Weyerhaeuser Restructuring REIT Step?

Weyerhaeuser has declared a $5.6 billion dividend, the final step in the timber company’s long journey to become a real estate investment trust. We discussed the planned restructuring into a new financial entity in an April story.

While the conversion makes a lot of sense to shareholders because it will reduce the tax hit on the company, the conversion has important longterm implications for the Northwest, where Weyerhaeuser still owns one million acres of forest. REITs are required to distribute a large percentage of their earnings to shareholders. That structure works when the economy is strong. But the wood products business is highly cyclical, when sales turn down, as they invariably will, Weyerhaeuser could find itself under pressure to sell its timber lands to maintain those high dividends. The presence of timber owners with a history of being good stewards of our forests has been important to tha maintenance of the many forestlands in our region. Pension funds, which are interested primarily in longterm returns, have been major owners of forestland. What will happen when more and more of our forests are subject to managers thinking about short term profits? In our April story, former CEO Jack Creighton worries about the shift to short-term thinking with respect to an important resource like forests.

As a region we have taken for granted Weyerhaeuser’s presence as a relatively responsible steward of the land. The future is far less certain.