February 19th, 2015
Investors looking to add timberlands to their portfolios and timberland-owning REITs looking to grow their asset base both face the challenge of identifying attractive, investable candidates from a market with limited supplies of quality properties. While the U.S. has more trees “than you can shake a stick at,” it does not have an unlimited supply of operationally viable forestland tracts. When evaluating investment strategies and relative competitive advantage, I watch this closely as it speaks to growth and returns. What opportunities exist for specific timber REITs or timberland investment managers (TIMOs) to grow? It’s a competitive environment and investors and firms want to acquire quality assets without sacrificing long-term returns.
Timberland Investment Performance in 2014
Timberland investment vehicles, while continuing to generate positive returns, lagged in 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).