Effective January 1, 2018, the Partnership adopted Topic 606, Revenue from Contracts with Customers. For revenue from the Partnership Timber and Funds Timber segments, which consists primarily of the sale of logs, there were no changes to the timing or amount of revenue recognized because contracts are legally enforceable, the transaction price is fixed, and performance is completed and control transfers at a point in time, typically when risk of loss and title passes to the customer. Similarly, no changes were identified to the timing or amount of revenue recognized from certain components of other revenue in these segments, including commercial thinning, royalties from gravel mines and quarries, and land use permits. For timber deed sales, the timing of revenue recognition was accelerated under the new standard to the effective date of the contract, whereas under the previous revenue recognition guidance the revenue was generally recognized when the timber was harvested by the customer. Under Topic 606, revenue recognized from timber deed sales in the third quarter of 2018 was $588,000 less than it would have been under the previous revenue recognition standards. For the nine months ended September 30, 2018, revenue recognized under Topic 606 was $6.9 million greater than it would have been under the previous revenue recognition accounting standards. For the Real Estate segment, this new standard may result in accelerating the recognition of revenue for performance obligations that are satisfied over time, which generally consist of construction and landscaping activity in common areas completed after transaction closing. The Partnership adopted this standard using the cumulative effect transition method applied to uncompleted contracts as of the date of adoption. The Partnership, however, had no uncompleted contracts at the date of adoption. Accordingly, the adoption of this standard did not have a cumulative effect on the Partnership’s consolidated financial statements.

Revenue is measured based on the consideration specified in a contract with a customer. The Partnership recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by the Partnership from a customer are excluded from revenue. Shipping costs associated with delivering products to customers are included in cost of sales.

Included in “Accounts receivable, net” are $4.4 million of receivables from contracts with customers as of September 30, 2018, and December 31, 2017. Significant changes in the contract asset balance during the period were as follows, and there were no contract liabilities as of September 30, 2018, and December 31, 2017:



Contract assets, January 1, 2018	$	—
Revenue recognized from the satisfaction of performance obligations	10,255
Revenue recognized from changes in estimates of variable consideration	249
Transferred to receivables from contract assets	(5,557		)
Contract assets, September 30, 2018	$	4,947

The contract assets in the table above represent rights to consideration for timber deeds transferred to the customer and are related to the Funds Timber segment. These contracts provide the customer the legal right to harvest timber on the Funds’ property. The value of a timber deed contract is determined based on the estimated timber volume by tree species multiplied by the contracted price. The contract consideration is considered variable because the timber volume is an estimate until the harvest is completed. The contract assets are transferred to receivables when the rights to consideration become due under the contract. Customers may harvest the timber at their discretion, within a time period and operational parameters stated in the contract.

The following is a description of principal activities, separated by reportable segments, from which the Partnership generates its revenue.

Partnership Timber and Funds Timber

Log sale revenue in these two segments is recognized when control is transferred, and title and risk of loss passes to the customer, which typically occurs when logs are delivered to the customer. Revenue in these two segments is earned primarily from the harvest and sale of logs from the Partnership’s and Funds’ timberland. Other revenue in these segments is generated from the sale of rights to harvest timber (timber deed sales), commercial thinning, ground leases for cellular communication towers, royalties from gravel mines and quarries, and land use permits. Timber deed sales are generally structured so that the customer pays a contracted price per volume, measured in thousands of board feet (MBF), and revenue is recognized when control is transferred to the customer, which generally occurs on the effective date of the contract. Commercial thinning consists of the selective cutting of timber stands that have not yet reached optimal harvest age. However, this timber does have some commercial value and revenue is based on the volume harvested. Royalty revenue from gravel mines and quarries is recognized monthly based on the quantity of material extracted.

The following table presents log sale and other revenue for the quarters and nine months ended September 30, 2018 and 2017:



(in thousands)	Quarter ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Partnership Timber
Log sale revenue	$	11,638	$	8,298	$	31,312	$	24,686
Other revenue	601		600		1,635		1,487
Total revenue	$	12,239	$	8,898	$	32,947	$	26,173

Funds Timber
Log sale revenue	$	11,353	$	5,682	$	29,356	$	19,912
Timber deed sale revenue	1,640		1,235		10,504		1,945
Other revenue	260		165		851		204
Total revenue	$	13,253	$	7,082	$	40,711	$	22,061

Timberland Investment Management (TIM)

Fee revenue generated by the TIM segment for managing the Funds includes fixed components related to invested capital and acres under management, and a variable component related to harvest volume from the Funds’ tree farms. These fees, which represent an expense in the Funds Timber segment, are eliminated in consolidation. The TIM segment occasionally earns revenue from providing timberland management-related consulting services to third-parties and recognizes such revenue as the related services are provided.

Real Estate

The Real Estate segment’s activities consist of investing in and later selling improved properties, holding properties for later development and sale, and managing commercial properties. Revenue is generated primarily from sales of land, sales of development rights known as conservation easements (CE’s), sales of unimproved land from the Partnership’s timberland portfolio, and residential and commercial rents. Revenue on real estate sales is recorded on the date the sale closes. When a real estate transaction is closed with obligations to complete infrastructure or other construction, the portion of the total contract allocated to the post-closing obligations may be recognized over time as that work is performed, provided the customer either simultaneously receives and consumes the benefits as we perform under the contract, our performance creates or enhances the asset controlled by the customer, or we do not create an asset with an alternative use to the customer and we have an enforceable right to payment for the performance completed. Progress towards the satisfaction of our performance obligations is generally measured based on costs incurred relative to the total cost expected to be incurred for the performance obligations.

The following table breaks down revenue for the Real Estate segment for the quarters and nine months ended September 30, 2018 and 2017:



	Quarter ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017

Development rights (CE)	$	—	$	—	$	3,730	$	—
Residential land sales	1,975		2,487		2,126		2,942
Unimproved land	—		—		125		—
Total land sales	1,975		2,487		5,981		2,942
Rentals and other	541		336		1,268		863
Total revenue	$	2,516	$	2,823	$	7,249	$	3,805