I just got the prospectus and info on a new investment coming out, and by gosh it relates to wood and forestry. Real Estate Investment Trusts (REITs) have been around for awhile now, they invest in many real estate ventures usually spread around the nation. They are usually made up of apartments, or malls, or office space, often carrying that theme throughout all the properties they invest in. They act much like a mutual fund to spread out the risk of investing in one single company. I have used them for various reasons in the past.
Well now there is a timberland and forestry REIT out there. First one. They will be investing in land with manageable and marketable timber. I know some of the big paper mills have sold off their land holdings over the last several years, I guess they decided it was cheaper to buy the timber as needed when cut than to own the land all the years it grows. (which was the idea they switched to 20 years ago) These companies are buying the land up on speculation that they can make it produce enough to make pretty good profits.
Something I just thought was kinda cool.
I think they've been around for awhile. I owned Plum Creek for a number of years and owned them when they converted to a REIT. Sold it a couple of years later. Still not quite sure what the appeal of a REIT is to a timber co. They tend to get evaluated on their dividend yield and would seem to be pressured to harvest whether timber prices were up or down.
I remember seeing a tout sheet from an investment marketing firm this last year, offering a list of "guaranteed investments." Believe most were timber REITs, recommened because of their tax status.
Most the timber land for sale here are clear cuts and marginal ground I have a link here somewhere for thousands of acres of timberland. Only trouble is the timber is in riparian strips and everything else has been gutted. It's been for sale now for 2 years and not even the forestry companies are after it. Some of those forest companies your talking about will be in dire straights for selling off land. That is only a short term financial fix. Freehold, what we call company ground, was the one thing a forest company could depend on for wood supply besides crown lands because private woodlot owners sell based on their needs, not forestry companies'. And some private land never gets cut, even more prominent in the US from my travel experience. The big forest companies of old, during grandfather's time, had a gold mine. Nearly free timber, and slave wages and free electric power and sometimes free transportation down the river systems. Now they have high power cost, big wages (management and paper mill Unions) and have to pay royalties and purchase prices and compete globally.
REIT's have been around for awhile, as others have pointed out. IN Texas they consist of plantations and cut over land. Some REIT's promised 10 to 15% return on the investment annually. The only way was to cut the remaining timber, and turn belly up.
Be very careful in investing in REIT's.