Q4 2023 Rayonier Inc Earnings Call
Welcome and thank you for joining it ran years fourth quarter and 40 you're twice.
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You have any objections you may disconnect at this time now I will turn the meeting over to Mr. Collin Mings, Vice President capital markets and strategic planning.
Collin Mings: Thank you and good morning, welcome to Rangers Investor Teleconference, covering fourth quarter earnings our earnings statements and financial supplement were released yesterday afternoon and are available on our website at rate in your dot com.
Collin Mings: I'd like to remind you that in these presentations. We include forward looking statements made pursuant to the safe Harbor provisions of Federal Securities laws, Our earnings release, and Form 10-K, and 10-Q filed with the SEC.
Collin Mings: The factors that may cause actual results to differ materially from the forward looking statements. We may make they're also referenced on page two of our financial supplement.
Collin Mings: Throughout these presentations, we will also discuss non-GAAP financial measures, which are defined and reconciled to the nearest GAAP measures in our earnings release and supplemental materials with that let's start our teleconference with opening comments from Dave Nunes as our CEO Dave.
Thanks, Colin Good morning, everyone first I'll make some high level comments before turning it over to Mark Mchugh, President and Chief Financial Officer to review, our consolidated financial results.
Mark D. McHugh: Then we'll ask Doug long executive Vice President and Chief Resource Officer to comment on our U S and New Zealand timber results.
Mark D. McHugh: Following the review of our timber segments, Mark will discuss our real estate results as well as our outlook for 2024.
Mark D. McHugh: We are pleased.
Mark D. McHugh: He used with our overall financial performance in 2023, particularly in light of the challenging and uncertain market conditions that we faced throughout the year.
Mark D. McHugh: For the full year, we generated GAAP earnings per share of $1 17.
Mark: Pro forma earnings per share of 36, and adjusted EBITDA of $297 million.
Mark: Full year, adjusted EBITDA declined 6% versus the prior year as lower results in our timber segments were largely offset by significantly higher contribution from our real estate segment.
Mark: Our southern timber segment full year, adjusted EBITDA was relatively flat versus the prior year as the segment benefited from recent acquisitions, which contributed to increased volumes as well as the operational flexibility to target more resilient saw log markets.
Mark: Additionally, non timber income generated by our southern timber segment increased $9 million or 35% relative to the prior year largely driven by increased revenue from our Burgundy land based solutions business.
Mark: In our Pacific Northwest timber segment, we chose to defer roughly 150000 tons of planned harvest in response to soft market conditions, which contributed to the significant decrease in adjusted EBITDA versus the prior year.
Mark: And our New Zealand timber segment, adjusted EBITDA declined modestly versus the prior year as reduced volumes and lower log prices were largely offset by a higher carbon credit sales and significantly lower export shipping costs.
Mark: Finally in our real estate segment, we capitalized on strong demand in both the rural HBU market and our improved development projects generating adjusted EBITDA well above our initial expectations entering the year.
Mark: Overall I'm proud of how our team was able to navigate an ever evolving market environment to deliver solid full year financial performance.
Mark: As Mark will discuss in greater detail later in the call. We are providing full year 2024, adjusted EBITDA guidance of $290 million to $325 million as we move into 2024, we are cautiously optimistic that timber market conditions have generally stabilized across our portfolio.
Mark: And we further expect to capitalize on a growing pipeline of land based solutions opportunities as well as continued strong demand for both rural HBU and improved development real estate properties.
Mark: Our 2024 guidance reflects a similar contribution from our U S timber segments as compared to last year, a meaningfully higher contribution from our New Zealand timber segment and another strong contribution from our real estate segment.
Mark: Importantly, this guidance excludes the potential impact of any additional asset sales as part of the $1 billion disposition target that we established late last year.
Mark: Turning back to the fourth quarter, we generated adjusted EBITDA of $94 million and pro forma net income of $25 million or <unk> 17 per share.
Mark: Exceptionally strong results in our real estate segment more than offset weaker results across our timber segments.
Mark: Drilling down further on our operating segments, our southern timber segment generated fourth quarter, adjusted EBITDA of $32 million down $1 million from the prior year period.
Mark: The 12% decline in net stumpage realizations was largely offset by a 17% increase in harvest volumes versus the prior year period, primarily due to incremental volume from the acquisitions completed in late 2022.
Mark: In our Pacific Northwest timber segment.
Fourth quarter, adjusted EBITDA of $6 million was down $9 million from the prior year quarter, driven by a 12% decline in weighted average log prices as well as a 25% reduction in harvest volumes as we elected to defer planned harvest in response to weaker domestic and export market demand.
Mark: Turning to New Zealand timber segment fourth quarter adjusted.
Mark: EBITDA of $12 million decreased $2 million versus the prior year quarter. The decline in adjusted EBITDA was driven by lower carbon credit sales, a 9% decrease in export sawtimber prices and 8%.
Mark: Lower harvest volumes, partially offset by favorable foreign exchange impacts and a significant reduction in port and freight costs.
Mark: And our real estate segment, we generated fourth quarter adjusted EBITDA of $54 million.
Mark: $39 million from the prior year period, as we closed on a significant world transaction during the quarter, while transaction volume in the prior year period was relatively light.
Mark: Additionally, I'd like to provide an update on the $1 billion disposition program, we announced in November in the fourth quarter. We were pleased to close on our previously announced sale of 55000 acres of timberland and southwest, Oregon for $242 million or.
Mark: Or $4400 per acre we.
Mark: We subsequently deployed $150 million of the proceeds to pay down our only floating.
Mark:
Mark: Our only floating rate debt and approximately $30 million towards a special dividend that was paid in January the remaining proceeds are being retained for further debt reduction or other capital allocation purposes.
Mark: There remains a strong bid for timberland assets in the private market and we are actively working to bring additional timberland assets to market over the next several months in order to capitalize on the disconnect between public and private market timberland values and to reduce leverage and a high higher interest rate environment with that let me turn it over.
Mark: To mark for more detail on our fourth quarter financial results.
Mark: Thanks, Dave let's start with our financial highlights on page five of the supplement sales for the fourth quarter totaled $467 million, while operating income was $145 million and net income attributable to rayonier was $127 million or <unk> 85 per share on a pro forma basis net income was 20.
Mark: $5 million or <unk> 17 per share pro forma items in the fourth quarter included $105 million of income from a large disposition of $2 million noncash pension settlement charge and a $200000 net recovery associated with the legal settlement adjusted EBITDA was $94 million in the fourth quarter up from 68 million.
Mark: In the prior year period.
Mark: On the bottom of page five we provide an overview of our capital resources and liquidity, our cash available for distribution or <unk> for the year was $164 million versus $192 million in the prior year period. The decrease was driven by lower adjusted EBITDA higher cash interest paid and higher capital expenditures, partially offset.
Mark: By lower cash taxes.
Mark: A reconciliation of <unk> to cash provided by operating activities and other GAAP measures is provided on page eight of the financial supplement.
Mark: As Dave mentioned earlier during the fourth quarter, we completed our disposition of 55000 acres of timberland in Oregon for $242 million and used $150 million of the proceeds to pay down our only floating rate debt. This was an important step toward reaching our enhanced leverage targets, including net debt to adjusted EBITDA of three times or less and net debt.
Mark: The asset value of 20% or less.
Mark: We closed the fourth quarter with $208 million of cash and roughly $1 $4 billion of debt, implying net debt to 2023 adjusted EBITDA of approximately three nine times at quarter end, our weighted average cost of debt was approximately two 8% and the weighted average maturity on our debt portfolio was approximately five years with no floating rate exposure.
Mark: August 2024, and no significant debt maturities until 2026, our net debt to enterprise value based on our closing stock price at the end of the quarter was 19% with.
Mark: With a long dated and well staggered debt maturity profile as well as a low cost fixed rate debt structure, we plan to be selective and opportunistic in achieving our enhanced leverage targets over the next several quarters I'll now turn the call over to Doug to provide a more detailed review of our timber results.
Doug: Thanks, Mark let's start on page nine with our southern timber segment.
Doug: Adjusted EBITDA in the fourth quarter of $32 million was $1 million or 4% below the prior year quarter, driven by lower net stumpage prices and higher costs, partially offset by higher volumes and higher non timber income.
Doug: Total harvest volume rose, 17% versus the prior year quarter, primarily driven by an increase in pine sawtimber volumes.
Doug: The successful integration of acquisitions, we completed in late 2022.
Doug: Meanwhile, the year over year improvement in noninterest income was driven in part by revenue from our initial carbon capture and storage lease signed in early 2023.
Operator: Welcome and thank you for joining Reineers' fourth quarter and being fully here. At this time, all participants are in a listen-only mode. During the question and answer session, please press star 1 on your telephone keypad.
Doug: Average saw log stumpage pricing was $29 per ton, a 15% decrease compared to the prior year period.
Doug: The moderation in pricing reflected reduced market tension across our operating areas relative to the prior year quarter due to softer demand from sawmills as well as less competition from pulp mills for chicken saw volume.
Operator: Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I will turn the meeting over to Mr. Collin Mings, Vice President, Capital Markets and Strategic Planning. Thank you. Good morning.
Meanwhile, pulpwood net stumpage pricing fell 16% versus the prior year quarter to roughly $18 per ton as weaker end market demand weighed on pricing.
Collin Mings: Welcome to Reynier's Investor Teleconference, covering fourth-quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our website at reynier.com. I would like to remind you that in these presentations, we include forward-looking statements made pursuant to the safe harbor provisions of federal securities laws. Our earnings release and forms 10-K and 10-Q filed with the SEC list some of the factors that may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on page 2 of our financial supplement. Throughout these presentations, we will also discuss non-GAAP financial measures, which are defined and reconciled to the newest GAAP measures in our earnings release and supplemental materials. With that, let's start our teleconference with opening comments from Dave Nunes, our CEO. Thanks, Collin. Good morning, everyone.
Doug: Overall weighted average stumpage prices in the fourth quarter fell 12% versus the prior year quarter to roughly $23 per ton.
Doug: Market conditions and yourself, particularly for pulpwood were challenging throughout 2023, as many of our customers Recalibrated production and shutdown underperforming mills amid weakening end market demand.
Doug: While our markets have not been immune from the pulp mill closures that have been announced over the past several months.
Doug: We have seen some offsetting demand from production increases at other mills within our operating areas.
Doug: Overall market rationalizing production capacity by post Covid environment.
Doug: As we enter 2024, we are increasingly optimistic that inventory stocking cycle that has weighed on containerboard demand is largely complete and pulpwood pricing has generally stabilized as a result.
David Laurence Nunes: First, I'll make some high-level comments before turning it over to Mark McHugh, President and Chief Financial Officer, to review our consolidated financial results. Then we'll ask Doug Long, Executive Vice President and Chief Resource Officer, to comment on our U.S. and New Zealand timber results. And following the review of our timber segments, Mark will discuss our real estate results, as well as our outlook for 2024. We are pleased with our overall financial performance in 2023, particularly in light of the challenging and uncertain market conditions that we faced throughout the year. For the full year, we generated GAAP earnings per share of $1.17, pro forma earnings per share of $36,000, and Adjusted Adiba Da of $297 million.
Doug: Turning to grain markets following a reset in the early 2023 pricing was relatively flat throughout the remainder of the year and has continued to be stable in 2024.
Doug: We're encouraged by the healthy interest in recent stomach packages, we've brought to market and are cautiously optimistic that increased rainfall coupled with improving end market demand will translate into higher pricing as the year progresses.
Doug: Moving to our Pacific Northwest timber segment on page 10, adjusted EBITDA of $6 million was $9 million below the prior year quarter.
Doug: The year over year decrease was primarily driven by lower harvest volumes, lower net stumpage realizations and higher costs, partially offset by slightly higher non timber income.
David Laurence Nunes: Our full-year adjusted EBITDA declined 6% versus the prior year, as lower results in our timber segments were largely offset by a significantly higher contribution from our real estate. Our southern timber segment full-year adjusted EBITDA was relatively flat versus the prior year as the segment benefited from a recent acquisition, which contributed to increased volumes, as well as the operational flexibility to target more resilient saw log markets. Additionally, non-timber income generated by our southern timber segment increased $9 million, or 35%, relative to the prior year, largely driven by increased revenue from our burgundy land-based solutions business. In our Pacific Northwest Timber Segment, we chose to defer roughly 150,000 tons of planned harvest in response to soft market conditions, which contributed to a significant decrease in adjusted EBITDA versus the prior year. In our New Zealand timber segment, adjusted EBITDA declined modestly versus the prior year as reduced volumes and lower log prices were largely offset by higher carbon credit sales and significantly lower export shipping costs.
Doug: Volume decreased 25% in the fourth quarter as compared to the prior year period, reflecting our decision to defer some planned harvest in response to soft market conditions as well as reduced volume from our Oregon disposition in preparation for closing.
At $94 per ton average delivered domestic solid pricing in the fourth quarter fell 10% from the prior year period.
Doug: Due to a combination of weaker demand from domestic lumber mills and reduced export market tension.
Doug: Meanwhile, at $29 per ton pulpwood pricing decreased 56% versus the prior year quarter as end market demand remained materially softer than historically high levels seen a year ago.
Doug: As we enter 2024 log market and northwest continues to be challenged by relatively soft domestic lumber markets as well as limited attention from the export market.
Doug: However, we are cautiously optimistic that demand will improve gradually over the course of the year as mill inventories normalize and lumber production increases to meet the growing mix of single family housing starts.
And we've seen early signs of market improvement to start the year.
Doug: Overall, while we expect that log prices in the northwest will improve from current levels. We anticipate that full year average delivered log pricing will likely remain below the levels achieved in 2023 due in part to a less favorable species mix. However.
David Laurence Nunes: Finally, in our real estate segment, we capitalized on strong demand in both the rural HBU market and our improved development projects, generating a just cedibit DOF well above our initial expectations entering the year. Overall, I'm proud of how our team was able to navigate an ever-evolving market environment to deliver solid, full-year financial performance. As Mark will discuss in greater detail later in the call, we're providing full year 2024 adjusted EBITDA guidance of $290 to $325 million.
Doug: However, we also expect modestly lower per ton cut and haul costs, which should help to improve net stumpage realizations.
Doug: Moving to New Zealand page 11 shows results and key operating metrics Pardon Zealand timber segment adjusted EBITDA in the fourth quarter of $12 million was $2 million below the prior year quarter.
Doug: The decrease in adjusted EBITDA compared to the prior year period was primarily driven by lower carbon credit sales and lower harvest volumes.
David Laurence Nunes: As we move into 2024, we are cautiously optimistic that timber market conditions have generally stabilized across our portfolio, and we further expect to capitalize on a growing pipeline of land-based solutions opportunities, as well as continued strong demand for both rural HBU and improved development real estate. Our 2024 guidance reflects a similar contribution from our U.S. timber segments as compared to last year, a meaningfully higher contribution from our New Zealand timber segment, and another strong contribution from our real estate segment. Importantly, this guidance excludes the potential impact of any additional asset sales as part of the $1 billion disposition target that we established late last year.
Doug: Partially offset by favorable foreign exchange impacts and higher weighted average net stumpage realizations.
Doug: Average delivered export sawtimber prices of $101 per ton declined 9% compared to the prior year quarter, primarily due to ongoing challenges in the Chinese property sector. However, export sawtimber stumpage realizations are relatively flat as port and freight cost remained significantly below.
Doug: High levels, we contended with the prior year period.
Doug: Heading into the lunar new year.
Doug: We are encouraged that softwood log inventories in China.
Doug: Estimated $2 7 million cubic meters down over 35% from a year ago.
Doug: And representing less than two months of supply.
Doug: While there is always a seasonal slowdown in activity. During this time of the year, we believe that the anticipated inventory to demand ratio coming out of the holiday period should support favorable pricing dynamics in the coming months.
David Laurence Nunes: Turning back to the fourth quarter, we generated a just-a-dip-a-dob $94 million and pro forma net income of $25 million, or 17 cents per share. Exceptionally strong results in our real estate segment more than offset weaker results across our timber segment. Drilling down further on our operating segments, our southern timber segment generated fourth quarter adjusted EBITDA of $32 million, down $1 million from the prior year period. The 12% decline in net stumpage realizations was largely offset by a 17% increase in harvest volumes versus the prior year period, primarily due to incremental volume from the acquisitions completed in late 2022. In our Pacific Northwest timber segment, fourth quarter adjusted EBITDA of $6 million was down $9 million from the prior year quarter, driven by a 12% decline in weighted average log prices, as well as a 25% reduction in harvest volumes as we elected to defer planned harvests in response to weaker domestic and export market demand. Turning to New Zealand, fourth quarter adjusted EBITDA of $6 million. Ebitda of $12 million decreased $2 million versus the prior year quarter.
Doug: Shifting to the New Zealand domestic market.
Doug: Fourth quarter average delivered solid prices fell 3% from the prior year period, and 5% when excluding foreign exchange impacts.
Doug: The decline in pricing reflects reduced tension from export markets, coupled with the challenges facing the local construction market amid a higher interest rate environment.
Doug: Fourth quarter non timber income in New Zealand up $8 million to $1 million relative to the prior year period, while carbon credit pricing in the fourth quarter was down versus the prior year period. It was well above the lows seen in the first half of 2023, we suspended our sales program a bit unusual market volatility.
Doug: We anticipate that we will remain active in the New Zealand car market in 2024 as market volatility has largely subsided and pricing has remained relatively strong.
Doug: Lastly, in our timber segment trading segment.
Doug: We posted a slight operating profit in the fourth quarter as a reminder, our trading activities typically generate low margins and are primarily designed to provide additional economies of scale to our fee timber export business.
Doug: I'll now turn it back over to Mark to cover our real estate results Mark.
David Laurence Nunes: The decline in adjusted Ebitda was driven by lower carbon credit sales, a 9% decrease in export saw timber prices, and an eight percent lower heart response, partially offset by favorable foreign exchange impacts and a significant reduction in port and freight costs. In our real estate segment, we generated fourth quarter adjusted EBITDA of $54 million, up $39 million from the prior year period, as we closed on a significant rural transaction during the quarter, while transaction volume in the prior year period was relatively light. Additionally, I'd like to provide an update on the $1 billion disposition program we announced in November. In the fourth quarter, we are pleased to close on our previously announced sale of 55,000 acres of timberland in southwest Oregon for $242 million, or $4,400 per acre. We subsequently deployed $150 million of the proceeds to pay down our only floating..., are only floating rate debt and approximately $30 million toward a special dividend that was paid in January. The remaining proceeds are being retained for further debt reduction or other capital allocation.
Mark: Thanks, Doug as detailed on page 12, our real estate segment delivered strong fourth quarter results real estate sales totaled $310 million on roughly 75500 acres sold which included the large disposition in Oregon, consisting of 55000 acres for $242 million. Excluding this transaction for <unk>.
Mark: <unk> sales totaled $68 million on.
Mark: And roughly 2500 acres sold and average price of $3300 per acre real estate segment adjusted EBITDA in the fourth quarter was $54 million.
Mark: Drilling down sales in the improved development category totaled $11 million and our wildlife development project North of Jacksonville, Florida sales consisted of a 58 acre industrial park site for $5 $8 million, a roughly $100000 per acre and an 11 acre commercial site to a church for $3 $1 million or roughly <unk>.
Mark: $300000 per acre.
Mark: And our Heartland development project South of Savannah, Georgia sales consisted of 21 finished residential lots to a national homebuilder for $930000 at an average base price of roughly $44000 per lot as well as a two acre commercial site to daycare provider for $635000 or roughly $360000 per acre.
Mark: We also generated $200000 of other net revenue during the quarter, which primarily consisted of $2 $6 million of lot true ups and marketing fees at our wildlife and heart with development projects, largely offset by $2 4 million of deferred revenue recognition on land sales with post closing construction obligations.
Mark D. McHugh: There remains a strong demand for timberland assets in the private market, and we are actively working to bring additional timberland assets to market over the next several months in order to capitalize on the disconnect between public and private market timberland values and to reduce leverage in a higher interest rate environment. With that, I will turn it over to Mark for more detail on our fourth quarter financial results. Thanks Dave.
Mark: Overall, we continue to believe that both of these development projects are very well positioned and will continue to benefit from favorable migration and demographic trends relative relatively affordable price points and a diverse mix of residential commercial and industrial end users.
Mark D. McHugh: Let's start with our financial highlights on page 5 of the supplement. Sales for the fourth quarter totaled $467 million, while operating income was $145 million, and net income attributable to Rainier was $127 million, or $0.85 per share. On a pro forma basis, net income was $25 million, or $0.17 per share. Pro forma items in the fourth quarter included $105 million of income from a large disposition, a $2 million non-cash pension settlement charge, and a $200,000 net recovery associated with a legal settlement. Jussie Beda earned $94 million in the fourth quarter, up from $68 million in the prior year period.
Mark: Lastly, I'd like to take a moment to recognize an important milestone achieved during the quarter and our wildlife project in November we received unanimous entitlement approval for Nassau County for the next phase of our Wildlife project. These entitlements allow for the development of roughly 15000 residential units and $1 4 million square feet.
Mark: <unk> of nonresidential uses on nearly 15000 acres, notably approximately 7000 acres are roughly half of the newly entitled acreage will be permanently preserved as part of our conservation habitat network, providing open space for wildlife habitat habitat water quality and recreation.
Mark D. McHugh: On page 5, we provide an overview of our capital resources and liquidity. Our cash available for distribution, or CAD for the year, was $164 million versus $192 million in the prior year period. The decrease was driven by lower adjusted EBITDA, higher cash interest paid, and higher capital expenditures, partially offset by lower cash taxes.
Mark: For context, the first phase of entitlements at Wildlife consisted of roughly 2900 acres and 3200 residential units we plan to go into more detail on the future of our wildlife development project as well as the rest of our improved development portfolio at our upcoming Investor Day on February 28.
Mark D. McHugh: A reconciliation of CAD to cash provided by operating activities and other gap measures is provided on page 8 of the financial supplement. As Dave mentioned earlier, during the fourth quarter, we completed the disposition of 55,000 acres of timberland in Oregon for $242 million and used $150 million of the proceeds to pay down our only flooding rate debt. This was an important step toward reaching our enhanced leverage targets, including net debt to adjusted EBITDA of three times or less and net debt to asset value of 20% or less. We closed the fourth quarter with $208 million of cash and roughly $1.4 billion of debt, implying net debt to 2023 adjusted EBITDA of approximately 3.9 times. At quarter end, our weighted average cost of debt was approximately 2.8 percent, and the weighted average maturity on our debt portfolio was approximately five years, with no floating rate exposure until August 2024 and no significant debt maturities until 2026. Our net debt-to-enterprise value based on our closing stock price at the end of the quarter was 19 percent.
Mark: Turning to the rural category fourth quarter sales totaled $57 million <unk>.
Mark: Consisting of approximately 20200 acres at an average price of roughly $2800 per acre key transactions included the sale of roughly 16100 acres in Alabama, and Georgia for $37 million or roughly $2300 per acre, notably the property sold consisted of scattered parcels with a relatively high.
Mark: <unk> <unk> of non plant will land other key rural transactions in the quarter included a roughly 1300 acre sale in St. Johns County, Florida for $7 1 million or <unk> $5600 per acre and 1100 acre sale in Pacific County, Washington for $5 $1 million or roughly $4600 per acre to a conservation oriented.
Buyer.
Mark: Overall, we continue to be encouraged by the healthy demand for rural land and the pipeline of deals we see for 2024.
Mark: Lastly, during the fourth quarter. We also closed on a 200 acre non strategic timberland sale for $400000 or $2000 per acre.
Douglas M. Long: With a long-dated and well-staggered debt maturity profile as well as a low-cost fixed-rate debt structure, we plan to be selective and opportunistic in achieving our enhanced leverage targets over the next several quarters. I now turn the call over to Doug to provide a more detailed review of our timber. Thanks, Mark.
Mark: Now moving onto our outlook for 2024 page 14 shows our financial guidance by segment and schedule G of our earnings release provides a reconciliation of our guidance for net income attributable to rayonier to adjusted EBITDA.
Mark: For full year 2024, we expect to achieve adjusted EBITDA of $290 to $325 million net.
Douglas M. Long: Let's start on page 9 with our Southern Timber segment. Adjusted EBITDA in the fourth quarter of $32 million was $1 million, or 4% below the prior year quarter, driven by lower net stowage prices and higher costs, partially offset by higher volumes and higher non-dipper income. Total harvest volume was 17% versus the prior year quarter, primarily driven by an increase in pine sultamer volumes from the successful integration of acquisitions we completed in late 2022. Meanwhile, the year-over-year improvement in non-temporary income was driven in part by revenue from our initial carbon capture and storage lease signed in early 2020. Average saw log stumpage pricing was $29 per ton, a 15% decrease compared to the prior year period.
Mark: Net income attributable to rayonier of $60 million to $80 million and EPS of 40% to 54.
Mark: As noted in our earnings release, our guidance excludes the potential impact from any additional asset sales as part of our previously announced $1 billion disposition target.
Mark: With respect to our individual segments and our southern timber segment, we expect full year harvest volumes of seven one to $7 3 million tonnes. This represents a modest decrease versus the prior year as we expect logging conditions to normalize following a relatively dry 2023, which translated to strong production output.
Mark: Further we expect that regional pine stumpage realizations will improve modestly versus the prior year based on improving end market demand coupled with an anticipated increase in rainfall from the El Nino weather pattern. However, we expect these pricing gains will be largely offset by less favorable geographic mix as compared to 2023.
Douglas M. Long: The moderation in pricing reflected reduced market tension across our operating areas relative to the prior year and quarter due to softer demand from sawmills, as well as less competition from pulp mills for chip and saw volume. Meanwhile, Hopewood net stumpage pricing fell 16% versus the prior year quarter to roughly $18 per ton as weaker in-market demand weighed on prices. Overall, weighted average stumper prices in the fourth quarter fell 12% versus the prior year quarter to roughly $23 per ton.
Lastly, we expect higher non timber income for full year 2024, as compared to full year 2023, primarily driven by additional income from land based solutions overall, we expect to achieve full year adjusted EBITDA in our southern timber segment of $153 million to $163 million.
Mark: In our Pacific Northwest timber segment, we expect full year harvest volumes of approximately $1 4 million tonnes. The anticipated increase relative to 2023 assumes a return to a more normalized level of demand and harvest activity, partially offset by a reduction in our Pacific northwest sustainable yield due to the recent Oregon disposition as Doug discussed.
Douglas M. Long: Market conditions in the U.S. South, particularly for pulpwood, were challenging throughout 2023 as many of our customers recalibrated production and shut down underperforming mills amid weakening market demand. However, our markets have not been immune from the pulp mill closures that have been announced over the past several months. We have seen some offsetting demand from production increases at other mills within our operating areas, as the overall market rationalizes production capacity for a post-COVID environment. As we enter 2024, we are increasingly optimistic that the inventory stocking cycle that has weighed on container board demand is largely complete, and pulpwood pricing has generally stabilized as a result. Turning to grade markets, following a reset in the early 2023, pricing was relatively flat throughout the remainder of the year, and has continued to be stable in 2024.
Mark: We expect that delivered log pricing will improve from current levels, but full year pricing will likely remain below the levels achieved in 2023 due in part to a less favorable species mix.
Mark: <unk>, we expect to achieve full year adjusted EBITDA in our Pacific Northwest timber segment of $25 million to $31 million.
Mark: And our New Zealand timber segment, we expect full year harvest volumes of two four to $2 5 billion tons, we expect full year domestic and export sawtimber pricing to improve modestly relative to the full year pricing achieved in 2023 as end markets continue to recover turning to the carbon market, we anticipate a modest increase in carbon credit sales in 2024.
Douglas M. Long: We're encouraged by the healthy interest in recent stomach packages we've brought to market and are cautiously optimistic that increased rainfall, coupled with improving in-market demand, will translate into higher pricing as the year progresses. Moving to our Pacific Northwest Timber Segment on page 10, adjusted EBITDA of $6 million was $9 million below the prior year quarter.
Mark: As pricing has remained strong following the significant market volatility experienced in the first half of 2023 overall.
Mark: Overall, we expect full year adjusted EBITDA in our New Zealand timber segment of 57% to $65 million.
Mark: And our real estate segment, we expect full year adjusted EBITDA of $92 million to $104 million as we continue to see healthy demand for our rural properties as well as continued momentum across our development projects similar to 2023, we expect very like closing activity in the first quarter, followed by a significant pickup in the second quarter.
Douglas M. Long: The year-over-year decrease was primarily driven by lower harvest volumes, lower net stumpage realizations, and higher costs, partially offset by slightly higher non-timber income. Volume decreased 25% in the fourth quarter as compared to the prior year period, reflecting our decision to defer some planned harvests in response to soft market conditions, as well as lower volume from our organ disposition in preparation for closing. At $94 per ton, average delivered domestic solid pricing in the fourth quarter fell 10% from the prior year period due to a combination of weaker demand from domestic lumber mills and reduced export market tension. Meanwhile, at $29 per ton, pulpwood pricing decreased 56% versus the prior quarter, as in-market demand remained materially softer than historically high levels seen a year ago.
Speaker Change: Before turning the call back for closing comments I wanted to take a moment to congratulate Dave on his upcoming retirement from Rainier and to thank him for the tremendous work that he has done and leading our organization for the last decade.
Speaker Change: When Dave joined ran near as CEO in 2014, he brought a unique blend of deep industry knowledge and strategic acumen as well as a strong but humble leadership style, Dave instilled in the organization and intense focus on nimble capital allocation and active portfolio management, all with a view towards building long term value per share while serving as a response.
Speaker Change: Steward of our land resources. He also built a strong and cohesive culture at the company, where our people feel empowered to act like owners and are truly dedicated to the company and its stakeholders Ranier, who has taken tremendous strides since we emerged from the spin off of our specialty pulp manufacturing business in 2014 to become the only pure play timber REIT.
Douglas M. Long: As we enter 2024, the long market in the Pacific Northwest continues to be challenged by relatively soft domestic lumber markets, as well as limited tension from the export market. However, we are cautiously optimistic that demand will improve gradually over the course of the year as mill inventories normalize and lumber production increases to meet the growing mix of single-family housing starts, and we've seen early signs of market improvement this year. Overall, while we expect that log prices in the Northwest will improve from current levels, we anticipate that full-year average delivered log pricing will likely remain below the levels achieved in 2023, due in part to less favorable species. However, we also expect modestly lower per-ton cut-and-haul costs, which should help to improve net stumpage utilization.
Speaker Change: With our best in class portfolio, and a unique set of growth opportunities in land based solutions and real estate development.
Speaker Change: We certainly wouldn't be where we are today without the steadfast leadership and unwavering commitment that they've brought to the job every single day, Dave on behalf of the entire organization. It's truly been a privilege to work alongside you for the past 10 years you'd left an indelible legacy at Rayonier and we wish you the best in this next chapter.
David Laurence Nunes: Thanks, Mark I appreciate the kind words have thoroughly enjoyed my our partnership over the last 10 years I am confident that Rainier will thrive under your leadership and I'm excited to watch as you and the rest of the team continue to work towards creating long term value for our shareholders and other stakeholders, especially amid.
Douglas M. Long: Moving to New Zealand, page 11 shows results and key operating metrics for our New Zealand timber segment. Adjusted EBITDA in the fourth quarter of $12 million was $2 million below the prior year quarter, a decrease in adjusted EBITDA compared to the prior year period, primarily driven by lower carbon credit sales and lower harvest volumes, partially offset by favorable foreign exchange impacts and higher wage average net stumpet realization. Average delivered export salt timber prices of $101 per ton declined 9% compared to the prior year quarter, primarily due to ongoing challenges in the Chinese property sector. However, ex-port Saltimber net stumbage realizations were relatively flat as port and freight costs remained significantly below the high levels we encountered in the prior year period.
David Laurence Nunes: The secular tailwind that are emerging for the timberland asset class.
David Laurence Nunes: I'd like to wrap up our prepared remarks by first thanking our team for the tremendous effort exerted throughout 2023, you'll learn a great deal of observing how it team navigate through a challenging market environment and this past year was no exception I was extremely encouraged to see how our organization came together during difficult market.
David Laurence Nunes: <unk> to collaborate and ultimately deliver full year adjusted EBITDA results generally in line with our initial expectations consistent with our focus on maximizing long term shareholder value. We did not seek to compensate for timber pricing headwinds by pushing additional timber volume into the market, but instead took.
Douglas M. Long: Heading into the Lunar New Year, we are encouraged that softwood log port inventories in China are at an estimated 2.7 million cubic meters, down over 35 percent from a year ago and representing less than two months of supply. While there is always a seasonal slowdown in activity during this time of the year, we believe that the anticipated inventory to demand ratio coming out of the holiday period should support favorable pricing dynamics in the coming months. Shifting to the New Zealand domestic market. The fourth quarter average delivered saw log prices fell 3 percent from the prior year period and 5 percent when excluding foreign exchange impact. The decline in pricing reflects reduced tension from export markets, coupled with the challenges facing the local construction market amid a higher interest rate environment. Fourth quarter non-temporary income in New Zealand of $8 million fell $1 million relative to the prior year period.
David Laurence Nunes: <unk> of our pure play timber model by reshuffling, our harvest plans to pivot towards relatively favorable markets. While also deferring harvest is more challenged markets.
David Laurence Nunes: Despite some transitory pressures on timber pricing timberland in rural HBU land prices held up remarkably well this past year, allowing us to execute on land sales at a significant premium to underlying timberland values.
David Laurence Nunes: In addition, the recent 15000 acre entitlement approval within our Wildlife project will serve to further enhance our real estate development platform, where we have assembled a powerful combination of valuable land use entitlements and growing markets along with a talented team of real estate professionals.
David Laurence Nunes: While managing our core timber and real estate businesses. We also continued to advance our land based solutions business as discussed previously we now have in place valuable wind solar and carbon capture and storage leases, we saw positive momentum across our land based solutions portfolio throughout 2023, and we look forward.
Douglas M. Long: While carbon credit pricing in the fourth quarter was down versus the prior year period, it was well above the lows seen in the first half of 2023 when we suspended our sales program amid unusual market volatility. We anticipate that we will remain active in the New Zealand carbon credit market in 2024, as market volatility has largely subsided and pricing has remained relatively strong. Lastly, in our timber segment and trading segment, we posted a slight operating profit in the fourth quarter.
David Laurence Nunes: Sharing future targets for these burgeoning businesses in our Investor day at the end of this month.
David Laurence Nunes: In addition, we successfully executed on our plan to sell timberland in Oregon to help reduce our leverage an important first step in a broader initiative, we developed to enhance shareholder value.
Mark D. McHugh: As a reminder, our trading activities typically generate low margins and are primarily designed to provide additional economies of scale to our feed timber export market. I'll now turn it back over to Mark to cover our real estate. Clark
David Laurence Nunes: While we've been pleased by the investment community's response to our $1 billion disposition plan, we still do not believe that the true value for quality timberland assets is reflected in our share price and we remain committed to capitalizing on the disconnect between public and private timberland values.
Mark D. McHugh: Thanks, Doug. As detailed on page 12, our real estate segment delivered strong fourth-quarter results. Real estate sales totaled $310 million on roughly 75,500 acres sold, which included a large disposition in Oregon consisting of 55,000 acres for $242 million. Excluding this transaction, fourth-quarter sales totaled $68 million on roughly 20,500 acres sold at an average price of $3,300 per acre.
David Laurence Nunes: Lastly, we made progress on sustainable ability related initiatives in 2023 and are proud to have been a founding member of the international sustainability Forestry coalition and more recently a signatory to the climate pledge. We believe these commitments are consistent with our goal of supporting a more sustainable.
David Laurence Nunes: Future and are excited to join other organizations from across the globe in the effort to accelerate responsible climate action.
Mark D. McHugh: The Real Estate Segment Adjustee, but done in the fourth quarter, was $54 million. Drilling down, sales in the improved development category totaled $11 million. In our wildlife development project north of Jacksonville, Florida, sales consisted of a 58-acre industrial park site for $5.8 million, or roughly $100,000 per acre, and an 11-acre commercial site to a church for $3.1 million, or roughly $300,000 per acre. In our Heartwood Development Project, south of Savannah, Georgia, Dales consisted of 21 finished residential lots to a national home builder for $930,000 at an average base price of roughly $44,000 per lot, as well as a two-acre commercial site to a daycare provider for $635,000, or roughly $360,000 per acre.
David Laurence Nunes: I am proud of what we accomplished in 2023 as well as extremely optimistic about the future of our land base and the team we have in place to execute on these exciting new opportunities.
Speaker Change: As such today is bittersweet that is my last earnings earnings call as CEO of Rainier.
Would be remiss, if I did not take the opportunity to thank the remarkable people that I've had the privilege to work alongside since joining the company nearly a decade ago. The many board members, who have provided invaluable counsel and the investment community that has supported our team as we have sought to leverage our pure play timber REIT model.
Mark D. McHugh: We also generated $200,000 of other net revenue during the quarter, which primarily consisted of $2.6 million of lot true-ups and marketing fees in our wildlife and hardwood development projects, largely offset by $2.4 million of deferred revenue recognition on land sales with post-closing construction. Overall, we continue to believe that both of these development projects are very well positioned and will continue to benefit from favorable migration and demographic trends, relatively affordable price points, and a diverse mix of residential, commercial, and industrial end uses. Lastly, I'd like to take a moment to recognize an important milestone achieved during the quarter in our wildlife project. In November, we received unanimous entitlement approval from Nassau County for the next phase of our wildlife project.
Speaker Change: To create long term value for our shareholders.
Speaker Change: While I will be retiring at the end of March I look forward to seeing many of you at our Investor Day in New York City on February 28, as we review our journey as a pure pure play timber REIT as well as the growth opportunities that lie ahead for the industry Our company and our next generation of leaders. During this event we plan to <unk>.
Speaker Change: <unk> our efforts to grow our land based solutions business and its associated cash flow potential take a deeper dive on the progress and potential of our real estate development portfolio and discuss our ongoing portfolio.
Speaker Change: Ongoing focus on active portfolio management.
Speaker Change: This concludes our prepared remarks, and I'll now turn the call back to the operator for questions.
Mark D. McHugh: These entitlements allow for the development of roughly 15,000 residential units and 1.4 million square feet of non-residential uses on nearly 15,000 acres. Notably, approximately 7,000 acres, or roughly half of the newly entitled acreage, will be permanently preserved as part of a conservation habitat network, providing open space for wildlife habitat, water quality, and recreation. For context, the first phase of entitlements at Wildlife consisted of roughly 2,900 acres and 3,200 residential units
Operator: Thank you. Our first question comes from he can ma'am your line is open.
Speaker Change: Thank you Dave.
Speaker Change: Dave I would like to extend my congratulations and wish you all the best in this next chapter.
Speaker Change: We really enjoyed.
Speaker Change: Working with you and and always.
Speaker Change: Talk soon.
Speaker Change: Discussions thank you.
Speaker Change: Maybe switching over.
Speaker Change: Can you talk a little bit about what you are seeing on the <unk>.
Mark D. McHugh: We plan to go into more detail on the future of our wildlife development project, as well as the rest of our improved development portfolio, at our upcoming Investor Day on February 28. Turning to the rural category, four-quarter sales totaled $57 million, consisting of approximately 20,200 acres at an average price of roughly $2,800 per acre. Key transactions included the sale of roughly 16,100 acres in Alabama and Georgia for $37 million, or roughly $2,300 per acre. Notably, the property sold consisted of scattered parcels with a relatively high proportion of non-plantable land.
Speaker Change: In terms of opportunity on the natural <unk>.
Speaker Change: Illusions that youre seeing kind of.
Speaker Change: Most interesting.
Speaker Change: Developments over the next let's say one to three years.
Speaker Change: And has that view changed at all.
Speaker Change: You've done more.
Speaker Change: Sure. This is Doug I'll start with that question. So yes, our teams quietly been building capabilities and relationships in Atlanta solution markets for the past several years and given the newness of these new businesses are made of projects are under NDA. So we arent really at liberty to speak in detail about them.
Mark D. McHugh: Other key rural transactions in the quarter included a roughly 1,300-acre sale in St. John's County, Florida, for $7.1 million, or $5,600 per acre, and an 1,100-acre sale in Pacific County, Washington, for $5.1 million, or roughly $4,600 per acre, to a conservation-oriented buyer. Overall, we continue to be encouraged by the healthy demand for rural land and the pipeline of deals we see for 2024. Lastly, during the fourth quarter, we also closed on a 200-acre non-strategic timberland sale for $400,000, or $2,000 per acre. Now moving on to our outlook for 2024, page 14 shows our financial guidance by segment, and schedule G of our earnings release provides a reconciliation of our guidance from net income attributable to REINEAR to adjusted EBITDA. For full year 2024, we expect to achieve adjusted EBITDA of $290 to $325 million, net income attributable to REINEAR of $60 to $80 million, and EPS of $0.40 to $0.54. As noted in our earnings release, our guidance excludes the potential impact from any additional asset sales as part of our previously announced $1 billion disposition target. With respect to our individual segments, in our southern timber segment, we expect full year harvest volumes of 7.1 to 7.3 million tons.
Doug: What I can say is that the pipeline of opportunities and the carbon capture storage the solar wind and bioenergy that Dave mentioned as well as the carbon sequestration continues to grow and I'm excited about seeing those results start to Neil meaningfully flow through into our financials. We saw this past year and so really we're going to take a deeper dive into these types of opportunities and the scale at our upcoming Investor day.
Speaker Change: Understood, Okay, and then to the extent you can get.
Speaker Change: Can you provide little more color on sort of how does the the asset sale program.
Speaker Change: You know kind of evolving here as you kind of look at opportunities.
Speaker Change: You had initially talked about sorry was that 18 month time period.
Yeah.
Speaker Change: Look at the Timberland market as you look at your portfolio and sort of where your leverage is kind of talk about panels.
Speaker Change: How how youll see that evolving over the next 12 months or so.
Speaker Change: Yeah sure John This is Marc I'll take that.
Marc: Obviously, when we announced the plan it was a target of 1 billion concurrent with that we announced the Oregon disposition, which was $240 million and we.
Weighed out a goal of achieving that at 1 billion total target over the course of the next 18 months in terms of where we're at today. We've identified a number of assets that we think are well suited to accomplish our objectives, you really with a focus and concentrating on our capital in markets with the strongest cash flow attributes and the most favorable growth prospects that we laid out.
Mark D. McHugh: This represents a modest decrease versus the prior year, as we expect logging conditions to normalize following a relatively dry 2023, which translated to strong production. Additionally, we expect that regional pine stumpage realizations will improve modestly versus the prior year based on improving end market demand coupled with an anticipated increase in rainfall from the El Nino weather pattern. However, we expect these pricing gains will be largely offset by a less favorable geographic mix as compared to 2023.
Marc: The announcement of the plan given the quality and diversity of our portfolio. There are a variety of different asset disposition combinations that will allow us to achieve our target and we're working simultaneously on various different options I would also highlight that unlike our peers, which have manufacturing assets to consider now.
Marc: Our pure play structure affords us pretty pretty considerable flexibility to determine which assets make the most sense for us to recycle capital capital out of it to create value for shareholders. So we're still confident in our initial plan, but we're not quite ready at this point to provide detail on any specific asset additional asset sales or target areas.
Mark D. McHugh: Lastly, we expect higher non-timber income for full year 2024 as compared to full year 2023, primarily driven by additional income from land-based solutions. Overall, we expect to achieve full-year adjusted EBITDA in our southern timber segment of $153 to $163 million. In our Pacific Northwest timber segment, we expect full-year harvest volumes of approximately 1.4 million. The anticipated increase relative to 2023 assumes a return to a more normalized level of demand and harvest activity, partially offset by a reduction in our Pacific Northwest sustainable yield due to the recent Oregon disposition. As Doug discussed, we expect that delivered log pricing will improve from current levels, but full-year pricing will likely remain below the levels achieved in 2023, due in part to a less favorable species. Overall, we expect to achieve full-year adjusted EBITDA in our Pacific Northwest timber segment of $25 to $31 million. In our New Zealand timber segment, we expect full-year harvest volumes of 2.4 to 2.5 million.
Marc: At this point, but just suffice it to say that we are.
Marc: You know we have a number of different options that we have made a pretty significant progress on and we will update you in the investment community in due course.
Speaker Change: Okay perfect that's helpful.
Speaker Change: We've done it over and jump back in the queue. Thank you.
Speaker Change: Thank you. The next question comes from Harman, Doug Your line is open.
Speaker Change: Hi, Thanks. This is harman that on behalf of Matt <unk> from RBC capital markets.
Harman: Thanks again for taking my question and congratulations on your upcoming retirement date I.
Doug: I guess, a quick question, we would've had us.
Harman: Just a clarification I suppose but for carbon credit sales that you flagged in New Zealand would you be expecting a pickup in sales or.
Mark D. McHugh: We expect full-year domestic and export saw timber pricing to improve modestly relative to the full-year pricing achieved in 2023 as end markets continue to recover. Turning to the carbon market, we anticipate a modest increase in carbon credit sales in 2024, as pricing has remained strong following the significant market volatility experienced in the first half of 2020. Overall, we expect full-year adjusted iwata in our New Zealand timber segment of $57 to $65 million.
Harman: Would that be in terms of dollar amount or would that be in terms of credit Suisse.
Harman: Sure. This is Doug again, I'm happy to answer that one so we are anticipating a pickup in the dollar amount per unit of <unk>.
Doug: Last year, there was a lot of volatility at the beginning of the year when the New Zealand government made some comments about how they might change the markets that have caused some oh, so I'd say in the markets, but generally that solve itself and as we've moved into this year. We've seen prices start to increase so that's on a dollar per ton.
Mark D. McHugh: In our real estate segment, we expect a full-year adjustment of ADOPT of $92 to $104 million, as we continue to see healthy demand for our rural properties, as well as continued momentum across our development projects. Similar to 2023, we expect very light closing activity in the first quarter, followed by a significant pickup in the second. Before turning the call back for closing comments, I want to take a moment to congratulate Dave on his upcoming retirement from Rainier and to thank him for the tremendous work that he has done in leading our organization for the last decade. When Day joined Rainier as CEO in 2014, he brought a unique blend of deep industry knowledge and strategic acumen, as well as a strong but humble leadership style.
Doug: <unk>.
Speaker Change: Got you. Thank you that's helpful and I suppose just a quick follow up.
Speaker Change: And I.
Speaker Change: Shifting gears as well.
Speaker Change: New Zealand.
I note that you mentioned.
The ratio in terms of inventory to demand in China.
Speaker Change: How do you expect changes on this front impact the New Zealand and Pacific Northwest export businesses over the next couple of years.
Speaker Change: Coming out of the lunar new year and into the balance of 'twenty four 'twenty five as a result.
Speaker Change: Yeah, I'll I'll happy to answer that again this is Doug also so.
Mark D. McHugh: Dave instilled in the organization an intense focus on nimble capital allocation and active portfolio management, all with a view to building long-term value per share while serving as a responsible steward of our land resources. He also built a strong and cohesive culture at the company where our people feel empowered to act like owners and are truly dedicated to the company and its stakeholders. Rainier has made tremendous strides since we emerged from the spin-off of our specialty pulp manufacturing business in 2014 to become the only pure-plate timber reed with a best-in-class portfolio and a unique set of growth opportunities in land-based solutions and real estate development. We certainly wouldn't be where we are today without the steadfast leadership and unwavering commitment that Dave brought to the job every single day.
Speaker Change: Your point as we mentioned before we've seen the inventory it at lowest point since pre pandemic and one of the things I think it's important when we acknowledged that property markets still we can China. One thing Thats also not talked about as much is that while demand is down from the peak so supply in standby 20 million cubic meters.
Speaker Change: With New Zealand recouping in the market share as port inventories are at those low levels and we have seen in China recovering economy was around exports kind of industrial and retail and Raytheon as good use in those things its reversal species that can use everything from furniture to pallets to two construction lumber type of thing. So as we're very optimistic as we discussed that coming out of this winter.
Speaker Change: New year that the positive trading price trajectory, we've typically seen in the past is when this inventory to demand ratio gets below two two months typically their yields a price recovery and so I think long term, we're seeing less and less supply the bark beetle in Europe has pretty much run its course the cost of shipping from Europe also to China has gotten very expensive.
Mark D. McHugh: Dave, on behalf of the entire organization, it's truly been a privilege to work alongside you for the past 10 years. You've left an indelible legacy at Rainier, and we wish you the best in this next chapter. Thanks, Mark. I appreciate the kind words and have thoroughly enjoyed our partnership over the last 10 years. I'm confident that Rainier will thrive under your leadership.
Speaker Change: And we've seen less wood coming out of South America. So net net we think that the opportunities for New Zealand are very strong as well as we've seen an increase over.
Speaker Change: Over the first couple of quarters from the U S going into China Chu from northwest exports I think we've had a somewhat of a low from the U S. Basically and believe that we've passed the low watermark for China and really do believe that west coast exports will be in greater demand as time moves forward.
David Laurence Nunes: And I'm excited to watch as you and the rest of the team continue to work towards creating long-term value for our shareholders and other stakeholders, especially amid the secular tailwinds that are emerging for the Timberland asset class. I'd like to wrap up our prepared remarks by first thanking our team for the tremendous effort they have put in throughout 2023. You learn a great deal observing how a team navigates through a challenging market environment, and this past year was no exception.
Speaker Change: Awesome. Thanks again.
Speaker Change: I'll pass back to the queue.
Speaker Change: Thank you. The next question comes from Gregory Andrew Annapolis. Your line is open.
Speaker Change: Good morning, Mr. Nunez, Mr. Mchugh, Mr mentioned, Mr. Along online friends made this morning.
Speaker Change: Thank you for all the detail and thank you for providing 2020 for guidance this year.
Speaker Change: Just one question for me on the trends on the transaction market.
David Laurence Nunes: I was extremely encouraged to see how our organization came together during difficult market conditions to collaborate and ultimately deliver full-year adjusted EBITDA results generally in line with our initial expectations. Consistent with our focus on maximizing long-term shareholder value, we did not seek to compensate for timber pricing headwinds by pushing additional timber volume into the market, but instead took advantage of our pure-play timber model by reshuffling our harvest plans to pivot towards relatively favorable markets, while also deferring harvests in more challenged markets. Despite some transitory pressures on timber pricing, Timberland and rural HBU land prices held up remarkably well this past year, allowing us to execute on land sales at a significant premium to underlying timberland values. In addition, the recent 15,000 acre entitlement approval within our wildlife project will serve to further enhance our real estate development platform, where we have assembled a powerful combination of valuable land use entitlements in growing markets along with a talented team of real estate professionals.
Speaker Change: You've seen from our perspective deal flow pick up a little bit and to year end 'twenty three and now in the first quarter. So I'm curious how would you characterize the quality of packages coming to market from your perspective, the competitive bidding process bid ask spreads and interest from non traditional owners in January.
Speaker Change: Sure. This is Dave I'll take that if you think about last year, we had roughly a 1 billion and a half to $2 billion of timberland M&A.
Speaker Change: Activity that was a fairly fairly low level versus the versus historic patterns as we as we look out.
David Laurence Nunes: Into this year I think we're we're in a mode, where the demand for timber continues to outpace the supply we estimate that there is roughly $3 billion to $4 billion of dry powder waiting to be deployed a lot of that is on the T Mo side, and particularly with <unk>.
David Laurence Nunes: While managing our core timber and real estate businesses, we also continue to advance our land-based solutions. As discussed previously, we now have in place valuable wind, solar, and carbon capture and storage leases. We saw positive momentum across our land-based solutions portfolio throughout 2023, and we look forward to sharing future targets for these businesses at our Investor Day at the end of this month. In addition, we successfully executed our plan to sell Timberland and Oregon to help reduce our leverage, an important first step in a broader initiative we developed to enhance shareholder value.
David Laurence Nunes: Separate account investors.
David Laurence Nunes: There are also a number of <unk> that have raised carbon related carbon centric funds and so we look to see that.
David Laurence Nunes: Those players playing a bigger role in the markets going forward.
David Laurence Nunes: This tends to be a slow time of the year in general, but we have.
David Laurence Nunes: We are aware of a couple of quality properties that are in the market in the U S. South right now as well as one larger transaction New Zealand. There's also a number of smaller packages in markets that are outside of our area.
We're seeing a lot of activity in Latin America, right now as well.
David Laurence Nunes: While we've been pleased by the investment community's response to our $1 billion disposition plan, we still do not believe that the true value of quality Timberland assets is reflected in our share price, and we remain committed to capitalizing on the disconnect between public and private Timberland values. Lastly, we made progress on sustainability-related initiatives in 2023 and are proud to have been a founding member of the International Sustainability Forestry Coalition and, more recently, a signatory to the Climate Pledge. We believe these commitments are consistent with our goal of supporting a more sustainable future and are excited to join other organizations from across the globe in the effort to accelerate responsible climate action. I'm proud of what we accomplished in 2023, as well as extremely optimistic about the future of our land base and the team we have in place to execute on these exciting new initiatives. As such, today is bittersweet as it is my last earnings call as CEO of Rainier.
David Laurence Nunes: And so I'd say, it's kind of the market is heating up.
David Laurence Nunes: And as we kind of indicated in our prepared remarks I think.
David Laurence Nunes: This is a positive environment right now on the on the timber M&A space.
David Laurence Nunes: We are anticipating to participate that in that with our our asset disposition plan.
Speaker Change: Okay. Thank you Mister who knows in terms of drivers. There I mean are you thinking fed rate cut expectations incremental capital into the space carbon opportunities are all drivers or are there. Other factors you think are at play.
Speaker Change: I mean I think those are all in play you know keep in mind I think is the timber asset class has has matured. It's also.
Speaker Change: It's also gained additional favor you know it's always been a.
Speaker Change: It's always been.
Speaker Change: A an asset class that has low volatility and so you see a lot of people wanting to add it to portfolios for that reason so it's.
David Laurence Nunes: I'd be remiss if I did not take the opportunity to thank the remarkable people that I've had the privilege of working alongside since joining the company nearly ten years ago, the many board members who have provided invaluable counsel, and the investment community that has supported our team as we've sought to leverage our pure play timber REIT model to create long-term value for our shareholders. While I will be retiring at the end of March, I look forward to seeing many of you at our Investor Day in New York City on February 28th as we review our journey as a pure play timber reef, as well as the growth opportunities that lie ahead for the industry, our company, and our next generation of leaders.
Speaker Change: You see when you see periods of market disruption.
Speaker Change: Tend to see a flight to quality in timber tends to be a beneficiary of that theres been a lot of research around timber as a as an inflation hedge so we see that.
Speaker Change: And I think increasingly we're seeing.
Speaker Change: We're seeing capital flow into the asset classes it relates to ESG related matters and we see that we.
Speaker Change: We see that on both the.
Speaker Change: The asset level as well as the public equity level in terms of where our investors are coming into the stock and the reasons why they are coming into the stock and I think all of that also applies to the to the timber M&A. So it gets back to that idea that.
David Laurence Nunes: During this event, we plan to detail our efforts to grow our land-based solutions business and its associated cash flow potential, take a deeper dive on the progress and potential of our real estate development portfolio, and discuss our ongoing portfolio, our ongoing focus on active portfolio management. This concludes our prepared remarks, and I'll now turn the call back to the operator for questions. Thank you.
There's there's more capital trying to get into the space right now than there is available properties.
Speaker Change: Okay. Thank you very much Mr names, but the detail and congratulations.
Thanks.
Speaker Change: Thank you and if he would like to ask a question. Please press star one on your telephone keypad.
Speaker Change: The next question comes from Michael Rosslyn Your line is open.
Michael Rosslyn: Thank you, Dave Mark Holleran <unk> for taking my questions. This is <unk> on for Mike.
Operator: Dave, I would like to extend my congratulations and wish you all the best in this next chapter. We've really enjoyed working with you and always your thoughtful discussions. Thank you. Maybe switching over, can you talk a little bit about what you are seeing in terms of opportunity for natural climate solutions, where you are seeing the most interesting developments over the next, let's say, one to three years, and has that view changed at all here as you've done more work? Sure, this is Doug.
Michael Rosslyn: <unk> stayed when their retirement.
I guess just first question around pulpwood, thanks for the color on that.
Michael Rosslyn: And you had mentioned prices, maybe looking more stable now.
Speaker Change: Just as it affects your.
Speaker Change: Your harvests.
Guidance and maybe how you think about given the mill closures in line closures Youre harvest rotations harvest planning going forward.
Speaker Change: Sure. This is Doug and I'll take this one so yeah as noted in our prepared remarks shrinkage about that pricing that large by enlarge seems to have stabilized.
Speaker Change: We've seen some positive signs on the containerboard side over the past few months.
Speaker Change: <unk> demand and an extra week or come into balance after the destocking that occurred over much of last year.
Speaker Change: Industry data is suggesting that U S. Containerboard operating rates have increased 89% in Q4, which is about 81% of prior year period.
Douglas M. Long: I'll start with that question. So, yeah, our team has quietly been building capabilities and relationships in the land-based solutions market for the past several years. Given the newness of these new businesses, many of the projects are under NDAs, so we aren't really at liberty to speak in detail about them. But what I can say is that the pipeline of opportunities in carbon capture, storage, the solar, wind, and bioenergy that Dave mentioned, as well as carbon sequestration, continues to grow, and I'm excited about seeing those results start to meaningfully flow through into our financials, as we saw this So, really, we're going to take a deeper dive into these types of opportunities and their scale at our upcoming Investor Day.
Speaker Change: And with no new major plants, our construction it appears that containerboard capacity remains stable or that near term and operating rates really should continue to improve on recovering demand as there was a very strong relationship with population growth and containerboard demand, particularly in food and beverage sector. So we're seeing some positive movement right now on capacity rates at the mills are there as well as market pulp prices have also stabilized since.
Speaker Change: The correction early in 2023, and some great such as southern bleached softwood Kraft and U S have retro pricing improvements there to end the year well.
Speaker Change: Since a modest operating rate improvements there.
Speaker Change: And kind of one of the last things you've also seen as a temporary increase in softwood chip exports and yes over the first three quarters of 2023, and that's almost none going to China in Q2, and Q3. This global growth in softwood fiber demand has been slowly growing and the global supply chains look favorable for the U S and New Zealand as many software plantations in South America are converting to eucalyptus so I think.
Douglas M. Long: Understood. Okay. And then, you know, to the extent you can, you know, can you provide a little more color on sort of how the asset sale program is kind of evolving here as you kind of look at opportunities? You know, you had initially talked about sort of that 18 month time period. Yeah, you know, as you kind of look at the Timberland market, as you look at your portfolio and sort of where your leverage is, can you talk about kind of, you know, how you see that, you know, evolving over the next 12 months or so? Yeah, sure, Ketan. This is Mark.
Speaker Change: There has been some discussion around those that have shut down and there have been some that have but what we've seen is also there were some deals that were running at lower operating rates that are picked back up that capacity and some of those mills have been and are favorable to our market wood baskets. So that's why we're feeling pretty good about what we see and as we've moved out of Q.
Speaker Change: Four and into Q1, we've seen those operating rates tick up we've seen demand improve and seen some pricing opportunities along there also.
Mark D. McHugh: I'll take that. You know, obviously, when we announced the plan, it was a target of $1 billion. Concurrently with that, we announced the Oregon disposition, which was $240 million. And we laid out a goal of achieving that $1 billion total target over the course of the next 18 months.
Speaker Change: And additionally, kind of over the near term as Mark mentioned before about the wet weather and the El Nino, we typically position ourselves to be their provide wood when weather conditions persist and invest in capital in our routing systems and we believe those investments will drive some benefits as we go forward and just kind of owning this spring.
Mark D. McHugh: You know, in terms of where we're at today, we've identified a number of assets that we think are well-suited to accomplish our objectives, really with a focus on concentrating on our capital and markets with the strongest cash flow attributes and the most favorable growth prospects that we laid out at the announcement of the plan. Given the quality and diversity of our portfolio, there are a variety of different asset disposition combinations that would allow us to achieve our target, and we're working simultaneously on various different options. I'd also highlight that, unlike our peers, which have manufacturing assets to consider, our peer-replaced structure affords us pretty considerable flexibility to determine which assets make the most sense for us to recycle capital out of to create value for shareholders.
Speaker Change: Mike nothing I'd add to that.
Speaker Change: Is that keep in mind that some of these facilities that have been shut down.
Speaker Change: May indeed end up converting into future fiber uses in the context of the growing <unk>.
Speaker Change: Demand for our bioenergy and so why you don't expect that to be necessarily a short term phenomenon, we think longer term.
Speaker Change: You'll see some recovery in those markets as those uses of the fiber change.
Speaker Change: Yeah, I would agree with Dave given for.
Speaker Change: For example, the one in Orange, Texas, given the proximity of refineries imports in Texas, Louisiana, I don't think theres going to be a long term structural shift in pulpwood demand in that market and disclosure may actually as Dave said, turning to a catalyst for new types of demands.
Mark D. McHugh: So, you know, we're still confident in our initial plan, but we're not quite ready at this point to provide detail on any specific asset, additional asset sales, or target areas at this point. But just suffice it to say that we are-you know, we have a number of different options that we've made pretty significant progress on, and we'll update you in the investment community in due course. Okay, perfect. That's helpful. I'll turn it over and jump back in the queue.
Speaker Change: Totally we've heard of multiple non traditional users who expressed interest in that area. So I do think it's a it's some short term maybe headwinds, but medium to long term I think the opportunity for new markets.
Speaker Change: Perfect that was very helpful. I appreciate it guys you guys dialed in.
Speaker Change: My follow up as well.
Operator: Thank you. Thank you. Hi, thanks. This is Harmon Datt on behalf of Matt McKellar from RBC Capital Markets. First off, thanks again for taking my question and congratulations on your upcoming retirement. I guess a quick question we would have had is, Just a clarification, I suppose, but for the carbon credit sales that you flagged in New Zealand, would you be expecting a pickup in sales or not? Would that be in terms of a dollar amount, or would that be in terms of credit sold?
Speaker Change: Yes, you've been hearing about.
Speaker Change: Alternative uses in that.
Speaker Change: Biomass bioenergy have view to the extent you can comment.
Speaker Change: Connected with any potential customers on that or.
Speaker Change: Is that something you can talk about.
Speaker Change: Yeah, I can't talk specifically about that but can say that we're in lots of discussions with many potential users of wood fiber that would be for products that are non traditional.
Speaker Change: Got it thank you very much.
Speaker Change: Thanks for the color guys I'll turn it over.
Speaker Change: Thank you. The next question comes from Buck Horne Your line is open.
Buck Horne: Hey, Thanks, good morning, guys.
Douglas M. Long: Sure, this is Doug again. I'm happy to answer that one. So, we are anticipating a pickup in the dollar amount per unit. Last year, there was a lot of volatility at the beginning of the year when the New Zealand government made some comments about how they might change the markets. That caused some chaos, I'd say, in the markets, but generally, that's solved itself. And as we've moved into this year, we've seen prices start to increase. So that's on a dollar per ton basis. The basin.
Buck Horne: Quickly.
Buck Horne: Great color on the alternative uses in the biomass I'm curious if you also explored any additional optionality.
Buck Horne: On solar projects or solar leases or what are your thoughts about utilizing more land for land leases around solar usage.
Buck Horne: Yes. This is an area, where we're very active in and we will speak more about that in our upcoming Investor day, but sure we see a.
Douglas M. Long: Gotcha. Thank you. That's helpful.
Buck Horne: Significant growth in demand for for land for solar and particularly large tracks of land that are.
Douglas M. Long: And I suppose just a quick follow-up, and I suppose Shifting Gears as well, with New Zealand. I note that you mentioned the ratio in terms of inventory to demand in China. How do you expect changes on this front to impact New Zealand and Pacific Northwest export businesses over the next couple of years, you know, coming out of the Lunar New Year and into the balance of 24, even 25? Yeah, I'll have to answer that again. This is Doug also.
Buck Horne: Close to close to markets as well as have the capacity for for power lines and based on the grid. So suddenly built a team around it and we explore that and have a lot of a lot of interest a lot of opportunities in that and continue to work on that and share more about that at our investor day.
Buck Horne: If I can I'd also note that a lot of that activity, especially in the U S. South on the solar front utility scale solar that is really concentrated in Texas, and Florida and if you look at the proportion of our land base in the South it's in those two states.
Buck Horne: We think we've got a really good opportunity both on an absolute basis on a relative basis relative to a telco timberland owners.
Douglas M. Long: So, you know, to your point, as we mentioned before, we've seen inventory at the lowest point since pre-pandemic. And one of the things I think it's important, while we acknowledge the property market is still weak in China, one thing that's also not talked about as much is that while demand's down from the peak, so is supply. It's down by 20 million cubic meters, with New Zealand recouping market share as port inventories are at those low levels. And we have seen in China, you know, recovery in the economy was around exports, kind of industrial and retail. And Radium is good use in those things.
Speaker Change: Awesome, great and on the wildlife and.
Speaker Change: New entitlements there so maybe.
Speaker Change: He ran through this somewhat too quickly.
Speaker Change: Run that by me again in terms of how many additional residential lots you guys were able to get entitlements for at wildlife.
Sure. This is Dave I mean, if you go back if you go back to the initial entitlements at Wildlife, We had roughly 3300 residential units and $6 2 million square feet of commercial space on approximately 2900 acres in.
Douglas M. Long: It's a very versatile species. It can use everything from furniture to pallets to construction lumber types of things. So, you know, as we're very optimistic, as we discussed that coming out of this Lunar New Year, that the positive pricing trajectory we've typically seen in the past is when this inventory to demand ratio gets below two months, typically the yield to price recovery. And so I think, long term, we're seeing less and less supply. The bark beetle in Europe has pretty much run its course.
David Laurence Nunes: Since that time from those initial entitlements, we sold roughly 63% of the residential units entitlement and 33% of the commercial space. We still have we still have a decent amount left roughly 200 residential units and $4 2 million square feet of commercial space the new entitlement.
Douglas M. Long: The cost of shipping from Europe to China has gotten very expensive, and we've seen less wood coming out of South America. So net net, we think that the opportunities for New Zealand are very strong, as well as we've seen an increase over the first couple of quarters from the U.S. going into China, too, from Northwest exports. I think we've hit a somewhat of a low from the U.S., basically, and believe that we've passed the low watermark for China and really do believe that West Coast exports will be in greater demand as time Awesome. Thanks again.
David Laurence Nunes: Will add nearly 15000 additional residential units and $1 4 million additional square feet of commercial space.
David Laurence Nunes: To the project and we've worked on this for a number of years and we're really excited to have this completed and have the entitlement approved and wildlife has.
David Laurence Nunes: Particularly in the post Covid environment has has enjoyed a tremendous success and is drawing more and more interest from major homebuilders in retailers and we believe that the new entitlement will both will help us to both improve our sales absorption pace as well as provide a runway for many many years worth of future <unk>.
Operator: I'll pass it back to the queue. Thank you. The next question... Gregory. Good morning, Mr. Nunes, Mr. McHugh, Mr. Mings, and Mr. Long. I'm on the line for Anthony this morning.
David Laurence Nunes: Thank you for all the detail, and thank you for providing 2024 guidance this year. Just one question from me on the transaction market. So we've seen, from our perspective, deal flow pick up a little bit into year end, 23 and now in the first quarter. So I'm curious, how would you characterize the quality of packages coming to market from your perspective, the competitive bidding process, bid-ask spreads, and interest from non-traditional owners in January? Sure, this is Dave.
David Laurence Nunes: So we're.
David Laurence Nunes: We're super excited about it and it's.
David Laurence Nunes: It is just fun, it's fun to see all the changes going on here.
Speaker Change: Yeah, no doubt Wow, congratulations thats, a big that's a big deal. So a good job guys. Thanks for the color.
Speaker Change: Thank you there are no other questions at this time.
Speaker Change: This is Collin mings I'd like to thank everybody for joining us please contact us with any follow up questions.
Speaker Change: Yeah.
David Laurence Nunes: I'll take that. If you think about last year, we had roughly a billion and a half to two billion of timberland M&A activity, which was a fairly low level compared to historic patterns.
Speaker Change: Thank you that does conclude today's conference call. We appreciate your participation have a wonderful rest of your day and you may disconnect.
David Laurence Nunes: As we look out into this year, I think we're in a mode where the demand for timber continues to outpace the supply. We estimate that there is roughly three to four billion dollars of dry powder waiting to be deployed. A lot of that is on the TMO side, and particularly with separate account investors. There are also a number of TMOs that have raised carbon-related or carbon-centric funds. And so we look to see those players playing a bigger role in the markets going forward. This tends to be a slow time of the year in general, but we are aware of a couple of quality properties that are on the market in the U.S. South right now, as well as one larger transaction in New Zealand. There are also a number of smaller packages in markets that are outside of our area.
David Laurence Nunes: We're seeing a lot of activity in Latin America right now as well, so I'd say the market is heating up. And as we kind of indicated in our prepared remarks, I think this is a positive environment right now for the timber M&A space. And we're anticipating to participate in that with our asset disposition plan. Thank you, Mr. Nunes.
David Laurence Nunes: In terms of drivers there, I mean, are you thinking Fed rate cut expectations, incremental capital into the space, and carbon opportunities are all drivers, or are there other factors you think are at play? I mean, I think those are all in play, you know, keep in mind. I think as the timber asset class has matured, it's also gained additional favor. You know, it's always been an asset class that has low volatility. And so you see a lot of people wanting to add it to their portfolios for that reason.
David Laurence Nunes: So it's when you see periods of market disruption, you tend to see a flight to quality, and timber tends to be a beneficiary of that. There's been a lot of research around timber as an inflation hedge, so we see that.
David Laurence Nunes: And I think increasingly we're seeing capital flow into the asset class as it relates to ESG-related matters. And we see that on both the asset level as well as the public equity level in terms of where our investors are coming into the stock and the reasons why they're coming into the stock. And I think all of that also applies to the timber M&A. So it gets back to that idea that there's more capital trying to get into the space right now than there is available property.
David Laurence Nunes: Okay, thank you very much, Mr. Nunes, for the detail and congratulations. Thank you, and if you'd like to ask a question... Press star 1 on your telephone. The next question comes from Michael Roxlin. Thank you Dave, Mark, Collin, and Doug for taking my questions. This is Nico Puccini on for Mike, and congratulations to Dave on his retirement.
Operator: I guess just the first question around Paul, thanks for the color on that, and you had mentioned prices may be looking more stable now, just as it affects your harvest guidance and maybe how you think about, given the mill closures and line closures, your harvest rotations, and harvest planning going forward. Sure, this is Doug again. I'll take this one. So, yeah, as noted in our prepared remarks, we're encouraged about the pricing that, you know, by and large seems to have stabilized. And we've seen some positive signs on the container board side over the past few months. Supply-demand dynamics are coming into balance after the de-stocking that occurred over much of last year.
Douglas M. Long: Industry data is suggesting that U.S. container board operating rates increased to 89% in Q4, which is above 81% in a prior year period. With no new major plans under construction, it appears that container board capacity will remain stable over the near term, and operating rates really should continue to improve on recovering demand, as there is a very strong relationship with population growth and container board demand, particularly in the food and beverage sector. So we're seeing some positive movement right now on capacity rates at the mills over there, as well as market bulk prices have also stabilized since the correction early in 2023, and some grades, such as Southern Leached Softwood Craft in the U.S., have registered pricing improvements there to end the year, and we're also seeing some MOST operating rate improvements there.
Douglas M. Long: And kind of one of the last things we've also seen is a 10% increase in softwood chip exports from the U.S. over the first three quarters of 2023, and that's with almost none going to China in Q2 and Q3. This global growth in softwood fiber demand has been slowly growing, and the global supply trends look favorable for the U.S. and New Zealand, as many softwood plantations in South America are converting to eucalyptus.
Douglas M. Long: So I think there's been some discussion around mills that have shut down, and there have been some that have. But what we've seen is also that there are mills that were running at lower operating rates that have picked back up that capacity, and some of those mills have been favorable to our market wood basket. So that's why we're feeling pretty good about what we see. And as we've moved out of Q4 and into Q1, we've seen those operating rates tick up. We've seen demand improve and seen some pricing opportunities along there also. Additionally, kind of over the near term, as Mark mentioned before about the wet weather in El Nino, we typically position ourselves to be there to provide wood when wet weather conditions persist and invest in capital in our roading systems.
Douglas M. Long: And we believe those investments will drive some benefits as we go forward in this kind of El Nino spring. Mike, another thing I'd add to that is that keep in mind that some of these facilities that have been shut down may indeed end up being converted into future fiber uses in the context of the growing demand for bioenergy. And so you don't expect that to be necessarily a short-term phenomenon.
David Laurence Nunes: We think, longer term, you'll see some recovery in those markets as those uses of the fiber change. Yeah, I would agree with Dave. Given, you know, for example, the one in Orange, Texas, given the proximity to refineries and ports in Texas and Louisiana, I don't think there's going to be a long-term structural shift in pulpwood demand in that market, and this closure may actually, as Dave said, turn into a catalyst for new types of demand.
Douglas M. Long: Anecdotally, we've heard of multiple nontraditional users who expressed interest in that area, so I do think there are some short-term maybe headwinds, but medium to long-term, I think it's an opportunity for new markets. That was very helpful. I appreciate it. You guys dialed in on my follow-up as well. I guess you've been hearing about the alternative uses of biomass, bioenergy. Have you, to the extent you can comment, connected with any potential customers on that, or is that something you can't talk about? Yeah, I can't talk specifically about that, but I can say that we're in lots of discussions with many potential users of wood fiber that would be for products that are non-traditional.
Operator: Got it. Thank you very much. Thanks for the call, guys. I'll turn it over.
Douglas M. Long: Thank you. The next question comes from Buckhorn. Hey, thanks. Good morning, guys.
Douglas M. Long: Quickly, Greg Culler, on the alternative uses in biomass, I'm curious if you've also explored any additional optionality on solar projects or solar leases, or what are your thoughts about utilizing more land for land leases around solar usage? Yeah, this is an area where we're very active, and we'll speak more about that at our upcoming investor day. But sure, we see a significant growth in demand for land for solar and particularly large tracts of land that are, you know, close to markets, as well as have the capacity for power lines and space on the grid. So suddenly, we built a team around that, and we explored that and have a lot of a lot of interest and a lot of opportunities that we continue to work on that.
Douglas M. Long: And we'll share more about that at our investor day. I could also note that a lot of that activity, especially in the U.S. South, on the solar front, utility-scale solar, that is, is really concentrated in Texas and Florida. And if you look at the proportion of our land base in the South that's in those two states, we think we've got a really good opportunity both on an absolute basis and on a relative basis relative to other timberlands.
Douglas M. Long: Awesome, great. And on the wildlife, new entitlements there. So I maybe ran through this a little bit too quickly. Could you run that by me again in terms of how many additional residential lots you guys were able to get entitlements for on the wildlife? Sure, this is Dave.
David Laurence Nunes: You know, if you go back, if you go back to the initial entitlements at Wildlight, we had roughly 3,300 residential units and 6.2 million square feet of commercial space on approximately 2,900 acres. And, you know, since that time, from those initial entitlements, we've sold roughly 63% of the residential units entitlement and 33% of the commercial space. So we still have a decent amount left, roughly 1,200 residential units and 4.2 million square feet of commercial space. The new entitlement will add nearly 15,000 additional residential units and 1.4 million additional square feet of commercial space to the project.
David Laurence Nunes: And we've worked on this for a number of years, and we're really excited to have this completed and have the entitlement approved. And, you know, Wildlight has enjoyed tremendous success and is drawing more and more interest from major home builders and retailers. And, you know, we believe that the new entitlement will both help us to both improve our sales absorption pace as well as, you know, provide a runway for many, many years' worth of future sales. So we're super excited about it, and it's just fun to see all the changes going on here. Yeah, no doubt about that.
Operator: Wow. Congratulations. That's a big, that's a big deal.
Operator: So, uh, good job guys. Thanks for the call. Thank you. There are no other questions at this time. This is Collin Mings.
Collin Mings: I'd like to thank everybody for joining us. Please contact us with any follow-up questions. Thank you. That does conclude today's conference call. We appreciate your participation. Have a wonderful rest of your day, and you may