14 Comments

Timberland Investments 林权投资

Institutional investors worldwide own approximately $60 billion worth of timberland, of which two thirds ($40 billion) is invested in the U.S., nevertheless, the principal owners of timberland are private, non-industrial landowners, with about $150 billion.

Some investors classify timberland investments as private equity, as many of the commercial timberland deals have been made through private equity investment structures and managed by a timberland investment management organization (TIMO).

Some investors consider timberland a specialized form of long-term fixed income, as it generates cash each year through harvest and sale of timber.

Some may also view timberland as real property/real estate. The difference is that traditional commercial real estate investments realize income primarily from leasing, while timberland derives its income from periodic timber sales, recreation, and value added. In addition, the source of return  of timberland investments also comes from land appreciation and biological growth.

The cash basis return of timberland investments is the total of income (timber sales, recreation, and value added), land appreciation, and biological growth of timber assets.

Performance (as represented by NCREIF Timber Index)

  • As of 8/31/2012, the NCREIF Timber Index had an annualized return of 7.6%, while the S&P 500 Index posted 6.5% for the last 10-year period; in the latest 20 years, NCREIF Timber achieved 9.7%, compared to 8.4% that of S&P 500.
  • In calendar year 2008, the NCREIF Timber returned 9.5%, however, the S&P 500 dropped 37%.
  • The 10-year Sharpe ratio for the NCREIF Timber is 0.91, but that of S&P 500 index is only 0.37. Timberland investments have a potential for more competitive returns relative to its risk profiles.
  • Timberland as an asset class has a negative correlation to the broad U.S. equity market, low correlation to global fixed income, and positive correlation to inflation. It hedges against inflation.

Benefits of Timberland Investments

  1. The U.S. timberland investments have delivered superior returns over the past decades relative to its risk profile.
  2. The calendar year 2008 performance (see above) also proves that private timber offers goo downside protection.
  3. Timber as an asset class offers a level of price stability over the long-term.
  4. Timber’s biological and investment growth cycles are steady and predictable.
  5. The total return can be enhanced by the biological growth of the timber, product class jumps, and active management.
  6. Timberland investments have the versatility to be shaped, and the portfolios can be structured to meet different investment objectives. A few examples: 1) higher cash flows can be achieved by including a higher proportion of more mature timber holdings; 2) young pine plantations with high growth rates can be considered for acquisition if long-term gains are more important than regular cash flow; 3) various timber age classes may be included if an investor’s goal is a balance of intermittent cash flows with an emphasis on long-term appreciation.
  7. Historically, demand for wood products has tracked closely with worldwide population growth; the rapid growth of investment in timberland among U.S. institutional investors will ultimately push the price of timberland higher as buyers compete for available land.
  8. The correlation profile of Timberland to other major asset classes (please see above) indicates that it offers great diversification benefit, and hedges against inflation and market downturns.
  9. Timber is a renewable, natural resource that provides ecosystems with clean air, water, wildlife habitat, and carbon sequestration.
  10. For individual investors, timberland ownership offers tax advantages where income from timberland can generally be treated as capital gains.

Potential Risks of Timberland Investments

  1. Physical risks can vary by region and generally include events such as fire, tornado, hurricane, and forest pests.
  2. Outside of the Western U.S., action from political and environmental groups has not traditionally been a major factor due to the large base of private timberland ownership.
  3. The demand for timber can be impacted by factors such as a decline in housing starts, substitution of other finished products and materials.
  4. Valuation risk in terms of site quality and land management
  5. Many areas with expansive timberland have few nearby production markets; overhead costs in transporting timber to mills negatively impact profits.
  6. Short-term price volatility, interest rate fluctuations, and lack of liquidity should also be considered.
Advertisements

14 comments on “Timberland Investments 林权投资

  1. Admiring thee commitment you put into your website and detailed information you offer.
    It’s great to come across a blog every once in a while that isn’t the same
    out of date rehashhed material. Wonderful read!
    I’ve saved your site and I’m including your RSS feeds to
    my Google account.

  2. Please let me know if you’re looking for a writer for your blog.
    You have some really good posts and I feel I would be a good asset.

    If you ever want to take some of the load off, I’d love to write some articles
    for your blog in exchange for a link back to mine.
    Please blast me an email if interested. Thank you!

  3. My brother recommended I might like this blog. He was totally right.
    This post truly made my day. You can not imagine just how much ttime I hadd spent for this information!

    Thanks!

  4. Thanks for your publication. One other thing is that often individual states in the United states of america have their unique laws in which affect homeowners,
    which makes it very hard for the our elected representatives
    to come up with a new set of guidelines concerning foreclosure on
    householders. The problem is that every state provides own legislation
    which may interact in an undesirable manner in relation to foreclosure procedures.

  5. I almost never comment, but i did some searching and wound up here Timberland Investments 林权投资 | Chenjiazi Zhong 钟陈佳子.
    And I do have a couple of questions for you if it’s allright.
    Is it simply me or does it seem like some of the comments look
    like left by brain dead visitors? 😛 And, if you are posting at other online social sites, I’d like
    to keep up with anything fresh you have to post. Would you list of every one of your public pages like your twitter feed,
    Facebook page or linkedin profile?

  6. You actually make it appear so easy together with your presentation but I to find this topic to
    be actually something that I feel I’d never understand.
    It sort of feels too complicated and very large for me. I am taking a look forward on your subsequent publish, I will
    attempt to get the dangle of it!

  7. We’re a gaggle of volunteers and starting a new scheme in our
    community. Your website offered us with helpful info to work on.
    You have performed a formidable task and our whole group will probably be grateful to you.

  8. Wow, that’s what I was exploring for, what a stuff!
    present here at this website, thanks admin of this
    web page.

  9. Hi this is somewhat of off topic but I was wanting
    to know if blogs use WYSIWYG editors or if you have to
    manually code with HTML. I’m starting a blog soon but have no coding expertise so I
    wanted to get advice from someone with experience.

    Any help would be enormously appreciated!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s