UPDATE 1-Weyerhaeuser says REIT change unlikely this year

* Weyerhaeuser says REIT conversion unlikely this year

* View could change if economy improves

* Stock down slightly (Adds more comments, background, stock down)

By Steve James

NEW YORK, May 29 (Reuters) - Timber company Weyerhaeuser Co (WY.N) said on Friday it was unlikely to convert to a real estate investment trust (REIT) structure this year, although that might change if economic conditions improve.

"Several factors, including the low level of timber income this year ... make it unlikely that conversion to a REIT will be beneficial in 2009," Chief Financial Officer Patricia Bedient said at the company's annual investor conference.

"However, if economic conditions improve that outlook could change," she said, noting the company's board had considered a potential REIT conversion, but had made no final decision.

Weyerhaeuser, which has been undergoing a multiyear restructuring, has been under pressure from analysts and investors to adopt a REIT structure, which is more tax efficient than its current corporate structure.

Last year, at the same event, Bedient had ruled out converting to a REIT in 2008 or 2009, saying such a move given the dismal U.S. housing market conditions would not be tax efficient and would only increase the company's debt burden.

On Friday, she said: "It remains clear to us that to maximize the value of our timberlands, we must use the best tax structure."

She noted Weyerhaeuser had made some recent changes, including adopting a calendar financial year, "so we would have the flexibility to change to REIT status if it is advantageous."

But this year, in addition to lower income from timber as demand slumped in the recession, she said REIT status would require the company to carry forward net operating losses.

Also, she said, distribution of earnings and profits under a REIT structure would require a distribution of $1.3 billion in cash, when the company's cash-in-hand at the end of March only totaled $1.7 billion.

Asked about the advantages of changing its corporate structure to a REIT, she said the company believed its portfolio of timberlands, lumber production, home construction and sales was "manageable within a REIT structure.

"But the most important part is not the structure, but how the businesses generate attractive returns for shareholders."

Weyerhaeuser has cut its quarterly dividend to 25 cents per share from 60 cents, as the company reported a wider first-quarter loss and she said it expected challenging market conditions to persist in the second.

Weyerhaeuser stock was down 6 cents at $33.33 in afternoon trading on the New York Stock Exchange. (Editing by Derek Caney; Editing by Andre Grenon)