Trees grow. Land values appreciate. Timber prices have outpaced inflation since early in the last century. Historically, total returns from timberland holdings have compared very favorably with those of more traditional asset classes.

History is nice, but what are the expected future returns?
As the growing pool of investment dollars continues to seek return opportunities away from mainstream asset classes, timberland has come on the radar screen of a growing list of institutional investors. While returns from forestland ownership will likely see some ‘compression’ as a result of investors competing for properties, Summit believes that unlevered returns of 8-11% can be achieved through an appropriately structured and managed timber portfolio. Moreover, opportunities to exploit inefficiencies and the generally long-term nature of the investment should maintain timber’s favorable relative return performance over those of other asset classes.

Timberland return drivers:

• Timber growth (volume and class)
• Timber prices
• Land values
• "Optionality" refers to the increasing value derived from land ownership. Traditional forest revenues, resulting from demand for lumber and pulpwood products, have been supplemented by an expanding range of ancillary income sources. Markets are emerging for biofuels, carbon credits, conservation and other eco-system products and services.

How to invest in Timberland
There are a variety of ways to invest in timber. Investors looking for indirect exposure could purchase shares in a timber Real Estate Investment Trust (REIT) or a Master Limited Partnership (MLP). Another alternative is to participate in a timber fund. Many such funds exist and are often sponsored by Timberland Investment Management Organizations (TIMO’s). Summit believes that direct investments (sourced, acquired and managed by an experienced team of professional foresters), supported by sophisticated timber and financial modeling techniques, provide investors the best opportunities to maximize returns from this asset class.

Summit looks forward to helping investors make direct investments in timberland.

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