Weyerhaeuser 2007 Annual Report

FORM 10-K

Real Estate
Our Real Estate business segment includes our wholly-owned subsidiary, Weyerhaeuser Real Estate Company (WRECO), and other real estate-related activities. WRECO’s operations are concentrated in select, high-growth metropolitan areas in the U.S.

What We Do
The Real Estate segment is focused on:

• constructing single-family housing;
• developing residential lots for our use and for sale; and
• making residential real estate investments with institutional investors.

Real Estate Products and Activities

Where We Do It
Our operations are concentrated in the U.S., including select, metropolitan areas:

• Single-Family Housing and Land Development
– Arizona, California, Maryland, Nevada, Oregon, Texas, Virginia and Washington
• Real Estate Investment Management Offices
– Arizona, California, Colorado, Illinois, Nevada, Virginia and Washington

How Much We Sell
We are one of the top 20 homebuilding companies in the U.S. as measured by annual single-family home closings.

Our revenues decreased from $3.3 billion in 2006 to $2.4 billion in 2007, primarily due to a 24 percent decline in single-family closings. The decline is the result of a general housing-market downturn, caused by excess supply and slow demand. This was worsened by the changing mortgage market which resulted in tightened credit standards.

The following factors affect revenues from our Real Estate business segment:

• Market prices of the homes that we construct for sale may vary.
• The product mix and geographic mix of sales vary based on the following:

– We build in a variety of geographic locations. Market conditions vary by geography which affects total revenues.
– We provide homes at a range of price points to meet our target customers’ needs, from entry-level products in Washington to ocean view homes in Southern California and waterfront homes in Maryland. The mix of these sales affects total revenues.
– We build both traditional single-family, detached homes and attached products such as town homes and condominiums. The mix of price points at which these products sell creates variability in our revenue from period to period.

• Land and lot sales are a component of our master-planned development activities. These sales do not occur evenly from year to year, but average approximately 5 percent to 15 percent of total Real Estate revenues annually.
• From time to time, we sell apartment buildings that we have constructed.

Five-Year Summary of Revenue for Real Estate⁽¹⁾⁽²⁾

Five-Year Trend for Total Net Sales in Real Estate⁽¹⁾⁽²⁾

Percentage Breakdown of 2007 Net Sales in Real Estate

Five-Year Summary of Single-Family Unit Statistics⁽¹⁾⁽²⁾

Where We're Headed
Our strategies for achieving continued success include:

• delivering quality homes to satisfied customers – a principle we measure through “willingness to refer” rates from surveys of every homebuyer;
• focusing on new market areas where demand for new single-family housing and master-planned communities is high;
• creating different and distinct value propositions that target a specific market niche in each of our chosen geographies;
• expanding into adjacent markets where our local value propositions fit;
• replicating best practices developed in each geographic area; and
• leveraging our size to improve supply agreements, and attract and retain a highly-talented workforce.