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How 'Timber-Like' Are Timber REITs?

I respectfully disagree with your analysis. In 2007 intersegment sales of timber were lower because of weakness in housing and the related weakness in their wood products division (lumber). Because pricing was much stronger in pulp (driven by China demand) the company, in the best interest of creating shareholder value, delayed harvesting some timber, and more aggressively harvested softwoods to take advantage of pulp pricing. This I am sure generated a higher ROIC than would be the case if they cut more hardwood. Also, while resource sales were about 20% of total, I believe the more relevant metric the market values these assets is the EBITDA they generate. In 2007 PCH generated about 60% of its EBITDA in its resources & real estate segments. that is all.

Timber REIT Potlatch Corp. Can Help Grow Your Portfolio

schwettyballs. thanks for the insight. i am aware of the real estate bubble, which is why the analysis excludes CURRENT prices of $1400 per acre and instead uses the 5 year average of $800 per acre. I would argue that timberland values are probably a bit more inelastic than residential housing, but I chose to use the lower 5 year average nevertheless.

In terms of the HBU land which probably is more correlated with discretionary spending and real estate market, I agree that there may be some volatility, but probably less than you think. The folks purchasing these types of property are generally well funded institutions (Nature Conservancy, State of Idaho) as well as high income individuals that are looking to purchase land for recreational use or as a vacation home. These types of customers are likely not the same folks that are applying for sub-prime loans.

The analysis tries to be as conservative as possible, but the wide margin of safety provides some wiggle room if PMV (private market values) fall off some