Research - MAY 17, 2017

Slow, steady timberland performance in first quarter

by Denise DeChaine

The National Council of Real Estate Investment Fiduciaries has released first quarter 2017 results of the NCREIF Timberland Index. The index returned 0.76 percent for the quarter, compared with 1.18 percent in the fourth quarter 2016 and –0.26 percent one year ago. The Earnings Before Income Tax, Depreciation, Depletion and Amortization return was relatively stable, at 0.63 percent, compared to 0.68 percent last quarter and 0.58 percent in the first quarter 2016. After a flat year for appreciation in 2016, timberland managed to show a 0.13 percent appreciation in the first quarter 2017.

For the trailing year, the annual total return was 3.64 percent, up from 2.90 percent for the year ending first quarter 2016. The annual total return was comprised of a 2.63 percent EBITDDA return and 0.99 percent appreciation.

The EBITDDA return ranged from 0.46 percent to 0.67 percent across regions, while the timberland capital return varied more substantially. The Northeast and South each returned 0.84 percent for the quarter with appreciation of 0.31 percent and 0.20 percent, respectively. Depreciation was slight, at 0.05 percent, in the Northwest, while 0.47 percent depreciation in the Lake States led to a –0.01 percent quarterly total return.

Timberland market value per acre was $1,800 in the first quarter 2017 and has remained close to this valuation since year-end 2014. This stability is largely due to the South holding at about $1,780 per acre due to the region accounting for over two-thirds of the timberland property count. The Lake States saw a partial reversal of last quarter’s improvement, landing at $711 per acre. The Northeast had a 2.0 percent quarterly gain in value per acre for a nearly flat annual comparison. The Northwest also had modest gains over the year and continues to report the highest value per acre, at $2,678 in the first quarter 2017.

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