the visible hand

it is the theory which decides what can be observed – einstein

timberland overvalued?

Posted by ecoshift on August 11, 2009

just what we needed…

Trouble in the Forest –
U.S. TIMBERLAND MAY BE ONE OF THE WORLD’S most overvalued asset classes.

Timberland is a rarity because prices have risen steadily since the mid-1990s, with Southern timber properties more than doubling to around $1,700 an acre, even as the price of logs, lumber and other forest products scrapes multiyear lows. Last year, when almost all investment categories declined in value and the U.S. stock market fell about 35%, timberland prices rose 9%, atop a 17% gain in 2007. In the first half of 2009, prices are down 0.5%, according to the National Council of Real Estate Investment Fiduciaries, or NCREIF, which tracks the timber market.

Timber prices could be vulnerable to a decline of as much as 50% in coming years. That likely would sting a group of real-estate investment trusts focused on timber, including Plum Creek Timber (ticker: PCL) and Potlatch (PCH), as well as Weyerhaeuser (WY), the forest-products company whose most valuable asset is two million acres of prime forest in the Pacific Northwest. Plum Creek, whose shares are flat this year, at 34, is expected to generate most of its 2009 profits from land sales, prompting analysts at Off Wall Street Consulting to write in a recent report that the company “increasingly looks like a self-liquidating entity rather than an ongoing business concern.”

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