The constantly changing definitions and value of HBU lands in forestry

Implications: The designation of forest land as higher and better use, HBU is becoming more important in the valuation of large Timberland transactions.  The definition of HBU has broadened into more nontraditional forestry uses.  Up to the mid-1980s, HBU was pretty much considered to be waterfront properties or property that had higher real estate values than forest land.  As the price of Timberland in general increase the need to quantify each HBU opportunity became more apparent, in order to get the proper valuation on Timberland.  In my previous employment I was involved in purchasing of large tracts of Timberland.  In the late 80s we discovered that there were a percentage of the tracts that had nontraditional HBU values.  The first HBU enhancements were the marketing of Ridge top forest lands for second-home development followed by primary home usage.  Many of these forest land tracts that were purchased contain a significant percentage of designated view lots. 

Analysis:   These potential lots were normally run along the Ridgetop in areas that were expanding to real estate.  So now the market has taken what was considered very poor Timberland and upgraded it to potential building lots featuring spectacular views of the countryside.  This upgrade accounted for a jump in valuation from as little as $200 an acre $2000 an acre in very short time
The next wave of HBU was the telecommunications industry.  As the use of cell phones increased exponentially, the need for more and more towers was evident.  These cell towers competed for the same sites as the so-called view lots.  Cell towers normally rely on line of sight to transmit information.  So the exact angle of the property itself was not as important as the next wave of HBU required.   The latest reincarnation of HBU is in the energy area.  Both solar panels and windmills have been competing for some of the same sites.  The angle of the windmills and solar panels is more critical to the correct operation of these low-impact energy producing sites.  Areas of West Virginia and Virginia windmills are being put in farms along the ridge tops.  Some of these windmills are over 400 feet tall.   This height and number of these windmills has created a controversy in itself.  Most people move out into rural areas, do so in an attempt to avoid the trappings of everyday life.  Many of these individuals consider themselves to be environmentalists, and support the concept of alternative energy sources. The impact of these windmill farms has caused consternation within this group, as the “not in my backyard” syndrome sets in.   As the price of timberlands generally increases so will the value of these alternate uses and HBU sources?  With at least three or four alternate uses for some of the same sites, competition for these sites will increase and the price per acre will continue to rise.  There may become a point where the traditional valuation process for forest land will operate in reverse.  Instead of increasing the Timberland values by HBU values, the, evaluation community may find it more efficient to evaluate the HBU and then speculate with the Timberland values.   The correct valuation and recognition of HBU lands will drive many analyses to a conclusion that would be different if HBU was not evaluated properly.  One has to wonder what the next wave of HBU values will be from traditional forestry applications.  This emphasis on HBU will also encourage fragmentation of the forest as the sites are broken into non traditional timberland holdings.  This phenomenon will put more pressure on traditional management and could contribute to increased costs for wood consuming Mills.   This is another case of the increasingly integrated and complicated process of forestry in the  United States has become.