Land Sales Expert Eric Andrews discusses how timber companies like Weyerhaeuser decide if they will sell or hold their land until timber matures.
Transcript:
So I was at the National Land Conference in San Antonio last week, and one of the featured speakers was Bill Colton. And he is the Vice President of real estate sales for Weyerhaeuser. And this guy was a wealth of information.
So first of all, I was shocked to hear that they sell approximately 1% of their land holdings per year. And this is a company that owns millions and millions of acres. A bunch of ALCs in the room, we’re all wondering, well, what’s the decision? Because first of all, like one of the best buys I ever made was, I bought 176 acres from Weyerhaeuser. And I bought that from them at like 2000 an acre, and it’s probably worth 14,000 an acre now. So those, those kind of things are, are real, real opportunistic buys when they come about.
So one of the reasons why they sell is because of property taxes. So everybody in Chatham County right now is concerned about property taxes, but once a property is evaluated at roughly $3,000 per acre, it is not going to grow timber fast enough to make the property taxes worthwhile. So if you’re having to pay property tax and you’re waiting for trees to grow, that growth rate is not greater over the tax base.
Now, and it’s pretty rare for something to get taxed at $3,000 per acre, because North Carolina has the Timber Management Deferred Tax Program. So you’re could have a $200,000 piece of land. And if it’s in the Timber Management Program, it could be, it could be taxed on a value of a 100,000 or even, or even 40,000. So when the property taxes get too high, that’s one of the things that they decide to sell.
The other thing is the yield. How many trees does it have, and how long before they can be harvested? So, if they got, if they have a bunch of trees that are the size of your arm, it’s going to be a while. If they have a bunch of trees that are the size of your waist, it’s probably pretty close to timbering them.
And then of course, they’re looking at the market in timber, and everybody’s heard about how much a two by four is this year, or how much a sheet of plywood is this year.
He said, one of the most fascinating things that he said was, there is a difference between timber and lumber. So there was not a timber shortage in the United States during COVID. There was plenty of timber. Problem was we didn’t have any lumber and lumber is cut wood. And we just didn’t have the people to transport or the labor to cut the wood. So there was no, there was no timber shortage. There was a labor shortage.
And then, and then they also look at the market for land. If they have a piece of land that they got two or 3000 an acre in it, and now it’s worth 20,000 an acre, they’re not going to wait for the trees to grow. They’re probably going to take advantage of that and sell the land. And the other thing that was really interesting about Weyerhaeuser, is because they’re in this business categorization, they’re not allowed to make deals and sell land themselves. So they have to, they don’t have any onsite or in-house real estate agents. They consult with accredited land consultants and land brokers throughout the country when they make their decisions. So they call us up and they say whether or not it’s a good time.
So the reason why I bring this up, what Weyerhaeuser is doing, and even though that’s a big, big, huge company, there’s still people in Chatham County and North Carolina that are worried about whether or not they should sell. We’ve had other videos where we say, if you’re going to sell now, do not take the timber off, keep it on, but you might want to have some balanced, educated decisions about whether or not this is a good time to sell.
So you should consider whether or not you have your land in the forestry program, the Timber Management Program. You need to figure out how long you’re going to hold onto it. You might want to consider, is it going to heirs? So, if you’re going to give it to your granddaughter that’s five years old, and you’re 55 years old, probably not a bad time to timber it because by the time she gets to a point where she’d like to sell that timber will be mature again.
You just, you need to have a management portfolio. You need to look at all your assets and what you’re going to do with it.
And the other thing that we’ve talked about before is the 1031 tax deferred exchange. So if you’re going to sell now, do you have something else that you want to buy? So if you’re going to buy land in this part of the world, it’s probably going to be sold for development, but we can go 20 miles down the road to Goldstone, Bear Creek, Bonlee, Bennett, even Moore County, Carthage, that area, that’s still area, that’s a lot of Timberland. And so if you’re willing to reinvest and defer the taxes, you can buy land further south and west.
So a lot of considerations, if you’re going to sell land with timber on it, just because you hear that exciting price of $2,000 per acre, or $2,400 per acre, it might be best to leave it alone and sell it as it is, or go ahead and harvest it.
