Federal Way, Wash.-based forest products company Weyerhaeuser ($20.55 0.53%) announced plans to convert into a real estate investment trust (REIT).

The company, which manages 22m acres of forests with offices or operations in 10 countries, said the conversion will include all the company’s divisions — timberlands, wood products, cellulose fibers and real estate.

The Weyerhaeuser board declined to specify a precise date for the conversion, adding the timing is influenced by economic conditions, tax policy changes and dividend payouts required under REIT legislation. In 2008, Weyerhaeuser had earnings of $8bn, and is projecting earnings and profits to total just under $6bn in 2010.

REITs typically specialize in construction development — office space, healthcare, multifamily and the like. While it’s uncommon, it’s certainly not unprecedented for a forestry firm to operate as a REIT. Weyerhaeuser will join the ranks of other wood product companies Plum Creek ($39.66 0.48%), Potlatch ($31.37 0.325%) and Rayonier ($45.66 0.97%), which are all forest product REITs.

The company said it will likely pay a dividend in connection to the conversion, primarily in stock, which will require shareholder approval at the firm’s annual meeting in April.

Citigroup ($32.88 0%) analysts updated ratings on a number of REITs. The sector enters next year “with a backdrop that could support current elevated REIT valuations over the next year,” Citi analysts wrote, but added REITs face long-term risks. Residential, healthcare and self-storage REITs will perform better than retail and office REITs.

Analysts upgraded the following REITs to buy from hold:
Codgell Spencer ($4.23 0%)
Kilroy Realty ($43.59 0.6%)
Kite Realty ($5.54 0.31%)
Public Storage ($140.09 2.38%)
UDR ($25.66 0.28%)
Weingarten Realty ($24.82 0.23%)

PS Business Parks ($64.06 0.79%) was upgraded to hold from sell.

The analysts also downgraded to sell from hold:
Highwoods Properties ($33.02 0.2%)
Kimco Realty ($18.83 0.445%)
Corporate Office Properties ($24.37 0.73%)

Write to Austin Kilgore.

The author holds no relevant investments.