $1.05-1.25 a share, from $1.30-1.50 a share, citing a market recovery in 2014 which "has been more muted than we and other industry participants initially expected".
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Wood Resources International reported earlier this month that US lumber markets began falling in the spring, with "lumber prices falling over 10% so far this year", with "weaker log export markets in Asia" a big factor.
"Demand for wood in China has declined somewhat because of a slowing in the construction sector, which has increase log inventories in the ports and on vessels waiting to unload logs," Hakan Ekstrom, principal of Wood Resources International, told Agrimoney.com. However, he added: "I see this as a temporary blip on the long-term upward trend in demand for wood raw material - logs, lumber and wood chips."
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March 17, 2014 11:18 AM
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I wrote a similar article to this last year titled "Timberland Values Increase 7.76% in 2012". Again, the data come from a quarterly newsletter from Brookfield Timberlands Management LP, a wholly owned subsidiary of Brookfield Asset Management Inc. (BAM). In it, the company discussed the NCREIF (National Council of Real Estate Investment Fiduciaries) Timberland Index results for 2013. NCREIF is an appraisal-based index. It included both third-party independent appraisals as well as internal appraisals of timberlands purchased for investments. Its members are generally the TIMO (Timberland Investment Management Organizations) community. TIMOs manage privately owned timberland investments. As far as I know, none of the timber REITs are members of NCREIF. Pope Resources (POPE), however, is.
In any case, the results would also reflect on the value of the timberlands owned by the publicly traded timber REITs and companies - Weyerhaeuser (WY), Plum Creek (PCL), Rayonier (RYN), Potlatch (PCH), CatchMark (CTT) and Acadian (OTC:ACAZF). Timberland properties are routinely bought and sold by the TIMOs and timber REITs to and from each other.
For 2013, the total return from timberland investments in the NCREIF index was 9.69%, up from 7.76% in 2012. This is broken down between EBITDDA returns and appreciation returns. Total EBITDDA returns were 2.80% for 2013 versus 2.68% in 2012. Appreciation returns for 2013 were 6.75% compared to 4.97% in 2012. The NCREIF Timberland Index in 2013 was made up of 457 properties totaling 13.6 million acres with a total market value of $23.1 billion.
The Index is further broken down by region.
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The next table applies a weighted average of the NCREIF 2013 returns by region to each company. As you can see, you can assume about an 8.5% appreciation to Plum Creek's land holding in 2013. In like manner, Rayonier's land appreciated 9.4%, Potlatch's 13.9%, Weyerhaeuser's 11.6%, Pope's 17.4%, Acadian's -0.9%, and CatchMark's 7.7%. Of course, these are all approximations.
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Commercial timberland is a very liquid asset. TIMOs have billions of dollars invested and are always in acquisition mode. Most of the REITs and other timber companies are also always in the market. For these reasons, I believe that the NCREIF index is very pertinent and investors in timber stocks should be aware of this.
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Prentiss & Carlisle
January 29, 2014 11:02 AM
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NCREIF recently reported Q4 2013 total returns for private US timberlands of 5.92%. This total return number accounts for nearly two-thirds of the total 9.69% return for all of 2013. Big moves during the fourth quarter for the NCREIF Timberland Index remain a common occurrence as a disproportionate number of the acres tracked by the index report their appraised market values towards the end of the year. This reality of tracking timberland investment performance reduces the value and rigor of comparing quarterly results to other asset classes, while reinforcing the usefulness of annual performance metrics. *** While publicly-traded timber REITs, as measured by the Forisk Timber REIT (FTR) Index, crushed the field in 2012 with returns of 34.12%, the S&P 500 captured the yellow jersey in 2013 with a 26.90% gain. The summary results, though capturing an arbitrary snapshot, remain consistent with the timberland investing thesis that direct ownership of timberlands provides superior capital preservation and diversification and stability, as reflected in balanced returns for 2012 and 2013. Alternately, public timber REITs offer superior liquidity and total returns over time with more risk as equity values can and will dive with the overall market.
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November 22, 2013 11:48 AM
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CalPERS’ annual review of its infrastructure and forestland programs shows the fund’s infrastructure program has outperformed its benchmark by 130 basis points annually since the program’s inception, while its forestland investments trailed the NCREIF Timberland index by 380 basis points from its inception.
Through March 31, the latest returns available, CalPERS’ infrastructure investments returned 8.1% annually from inception, 13.9% over five years, 17.6% over three years and 5.7% over the one-year time frame. In each period, returns were above the benchmark of CPI plus 400 basis points.
Annualized forestland returns of 0.6% (from inception), -1.1% (five years), -2.5% (three years) and 6.5% (one year) trailed the NCREIF Timberland index in each period.
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Prentiss & Carlisle
April 9, 2013 3:36 PM
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I recently read a quarterly newsletter by Brookfield Timberlands Management LP, a wholly owned subsidiary of Brookfield Asset Management Inc. (BAM). In it, they discussed the NCREIF (National Council of Real Estate Investment Fiduciaries) Timberland Index results for 2012. *** For 2012, the total return from timberland investments in the index was 7.76%. This is broken down between EBITDDA returns and appreciation returns. Total EBITDDA returns were 2.68% and appreciation returns were 4.97%. The NCREIF Timberland Index is made up of 443 properties totaling 15.1 million acres with a total market value of $26.0 billion.
The Index is further broken down by region.
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February 6, 2013 4:58 PM
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The fortunes of the timber industry wax and wane with that of the housing industry, so it isn't surprising that as the housing industry begins its recovery, the timber industry is recovering as well. *** According to the fourth quarter 2012 report on the timber index by NCREIF, the total return for the category was 5.92%, the highest since fourth quarter 2007. The return was split between 5.33% appreciation and .59% income. For the year, timberland had returns of 7.76%, split between 2.68% in income and 4.97% in appreciation.
NCREIF's timber index has 317 properties in the South, 86 in the Pacific Northwest, 15 in the Lake States and 20 in the Northeast. *** The last time appreciation in the timber index was greater than 5% was in fourth quarter 2007 when timberland appreciated by 8.71%, according to the NCREIF report. Even though the index had three consecutive quarters of positive appreciation, it remains more than 5% below its previous peak. The Pacific Northwest continues to be the strongest region with a total return of 10.02% of which .97% was income. This marks the sixth consecutive quarter in which it was the leading region in the index, according to the report.
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May 29, 2012 3:28 PM
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The National Council of Real Estate Investment Fiduciaries (NCREIF) is proud to release its initial Timberland Fund and Separate Account Index (TFSAI). The index is comprised of results from 101 funds and separate accounts contributed by 11 distinct mangers. Going forward, NCREIF will release this report quarterly showing returns from the current quarter, previous quarter and the quarter from a year ago. The report will also have one year and three annualized returns. All of results will be shown on a gross and net and on a value weighted and equal weighted basis.
Results from the first quarter 2012 show the index returned 0.06% gross and (0.14%) net. This is an increase of 17 basis points on a gross basis and 27 basis points net from last quarter. The value weighted one and three year returns on a gross basis were 0.18% and (1.72%). However, the equal weighted returns were positive, 1.18% and 0.60% respectively. In addition, timber acreage increased slightly to 11.9 million while gross assets fell slightly to $19.9 billion.
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Prentiss & Carlisle
July 30, 2018 5:53 PM
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The National Council of Real Estate Investment Fiduciaries (NCREIF) has released second quarter 2018 results of the NCREIF Timberland Index. The index returned 0.48 percent for the quarter, down from 0.92 percent last quarter and 0.70 percent in the second quarter 2017. The EBITDDA return, at 0.75 percent, was lower than 0.87 percent last quarter but higher than 0.62 percent a year ago. Appreciation in the second quarter dropped by 0.27 percent.
The Total Timberland Index had a 3.57 percent trailing year return, with 1.41 percent as the 2018 year-to-date total return.
The Northwest led regional returns for both the second quarter and for the trailing year. The total quarterly return for the Northwest was 2.49 percent, fairly evenly split between appreciation and EBITDDA return. The South dragged the index in the second quarter, with a total quarterly return of -0.35 percent, driven by a negative appreciation return of -0.94 percent.
Timberland market value per acre, at $1,804 as of the second quarter, has slightly decreased from $1,824 over the past year. Within the regions, the Northwest region continues to climb higher with a 5.78 percent increase year-over-year in the market value per acre. Market value per acre for the South region continues to follow closely with the Total Timberland Index market value per acre.
The NCREIF Timberland Index consists of 453 investment-grade timber properties with a market value of $25.3 billion. This includes 307 properties in the South, 93 in the Northwest, 35 in the Northeast, and 17 in the Lake States. This data enhances the ability of institutional investors to evaluate the risk and performance of timberland investments across the United States.
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November 4, 2015 3:53 PM
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The NCREIF Timberland index returned 0.77% in the third quarter, consisting mostly of 0.71% income return, and appreciation of 0.06%.
The annual return for the one-year period through Sept. 30 was 9.26%, down from last quarter's 10.02% return and down from the one-year return of 10.48% for the same quarter last year.
In a news release, Ryan Reddish, acquisitions analyst for Forest Investment Associates and chair of the NCREIF Timberland Committee, said “timberland properties produced positive cash flows across all four regions of the index, a trend that should continue as the U.S. housing market strengthens.”
The most recent data from the U.S. Commerce Department show that housing starts increased 6.5% in September.
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April 28, 2015 12:59 PM
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The first quarter 2015 rate of return for all properties was 1.75%, higher than any first quarter since 2008.
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January 29, 2015 8:56 AM
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The NCREIF Timberland index returned 10.48% in 2014 -- its highest return since 2007. Last year's return consisted of 7.46% price appreciation and 2.86% income return.
NCREIF said the average annual return for the index since 1986 is 12.59%. In the last five and 10 years, the index had annualized returns of 5.8% and 8.3%, respectively.
“Timberland returns remained strong in 2014, with annual appraisals contributing to a sizable bump in fourth-quarter returns. Increasing EBITDDA returns show that timberland managers are capitalizing on the renewed demand for wood in domestic markets,” said Ryan Reddish, chairman of the timberland committee and acquisitions analyst at Forest Investment Associates.
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September 12, 2014 9:30 AM
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April 29, 2014 9:44 AM
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As the US farmland market is slowing down, returns from buying forestry land is picking up, lifted by demand from China and recovery in the US housing market.
US timberland values returned by 9.8% in the year to the end of March – the strongest annual performance since the third quarter of 2008, as the world was entering economic crisis, the National Council of Real Estate Investment Fiduciaries said.
These returns are still lower than those obtained from cropland, estimated by the council last week at 17.4% over the past year. However, on terms of price appreciation alone, the forestry market has nearly caught up.
The timberlands return figure comprised price growth of 7.0%, with the balance from income.
Growth in cropland values has slowed to 8.4%.
The rising returns reflect in part revival in US housebuilding, a key source of demand for timber.
"US housing recovery continued at a modest pace, supporting increased timber harvest volumes across the US," said Mary Ellen Aronow, chair of the Ncreif timberland committee, and a senior forest economist at Hancock Timber Resources Group.
However, she also highlighted "strong" export orders for wood, "in particular demand from China".
This demand was "reflected in record-setting prices for timber in the Pacific North West," a key US timber-growing region, largely in Washington state.
Indeed, returns in the Pacific North West were particularly strong over the year to the end of last month, hitting 18.1%, up from 14.1% in the previous year.
Ms Aronow forecast continued strength in the sector, terming "positive" the outlook for both timber and forestry markets.
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February 7, 2014 10:59 AM
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The NCREIF Timberland index returned 9.69% in 2013, its highest return since 2007 when the index returned more than 18%. Last year’s return consisted of 2.8% income and 6.75% appreciation.
Timberland returned 7.75% and 1.58% in 2012 and 2011, respectively.
Mary Ellen Aronow, senior forest economist at Hancock Timber Resource Group and chair of the NCREIF timberland committee, noted in a news release that properties contributing 70% of the index’s market value were appraised during the fourth quarter. Appraisers “recognized a strengthening timberland market, with lower discount rates, citing timberland transaction evidence which indicates higher land values. In some cases, appraisers have also raised their outlook for timber prices.”
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Prentiss & Carlisle
November 22, 2013 12:20 PM
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The NCREIF Timberland index returned 1.05% in the third quarter, split between 0.45% appreciation and 0.6% income return. The return is up 12 basis points from the prior quarter and up 30 basis points from the year-ago quarter.
It also marks the highest third-quarter return since 2007. Mary Ellen Aronow, senior forest economist at Hancock Timber Resource Group, said in a news release quarterly gains were driven by “continued recovery in U.S. housing markets combined with Chinese demand for imported logs and lumber.”
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July 29, 2013 9:10 AM
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Returns on US forestry hit their highest since the global economic crisis, and are poised for further gains, despite setbacks to hopes for housebuilding, a key destination for lumber.
A timberland index compiled by National Council of Real Estate Investment Fiduciaries showed returns of 9.36% in the year to the end of June, the highest figure since autumn 2008, as the world was falling into slump.
The figure, of which income accounted for 2.71 points and capital appreciation for 6.51%, came against a backdrop of disappointment for the domestic property market, slowed by rising borrowing costs.
"The second quarter rise in US interest rates and the 9% drop in overall US housing starts triggered a slight downward adjustment in forecasts for housing demand for the remainder of 2013," the council said.
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March 25, 2013 9:04 PM
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October 29, 2012 12:36 PM
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An excerpt:
The National Council of Real Estate Investment Fiduciaries (NCREIF) has released third quarter 2012 results of the NCREIF Timberland Index. The 0.75% total return, while still sluggish, is a vast improvement over the past several quarters. It is the highest return since 0.75% total return in the first quarter last year. The return was split between 0.23% appreciation and 0.52% income.
Capital appreciation was positive for the second consecutive quarter. The two quarters of slight positive appreciation doesn’t offset the greater than 10% decline since the beginning of 2009, but it is a step in the right direction. The Pacific Northwest was the best performing region for the fifth consecutive quarter with a total return of 1.25%, of which 0.83% was income. It was also the best performing region on a rolling four quarter basis with an 11.76% total return. Returns in the region have been above the rest of the country four of the past six quarters. The South was the worst performing region with a total return of 0.60%. All four regions had positive appreciation for the first time since first quarter 2007.
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May 6, 2012 8:31 PM
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This is the first in a three-part series related to the financial performance, current trends and changing structure of the timberland investment sector.
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