This excerpt taken from the PCH 10-K filed Feb 23, 2007.
LAND SALES AND DEVELOPMENT SEGMENT
The Land Sales and Development segment consists of the sale of selected non-strategic land parcels, including sales of land for higher and better use purposes. Sales of conservation easements are also included in this segment. Results for the segment depend on the timing of closing of transactions for properties we identify as having higher and better use values. Any land development activities that may occur will be undertaken by Potlatch TRS. The Land Sales and Development segment also plays an active role in negotiations for major timberland acquisitions.
One of the main focuses of this segment is to continually assess the use of each of our lands to manage them proactively for the highest value. In December 2006, we completed an initial assessment of all of our 1.5 million acres of land. The following tools were used in assessing our lands:
As a result of the assessment of our lands, we identified 250,000 to 300,000 acres, or approximately 17% to 20% of our land, as having values that are potentially greater than for timberland. Sales of these lands are expected to occur within the next 10 years, with the goal of utilizing like-kind exchange transactions for tax efficiency, thus maximizing cash flows. We expect to sell 15,000 to 20,000 acres in 2007.
In December 2006, we granted a conservation easement covering a small portion of our Arkansas timberlands to the Nature Conservancy. As a result, we recognized $6.7 million of Arkansas conservation easement revenue in 2006. We also finalized a conservation easement on a small portion of our Minnesota timberlands in 2006 and recognized conservation easement revenue of $1.1 million.
In December 2006, we entered into a definitive agreement to acquire 76,000 acres of prime timberland in Wisconsin for $64.5 million from Tomahawk Timberlands, LLC, and Tomahawk Highlands, LLC. The transaction closed in January 2007. This is our first significant purchase of timberland by us in more than a decade, and its location and high-value mature timber complement our existing timberland holdings in Minnesota. The timberland is located in the north-central part of the state, contains well-managed hardwoods and is made up of diverse age classes with significant amounts of mature timber. The timberland also has prime recreational values, and the majority of the land is concentrated in contiguous blocks located less than a five hour drive from Chicago and Minneapolis.
2006 FORM 10-K / 5
As discussed above, we expect to use Internal Revenue Code section 1031 like-kind exchanges whenever possible to match sales of our land having values greater than for timberland with acquisitions of land that has strategic benefits to us. For example, the Wisconsin timberland purchase allowed us to utilize a section 1031 like-kind exchange and not be subject to built-in-gains tax on the Arkansas conservation easement sale in 2006. We also expect to use the Wisconsin land purchase for section 1031 like-kind exchanges of land we expect to sell in the first half of 2007.