Weyerhaeuser closes door on REIT conversion in '09 (AP)
Fri, 29 May 2009 18:41:43 Etc/GM
The recession and resulting housing construction collapse have hammered timber and wood products companies like Weyerhaeuser. Its first-quarter loss -- the fifth loss in the last six quarters -- increased to $264 million from $148 million a year earlier.
Share price losses have followed: Between April 1, 2008, shortly after the current recession began, to March 6 of this year the stock plummeted 71 percent. By contrast, shares of Plum Creek Timber Co. Inc., a REIT, fell in the same period by 42 percent.
Absent prospects for a quick economic recovery, shareholders want Weyerhaeuser to become more tax efficient. The company now pays a 35 percent tax on income and then shareholders pay another 15 percent tax on dividends. REITs like Plum Creek, however, face no income tax and its shareholders merely pay a long-term capital gains tax of 15 percent on dividends.
Chief Financial Officer Patty Bedient said in New York at the company's annual investor conference that "there are certain limitations that make it unlikely that REIT conversion in 2009 would be beneficial."
She cited as reasons Weyerhaeuser's current low level of timber income, which reduces the benefit from converting to REIT status this year, plus a hefty one-time cash distribution that would be required.
Nevertheless, the CFO also said the situation was fluid.
"While the board continues to review the benefits and risks associated with REIT conversion, no final decision has been made," she said. "We believe it is unlikely that REIT conversion in 2009 would be value creating. However, if economic conditions improve, this outlook could change."
In afternoon trading, shares fell 15 cents to $33.24.
source: http://biz.yahoo.com/ap/090529/us_weyerhaeuser_reit.html?.v=3