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Sale en masse

The great forest lands of the Northwest are in largest part public – a whole lot are national forest lands, or state-owned lands. But big, significant portions of those forest lands are privately held, many by timber companies and others – a growing number – by companies simply managing them, with no particular tie to timber.

forest in NC IdahoWe’ve been accustomed to the idea that these lands are almost a supplement to the public lands – logged to a greater degree, yes, and privately held, yes, but seeming not so different. But they are different, always have been and most certainly will be, and a new report from Potlatch underscores that. (A hat tip here to the correspondent who pointed this out.)

Idahoans are accustomed to thinking of Potlatch as a timber production company, what with its big plants at Lewiston and elsewhere, and it still is to a point. But it has been formally reorganized as a REIT – a real estate investment trust – and while it did that for tax and other business reasons, the reorg also highlighted the way the company is changing and its ongoing direction. Potlatch is the owner of 1.5 million acres of land, about 100,000 to 120,000 acres in Idaho alone. Think about the value real estate has taken in recent years, and the development growth Idaho has seen, and the shape of things to come begins to emerge.

Here’s the key part of Potlatch’s statement from Monday:

“After reorganizing as a REIT earlier this year, we began a process of taking a very deep look at all of the values associated with our land holdings,” said President and Chief Executive Officer Michael J. Covey. “Through this intensive land value stratification process, we have identified those lands that are non-strategic to our core forestland operations. These higher valued forestlands are available to be sold over time and the proceeds may be used to fuel the growth of the company through acquisitions, or to pay down debt or execute a share repurchase program.”

Potlatch’s entire ownership of 1.5 million acres is located in desirable rural and mountain regions across the country. A significant portion of Potlatch lands have key attributes that make it superior recreational property. Additionally, in keeping with Potlatch’s long tradition of managing forestland using the highest levels of stewardship, our forestlands are third-party certified.

“Potlatch’s Idaho land holdings are located in the beautiful north-central part of the state, which has long been known for its spectacular wilderness, white water rivers, salmon, trout and steelhead fishing and big game hunting,” said Vice President Land Sales and Development William R. DeReu. “Potlatch properties in Minnesota are rural, forested and located within a few hours drive from Minneapolis and St. Paul. The Arkansas ownership, like Minnesota, offers exceptional opportunities for hunting and outdoor recreation in a beautiful mixed hardwood and conifer forest,” added DeReu.

This should be considered new-directional, since Covey took over as CEO only earlier this year – this has the mark of a direction with the new administration’s brand on it.

Imagine a large part of 110,000 acres up for sale in north-central Idaho: the region could be transformed.

Of course, we don’t yet know how many of those acres will actually be posted for sale or new use. And there are limitations. A correspondent notes that “Potlatch entered into an agreement a couple of years ago with Trust for Public Lands, The Nature Conservancy and the feds to place conservation easements (logging ok, no development) on up to 70,000 acres of their Idaho lands for which they were to receive $40M from the federal treasury” – and that may be a significantly limiting factor. Or, in the nature of these things, possibly not as limiting as we think.

But you can get some indication from recent developments in Oregon, where Plum Creek Timber has filed a huge Measure 37 land use claim which could open the door to development – residential, commercial, industrial? – of 37,000 acres of forest land in Lincoln and Coos counties. That claim could fail, for several reasons, and even if it passes legally it might never be (probably would not be) fully executed.

But it shows the direction publicly-held timber companies, with their huge asset base and limited ability to accelerate their quarterly profits the way some others do, may be looking. Some of those directions could change very face of the Northwest.

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One Comment

  1. msolomon msolomon December 18, 2006

    Slight corrections to your post: Potlatch owns 660,000 acres in Idaho and have identified 120,000 acres for sale; Covey became CEO two weeks ago, one week before announcing the sell-off of land assets.

    Reporting on the story in the Lewiston Tribune quotes DeRue saying $$ from sale will be distributed to shareholders (to a large extent that means the Weyerhauser family) and to purchase other timber land nationwide ala Plum Creeks move into the NE and SE. And OR as you point out. No mention of reinvesting any of the $$ in Potlatch’s aging mills, but that’s one of the wonders of an REIT: there is an actual tax disincentive to investing land/timber revenues in the manufacturing side of an REIT. Without access to that revenue stream, the outlook for needed major capital investments in the Lewiston pulp mill are very grim, especially as required water pollution permit requirements come due in May 2010 with an estimated price tag ranging (according to company estimates) of $50-150M.

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