Thursday, June 2, 2016

How Much Does Merchantable Timber Add To The Value Of A Property Sale?

When setting up a land sale that includes merchantable timber one of the first things that needs to be done is to conduct a timber cruise and timber valuation. This is often more complex than expected as the tract is usually comprised of  stands where the timber is of like kind in terms of timber type, specie, age, quality and value.

At this point stand mapping usually done by using GPS/GIS technology. It is typical for forested tracts to be considered as a tract of land that contains acres of some quantity but in reality the whole is managed by the parts or micro managed as the various stands can be different in many ways.
The techniques of timber cruising and valuation are not discussed at this point in the post. Once all the stands have been evaluated based on forest management criteria and valued the questions becomes a little more complex.

In a property sale, especially those properties that are recreation oriented or those with near term higher and better use potential questions arise as to the contribution of the timber assets in the sale of the whole tract. In my experience this becomes somewhat difficult as the timber cruise and timber appraisal is usually based on the concept of stumpage value, as of the date of the cruise/appraisal. Stumpage value is what the timber will sell for on the stump by a harvest within a relatively short period of time at market prices and specifications on the valuation date.

The market participants and real estate professionals should realize that product shifts can occur in the near term and just because some stands are merchantable doesn't mean that they should be thinned or harvested soon after the sale. What would the well advised, astute investor pay for the property with the current timber condition on a stand level basis? The answer to these questions may be more difficult and therefore can make a stumpage value estimate inadequate to measure the true contribution of the timber when associated with the other property components which include land, improvements, personal property, etc. that are usually part of a property sale.

A term in property appraisal called anticipation is ever present in land and forest investments. The value to an investor is not necessarily based on the spot or current condition but what the investor perceives as the present value of the future benefits to be produced by the property during their future period of ownership.

I have not nor will I attempt to answer the question posed in the title above as every situation is different. These differences may include variations in tract size, timber stand opportunities and obstacles, weather and site factors, internal and external access, location to first processing points, markets for the timber and the motivations of the typical buyer, given the highest and best use of the property.

In conclusion it is wise to look beyond a stumpage value estimate as the stands while capable of producing immediate value by being cut may not be financially or biologically be ready to cut. A timber valuation by a party that wants to buy the timber should also be looked at very carefully unless it can be audited by an independent third party. The seller or buyer who is most informed will ultimately win in the deal. I guess that if one of the parties in the sale did not think they knew more than the other there would never be a deal.
These comments indicate that agents and sellers and buyers should be better prepared !  What do you think?

Thursday, April 21, 2016

Growing Season Burns- One of the best Forest and Wildlife Management Tools? I think so!

Growing season burning is one of  the best forest and wildlife management tools you can employ. Unlike winter burns which are geared more toward aesthetics and fuel reduction, growing season burns enable undesirable trees and plants to be attacked more effectively when foliage is developing and transpiration is in full gear. The potential for killing or setting back undesirables in the under story is far better than winter burns.
The picture above shows an old friend setting a flanking fire during a winter burn but firing techniques are the same.
Some lower gulf coastal plain sites are hard to burn in the winter due to dispersed fuels to carry a fire and heavy upland hardwood leaf matter which does not burn well. This tends to produce more smoke which is the greatest risk in prescribed burning to start with, in my opinion. During the growing season the daily temperature is higher and humidity levels do not vary like they tend to do in February and March. The green foliage tends to hold down the fire thus creating greater resident times for the fire to stay on the unwanted species longer.
In some rougher spots that haven't been burned for a while it may take several burns but eventually the under and mid stories can be altered. There will be great change in the herbaceous layer and grasses and plants that are more beneficial to wildlife will emerge. Predators will have a much harder time threatening turkeys and small game and there will definitely be a reduction of risk in the event of a stand killing wild fire event.
What are your experiences with growing season burns? Do you plan on doing more of them in the future. I know we are! Let me hear from you!

Saturday, April 16, 2016

One of the most difficult property situations you can deal with is a transitional tract that has an excellent stand of merchantable timber. The highest and best use of the property is not for growing timber products. Questions immediately pop up including, what does the timber contribute to the property value? Can all or some of the timber be harvested? Which trees will be left and what biological issues will be posed by the stand density once the other trees have been removed? Will timber operations detract from the market value of the property under its current highest and best use?

Would love to hear some comments on how this situation has been handled!