Hardwood Timber Reforestation Projected Values
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Trees grow at their own pace, they don't pay any attention to the market.
Projecting the value of tropical hardwoods in 20 years is not an exact science. Nevertheless, there is an abundance of energy devoted to the task, resulting in a substantial set of estimations and projections, which vary considerably and can be found on the Internet. We expect investors to do their own careful due diligence. We are willing to provide any information available to us and to thoroughly discuss value projections and/or rate of return calculations.
Timber is one of the safest and steadiest growth investments available, protecting an investor from inflation, and providing returns above most alternative investments. Tropical hardwood has a shorter growth cycle and higher market price than North American hardwood timber, thus a higher ROI in general. We prefer to provide information and references and allow the investor to project value and calculate rate of return. Yet, certain facts are clear:
Conservative Valuation Model
The most conservative evaluation of return on investment uses current wood prices and does not include an inflation factor. This model also does not count thinning revenue. This conservative evaluation does produce an attractive return on investment. For example:
-Current Prices: In 2009 teak in roll form (logs) is priced at approximately $500 per cubic meter. As rough sawn lumber, teak is currently priced at approximately $1500 per cubic meter.
-Hardwood per Hectare: The initial planting on a hardwood plantation involves 1000-1200 trees per hectare. Typical management practices include two large thinning, the first at 10-12 years and a second at 16-19 years. Both thinning are revenue-producing events. Given thinning and natural mortality, at maturity (20-25 years) each hectare will have approximately 250-300 mature trees. These trees will yield approximately 220-250 cubic meters of marketable hardwood per hectare.
-Ten-Hectare Example: Using this widely accepted data, a 10 hectare teak plantation at maturity will have approximately 2750 trees yielding approximately 2400 cubic meters of marketable hardwood. In roll (logs) the approximate value today is 1.2 million US$. As rough sawn lumber, allowing for loss in processing, the approximate value today is 2.2 million US$. Again, these amounts do not include thinning revenue or inflation and use 2009 wood prices.
We are comfortable with the widely accepted conclusion that a properly managed tropical hardwood timber plantation will yield an annualized return of 10-20%
Request a full brochure with detailed projections. . .