Kurt Yinger, senior vice president at D.A .Davidson, joined the REIT Report podcast to review the timberland REIT sector, which he described as offering an “attractive blend of defensive and offensive” characteristics amid an uncertain macro backdrop.
“We like the timber REITs. It's been a frustrating one for investors, but I don't think we should just necessarily toss it aside because of some of the cyclical pressures that we see today,” Yinger said.
He pointed to downside protection and relative outperformance potential for the sector “in kind of a lackluster housing environment.” At the same time, lumber and wood products, he noted, are exiting a trough.
“We've seen some pretty meaningful structural supply dynamics on the lumber side that we think are going to support sustained profitability improvement versus the last two to three years, even if housing demand remains lackluster,” he said.
Yinger also discussed the importance of scale within the sector, with the number of publicly traded timberland REITs today standing at only two.
"Scale matters, not only in terms of the timber REITs themselves, but also from a public equity institutional investor perspective,” he said. Consolidation has led to a focus on larger players who can reinvest in their operations and maintain a competitive edge, he noted.
Timberland REITs are also exploring environmental solutions and better land use as alternative revenue streams. Yinger indicated that these new strategies could ultimately positively impact sector valuations and earnings.