While US annual housing starts declined 72% between 2005 and 2010, timberland-owning REITs – Potlatch (PCH), Plum Creek (PCL), Rayonier (RYN) and Weyerhaeuser (WY) – deferred forest harvests and shifted harvest mix away from sawtimber (the logs for manufacturing lumber and building houses) towards pulpwood (the raw material for paper and paperboard), where pricing and demand remained relatively stable. While summarizing the overall exposure to housing markets across firms, this January 2011 technical note focuses on volumes and product mix from forest operations and analyzes the potential future operational performance of timber REIT equities as housing recovers, with regard to the implications or opportunities from their deferral of forest harvests and shift of mix.
The issues examined in the note are:
- Timber REITs’ Exposure to Housing (across firms and over time)
- Forest Harvesting by Timber REITs: Recent History and Outlook
- Timber REIT Forest Harvesting: Impact of Mix and Relative Prices
- Investment Implications
The analysis will be useful for investors, analysts, and executives interested in publicly-traded timberland-owning real estate investment trusts (REITs).
The Executive Summary of the note is available here.
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