Research & Data

Timber posts lowest quarterly performance since 2012

The NCREIF index shows a negative appreciation return and a flat market value per acre.

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Growth and business investment concept with three growing trees of different size forming a graph diagram. On white background.

Quarterly timber returns in the second quarter of 2015 were the worst since Q3 2012.

US timberland assets, as tracked by the National Council of Real Estate Investment Fiduciaries (NCREIF) Timberland Index, returned just 0.51 percent for Q2. That’s a significant drop compared to the 1.75 percent total return registered in Q1 2015 and the 1.08 percent returned in Q2 2014.

The sector witnessed the lowest quarterly income performance since Q3 2012.  The appreciation return came in at -0.05 percent and earnings before income tax, depreciation, depletion and amortisation (EBITDDA) return stood at 0.56 percent.

Timber returned 10.02 percent for the year ending second quarter of 2015, down from 10.64 percent for the 12 months at the end of first quarter.

“Seasonal downward movement in product prices led to reduced harvest activity, especially in the South and Northwest markets,” Ryan Reddish, Chair of the Timberland Committee and Acquisitions Analyst for Forest Investment Associates, said in a statement.

According to the Index, timberland market value per acre has been picking up since the fourth quarter 2013, but was flat over the quarter at $1800. The pattern is seen across all regions in the US except the Northeast, where value per acre fell from about $1500 at the beginning of 2013 to less than $1200 this year, a 20 percent decrease.

The Lake States and Northwest are seeing the strongest growth in value per acre, and had 0.79 percent and 0.55 percent quarterly returns respectively. The Northeast turned in a negative total return for the quarter, driven by a negative 1.16 percent appreciation return.

According to NCREIF, its Timberland 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.

“Returns for timberland tend to be very seasonal with the highest returns in the fourth quarter,” explains NCREIF.

Source: NCREIF.