Weyerhaeuser Will Become a REIT as Citigroup Updates Ratings
Federal Way, Wash.-based forest products company Weyerhaeuser (WY) 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 (PCL), Potlatch (PCH) and Rayonier (RYN), 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 (C) 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 (CSA) Kilroy Realty (KRC) Kite Realty (KRG) Public Storage (PSA) UDR (UDR) Weingarten Realty (WRI) PS Business Parks (PSB) was upgraded to hold from sell. The analysts also downgraded to sell from hold: Highwoods Properties (HIW) Kimco Realty (KIM) Corporate Office Properties (OFC) Write to Austin Kilgore. The author holds no relevant investments.