State's Timber Landscape Shifts

by Mark Friedman  on Monday, Nov. 12, 2007 12:00 am  

(To download a pdf containing financial reports for companies with timberland in Arkansas, click here. To purchase a spreadsheet version, click here.)

Deltic Timber Corp. of El Dorado is one of the few timber companies left in Arkansas that owns both timberland and sawmills.

Since 2001, the Arkansas timber landscape has slowly shifted from companies that milled the trees they grew to companies that do one or the other.

Georgia-Pacific LLC of Atlanta started the trend when it sold off its timberland in 2001 to the real estate investment trust Plum Creek Timber Co. of Seattle, which is now the largest landowner in Arkansas with 905,000 acres.

International Paper of Memphis followed Georgia-Pacific's lead and sold off 5.1 million acres of timberland for $6.1 billion in April 2006.

In Arkansas, Resource Management Services Inc., which is a timber investment manager based in Birmingham, Ala., gobbled up 300,000 of IP's acres in Arkansas. Timberstar of Atlanta bought IP's remaining 300,000 acres in the state.

And at the end of 2005, Potlatch Corp. of Spokane, Wash., which owned both mills and timberland, converted to a REIT.

Now the management of the timberland is the main segment of Potlatch's business and its mills are subsidiaries.

"The primary benefits of becoming a REIT has to do with tax advantages and pushing through as much value to the shareholders as possible," said Matt Van Vleet, a spokesman for Potlatch, which owns 470,000 acres in Arkansas.

It's difficult to say exactly how much money companies save by going to a REIT because the firms don't release their tax forms, said Matt Pelkki, professor of forest economics and management for the University of Arkansas at Monticello.

"I know the companies told me that it's a considerable amount of money," he said.

Van Vleet said before Potlatch became a REIT, its earnings were subject to corporate income tax of 30 to 40 percent. The rest would be paid out as dividends to shareholders, who would then have to pay a capital gains tax on that.



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