Weyerhaeuser’s sale of Michigan timber property could be the start of a move away from northern markets by the largest timberland owner in North America, suggest industry observers.
The New York Stock Exchange-traded REIT last week sold 555,000 acres of Michigan timberland to an affiliate of Lyme Timber Company for $300 million, as part of a “strategic optimization” of its portfolio.
Forest Research Group economist Jack Lutz told Agri Investor that though diverse, a significant portion of the Michigan timberland likely contained hardwood species similar to properties Lyme manages in New Hampshire. By contrast, softwood timber varieties are predominant in the western and south-eastern markets where Weyerhaeuser has a larger presence, Lutz said.
“This may be Weyerhaeuser saying they don’t like this area or this species,” he said. “It doesn’t surprise me that Lyme would pick this up. They know how to manage this stuff.”
He added that it could take as long as 24 months to confirm if the Michigan sale to Lyme reflects a change in strategy, or if it is simply a one-off deal proposed to Weyerhaeuser by Lyme. A key signal, he said, would be if Weyerhaeuser moves to sell a portion of the 838,000 acres it owns in Maine, which is also mostly hardwood.
In a research note published soon after the deal was announced, RBC Capital Markets analyst Paul Quinn said Weyerhaeuser’s Maine timberland would be the most material of sales expected as part of the optimization “for the right price.”
Quinn wrote that investors generally attribute greater value to Weyerhaeuser’s Pacific north-west and US south-east assets than any of its northern holdings, adding that in his view, the company might also be willing to sell properties in Montana and West Virginia.
“Acadian Timber would be a natural buyer of the Maine timberlands, although that would likely require equity issuance (we value the timberlands at ~$344m),” Quinn wrote. “For the Montana timberlands, PotlatchDeltic could be a natural buyer given the company’s nearby timberland portfolio in Idaho.”
Quinn added that in addition to Lyme, other private acquirers active in the US north and north-east include The Conservation Fund, Hancock and The Forestland Group.
Given the scarcity of sizable timber properties for sale and the slow pace of transactions, Lutz speculated that pressure to invest capital might have played a role in Lyme’s interest in Weyerhaeuser’s Michigan assets.
While US fundraising for timber vehicles has slowed in recent years, Lutz said he had heard recent indications of strong demand from LPs elsewhere.
“US investors are either in or they are not going to get in,” he said. “You are not going to raise billions of dollars from US pension funds because they are already in, but it looks like there is a lot of interest in Europe and in Asia and there is more money available there.”
Weyerhaeuser declined to comment and Lyme did not reply to requests seeking further detail.