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Timber REIT Time Machine

In 2012, publicly-traded timberland-owning REITs, as measured by the Forisk Timber REIT (FTR) Index, outperformed the S&P 500, private timberland investments and the universe of publicly-traded real estate investment trusts:

  • S&P 500 (2012):   13.41%
  • Public REITs (NAREIT, 2012):   14.98%
  • Private timberlands (NCREIF, 2012):   7.75%
  • Public timber REITs (FTR Index, 2012):   34.12%


Now, we step into our time machine to evaluate 2013 year-to-date performance of public and private timber investment vehicles relative to the S&P 500.  Imagine relaxing in a rocking chair at Cracker Barrel on December 31, 2012 with a brokerage account bursting with 2012 timber REIT returns.  Do we reallocate our funds to the S&P 500 or private timberlands, or do we stick with public timber REITs?  Based on the performance of key indices, putting $100 on public timber REITs for the first three quarters of 2013 would have earned you $5.25 (see Table), enough for a grande soy vanilla latte at Starbucks.  However, the same investment in the S&P 500 earned over three times as much at $17.91.  Overall, equity markets outperformed real estate investments, timber and otherwise, year-to-date.

20131027 FTR vs NCREIF

How can we put the S&P outperformance in context?  As with all things timber, investment models and timeframes matter.  The year-to-date comparison is both arbitrary and informative.  When evaluating rolling fixed-period financial performance over the past ten years, we find a cyclical horse race across asset classes that vary most prominently in their relative volatility and cash generation.  This reflects, in part, the difference between investing in a high maintenance, portfolio-stabilizing hard asset and liquid, dividend-yielding, more volatile equity vehicles.

Click here to learn about and register for “Applied Forest Finance” on February 10th 2014 in Atlanta, Georgia.  The course details necessary skills and common errors associated with the financial and risk analysis of timberland and other forestry-related investments. 

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