My parents purchased the 23 acres of land where my dad built our house over 30 years ago, and sat back and watched the timber grow. I grew up out in the forest, which, in itself, is priceless. My dad looked at harvesting some of the timber about 10 years ago, mostly to clear a view off the top of our hill, but also had an estimate done on the total value of the lumber were it all to be harvested; however, the lumbering costs would have eaten up nearly the entire value of the trees. My father grew up in the lumber business (father and brother were loggers; he logged in Alaska to pay his way through college and law school; and, another brother owns a small trucking firm), and he specializes in dealing with large lumber companies, among other things. The beauty of the land with the trees is still there, even though the valuable underlying lumber has proven too costly to harvest at this time. Given the regulations and environmental issues surrounding old growth forests (some of the trees are considered old growth on our land) that are constantly changing, the ability to harvest our own lumber may be taken away in the future, rendering the underlying value of the trees virtually worthless. It is all a crapshoot. Thankfully, my father also specializes in developing pension plans for large public entities, and he has diligently invested his funds in the market, among other things, and never relied on the lumber as a “sure thing”. If you are looking to invest in timber, I wouldn’t go the individual route - it is far too risky, especially when you can simply invest in a REIT or other lumber entity that offers intelligent management and stewardship, great dividends (the REITs), as well as a liquid investment that you can easily trade out of at any given moment.
I follow paper and forest products stocks and would urge others to take a look at WY. Its a special situation right now, in that they are one of the few remaining vertically integrated companies left int the space with significant timber assets (7.2M acres). As a C-corp they destroy value every time they sell timberland assets, since shareholders are taxed at the corporate rate on those profits. If you go through a sum-of-the parts valuation your eyes might pop out of your head given where the stock is trading now. Investors continue to demand timber as part of their portfolios which has put a lot of pressure on per/acre valuations across the country. So, despite the comments above that now would be a good time to buy timber assets because the housing market sucks, well, that hasn’t seemed to have any negative impact on valuations ast all. In fact, most recent transactions continue to come in ahead of NAV’s—Rayioniers recent deal being a good example at +12% to fair value estimates.
Is wy going to convert or spinoff a reit? That’s what some others did and it was very profitable for shareholders.
equity_analyst - do you cover RYN or the other timber REITs? Just curious.
I don’t really follow the REITS, but I do own PCL. There are several scenarios that WY could pursue–long dated sale to minimize taxes, some kind of spin-off, or, a REIT. It’s not a question of IF, but a question of when they make a move. There is an activist investor involved and they added a REIT expert to the board a while back–when the stock shot up to $85. Many on the street value the stock at $100, I’m a little less generous and would be happy to get back to the mid 80’s … : ) Either they make the decision to stop destroying value or the markets will force their hand–which is what Carl Icahn was trying to do. There is a long history of coporate raiders getting involved with asset rich timber companies–Sir James Goldsmith is one of the most well known.