Timber REIT stumpage rates moved faster than the equity prices in 2022 and 2023, and that gap is still sitting there.
Stumpage is the price a timber REIT gets for standing timber sold to a mill, and it ran hard through the post-pandemic building surge while the REIT share prices pulled back with the broader sector on rate fears. That created a period where the underlying commodity the trust holds was appreciating and the equity was not, which is not how timber REITs usually behave because the correlation between log prices and share price is normally tighter than that. The mechanism that closed the gap in prior cycles was a combination of harvest acceleration, which shows up in near-term FFO, and a rerating once the market accepted that timberland is duration-insensitive in a way office or retail cannot be. The 2022 to 2023 period tested that thesis and the rerating came slower than the stumpage move warranted. What you want to know before buying on that argument is whether the REIT's harvest schedule is already pulled forward, because a trust that accelerated cuts to capture the high stumpage prices has less optionality left than one that sat on its acreage. The carbon credit overlay complicates this further. Weyerhaeuser and PotlatchDeltic both carry carbon and conservation easement value that has no settled accounting treatment and no consistent analyst methodology, so two people can look at the same NAV estimate and get answers fifteen to twenty percent apart depending on how they haircut that line. The question I would put to the room is what discount rate you are applying to the carbon segment specifically, because that assumption is doing more work in a timber REIT valuation right now than almost anything else on the income statement.
