Plum Creek real estate rides the baby boom demand

Hungry Horse News

Real estate is hot and the Chief Financial Officer of Plum Creek doesn't see the market slowing down any time soon.

Plum Creek is one of the largest private landowners in the country. While its primary business is still in timber and timber sales, it is also realizing significant profits from land sales - prime pieces of real estate across the country, including Montana, where former Plum Creek lands have been subdivided and turned into coveted second-home getaways.

"There's a lot of emotional appeal in these properties," Plum Creek CFO William Brown said at the Ragen MacKenzie Investment Conference last month.

Plum Creek has identified about 1 million acres of "non-strategic" timberlands which the company, over time, plans on selling - much of it as higher valued real estate. Plum Creek owns about 7.7 million acres nationwide and about 1.3 million acres in Montana.

The sales aren't happening just in Montana, either.

Plum Creek holds land in Georgia, Florida and a host of other states. Some of the land is sold to hunting clubs, while other parcels have been sold as real estate developments.

Here in Montana, Plum Creek has sold prime real estate it used to own near lakes west of Kalispell as well as in the Swan Valley.

In short, Plum Creek is realizing gains from a "pent up demand for second houses," Brown explained.

The demand is fueled by the baby boom generation, he said, which has inherited wealth as well as made its own.

The goal, Brown said, is to liquidate some of the attractive recreational properties and then reinvest the funds into its core timber holdings.

Plum Creek in Montana has also profited from conservation easements. A few years ago it was paid about $30 million for conservation easements on 142,000 in the Thompson River corridor.

The state is currently working on another deal with the company in the Swan River Valley.

Real estate sales are also about significant profits for the company.

Plum Creek's real estate segment reported revenue of $68 million and operating income of $44 million for the first quarter of 2005.

Will the boom end?

Brown told the crowd he didn't think so - at least not anytime soon. Demand is simply too high, he noted.