In season one of the TV show Yellowstone, there’s a scene in which Kevin Costner’s rancher character, John Dutton, famously tells a Chinese tourist: “This is America. We don’t share land here.” The tourist had, moments earlier, expressed bewilderment that one man could own an entire mountain. Reflecting on my time living in Wyoming, I can attest that the Duttons, though fictional, are not far from reality. Some families in the United States own ridiculously vast expanses of land. However, these families don’t own as much as you might expect. I reached out to Brooks Mendell, a former Forestry Professor at the University of Georgia and the CEO of Forisk Consulting, a renowned expert in the field. With his extensive experience, including logging work in the Pacific Northwest for one of the largest U.S. landowners, he was the perfect person to shed light on the lessons smaller landowners could take away from the big dogs.
Who Owns The Most Land in the U.S.?
While there’s been a buzz about companies like Microsoft acquiring land, their purchases are a mere drop in the bucket. Especially when compared to the vast holdings of large timberland companies. These companies, with their extensive land ownership, truly shape the landscape of the U.S.
“The United States is about 2.1 billion acres in size, and about a third of it, over 700 million acres, is forested or has forests,” Mendell said. “And of that 700 million, two-thirds of that are privately owned.”
When excluding small yards and other properties that meet the U.S. Forest Service’s broad definition of timberland, we’re still left with a staggering 300 million acres. Of this vast chunk, large companies or families hold a significant share, approximately 80 to 100 million acres. And here’s the kicker: the top three landowners are all timber companies.
According to Mendell, timber giant Weyerhaeuser is the undisputed king, owning approximately 10.5 million acres. Most of their land is in the West, South, and Northeast parts of the U.S. Their big industry is timber, but Weyerhaeuser also deals in real estate, recreational lands, natural gas, minerals, and aggerates. Weyerhaeuser’s operations are more diverse than many realize. The company also deals with forest carbon, wind, and solar energy production.
TIMOS and REITS
The two major types of companies that own the vast majority of land fall into two categories. Timberland investment management organizations (TIMOS) are essentially companies that act as asset managers. They don’t own the timber they manage. According to Mendell, approximately 20 to 25 TIMOS manage up to 25 million acres of timberland in the United States. These companies raise funds from clients that are then invested back into timberland. Mendell compared it to a big pension fund.
“They manage these timberlands in two main ways. One is they manage funds; they call them commingled accounts,” Mendell said. “They pool a bunch of people’s money together so they can buy bigger parcels of land. And then they also manage these things called separate accounts, which means it’s one investor.”
Timberland investment management organizations (TIMOs) are asset managers that oversee timber without owning it.
The other big companies are real estate investment trusts (REITS). Mendell said REITS weren’t originally designed for timber. They were created when President Dwight D. Eisenhower signed the Cigar Excise Tax Extension into law in 1960. This act also included the REIT Act, which better aligned this type of company with IRS tax codes. Essentially, REITS must distribute all their earnings to the shareholders, who then pay the income tax on those distributions.
“They’re tax efficient because they don’t get taxed twice,” Mendell said. “But it’s also not a good type of company to store a bunch of money in because they have to distribute their earnings. But it’s a very efficient way to manage real estate.”
Weyerhaeuser is the largest REIT in the country. The other two big players are Rayonier and Potlatch Deltic. According to Mendell, Rayonier owns approximately 2.3 million acres in the U.S., mostly in the South and Pacific Northwest. Potlatch Deltic owns about 2.2 million acres, primarily in the South. However, Potlatch Deltic also owns over 600,000 acres in Northern Idaho. In the end, REITS were essentially borne out of necessity in the years following World War II.
“The US was booming in the 50s, and a lot of people wanted homes,” Mendell said. “Investors and companies needed ways to aggregate and invest capital efficiently.”
What Can Private Landowners Learn From The Largest U.S. Landowners?
Mendell says the largest U.S. landowners, big companies like Weyerhaeuser, are constantly buying and selling land. The reasons for either vary from situation to situation. Sometimes, they may have a piece of land better suited for crops like corn rather than timber. In other cases, new developments, such as a new industrial park, may cause these companies to ditch a piece of timberland.
Aside from that, large REITs generate income in many ways that landowners can model. One of the most obvious is timber. However, Mendell notes that it relies on having the right soil type, growing conditions, and proximity to mills. Timber leases are becoming somewhat less common. Mendell says the advantages and disadvantages vary depending on the terms of the contract. Landowners might not make as much money leasing through a TIMO or REIT. However, it’s a hands-off approach as the companies do all the work. Landowners need to read and understand a contract clearly. One major downside is that sometimes there are restrictions on how landowners can use their own land while under contract.
Mendell notes that the REITS are vast knowledge sources for landowners interested in monetizing their land, especially through timber.
Look to the strategies of the largest U.S. landowners and adapt them—many of their income-generating methods work for smaller landowners too.
“If someone wants information on those guys, the nice thing about the REITS is because they’re publicly traded, you can go to their website and read their financial statements or their reports,” Mendell said. “There’s a lot of information in their financials where they talk about timber markets and what’s going on with lumber and housing. And they’ve already done the research.”
Sometimes, there are unique markets, like the harvest of kaolin clay in many southern states. Other common ways landowners can use their land to generate income include selling mineral rights, cell tower leases, solar leases, and forest carbon credits. Buying and selling forest carbon credits is still a somewhat new market. The more greenhouse gas-reducing carbon a landowner’s property can produce, the more money can be made.
“We have cases and contracts now in markets where forest owners are essentially being paid or compensated, or there are forestry projects that the income is coming from people who are essentially buying the credits derived from the trees sequestering carbon,” Mendell said.
However, he also notes that carbon sequestration is not a straightforward market. Landowners must do extensive research to take advantage of these emerging markets, especially since projects like solar farms are controversial in many areas.
Conservation Effects
According to Mendell, the good news is that many of these institutional landowners are now benefiting from running their businesses from a sustainable standpoint. He’s noticed a shift in how many manage their acreage, away from the more production-focused approach of old.
“We track a lot of these acres very closely. We get a lot of information from these firms and almost universally, they replant their forests, and they continue to grow them,” Mendell said.
Many of the largest U.S. landowners are now managing their forests to be more diverse, which, in turn, promotes better soil health and increases production. At the same time, as cities keep expanding and putting more pressure on rural areas, he expects more differences of opinion on how to use forested areas in the future. However, this also means new opportunities for people looking to enter the forestry profession.
“Forestry is evolving and changing with the times,” Mendell said. “It is a really cool profession and it is an industry that needs people. There’s more technology work, there’s more opportunities to communicate with landowners. And if you like hunting and fishing, it’s a great synergy.”
Final Thoughts
While it still may be true that “we don’t share land here” in America, there are still opportunities for entrepreneurial landowners. The key is to look at what the largest U.S. landowners are doing and adjust accordingly. Many of the same ways they are making money can be utilized by the smaller landowners. It just takes a little time and research to determine the best way to go about it.