Managing Timberlands Owned by a REIT

1
Managing Timberlands Owned by a REIT
2
Key Components of a REIT

• REIT Background
• Form of C-corporation
• Created in 1960
• Vehicle for the multitudes
• Pass-through tax structure
• REIT Qualification
• Entity that is taxable as a corporation
• Managed by a Board of Directors
• 75 of total assets in Real Estate
• 75 of its gross income from rents from real
  estate or interest on real estate
• pay out annually at least 90 of its taxable
  ordinary income
• Benefits of the REIT Structure
• Single layer of Taxation
• Attractive, tax efficient dividend
• More cash available for distribution
• Long-term capital gains treatment of of dividends

3
An Industry in Transition

• FROM
• COMMERCIAL FORESTRY
• Vertical integration strategy
• Timber volume focus
• Physical asset management

• TO
• TIMBERLAND MANGEMENT
• Portfolio management strategy
• Timberland value focus
• Tangible and intangible asset management

4
Commercial Forestry Business Model is Volume
Focused

• Assumes volume value
• Static timberland ownership is tied to converting
  operations
• Intensive management improves growth and yield
• Non-timber values receive minimal attention

5
Timberland Management Business Model,
Focused on Value, is Now Emerging
Manage Property for Multiple Values
Timber Values
Extractive Resource Values
Intangible Values
Real Estate Values
6

• Plum Creek Growing Value From Exceptional
  Resources
• Mission Statement
• Plum Creek is committed to being the premier land
  and timber company by demonstrating leadership
  and innovation in
• Optimizing opportunities for value growth from
  our assets.
• Practicing environmentally responsible resource
  management.
• Providing consistently high quality products and
  services to our customers and business partners.
• Fostering an ethical business culture that
  encourages individual ideas and initiative and
  rewards accomplishments.
• Achieving superior returns for our owners.

7
Realizing Maximum Value
Focus on realizing maximum value from every acre
of our exceptional asset base 8.2 million acres

• Timber
• Land
• Natural Resources
• Manufacturing

As of 12/31/2005
8
Plum Creek Has a History of Growth

• Spun off from Burlington Resources to become a
  Master Limited Partnership with 1.4 million
  acres
• Acquired 865,000 acres in Montana
• Purchased 538,000 acres in Louisiana and
  Arkansas
• Acquired 905,000 acres in Maine
• Converted to a Real Estate Investment Trust
  (REIT)
• Merged with The Timber Company resulting in an
  ownership of 7.8 million acres in 19 states
• Added to SP 500 and purchased 309,000
  acres in Wisconsin and Michigan
• Acquired 139,000 acres in Arkansas, New
  Hampshire and South Carolina
• Purchased 29,000 acres in Arkansas 48,000
  acres in Maine
• Acquires 56,000 acres in Florida and
  650,000 acres in OP of Michigan

9
Acquisition History
10
Timber and Land Assets
We have two large appreciating assets. . .
11
Focus on Capturing Land Use Potential

12
Asset Analysis

• Conducted detailed analysis of timberland
  holdings to determine best use and highest value
• Segmented land into
• Core timberlands
• Non-strategic timberlands
• Lands with values in excess of timberland

13
Detailed Asset Analysis

• Core timberlands (Action Hold)
• Attractive long-term markets
• Highly productive land
• Good mix species, age class
• Non-strategic timberlands (Action Sell, over
  time)
• Minimal market presence
• Less attractive mix profile
• Timberlands with higher value (Action Sell, over
  time)

14
Optimize Value of Extensive Land Holdings

15
Core Timberlands Produce Over 85 of Timber Cash
Flow
Most Diversified Timberland Owner in the U.S.

• Ability to match harvest to market conditions
• Access to more markets
• Located in attractive markets
• Highly productive and well stocked
• Mix of hardwoods, softwoods, sawlogs pulpwood

16
Plum Creek has Improved Long-term Growth in
Timber Inventory and Harvest
Acquisition of well stocked, productive
timberlands results in increased standing timber
inventory and future harvests

• Harvest levels increase over time as the
  inventory grows and matures

• A more productive asset base
• Projected merchantable timber inventory has
  increased despite a reduction in total acreage

Projected Harvest 2004
Projected Harvest 2003
17
Selling non-strategic Timberlands to Invest in
More, Productive Lands

• Considerable Progress on Sale of Non-strategic
  Lands
• 255,000 acres of large, non-strategic timberlands
  sold in 2004
• 33,000 acres of small tracts sold in 2004
• 80,000 acres on market via local broker network
• Highly Productive Lands Purchased
• 525,000 acres in attractive, long-term markets in
  past 3 years
• Cash accretive acquisitions

18
Achieving Excellent Premiums for Timberland with
Higher Values
Captured 75 million above and beyond timberland
value in 2004.
200,000 acres
Evaluation of properties and potential joint
venture partners proceeding
450,000 acres
79 premium to appraised timberland value
above projections
700,000 acres
Conservation
19
Significant Opportunities to Realize Value from
Non-timber Resources
Maximizing the Value Above and Below the Ground

• Growing recurring cash flow
• Opportunistic asset sales capture significant
  value
• 27 million CBM operating interest
• 45 million coal assets
• Opportunities
• Construction materials
• Minerals
• Wind water

Includes pending Q1 2005 coal sale for 22
million
20
Questions