Dr. Brooks Mendell

GLG News by Dr. Brooks Mendell, President

Timber REITs: why else might Weyerhaeuser (WY) resist a REIT conversion?

April 20, 2009

Analysis of:Ending Weyerhaeuser Shareholders Know Is CEO’s Focus | www.bloomberg.com

Legitimate reasons exist for Weyerhaeuser's resistance to converting to a REIT.  In addition to restrictive income and asset tests, timber REITs - such as PCL and RYN - develop their capital allocation strategies with fewer options, through the business cycle, than does WY.  The requirement to pass on earnings to shareholders results in fewer retained earnings and deeper dependence on capital markets.

Timberland markets: What are International Paper's (IP) timberlands worth?

March 4, 2009

Analysis of:International Paper Cuts Dividend, Sells Timberland | www.bloomberg.com

In announcing its 90 percent dividend cut, International Paper (IP) also cited the implementation of a common forest industry strategy in times of financial distress: the selling of timberlands.  While IP has a potential deal in place to sell 143,000 acres, the terms are (1) contingent upon financing and (2) seemingly aggressive in a current timberland market that has seen three major potential deals withdrawn from the market or terminated.

Timber investments and REITs: what are investors asking?

January 30, 2009

Analysis of:For Some, Sound of Profit Is "Timber!" | online.wsj.com

The article summarizes the historical attractiveness of owning timberlands as a long-term investment.  However, the questions raised by investors regarding the asset in the current environment have changed.  In addition, the strategy of using timber REITs as a pure-play proxy for direct timberland investments remains questionable. 

Timber REITs: Debt Burdens Remain

January 19, 2009

Analysis of:Wash-based Potlatch Sells Timberland in Arkansas | news.moneycentral.msn.com

Potlatch's recent sale of timberland in Arkansas highlight two issues relevant to investors of publicly-traded that currently own timberlands (timber REITs) or formerly owned timberlands (forest industry C-corps).  First, industry-wide debt levels became sharply and increasingly burdensome with this period of minimal demand in housing-dependent end use markets (lumber, plywood, etc).  Two, timberlands provide firms with a relatively liquid asset that can supply cash on a near term basis.  Those firms with substantive debt that divested their timberland portfolios eliminated a ready option in this period of financial distress.

Timber REITs: do they behave like direct timberland investments?

May 4, 2007

Analysis of:Industry’s First Public, Nontraded Timberland Investment | atlanta.dbusinessnews.com

Publicly-traded timber REITs - such as Plum Creek and Rayonier - provide a liquid and tax efficient structure for investor participation in timberland-related investments.  Non-traded timber REITs retain the tax efficiency, but sacrifice certain liquidity benefits, depending on the operating agreements.  In addition, and perhaps most importantly, timber REIT investment performance does not mirror the risk and return characteristics of direct timberland investments.

Timberland investments: the ownership structure matters

April 12, 2007

Analysis of:For sale signs pop up on US timberlands | www.marketwatch.com

Article highlights certain issues associated with changing timberland ownership trends and key implications associated with alternate ownership structures for timberland investments.   May overstate the case associated with 10-15 year time horizon issues.

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