In this Timberland Special Feature, Bret Vicary, vice president, forestry and natural resource consulting at James W. Sewall Company, who specialises in timberland investment analysis and appraisals, is going to share why appraisals pose a challenge for investors? Towards that end, he shares how effective and useful GIS (an acronym for geographic information system), remote sensing and aerial photography can be in determining timberland inventory...
Listen to the complete feature The geographic information system (GIS) which includes geographic area files describing the "lay-of-the-timberland", forms the foundation for determining amongst others the cash flow estimates
Q1 - The basic role of the timberland or forestland appraiser in helping investors making informed decisions (due diligence)
Why forestland appraisals pose a challenge?
Why timberland appraisals are unlike real estate appraisals?
Why statistical inference introduces a level of uncertainty in the investment process
For as time passes the data become archaic and have to be recalibrated which can introduce a certain amount of investment return volatility which is quite independent from the economics and the growth associated with the forests investment itself.
Q2 - Quantifying this volatility - how much does it tend to be and what has it been historically?
The industry standard varies around the world.
Reliance on geographic information system (GIS) - provides a basis for the maps - the maps provide a basis for laying-out and designing the forest inventory - which then forms the basis for the growth and yield models, which in turn are used as the basis for the cash flow estimates.