Tag Archives: returns
Farmland Returns 2.9% In Third Quarter
By: Timothy Pollard Published: October 22, 2013 The National Council of Real Estate Investment Fiduciaries Farmland index rose 2.94% during the third quarter of 2013 – 2.09% from income and 0.85% from appreciation. The total return marks the highest third-quarter return since 2005; the asset class has returned 21.3% over the past four quarters. Christopher Jay, chairman of the NCREIF farmland committee and director of financial analysis with Prudential Agricultural Investments, in a news release said returns during the quarter were driven by the Pacific West, “where many of the diverse crops grown in that region remain strong.” The index consists of 548 investment-grade farm properties – 403 annual cropland properties and 145 permanent farmland properties. Continue reading
Investment In Forestry Continues to Provide Outstanding Returns say UPM Tilhill
The latest UPM Tilhill Timber Bulletin highlights and provides a unique insight into key factors relating to UK standing coniferous timber sales such as market share, performance of the market with a view to investment and, additionally, the impact of the growth in renewable energy. Very positive news is that UK processors continue to increase their market share which has risen from 41 per cent to 44.6 per cent by volume. This, says the report’s author UPM Tilhill’s Timber Operations Director Peter Whitfield, is a huge achievement. Timber Extraction He explains: “There was a dip in timber prices at the end of 2012 but there are signs of recovery in the first half of 2013. An increase in market share of nearly 4 per cent is an outstanding achievement which I believe has been helped by significant investment across the UK timber processing sector.” Investment in forestry continues to provide outstanding returns compared to practically any other investment. In 2012 the return on investment was 18.3 per cent and over the last 10 years the annualised return was 16.3 per cent. With the most recent forecast[ii] of softwood availability for the UK forest estate showing an increase to an average of 16 million m3 over the next 25 year period – 10.6 million m3 of this totalfromthe private sector and 5.4 million m3 from the Forestry Commission – the future looks bright for both the industry and investors. The report highlights the impact of pests and diseases on commercial tree species, particularly the spread of Phytophthora ramorum and Dothistroma needle blight on Pines, which is forcing processors to review how they handle the potential additional volumes of these species coming to market and driving foresters to examine alternative species. It also says the Sterling/Euro exchange rate remains a crucial factor in the success of the UK timber industry. Peter concluded: “Looking ahead there is good evidence that the level of timber market activity should continue as it has for the past few years, driven by favourable exchange rates, continued investment and growth of domestic processors, available timber and the demand for biomass.” UPM Tilhill, established more than 60 years ago, is a national company operating from a network of offices throughout the UK. UPM Tilhill is the UK’s largest forest management and timber harvesting company. The company provides a full range of consultancy and contracting services to the forest owner and forestry investor. Continue reading
UK Forestry Returns On Fire
15 May 2013 by Andrew Shirley Posted in Farmland Market Commercial forests showed an average total return of just over 18% in 2012, according to the latest results from the IPD UK Forestry Index. Launched yesterday (14 May 2013), the latest instalment of the index, which has been running for 20 years, reveals that last year forestry comfortably outperformed most mainstream asset classes including equities (10.2%) and gilts (4.7%). On an annualised basis, forestry has delivered a return of 8.1% over the past two decades. This compares with 7.2% for equities and 7.7% for gilts. Many consider forestry to be a useful hedge for investment portfolios because of its limited correlation with more conventional asset classes. The three-year (23.9%), five-year (17.7%) and 10-year (16.3%) annualised returns appear to support this sentiment. Over the same periods, equities only managed to produce returns of 6.7%, 2.1% and 8.0%, respectively. Although this looks a strong performance, calculating the annual income return from the asset class is slightly more complicated, as IPD’s Mark Weedon explained to me and other slightly bemused launch attendees. Even though the value of timber sold last year accounted for 3.3% of the value of the 148 upland, mainly Sitka spruce, plantations – worth in total £221m and on average £2016/acre – tracked by the IPD Index, the calculated income return was actually -0.9%. This means the index’s performance is entirely down to capital appreciation. Mark said this seeming disparity is down to the unique nature of forestry investments. Even though felling and selling trees can produce a significant, if irregular, cash flow, the removal of the timber is, in effect, reducing the value of the plantations, hence the negative performance. While some investors may struggle slightly with this concept, the taxation benefits of owning commercial forestry are more clear cut. Income from timber sales is free of income and corporation tax, growing timber is exempt from Capital Gains tax and commercial woodland qualifies for 100% Business Property Relief after two years of ownership. The future outlook for forestry as an investment remains strong, according to the industry experts at the launch. There has been huge investment in timber processing facilities in the UK meaning more useful product can be extracted from each log. Demand for wood by the fast-growing biomass renewable energy sector has also doubled over the past two years. The ongoing weakness of Stirling also helps the export market. My colleague Tom Raynham, who advises funds and wealthy individuals looking to invest in farmland and forestry, says he has seen a rise in the demand for woodland as a long-term investment. “Like farmland, it is seen as a “safe-haven” investment that can offer not only significant tax advantages, but also lifestyle and amenity benefits. This makes forestry of particular interest to individuals and family offices. Knight Frank is currently selling a large block of woodland in south-west England that could appeal to investors.” Continue reading
