Timberland transaction costs: survey results and insights

Main Article Content

Andrew Hiegel https://orcid.org/0000-0002-0773-4942
Jacek Siry
Pete Bettinger https://orcid.org/0000-0002-5454-3970
Bin Mei

Keywords

acquisitions, appraisal, capitalization, forest economics, real assets, REIT, TIMO

Abstract

Timberland is a real asset that has been gaining significant attention and capital from investors over the last four decades. This paper describes and summarizes the results of a timberland investment survey conducted in early 2020. The survey polled timberland investment professionals active in the sector and provided insights into how transaction costs affect timberland investments according to the size and location of the timberland estate. Component costs were also obtained and summarized for each of the steps involved in typical timberland transactions. The survey also provided insight into investor sentiment toward timberland transaction costs as well as the process of accounting of these costs within the forest industry. Key results of the study showed differentiation in transaction costs by location and size of the timberland estates. The study also showed that transactions costs do not deter most investors from placing capital in this asset class. This manuscript provides a baseline of transaction cost information for investors and professionals interested in the timberland real asset space.

Abstract 365 | View Full Text Downloads 0 Download PDF Downloads 5

References

Amihud Y, Mendelson H. 2013. Transaction costs and asset management. In: Pinedo M, and Walter I. (eds). Global asset management: strategies, risks, processes, and technologies. Palgrave Macmillan UK, London pp. 414-432.
https://doi.org/10.1057/9781137328878_22

Bian X, Waller B, Wentland S. 2016. The role of transaction costs in impeding market exhange in real estate. Journal of Housing Research. 25 (2): 115-136. https://doi.org/10.1080/10835547.2016.12092115

Binkley CS, Raper CF, Washburn CL. 1996. Institutional ownership of US timberland: History, rationale, and implications for forest management. Journal of Forestry 94 (9): 21-28.

Chudy R, Mei B, Skjerstad S. 2022. The performance of private equity timberland funds in the United States between 1985 and 2018. Journal of Forest Economics 37(2):199-215. https://doi.org/10.1561/112.00000550

Coase RH. 1937. The nature of the firm. Economica 4 (16): 386-405. https://doi.org/10.1111/j.1468-0335.1937.tb00002.x

Coase RH. 1960. The problem of social cost. The Journal of Law & Economics 3: 1-44. https://doi.org/10.1086/466560

Cubbage F, Donagh P Mac, Balmelli G, Olmos VM, Bussoni A, Rubilar R, Torre RD La, Lord R, Huang J, Hoeflich VA, et al. 2014. Global timber investments and trends, 2005-2011. New Zeal J For Sci. 44(Suppl 1):2005-2011. https://doi.org/10.1186/1179-5395-44-S1-S7

Dillman DA, Smyth JD, Christian LM. 2014. Internet, phone, mail, and mixed-mode surveys: the tailored design method. Fourth edition., John Wiley & Sons, New York. 464 p. https://doi.org/10.1002/9781394260645

Hiegel A, Siry J, Bettinger P, Mei B. 2020. Timberland transaction costs and due diligence: a literature review and assessment of research needs. International Forestry Review 22 (2): 199-210. https://doi.org/10.1505/146554820829403513

Kusewitt JB. 1985. An exploratory study of strategic acquisition factors relating to performance. Strategic Management Journal 6 (2): 151-169.
https://doi.org/10.1002/smj.4250060205

Mei B. 2017. Investment returns of US commercial timberland: insights into index construction methods and results. Canadian Journal of Forest Research 47 (2): 226-233. https://doi.org/10.1139/cjfr-2016-0186

Mei B, Clutter ML. 2010. Evaluating the financial performance of timberland investments in the United States. Forest Science 56 (5): 421-428.

Newell G, Eves C. 2009. The role of U.S. timberland in real estate portfolios. The Journal of Real Estate Portfolio Management 15 (1): 95-106.
https://doi.org/10.1080/10835547.2009.12089837

Nozeman E. 2010. Transaction costs in commercial real estate: A European comparison." In 17th Annual European Real Estate Society Conference. ERES: Conference. Milan, Italy, 2010.

Qualtrics. 2020. Accessed from: https://www.qualtrics.com

Wan Y, Mei B, Clutter ML, Siry JP. 2013. Assessing the inflation hedging ability of timberland assets in the United States. Forest Science 59 (1): 93-104. https://doi.org/10.5849/forsci.11-029

Williamson OE. 1981. The economics of organization: The transaction cost approach. American Journal of Sociology 87 (3): 548-577.
https://doi.org/10.1086/227496