NCREIF timber index shows slowing returns

The Q2 index reveals 0.70 percent returns that fell short of both the previous quarter and the same period of 2016.

US timber returns in the second quarter of 2017 fell slightly on the first quarter of the year and showed a larger yearly decline, according to the National Council of Real Estate Investment Fiduciaries (NCREIF).

In its Q2 Timberland Index, NCREIF reported that US timber markets saw 0.70 percent returns during the second quarter, comprised of 0.62 percent growth in earnings and 0.08 percent land value appreciation. Those returns fell short of the 0.76 percent in NCREIF’s Q1 index, as well as the 0.98 percent returns recorded during the second quarter of 2016.

On a trailing one-year basis, NCREIF reported 3.35 percent growth, comprised of 2.64 percent growth in earnings and 0.70 percent appreciation, which also fell short of the 3.39 percent growth recorded in the year ending in Q2 2016.

While the lack of major recent transactions and comments of consultants monitoring the US timber market support a reading of modest recent growth, there is a possibility that methodological factors also play a role in NCREIF’s findings.

In an Agri Investor commentary last month, Olympic Resource Management vice president of timberland investments Kevin Bates wrote that the widespread practice of scheduling timberland appraisals during the fourth quarter dictates that much of the capital appreciation reflected in the NCREIF index is not recognized until the end of the year.

“Over time, we would not be surprised to see a trend towards appraisals being distributed throughout the year, consequentially spreading the capital appreciation results throughout the year as well,” Bates wrote. “The benefits of this change will extend to many participants in the timberland investment industry.”

Comprised of 457 investment-grade timber properties, NCREIF’s Timberland index incorporates data contributed by Brookfield Timberlands Management, Campbell Global, Forest Investment Associates, Global Forest Partners, Hancock Timber Resource Group, Olympic Resource Management, Pennsylvania Timber, BTG Pactual, Resource Management Service, the Molpus Woodlands Group and Timberland Investment Resources.