October 2018 brought with it tremendous volatility and uncertainty in the financial – and even timber – markets. Rising interest rates, slower housing activities, disruptive tariffs and trade policy, and the associated volatility in public markets produced a punishing quarter for public timberland owning REITs, while private timberland investments and values held steady.
Timber REITs
Public timber REITs returned -22.8% through the first ten months of 2018 (through the last Friday in October). Over the past twelve months, Rayonier (RYN), which currently comprises 15% of the timber REIT sector, led the sector with a 2.4% gain. Among public timberland-owning firms tracked by Forisk, only Rayonier, among timber REITs, and master limited partnership (MLP) Pope Resources (ticker: POPE) netted positive stock price appreciation. Sometimes you feel like a nut, and sometimes you don’t.
The table below compares 2014 through 2017 annual and YTD 2018 performance of indices tracking the S&P 500, public real estate investment trusts (NAREIT), private timberlands (NCREIF), and public timber REITs (FTR). Timber REITs in the FTR Index include CatchMark Timber Trust (CTT), PotlatchDeltic (PCH), Rayonier, and Weyerhaeuser (WY).
Year-by-year ranking shows how investors more capital, and how performance varies, across investment vehicles, with the high volatility of equities (S&P, NAREIT and FTR) versus the relatively stable, positive returns of timberlands (NCREIF) since 2013. Timber REITs now on pace for their first negative year since 2015, which is also the last year private timberlands led this set of benchmarks.
Timberland Markets
Since Q4 2017, nearly 2.6 million acres of private timberlands changed hands in the United States in deals exceeding 20,000 acres each. Over this same period, we tracked nearly 3.0 million acres of completed timberland transactions in the U.S. exceeding 1,000 acres in size. Private timberland investment managers (TIMOs) accounted for 62% of the total acres sold, while timber REITs accounted for 57% of total acres acquired. The table below includes the top 5 buyers and sellers of U.S. timberland year-to-date, with REITs leading on acquisitions and TIMOs leading on divestitures.
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