Rayonier Shifting To REIT Status

Rayonier Inc. extended the trend in which operating companies with heavy investments in physical property, such as timberlands, try to unlock value and gain highly favorable tax positions by turning themselves into real estate investment trusts (REITs). Unlike its predecessors, Rayonier will not spin off its operating segment, which includes wood products and pulp cellulose for synthetic fibers. Instead, the company will put the production part in a special wholly owned subsidiary whose profits will be taxed. REIT profits are not taxed if they are almost entirely distributed to shareholders. Willens says that the sub will send dividends up to the parent REIT after paying corporate profits taxes. When the Rayonier REIT distributes its dividends, its holder will pay 15% federal tax on the amount attributable to the industrial sub; the remainder will be tax-free. Willens notes that the industrial sub could be sold or spun-off at some point in the future when, in accounting parlance, it is considered “old and cold.” Copyright 2003 Thomson Media Inc. All Rights Reserved. http://www.thomsonmedia.com