Open Journal of Forestry
2012. Vol.2, No.4, 257-264
Published Online October 2012 in SciRes (
Copyright © 2012 SciRes. 257
Forestland and Timber Donations: Challenging Management
Opportunities for Foundations
Phillip Lee Ward, Thomas J. Straka
School of Agricult ural, Forest, an d En v i ronmental Sciences, Clemson University, Cle mson, USA
Email: tstraka@clemson . edu
Received July 20th, 2012; Revised August 25th, 2012; Accepted September 13th, 2012
Over half of the forestland in the United States is in private hands. Just over 10 million individual and
family owners control about 60% of this private forestland. Ownership of family forests changes on a
regular basis; sometimes from generation to generation and sometimes to outside of the family. Often new
owners are not interested in forest management and sell off the asset. Some owners attempt to ensure their
family forest remains pristine and undeveloped. This is leading to timberland donations to entities that can
be expected to hold the donated forest permanently and ensure sustainable forest management. University
foundations and forestry schools are increasingly receiving timberland as donations. It is a way for donors
to monetize the asset (with tax breaks) and protect it at the same time. Foundations have a problem with
timberland as they often don’t fully understand it as an investment. Certainly there are even times when a
foundation should not accept it as a donation. The nature of timberland as an investment is explained,
along with basic terminology that is common use. Age class distribution and the resulting cash flow dis-
tribution is explained, as well as timber volume, harvest scheduling, timberland investment analysis, tim-
ber value, timber sales, and timber contracts. All of these are tools foundation board members need to
evaluate timberland donations.
Keywords: Foundation; University Foundation; Donation; Timberland Donation; Forestry Investment
About 11 million private forest owners control 56 percent of
the forest land in the United States (Butler, 2008). Nationally
10.4 million of these owners are classified as family forest
owners (Butler, 2008). These are families, individuals, trusts,
estates, family partnerships, and other nonincorporated groups
of individuals that own forestland (Smith et al., 2009). These
lands are changing hands at a rapid pace (Sampson & DeCoster,
2000; Kilgore et al., 2007).
Many family forest owners are seeking methods to gradually
transfer natural resource-based assets to new owners who offer
long-term protection to the natural values of the properties
(Straka & Greene, 2002). Often forest land has been in a rural-
based or agricultural family for generations and the family
gradually loses it rural roots (Straka, 2011). There are limited
options that can allow for some sort of monetary return, while
ensuring protection of the property. Methods that allow the
owner to capture some of the monetary value of the property,
like tax-advant a g ed donat i o ns , a re becoming popular (Greene et
al., 2004).
At some point the younger generation would prefer to sell the
timberland, or at least get some monetary return, rather than
manage a family property (Kays et al., 1998). Other times the
family might prefer to break a large holding into smaller hold-
ings; for example, one equal smaller parcel for each sibling.
This is called forest parcelization and it poses a societal prob-
lem if these smaller tracts are to be managed for sustainable
forestry goals (Sampson & DeCoster, 2000). These smaller
tracts lose “economies of scale” relative to forest management
that can be practiced and often lose key attributes necessary for
Family forest owners are actively seeking methods to retain
some long-term level of family ownership, while avoiding for-
est parcelization (Butler, 2008). Forest land and timber are
increasingly being donated to foundations as older donors look
for tax-advantaged means to gradually transfer natural re-
source-based assets to new owners who offer long-term protec-
tion to the natural values of the properties (Zinkhan et al., 1992;
Chung, 2012).
Land donations to foundations are common and management
of land assets usually does not create a problem for foundation
administrators. Often the intent is for some organization to
retain perpetual ownership under some restrictions, but to allow
timber harvesting to generate periodic revenue to sustain the
property and pay for management. The timber resource, how-
ever, can increase the complexity of a land transaction and
make a donation difficult to value (Fasano & Straka, 2009). Po-
tentially, timber investments can produce negative cash flows
for lengthy periods of time. These long-term sustainability and
valuation issues can be difficult to address; acquisition of for-
estland requires a different set of tools for foundation deci-
sionmakers (D’Amato et al., 2010). Few foundations are
equipped to deal with forestland and timber assets, especially
the on-going management responsibilities (Straka, 2009a).
Most foundation managers don’t even understand the basics
of forestry or timber. Properly managed, timber can be an at-
tractive investment, especially if the investor understands the
fundamentals of forest management (Straka, 2009b). We de-
scribe the basic financial underpinning of a timberland donation,
including expected generation of cash flows, managerial com-
plexity, and key factors to consider when valuing potential
timberland donations. A basic review of forestry and timber
fundamentals is presented, including units of timber measure-
ment. Timber sales and contracts are discussed as they are the
source of cash flows. The importance of age-class distribution
is discussed in terms of its impact on cash flows. Forests pro-
duce periodic timber harvests that equate to periodic cash flows.
The “mechanics” of this process is described, as well as how
the process can be manipulated to produce favorable cash flows.
The importance of this material is that it can serve as a primer
for foundation managers who are first evaluating a potential
donation of forest land or timber.
Forestry Basics
A forest is an ecosystem consisting of an extensive tree cover.
Foresters divide forests into stands; these are contiguous groups
of trees that are similar in terms of age, species composition,
structure, and that grow on a site of relatively uniform soil
productivity. Stands are the basic management units used on the
forest (Helms, 1998). For example, a stand usually receives
management treatments as a unit; for example, all trees in a
stand would be thinned or harve st ed at the same time.
Soil productivity in forestry, the quality of forestland to grow
trees, is measured by site index. Site index always refers to a
particular tree species, for example loblolly pine sites or white
oak sites. Few species grow equally well on the same site. Spe-
cifically, site index is the average total height of the dominant
trees in a forest stand at an index age.
Site index is usually based on an index age of 25, 50, or 100
years. In the American South the common index age is 50 years
for natural pine stands and 25 years for pine plantations. If for-
estland has the capacity to grow dominant loblolly pines to an
average height of 28 m in 50 years, it is classified as site index
28 land for loblolly pine, base age 50. Site index is important
because of its dramatic impact on timber yield at harvest. Table
1 shows loblolly pine yields by site index for a 20-year old pine
plantation. The amount of pulpwood produced is over three and
a half times as much on the higher site index land.
Because site quality has such a major effect on timber yield,
it should be a key element in valuing any forest property. High-
er site index land is worth more than lower site index land for
timber production. If the forest is an investment and investment
capital is limited, the highest site index portion of the forest
should receive investment priority since this is the source of
maximum timber production.
Yield is just that, what the forest yields in timber products
(Stelzer, 2011). It is commonly measured in cubic meters per ha.
In much of North America, pulpwood is often measured in
cords and sawtimber in board feet. A cord is a stack of wood
122 cm (4 feet) wide, 122 cm (4 feet) high, and 244 cm (8 feet)
Table 1.
Pulpwood yields for a 20-year old loblolly pine stand on Virginia’s
coastal plain with 1730 trees per ha at various site indexes (base age
Site Index (meters) Yield (tonnes per ha)
15.2 (50 feet) 136
18.3 (60 feet) 207
21.3 (70 feet) 317
24.4 (80 feet)
long. This is a volume of 3.62 cubic meters (128 cubic feet). A
board foot of lumber is 30.48 cm (1 foot) × 30.48 cm (1 foot) ×
2.54 cm (1 inch). Weight is also commonly used as a measure
of forest yield. There are other products like chip-n-saw (small
timber that can produce some sawtimber, with the rest of the
trees chipped for pulpwood) and large high quality logs suitable
for plywood or poles.
Tree size is measured as diameter 1.3 m (4.5 feet) above the
ground, called diameter at breast height or DBH (Slusher, 1993;
Oderwald, 2009). Trees are often grouped into 5 cm (2 inch)
diameter classes, for example, a 25. 4 cm (10 inch) tree would
vary from 22.9 cm (9 inches) to 27.9 cm (10.99 inches). Larger
trees produce more valuable products and higher timber reve-
nue. Pulpwood is commonly trees in size from 12.7 cm to 25.37
cm (5.0 to 9.99 inches), chip-n-saw is commonly 25.4 cm to
32.99 cm (10 to 12.99 inches), and sawtimber is 33 cm (13
inches) and above. Keep in mind the larger diameter products
have significantly higher values. Pulpwood might be worth $10
per tonne on the stump, while chip-n-saw could be worth $25
per tonne, and sawtimber could be worth $35 per tonne. Poles
and plywood quality sawtimber might be worth $45 per tonne.
A forest inventory is necessary to determine the timber vol-
ume on a tract (Johnson, 2009). It should list trees per ha by
DBH classes. Further, the trees can be converted into timber
volumes by product, leading to an estimate of total timber value.
Basically, forest yield and stumpage price (price of timber on
the stump) are the bases of defining the revenue expected from
a timber sale. The forest yield is determined by site index, but is
also greatly impacted by stocking.
Stocking is a measure of how many trees are in a forest stand
relative to how many are needed to attain the best growth.
There are two common measures of stocking: trees per ha and
basal area. Basal area is the cross-sectional area of trees per ha
at breast height, measured in square meters per ha. Or, in plain
English, basal area is the square meter area of the top of all the
tree stumps on an ha of land if all the trees are cut 1.3 m (4.5
feet) above the ground.
A forest stand should be fully stocked to get the best growth,
not under-stocked or over-stocked (Blinn & Hendricks, 1997).
Basal area is most commonly used to estimate adequate stock-
ing. Trees per ha is a less reliable measure of stocking, unless
you have an idea of tree size and how the trees are spaced in the
stand. But it has the great advantage of being easily understood.
Stocking has little effect on total yield a forest if you are only
interested in cubic meters or tonnes of wood produced. Stock-
ing has a great impact, however, on the timber products avail-
able at harvest. You need a properly stocked stand to grow
sawtimber. For example, for a 30-year old loblolly pine stand,
stocking difference can account for over nearly five times more
sawtimber from a stand. Table 2 shows the amount of pulp-
wood and sawtimber that results from various stocking levels
for this 30-year old loblolly pine stand. A forester will be
needed to appraise stocking levels. Notice if you are just grow-
ing tonnes of wood, then stocking does not matter. But if you
are growing quality timber products, then it is critical. Existing
stocking will be a factor to consider when evaluating a timber
investment or donation.
Age Class Distribution
For donated timberland a key determinant of value will be
the age class distribution of the timber. Older timber usually
Copyright © 2012 SciRes.
Table 2.
Pulpwood and sawtimber yields for a 30-year old loblolly pine stand on
the Virginia coastal plain.
Single Product Multiple Products
Trees/ha All Pulpwood Sawtimber Pulpwood
tonnes per ha
1236 315.4 104.9 194.8
1483 316.1 77.6 223.0
1730 315.4 57.2 243.4
1977 312.9 41.9 257.8
2224 310.0 30.9 267.4
2471 310.0 22.6 273.5
equates to greater timber volume, plus a greater proportion of
more-valuable timber products. Proper forest management en-
sures the optimum tree species for a site is regenerated and that
stocking is controlled to produce optimum growth, both in vo-
lume and timber products. Forest stands may be thinned peri-
odically, to generate timber revenue and to enhance stocking.
Consider the simple case of a natural loblolly stand in Vir-
ginia, as it becomes older, more and more of the timber volume
becomes sawtimber. Figure 1 illustrates this with real-world
data. This illustration is for just pulpwood and sawtimber to
keep the example simple. If chip-n-saw was included, much
more of wood would be sawtimber; plus, poles and ply-
wood-quality sawlogs would add more value if included. The
difference is more pronounced if the illustration is viewed in
terms of value. If pulpwood is valued at $8.82 per tonne and
sawtimber at $33.07 per tonne, the comparison shows how
much value is added by the sawtimber (Figure 2).
Thus, one of the first questions that should be asked about
donated timberland is the age distribution of the stands. Where
is the timber in terms of its growing cycle? Is it premerchant-
able timber, young timber about to become sawtimber, or ma-
ture timber ready for the market? How well was it managed for
growth? Was it properly thinned when necessary? While the
overall volume of timber per ha is relevant, the overall propor-
tions of various timber products are even more important.
Cash Flow Distribution
The importance of the age class distribution is that is controls
the cash flow distribution. Donated timberland property can
have negative or positive annual cash flows. The age class dis-
tribution controls the sequence of thinning and harvest revenues.
Often, in the absence of significant annual revenue sources (like
hunting lease revenue; for example), annual cash flow can be
negative. Consider the typical loblolly pine management regime
in Table 3. The value of forestland managed under this man-
agement regime with these costs and revenues is $2470.95 per
ha based on discounted cash flows over a perpetual time hori-
zon at a 4% interest rate. This is called land expectation value
(LEV) and the calculation follows. A single rotation of timber
has a net present value (NPV) of $1544.06 per ha. That same
value, considering the 4% interest, has a net future value (value
at the end of the rotation) of $4116.21. Net future value equals
$1544.06(1.04)25 = $4116.21 per ha. LEV (or bare land value)
is equal to an infinite number of these rotations and has a NPV
of $2470.95 per ha.
15 2025 30 3540 45
Stand Age
Tonnes per ha
Figure 1.
Pulpwood and sawtimber yields for a natural loblolly
pine stand on Virginia’s coastal plai n.
15 2025 30 3540 45
Stand Age
Dollars per ha
Figure 2.
Proportionate pulpwood and sawtimber value for a nat-
ural loblolly pine st and on Virgi nia’s c oastal plain.
Table 3.
Hypothetical timber management regime for loblolly pine with actual
and discounted cash flows pe r ha at a 4% interest r ate.
YearActivity Cash Flow Discounted Cash Flow
0 Site prepare –$494.21 –$494.21
1 Weed control –185.33 –178.20
18 Thinning revenue+741.32 +365.94
25 Harvest revenue +5447.95 +2043.62
1 - 25Annual cost –1 2.36 –193.09
NPV = $1544.06
Several key characteristics of timberland investments control
its cash flows (Bettinger et al., 2009). First, unless the forest is
already established, there are usually potentially large initial
costs. Site preparation, planting, herbaceous weed control, and
fertilization occur early in the investment. Bare land will mean
significant initial costs. Second, the age class structure, as al-
ready discussed, will control cash flows. If the age class struc-
ture is limited, potential revenue might be infrequent and de-
layed. Fortunately, forest yields from any age class distribution
can be easily projected. Third, forestry investments tend to be
long-term. A single timber rotation in the American South can
range up to 35 or more years. In the American West the range
can be 50 to 100 years. Of course, a forest can have many age
Consider the cash flow generated by t he mana gement regime
in Table 3. There are negative cash flows until the timber is
thinned at year 18 and even then the cumulative cash flow con-
sidering interest is negative. However, at final harvest the major
positive cash flow occurs, but that is at year 25. The cumulative
cash flow considering interest at year 25 is $4116.20 (if the
Copyright © 2012 SciRes. 259
planting and site preparation cost of the next rotation is in-
cluded, it is $3621.99).
Table 4 and Figures 3 to 6 illustrate the huge impact of age
class distribution on donated timberland. Notice if the timber-
land is donated as bare land (needing site preparation and
planting), it has a negative cumulative cash flow until the final
harvest at age 25. This is the situation where LEV or bare land
value is calculated and this bare land donation would have a
value of $2470.95 per ha at 4% interest.
When more mature timber is donated, say 10-year old pre-
merchantable timber, the negative cash flow is only for eight
years and then the cumulative cash flow remains positive. If the
donated timber was at the thinning age of 18-years old, then the
cumulative cash flow is always positive. If a mature timber
stand of age 25-years is donated, there is an immediate huge
cash flow. Recall the age zero timber stand is worth $2470.95
per ha at 4% interest; the age 10-year timber stand would be
worth $4788.98 per ha; the age 18-year timber stand would be
worth $6672.50 per ha; and the age 25-years timber stand
would be worth $7906.54 per ha (this is the immediate cash
flow of $5435.59 plus the value of all the remaining rotations
of $2470.95). Figure 7 shows the donation value (LEV plus
discounted value of existing stand) for all donation ages be-
tween 0 and 25 years.
Table 4.
Cumulative cash flows including 4% interest for a loblolly pine tract
donated at ages 0, 10, 18, and 25 y ear s.
Annual Cumulative Cash Flow Inclu ding Interest
Cash Age 0 Age 10 Age 18 Age 25
Year Flow Donation Donation Donation Donation
0 –$494.21 –$494.21
1 –197.69 –711.67
2 –12.36 –752.50
3 –12.36 –794.96
4 –12.36 –839.12
5 –12.36 –885.04
6 –12.36 –932.80
7 –12.36 –982.47
8 –12.36 –1034.13
9 –12.36 –1087.86
10 –12.36 –1143.73 –$12.36
11 –12.36 –1201.84 –25.21
12 –12.36 –1262.27 –38.58
13 –12.36 –1325.12 –52.48
14 –12.36 –1390.48 –66.94
15 –12.36 –1458.46 –81.98
16 –12.36 –1529.16 –97.62
17 –12.36 –1602.69 –113.88
18 +728.96 –937.84 +610.52 +$728.96
19 –12.36 –987.71 +622.58 +745.76
20 –12.36 –1039.58 +635.12 +763.23
21 –12.36 –1093.52 +648.16 +781.40
22 –12.36 –1149.62 +661.73 +800.30
23 –12.36 –1207.96 +675.84 +819.95
24 –12.36 –1268.64 +690.51 +840.39
25 +5435.59 +4116.20 +6153.72 +6309.60 +$5435.59
Cumulative Cash Flow ($)
Figure 3.
Cumulative cash flow per ha for a donated loblolly pine
forest at age 0, including inte rest.
Cumulative Cash Flow ($)
Figure 4.
Cumulative cash flow per ha for a donated loblolly pine forest
at age 10, including interest.
Cumulative Cash Flow ($)
Figure 5.
Cumulative cash flow per ha for a donated loblolly pine forest at
age 18, including interest.
Converting Cash Flow into Donation Value
A timberland investment or donation is evaluated just like
any other investment or donation (Bullard & Straka, 1998).
Consider the loblolly pine stand described in Table 3. The
structure of the cash flows can be determined from the man-
agement regime and discounted cash flow analysis can be used
to determine the standard financial criteria. The NPV of a sin-
gle rotation is calculated in Table 3 as $1544.06 and the inter-
nal rate of return (IRR) for this investment is 9.02%. Like NPV,
IRR is calculated in the standard manner.
One interesting financial criterion used in forestry is equal
annual income (Straka et al., 2001). The investment’s NPV is
multiplied by the formula to convert a single sum into an an-
nual series to obtain the equivalent equal annual cash flow.
Foresters sometimes use this criterion to compare timber in-
vestments with annual investments, like agricultural crops
Copyright © 2012 SciRes.
Copyright © 2012 SciRes. 261
012345678910111213141516 1718 192021 2223 2425
Cumulati ve Cash Flow ($
Figure 6.
Cumulative cash flow per ha for a donated loblolly pine forest at age 25, including interest.
Stand a
e at donation
Donation value
Figure 7.
Donation value of loblolly pine stand per ha for various stand
ages, value of discounted remaining cash flow in rotation
plus di sc ou nte d land ex pect ati on val ue at 4% inte re st.
(Straka et al., 2002). For this example, equal annual income is
$98.84 per ha. At a 4% discount rate, a cash flow of $98.84 per
year for 25 years is equal to a single sum (or NPV) of $1544.06
at year 0. An equivalent positive annual cash flow of $98.84 per
ha might seem reassuring, but keep in mind that this investment
would have a negative cash flow for 23 of the 25 years.
Finally, LEV or bare land value is the NPV of an infinite
number of timber rotations on a forested tract (Straka & Bullard,
1996). The criterion assumes the land is bare and the manage-
ment regime will be re peated forever. The basic formula for the
present value of a perpetual periodic cash flow series is used to
calculate LEV (Klemperer, 1996). For the loblolly pine stand in
Table 3, LEV is $2470.95 per ha. This is the value of a string
of timber rotations based on Table 1 that extends forever. This
means if an investor paid $2470.95 per ha for bare land and
grew timber according to Table 1 forever, the rate of return
earned on the investment would be 4%. This is because LEV is
a type of NPV calculation and it was calculated using the same
4% interest rate as the example.
Donation value is calculated in each case from the data in
Table 4. At each age the remaining cash flow is discounted for
the years remaining in the rotation; added to this is LEV dis-
counted for the same time period; the two combined add up to
the donation value. For example, the cash flow from an age 25
donation is an immediate harvest value of $5435.59. The donor
receives that harvest value plus has a perpetual flow of timber
rotations (LEV) with a value of $2470.95. The donation value
is the sum of the two or $7906.54 per ha.
If the donation was an 18-year old stand, the donor would
have the cash flow in Table 4 that has a future value in seven
years of $6309.60. In seven years LEV would then be worth an
additional $2470.95. So the donation value for an 18-year old
stand is $8780.55, discounted for seven years at 4% interest, or
$6672.50 per ha. Likewise a 10-year old stand would be worth
$6153.72 plus $2470.95, both discounted for 15 years, or
$4788.97 per ha. Finally, the 0-year old stand donation value
would be worth $4116.20 plus $2470.95, both discounted for
25 years, or $2470.95 per ha. As we’d expect the donation val-
ue of a zero aged stand is LEV. Calculations for ages not in
Table 4 are performed in an identical manner using the ex-
pected cash flows.
Other Forestry Basics
Foundation administrators and board members should under-
stand the basic terminology and management considerations of
timberland investment alternatives (Slusher, 1990). Timber and
timberland pose some unique management problems. Some of
the basic ones are discussed below.
Many items not considered in an investment analysis influ-
ence timber values (Straka et al., 1985). For example, it is pru-
dent for investors and owners to know how their timber is actu-
ally valued. There are two common types of timber prices:
delivered and stumpage. Delivered is the price if you deliver
the timber to a mill; stumpage price is for timber as it sits on
the stump in the woods. Stumpage price is less than delivered
price as someone has to harvest and transport stumpage to the
mill. Other significant factors influencing the price offered for
timber are discussed below.
Timber Volume
The owner expects to be paid for the amount of timber sold
(Rickenbach, 2003). That is sometimes not as easy as it seems.
Timber is sold lump sum and “per unit.” With lump sum the
owner sells the timber on a specific area or marked timber for a
negotiated price and the buyer obtains ownership for whatever
timber volume is actually there. A professional forester needs to
perform a timber cruise to ensure the owner knows the volume
being sold. With a per unit sale the owner receives periodic
payment for the actual timber cut as it is delivered. That means
the owner needs some sort of security to assure payment for all
loads from the tract.
Is the timber properly merchandized (e.g., is there sawtimber
in a load of pulpwood?). What unit is the wood measured in
(cubic meters, tonnes, or some other measure)? In North Amer-
ica thousand board feet it used to measure sawlogs and various
scales are used (there are many “log rules” and they vary). Is
there a conversion between volumes? Sometimes volume
measures are converted into weight measures for payment pur-
poses. Some timber species are worth more than others. As
average diameter increases on a tract, so should the price of the
timber. Larger diameter logs have much greater lumber vol-
umes and value; both size and quality contribute to this value.
Even the length of the timber sale contract can impact timber
volume. If the seller allows the buyer a couple of years to get
all the timber off the tract, and logging occurs at the end of the
contract period, there would be two years of extra growth the
seller never gets paid for if it were a lump sum sale.
Harvesting Costs
Timber value is based on the value of wood delivered to a
processing facility, minus harvesting costs and transportation
costs (Watson et al., 1986). The company that buys a tract of
timber incurs costs (overhead cost of personnel and vehicles,
timber cruising, biding, legal work, and the cost of unsuccessful
bids). These costs are deducted from a bid. The largest cost
deducted from log values is the actual cost of harvesting the
timber, which is influenced by many factors. The type of har-
vest has a huge impact (a partial cut is much more expensive
than a clearcut). Timber size and species also affect the costs of
harvesting. On a per unit of volume basis, large timber is less is
less expensive to harvest than small timber. Hardwood species
require more time to delimb than do pines and are, therefore,
more expensive to harvest.
Weather conditions directly influence harvesting costs. Wet
weather probably increases harvesting costs more than any
other single factor. Wet weather reduces skidder capacity and
some owners ban logging during wet weather to minimize soil
damage. Any sales restriction will result in lower timber prices.
As mills can only stockpile so much timber to carry them
through wet periods, tracts that can be efficiently logged in wet
weather often earn premium timber prices.
The physical condition of a tract affects logging. Fragile soils
require special care. Steep slopes also require special care and
extra effort from machine operators. Access can add costs.
Rights-of-way may need to be acquired and logging roads con-
structed. Any constraint on the logger adds costs (e.g., gas lines,
power lines, and streams decrease productivity and increase
hazard). Landowner restrictions on length of work day or work
week, condition of fences, ponds, and logging roads, aesthetic
barriers, or game habitat all increase harvesting costs.
Transportation Costs
Costs of moving loggers to and from various timber tracts
can vary greatly. The distance that equipment must be moved to
begin logging a tract and the number of machines to be moved
affects total harvesting costs. As the amount of wood to be
moved from a tract increases, however, the influence of moving
costs is greatly reduced (the cost per unit of production goes
Transportation from the tract to the mill is another significant
cost. Factors that influence this cost are distance to the mill on
public roads, condition of public roads and bridges, urban areas
between the tract and mill, and distance and condition of woods
roads. Gross truck weight laws can also be a factor.
Forest owners need to be aware that stumpage price is de-
rived from delivery value minus the costs of purchasing, har-
vesting, and hauling timber from a tract. Owners can control
only a few of the factors, like contract restrictions. Sometimes
fewer restrictions can produce both better timber prices and
after-harvest tract conditions, as often it is cheaper for loggers
to accomplish the desired results as part of the logging opera-
tion. Professional assistance is usually well worth the invest-
ment and can ensure timber sale security and top timber value.
Timber Sale Fundamentals
A timber harvest is not a single event, but should be part of
the owner’s management strategy and goals; it has huge silvi-
cultural implications and impacts the future productivity of the
tract (Straka & Watson, 1985). Unless the owner is well versed
in timber sale requirements, a professional forester’s services
will likely be well worth the investment (Straka, 2010). If the
forest is well managed, the owner will have a forest resource
management plan and a supplemental timber harvest plan
(Straka, 1997). For most forest owners, this is not a do-it-
yourself project.
As a first step the property boundaries and timber sale boun-
daries need to be clearly marked. It is important that the trees to
be cut are positively identified to eliminate the major problem
of accidentally cutting on a neighbor’s property. The contract
should specify exactly which trees are to be cut and uncut in a
partial sale. Adjacent neighbors should be contacted. It is sim-
ply polite and it could avoid a misunderstanding. Plus, then
there would be other people in the area knowing what is going
on, perhaps helping the owner keep tract of timber removed
from the tract.
Second, the best timber price should be obtained and this
means marketing the timber. This is a major reason a forester is
recommended; they have the contacts and experience to best
market timber. Many consider sealed bids to be a means to
maximize timber price. Certainly, the better the marketing, the
greater the number of bids, and that will produce the highest
timber prices. Timber will be sold on a lump sum or per unit
basis. Lump sum eliminates many timber security issues as
there is no need to keep tract of timber (unless a partial sale is
involved, then someone must see that no “extra” timber is cut).
The owner needs to know what the timber is worth. This
seems too simple to mention, but many owners don’t under-
stand units of measure. Some timber species are worth much
more than others. Average DBH of a tract will largely control
price, but tree quality is another big factor.
Third, a timber contract is a must. On a per unit or pay-as-cut
sale it can ensure the owner is paid on a regular basis. It can
establish where logging roads will go, locations of logging
decks, protection of sensitive areas, and ability to shut down
operations in bad weather. There are dozens of other issues
addressed in a good timber sale contract.
Fourth, the owner needs to be certain a quality logging firm
will be operating on the property. There are many truly compe-
tent professional loggers and a few who are not. The owner will
regret letting a “not” operate on his or her property. Best Man-
agement Practices (BMP’s) could become an issue. BMP’s are
established practices that offer protection to your property and
reduce soil erosion from harvesting operations. The forest
owner is ultimately for voluntary BMP compliance. The choice
of logger has a huge impact on what the finished job looks like
(Watson & Straka, 1983).
Fifth, someone needs to monitor the timber sale. Only by
regular visits can the owner or forester be certain contract pro-
visions are being met. A good logger will have to interpret the
contract to fit the many conditions on the tract. Sometimes the
logger’s interpretation differs from the owner’s interpretation.
Often the logger can suggest contract modifications that will
increase profit.
Sixth, once the logging operation is complete, a final inspec-
tion should establish the tract has been left in the condition
Copyright © 2012 SciRes.
specified in the contract. Does logging slash meet requirements?
Have all marked trees been harvested and are all unmarked
trees uncut? Are any erosion control practices in place? Even
for a tract left in good condition, the owner will have erosion
and water pollution concerns, as this is a time the tract is vul-
nerable. There are post-harvest BMP’s that must be put into
place. Of course, regeneration is often part of the post-harvest
Timber Contract Fundamentals
Most forest owners harvest timber. Donated timber needs to
be harvested periodically. The experience can vary from pleas-
ant to catastrophic and often the difference is due to a
well-written timber sale or timber deed contract (Clatterbuck &
Tankersley, 2005).
A clearly-written, legally-binding contract should be the ba-
sis of all timber transactions (Straka & Watson, 1985). A docu-
ment that can be recorded at the courthouse is best. Ideally, the
owner will seek the advice of three professionals; an accountant,
lawyer, and forester. A timber sale is often a large financial
transaction and ought to be treated as such (Daniels et al., 2012).
Four basic issues need to be resolved by the contract: the exact
timber being sold, the terms and prices, restrictions on logging
operations, and property protection measures. Below are spe-
cific considerations for any timber sale contract.
Who are the buyer and seller? Who actually owns the timber?
Will the buyer and seller have agents or deal directly with each
other? If the seller is an absentee landowner, who will represent
him? Can the buyer assign rights? What is the length of the
contract? What if the timber sale is incomplete at the termina-
tion date? Are extensions allowed and is there a cost? There
would certainly be a cost to the seller due to delayed regenera-
tion. Can the logging job be shut down during bad weather?
Will the owner be notified when operation begins, is temporar-
ily shut-down, and ends?
What is the legal description of the sale location and exactly
what is being sold? Exactly what is being sold needs to be
clearly defined. It can be just as important to define what is not
being sold. Besides a formal legal description, a tract location
map should be included, with property lines and sale bounda-
ries. If there is a problem precisely defining the sale boundary,
the owner should insist that a well-defined boundary be estab-
lished. Exact, precise definitions of the trees being sold are an
absolute necessity. What tree species are included and excluded.
What trees sizes are to be cut and how will it be measured (if
tree size is defined by DBH there will be no precise way to tell
if a cut tree actually met the requirements; maybe measurement
should occur on the stump portion of the tree)? Will the cut
trees be marked? Flagging should never be used for marking; it
is temporary. If paint is used, the owner should be certain that
the stumps are also marked and that there are no way additional
trees can be marked later. Trees grow; if cut trees are defined
by DBH or merchantability, which date is used to establish if
they are included in the sale? Is it the date of the contact or the
date of harvest? What units of measure will be used?
What is the timber price and payment schedule? The timber
price per unit can be tricky and is why a forester should be
involved. Lump sum or per unit sales will mean different types
of payment schedules. Will there be a down payment? Will
there be a performance bond or security payment? This can
ensure contract provisions are satisfied and can be used to en-
sure soil, water, and other resources are protected. All owners
would want to require adequate insurance is in place and should
be certain the contract places liability for the logging operation
on the buyer. This is crucial as harvesting operations are dan-
Are BMP’s to be followed and what if they are not? A har-
vest map ought to be part of any timber harvest plan and needs
to include tract and sale boundaries, location of landings,
stream crossings, logging roads, and any environmentally sen-
sitive areas like wetlands or special wildlife habitats. What
conditions does the owner expect the landings, stream crossings,
and logging roads to be left in? Where will the buyer have ac-
cess to the property and will it be limited in any way (gates)?
Some owners are sensitive about logging slash and debris; and
contract specifications can address this issue. Each restriction
increases logging cost.
What if unmarked trees are cut or cutting occurs across a
boundary? Penalties need to be explicit. What if timber is im-
properly merchandized (sawtimber included in a load of pulp-
wood on a per unit sale)? On a per unit sale, utilization stan-
dards are important. Both maximum stump height and top di-
ameter need to be specified so that no usable wood is left in the
Fire is sometimes an issue. The buyer should be required to
follow all fire laws. What if the seller suffers injury due to a fire
caused by the logging operation? What if the timber is de-
stroyed mid-harvest by fire or hurricane? Arbitration is often
specified in the contract to handle disagreements.
Timber sales represent an opportunity to have improvements
made to the property (Bardon, 2011). Keep in mind the tract
conditions at the end of a harvesting operation are the tract
conditions at the beginning of the site preparation and regenera-
tion operations. Perhaps the contract can include provisions to
ensure the tract is left in shape to minimize the cost of regen-
eration. Gates could be added and roads lengthened. Maybe
pre-commercial thinning could be accomplished on an adjacent
stand while the equipment is nearby. Obviously, this would
increase overall harvesting cost, but it might be the most cost-
effective way to achieve these improvements.
Foundation managers can increasingly expect to obtain offers
of donated forestland and timber properties. Often these assets
come with “strings attached,” like retaining the land in forest,
expectations that the forestland will be retained in some sort of
ownership on a perpetual basis, or limitations on timber har-
vesting. Forests and timber are complex investments and many
financial managers are not well-versed in their management
requirements. The forestry basics presented in this article
should provide these managers the basic issues to address in
terms of forestry basics, timber value, sales, and contracts. This
represents the basics the manager needs to know prior to bring-
ing a forestry professional into the discussio n .
Any asset that can produce negative cash flows for long pe-
riods is one that foundation managers look at closely. The age
class distribution controls cash flow for a forestry investment
and the mechanics of how these cash flows can be determined
should prove invaluable in making preliminary determinations
on the value of forested properties. Certainly this basic forestry
information can be found on the web and introductory forestry
textbooks. However, the information summarized here is spe-
Copyright © 2012 SciRes. 263
Copyright © 2012 SciRes.
cifically addressed to foundations and donated forestland. That
explains the emphasis on cash flows and timber security issues.
Foundation managers will want this type of information in their
files when called upon to exercise fiduciary responsibilities
when donated forest land opportunities arise.
Bardon, R. F. (2011). Timber sales: A planning guide for landowners.
AG-640 (Revised). Raleigh, NC: North Carolina State University
Cooperative Extension Service.
Bettinger, P., Boston, K., Siry, J. P., & Grebner, D. L. (2009). Forest
management and planning. Burlington, MA: Academic Press.
Blinn, C. R., & Hendricks, L. T. (1997). Marketing timber from the
private woodland. St. Paul, MN: Un iv e rsity of Minnesota Extension.
Bullard, S. H., & Straka, T. J. (1998). Basic concepts in forest valuation
and investment analysis (2nd ed.). Jackson, MS: Forestry Suppliers.
Butler, B. J. (2008). Family forest owners of the United States, 2006.
Newtown Square, PA: USDA Forest Service, Northern Research
Chung, H.-F. (2012). Timberland investment: A primer. Brookline, MA:
Timberland Investment Resources LLC.
Clatterbuck, W. K., & Tankersley, L. (2005). Landowner’s guide to
timber sale contracts. Knoxville, TN: University of Tennessee Ex-
Daniels, B., McAvoy, D., & Kuhns, M. (2012). Preparing a timber sale
contract. Logan, UT: Utah State University Coopera tive Extension.
D’Amato, A. W., Catanzaro, P. F., Damery, D. T., Kittredge, D. B., &
Ferrare, K. A. (2010). Are family forest owners facing a future in
which forest management is not enough? Journal of Forestry, 108,
Fasano, G. A., & Straka, T. J. (2009). Timberland investing for finan-
cial planning clients. Journal of Financial Planning, 22, 56-63.
Greene, J. L., Straka, T. J., & Dee, R. L. (2004). Non-industrial private
forest owner use of federal income tax provisions. Forest Products
Journal, 54, 59-66.
Helms, J. A. (Ed.) (1998). The dictionary of forestry. Bethesda, MD:
The Society of American Foresters.
Johnson, J. E. (2009). Forest landowner’s guide to the measurement of
timber and logs. Blacksburg, V A: Vi rginia Cooperative Extension.
Kays, J. S., Goff, G. R., Smallidge, P. J., Grafton, W. N., & Parkhurst, J.
A. (Eds.) (1998). Natural resources income opportunities for private
lands—Proceedings of the conference. College Park, MD: University
of Maryland Cooperative Extension Service.
Kilgore, M. A., Green e, J. L., Jaco bso n, M. G., St raka, T. J., & Dan iels,
S. E. (2007). The influence of financial incentive programs in pro-
moting sustainable forestry on the nation’s family forests. Journal of
Forestry, 105, 184-191.
Klemperer, W. D. (1996). Forest resource economics and finance. New
York, NY: McGraw-Hill, Inc.
Oderwald, R. G. (2009). Measuring standing trees and logs. Blacks-
burg, VA: Virginia Coop erative Extension.
Rickenbach, M. G. (2003). Conducting a successful timber sale: A
primer for landowners. Madison, WI: University of Wisconsin-Ex-
Sampson, N., & DeCoster, L. (2000). Forest fragmentation: Implica-
tions for sustainable private forests. Journal of Forestry, 98, 4-8.
Slusher, J. P. (1990). Forestry terms for the woodland owner. Columbia,
MO: University of Missouri Extension.
Slusher, J. P. (1993). How to measure trees and logs. Columbia, MO:
University of Missouri Extension.
Smith, W. B., Miles, P. D., Perry, C. H., & Pugh, S. A. (2009). Forest
resources of the United States, 2007. Washington, DC: USDA Forest
Service, Washington Office.
Stelzer, H. E. (2011). Selling timber: What the landowner needs to
know. Columbia, MO: University o f Missouri Extension.
Straka, T. J. (1997). Forest management plans for small holdings. For-
est Landowner, 56, 34-35, 38-39.
Straka, T. J. (2009a). Does your client own timberland? Financial Ad-
visor, 10, 95-96.
Straka, T. J. (2009b). Forest products finances: Institutional investors.
Forest Products Equipment, 17, 12-13, 21.
Straka, T. J. (2010). How to sell timber. Forest Landowner, 69, 30-32.
Straka, T. J. (2011). Taxonomic review of classical and current litera-
ture on the perennial American family forest problem. Forests, 2,
660-706. doi:10.3390/f2030660
Straka, T. J., & Bullard, S. H. (1996). Land expectation value calcula-
tion in timberland valuation. Appraisal Journal, 64, 399-405.
Straka, T. J., Bullard, S. H., & Dubois, M. R. (2001). Introduction to
forestry investment analysis, part I: Basic investment characteristics
and financial criteria. F orest Landow ner, 60, 9-12, 14.
Straka, T. J., Bullard, S. H., & Dubois, M. R. (2002). Introduction to
forestry investment analysis, part II: Taxes, inflation, and other is-
sues. Forest Landowner, 61, 39-44.
Straka, T. J., Bullard, S. H., & Watson, W. F. (1985). Primer on for-
estry investme n t . Forest Farmer, 45, 10-11.
Straka, T. J., & Greene, J. L. (2002). Do your clients understand how
taxes affect their timber investments? The Consultant, 47, 27-29.
Straka, T. J., & Watson, W. F. (1985). Avoiding ambiguities in timber
sale agreements. The Consultant, 30, 29-31.
Watson, W. F., Bullard, S. H., & Straka, T. J. (1986). It pays to know
how your timber will be valued. Forest Farmer, 45, 14-16.
Watson, W. F., & Straka, T. J. (1983). Match harvesting equipment and
methods to your fores t ’ s conditions. Forest Farmer, 42, 6-7, 19.
Zinkhan, F. C., Sizemore, W. R., Mason, G. H., & Ebner, T. J. (1992).
Timberland investments: A portfolio perspective. Portland, OR:
Timber Press.