Company ponders shift to real estate investment trust

By MATEUSZ PERKOWSKI

Capital Press

The Weyerhaeuser Co. appears to be digging out of its financial hole as its quarterly losses drop substantially.

The firm reported losses of about $5 million in the third quarter of 2009, down from $116 million last quarter, according to filings with the U.S. Securities and Exchange Commission.

"We're pleased to report a quarter-to-quarter improvement," CEO Dan Fulton said during a conference call.

Even so, Fulton said, the company remains wary of its short-term prospects.

At about $4 billion, Weyerhaeuser's total year-to-date sales are down by 33 percent compared to 2008, and its losses so far in 2009 top $380 million, according to SEC filings.

The firm was able to reduce its losses in the third quarter primarily by cutting costs, since quarter-to-quarter sales only rose about 1 percent, according to SEC filings.

"The pace of recovery remains uncertain, and the market seems tentative and sometimes fragile as we move toward year-end," Fulton said.

Unlike real estate investment trusts like Plum Creek, Potlatch and Rayonier, Weyerhaeuser is a fully integrated timber company that faces no restrictions on its business.

REITs must limit how much of their income and assets are derived outside of real estate sales and holdings, said analyst Brooks Mendell.

Weyerhaeuser representatives indicated earlier this year the company is restructuring to make REIT conversion a future possibility.

The advantage would come in tax savings: Generally,
REITs don't pay corporate income tax as long as they meet certain criteria, according to the National Association of Real Estate Investment Trusts.

Theoretically, Weyerhaeuser should benefit from its larger diversification, Mendell said. At this point, though, all the businesses the company is involved in are not doing well.

"It's an unusual alignment of stars against the company," he said.

Staf writer Mateusz Perkowski is based in Salem, Ore. E-mail: mperkowski@capitalpress.com.