Let's take a look at each timber REIT individually.
PotlatchDeltic has about 1.9 million acres of timberland in Alabama, Arkansas, Idaho, Louisiana, Minnesota, and Mississippi. It was founded in 1903 as Potlatch Lumber.
The REIT acquired Deltic Timber two years ago, helping expand its harvest volumes and increase lumber production. PotlatchDeltic manufactures and sells lumber, panels, and particle boards.
CatchMark Timber Trust is headquartered in Atlanta. This is a newer timber REIT and was founded in 2007. CatchMark owns 1.6 million acres of timberland.
The CEO recently said people should encourage healthy timberland and lumber markets because it’s an incentive for landowners to commit the capital to reforestation. CatchMark is focused exclusively on timberland ownership and management.
Weyerhaeuser is one of the largest and oldest REITs in the country. The Seattle-based company has been around since the early 1900s and went public in the 1970s when it owned 900,000 acres of land. Weyerhaeuser became a REIT in 2010.
The company owns or controls more than 13 million acres and manages an additional 14 million acres of timberlands in Canada. Along with lumber sales, the company owns and manages real estate, energy, and natural resources. It also sells wood products.
Rayonier has headquarters in the U.S. and New Zealand. This REIT owns 2.4 million acres of land and was founded in 1926. Although it’s considerably smaller than the largest timber REIT, Rayonier is still the second-largest REIT in its sector.
The company’s CEO recently said that trade tensions with China haven’t necessarily impacted Rayonier’s market outlook. He added that China continues to have a large need to import wood. Rayonier has been involved in several smaller deals in 2019.
Forecast for timber REIT investing
With demographic trends suggesting a comeback of the single-family housing market in 2020 and beyond, the long-term outlook for timber REITs appears to be strong. But if the economy takes a fall, so do these REITs, since consumers have less to spend on timber.
Timberland is a hedge against inflation, according to the Realtors Land Institute, which says that historical data on timberland returns and inflation show a positive correlation between the two.
Moreover, trees continue to grow in volume (and value), regardless of economic conditions.
Before investing in any REIT, do your homework and learn about the various REIT asset classes and how companies become REITs and why.
The Realtors Land Institute also points out a few potential pitfalls to be aware of with timber REIT investing, including market uncertainty and the fact that timber isn't a liquid asset (it can take 6–18 months to sell). Environmental and weather challenges can also pose problems, but geographic diversification helps lower those risks.
Should you invest in timber REITs?
Timber REITs got a bad rap in 2018, but are expected to recover as home building and remodeling rebounds. Want to learn more about timber REITs? Check out our full guide to investing in this asset class.