Timber REITs own and operate the land used for harvest and sale of timber. Also known as timberland REITs, these REITs offer a diversification opportunity for real estate investors due to the completely different profit model, not relying on rent-paying tenants in the same way other REITs do.
Timber REITs are then structured less like a real estate equity and more like a commodity, maintaining similar ebb and flow in its profitability and share price to other cyclical stocks such as oil and basic materials.
This in mind, although the primary mode of profit for timberlands is the sale of timber and wood products, the singular goal of these organizations is to maximize the value of their land. In some cases this means renting out the real estate to tenants or even maintaining the land as a conservation site or park.
The risk and reward associated with timber REITs are largely the same ones associated with basic commodities. Lumber prices are currently high, benefiting real estate investors in the timberland sphere greatly, but lengthy periods of low lumber prices can force timber REITs to cut their dividend. This makes timber REITs more cyclical in nature than the other REITs described on this list.
Timber is a small sector, with only 4 publicly traded timber REITs. They are CatchMark Timber Trust, Inc. (NYSE: CTT), Weyerhaeuser Company (NYSE: WY), PotlatchDeltic Corporation (NASDAQ: PCH) and Rayonier Inc. (NYSE: RYN).