Confirming suspicions that western timberland has been selling for vastly inflated prices lately, a recent Barron’s report states that “U.S. timberlands may be one of the world’s most over-valued asset classes” and could see up to 50 percent reductions in value in coming years.
If accurate, the forecast doesn’t bode well for The Nature Conservancy, which recently paid an average of $1,570 per acre to Plum Creek Timber for 312,000 acres of timberland through the Montana Legacy Project (for an in-depth analysis of the Legacy Project, click here.
Clarification: There is not necessarily a direct link between the average value of timberland across the nation and the value of timberland purchased or sold as conservation land, such as the lands included in the Legacy Project. Several other factors may also affect the value of a specific parcel of timberland.
Nor will the report comfort Western Pacific Timber, which is currently accepting sealed bids for a 69,200-acre block of timberland in south-central Washington. The auction ends August 17, and the minimum bid price is $1,000 per acre.
Among other findings, the report said: “Timber is one of those overhyped investments whose supposed virtues don’t hold up well under closer scrutiny. It is hard to find an asset that has appreciated so much, even as the products created from it are so weak. This doesn’t bode well for private holders of timber and investors in timber REITs. For those seeking commodity investments and inflation hedges, look elsewhere.”
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