On the way to becoming a real estate investment trust in 2010, Weyerhaeuser got out of the fine paper business, closed mills and factories, sold its containerboard, packaging and recycling business and shrank its workforce by 70 percent. There seemed to be little left to see from this one-time titan except the mandatory funneling of most of its earnings to investors and benefiting from the tax break for REITs. That changed over the weekend, when the company, headquartered in Federal Way, announced that it would buy Longview Timber for $2.65 billion. Not only that, but it said it might dump its house-building subsidiary.
The former is a blockbuster deal that adds to Weyerhaeuser’s timberlands at a time when timber demand is rebounding. The latter, if it comes to pass, would represent a major shift from Weyerhaeuser’s strategy. In the mid 2000s, facing years of underperforming the S&P 500, Weyerhaeuser placed special hope in residential real estate and its Wreco (Weyerhaeuser Real Estate Co.) unit which includes Quadrant Homes and Pardee Homes. Also, one of the little-discussed appeals of focusing on holdings of timberlands, was the notion that exurban building would continue and some of the company’s land might become valuable subdivisions. Not for nothing did Wreco’s former chief, Dan Fulton, become chief executive of the new Weyerhaeuser. Then the housing crash hit, not only tanking demand for lumber but badly wounding Wreco like all house builders. As part of Sunday’s news, the company said Fulton, 63, will retire and Doyle Simons, former CEO of Temple-Inland, will become chief executive in August.
Simons, 48, came up through the executive ranks of Temple-Inland, a pulp and paper company which was purchased last year by International Paper. Even as it was converting to a REIT, Weyerhaeuser was saying “trees are our future.” This leadership reaffirms that mantra, and if the housing division is spun off the company will become even more of a pure play. Housing is recovering, but we’re not going back to a 2000s boom, nor is exurban mass building as appealing as it seemed before the crash.More