Rayonier Inc. Stock

Hello, everyone. Thank you for joining us, and welcome to the Q2 2026 Rayonier Inc. Earnings Conference Call. [Operator Instructions]

I will now hand the conference call over to Collin Mings, Vice President of Capital Markets and Strategic Planning. Collin, please go ahead.

Thank you, and good morning. Welcome to Rayonier's investor teleconference covering second quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our website at rayonier.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 nearest GAAP measures in our earnings release and supplemental materials.

With that, let's start our teleconference with opening comments from Mark McHugh, our President and CEO. Mark?

Thanks, Collin. Good morning, everyone. Before turning to our second quarter results, I'd like to provide a brief update on our merger of equals with PotlatchDeltic as well as the two timberland transactions we announced yesterday, which further advance our portfolio optimization strategy. Since closing the merger in late January, our team has moved quickly to optimize our organizational structure, capture operational efficiencies and integrate the two companies' cultures into a shared foundation.

We also signed a lease on our new corporate headquarters in Atlanta, which we expect to open in early 2027. I'm proud of our team's execution over the past 6 months. We've made significant progress on integration initiatives, and we remain on track to achieve our run rate synergies targets.

Moving to the transactions we announced yesterday. Last week, we closed two timberland transactions with Resource Management Service, or RMS. The transactions comprised the sale of approximately 36,000 acres in Southwest Washington for $145 million and the concurrent acquisition of approximately 57,000 acres in Texas and Alabama for $146 million, subject to customary closing adjustments. The transactions were structured as a tax-efficient like-kind exchange and are expected to be accretive to cash flow on a timber-only basis with further upside potential from HBU real estate sales and land-based solutions opportunities.

These transactions reflect our continued focus on portfolio optimization as we look to concentrate our capital in markets with the strongest cash flow attributes and the most favorable long-term growth prospects. Notably, we were able to advance these objectives through a land exchange transaction rather than an outright acquisition, thereby preserving our future capital allocation flexibility.

Now let's move on to our second quarter results. I'll start with a review of our overall financial results as well as our segment level performance, after which Wayne will review key liquidity and balance sheet metrics as well as our outlook for the balance of the year.

For the second quarter, Rayonier reported GAAP earnings of $19 million or $0.06 per share. Adjusting for pro forma items, the majority of which were related to the merger, net income was $32 million or $0.10 per share. Adjusted EBITDA in the second quarter was $124 million, which was well above the prior year period, primarily due to the contributions from the PotlatchDeltic operations, along with solid operational performance across our segments.

Moving on to our segment results. Let's start on Page 9 with our Southern Timber segment. Adjusted EBITDA in the second quarter of $53 million was 85% above the prior year quarter as increased harvest volumes more than offset lower pricing. Total harvest volumes more than doubled versus the prior year quarter, primarily due to the addition of roughly 1.5 million tons of volume from the PotlatchDeltic timberland.

Turning to pricing in the Southern Timber segment. Recall the beginning last quarter, our reported pricing reflects delivered log prices rather than net stumpage realizations, consistent with the prevalent mode of sale across the combined portfolio. In sawlog markets, demand was steady as lumber prices climbed throughout the second quarter. Looking ahead, we expect that sawmills in the U.S. South will continue to gain market share from Canada and gradually increase production in response to a more favorable lumber pricing environment, which should support stronger sawlog demand within our southern footprint.

In pulpwood markets, challenging conditions persisted during the quarter. Demand remained subdued, while historically dry weather across the U.S. South, coupled with salvage harvesting associated with the fires in Florida and Georgia further added to supply. That said, we believe that pulpwood pricing has generally stabilized in our primary market areas, and we're encouraged by recent gains in containerboard pricing as well as improved mill operating rates for our customers.

As it relates to the fires in the U.S. South, approximately 9,300 acres of our timberlands in Georgia were affected. Following our assessment of the damage, we recorded a casualty loss of approximately $2 million in the second quarter which was reflected as a pro forma item. Our team moved quickly to initiate salvage operations on the affected tracks, harvesting approximately 50,000 tons during the quarter. These efforts are now largely complete, and we do not expect any material impacts to our business moving forward.

Moving on to our Northwest Timber segment on Page 10. Second quarter adjusted EBITDA of $26 million was significantly above the $7 million reported in the prior year quarter. Harvest volumes more than doubled in the second quarter as compared to the prior year period, primarily due to the contribution of 360,000 tons of incremental harvest volume from PotlatchDeltic's Idaho timberlands. Notably, harvest activity in Idaho was strong during the second quarter due to drier than normal weather conditions. Improving lumber prices also helped propel sawlog prices higher in Idaho in the quarter as a significant portion of our sawlog sales in the state are indexed to lumber prices.

Turning to Wood Products on Page 11. This segment generated $25 million of adjusted EBITDA in the second quarter, which was above our expectations entering the quarter. Notably, this was the strongest quarterly adjusted EBITDA result that this segment has registered since PotlatchDeltic's third quarter of 2022. Our average lumber price realization was $505 per MBF and shipments totaled 314 million board feet, in line with our prior guidance. Our average lumber price realization increased by roughly 18% from $427 per MBF in the first quarter, including the premerger period. The improvement in lumber markets during the second quarter was driven primarily by supply side factors as mill curtailments coupled with higher tariffs on Canadian imports have limited supply.

In addition, industry-wide transportation challenges, especially the limited availability of flatbed trucking have constrained the flow of lumber into certain markets. Our team has been very proactive in navigating these transportation challenges by further leveraging rail transportation alongside our established trucking network, we maintained a reliable product flow to customers throughout the quarter.

In addition, the increased transportation costs that we've incurred have largely been passed through to customers. Against this backdrop, overall demand was relatively stable and the seasonal price weakness following the spring building season that we saw in each of the past 2 years, did not materialize this year. In fact, buyers generally encountered less available supply than anticipated during the quarter, which supported pricing. Our home center business also remained healthy through the quarter, which was encouraging as demand from this channel typically tapers off heading into the summer months. Channel inventories remain at normal levels and pricing has remained fairly stable into the early part of the third quarter, with supply and demand generally in balance.

Moving to our Real Estate segment on Page 12. In the second quarter, real estate revenue totaled $54 million on approximately 7,500 acres sold at an average price of $6,300 per acre. Sales increased significantly from the prior year quarter due to a higher number of acres sold, partially offset by a slightly lower average price per acre due to the sales mix. Real Estate segment adjusted EBITDA in the second quarter was $38 million, up $20 million from the prior year period. Within improved development, sales totaled $6 million.

We continue to see broad-based demand in our Wildlight and Heartwood development projects and activity remains on a favorable trajectory, reflecting the benefit of the investments we've made over the past several years in entitlements, infrastructure and market development. Meanwhile, the Chenal Valley project in Little Rock, which is relatively more mature, remains well positioned to provide a steady stream of cash flow moving forward.

Moving to the rural category. Second quarter sales totaled $41 million, consisting of nearly 7,500 acres sold at an average price of roughly $5,400 per acre. The most notable transaction was a 460-acre bolt-on sale to a solar developer for $4.6 million or roughly $10,000 per acre. This sale underscores the continued interest we are seeing from solar developers across our Southern land portfolio. At the end of the second quarter, our pipeline of land under option for lease or sale to solar developers stood at approximately 77,000 acres. More broadly, overall sentiment in the rural land market remains positive, and we continue to achieve strong premiums above timberland value in our rural HBU business.

I'll now turn the call over to Wayne to cover key liquidity and balance sheet metrics as well as our outlook for the balance of the year.

Thanks, Mark. Moving to our capital resources and liquidity. Our cash available for distribution, or CAD, was $177 million through the first 6 months of 2026 versus $47 million in the prior year period. The significant increase in CAD was primarily driven by the contribution from the PotlatchDeltic businesses, coupled with significantly improved real estate results. A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on Page 8 of the supplement.

During the second quarter, we repurchased approximately 3.5 million shares at an average price of $20.95 per share or $72 million in total. We have been very active on this front during the first half of the year as we have repurchased 4.9 million shares for a total of $103 million. As of the end of the second quarter, we had $126 million remaining on our current share repurchase authorization. We continue to believe that our stock price is trading at a significant discount to net asset value. As such, we remain active under our share repurchase program as we believe buybacks represent a compelling use of capital and one of the most attractive opportunities to create value for our shareholders in the near term.

Turning to our balance sheet. We continue to maintain a conservative leverage profile and significant capital allocation flexibility. In April, we repaid a $200 million term loan at maturity using cash on hand, which we viewed as a more favorable capital allocation option than refinancing in the current higher interest rate environment. We finished the second quarter with $412 million of cash and roughly $1.9 billion of debt. Our net debt to enterprise value based on our closing stock price at the end of the quarter was 18%.

Moving to our outlook. Consistent with the initial 2026 financial guidance we provided in February, full year metrics reflect a pro rata contribution from the PotlatchDeltic operations starting on January 31. With respect to our individual segments, starting with our Southern Timber segment, we expect to achieve full year harvest volumes of 12.2 million to 12.5 million tons, with anticipated harvest volumes of 3.1 million to 3.3 million tons in the third quarter. We expect regional sawtimber and pulpwood prices to remain relatively stable for the third quarter compared to the second quarter.

However, as previously discussed, full year and quarterly average pine prices for the combined company's Southern Timber segment are expected to be lower than the stand-alone prices for Rayonier in the prior year based on the geographic mix of the combined company. In our Northwest Timber segment, we expect to achieve full year harvest volumes of 2 million to 2.2 million tons with anticipated harvest volumes of approximately 600,000 tons in the third quarter. We expect overall sawtimber prices to be modestly higher in the third quarter compared to the second quarter, primarily due to higher index sawlog prices on a portion of the volume coming from our Idaho timberlands. We continue to expect that full year 2026 average log pricing for the combined company's Northwest Timber segment will be higher than the stand-alone pricing for Rayonier in the prior year.

In our Wood Products segment, we continue to expect lumber shipments to total approximately 1.1 billion board feet for the 11 months of contribution in 2026. We further expect lumber shipments in the third quarter of approximately 320 million to 330 million board feet. We continue to be encouraged by the improvement in lumber prices which has been driven largely by more favorable supply-demand dynamics in addition to broader transportation constraints. As July month end, our average quarter-to-date lumber price realization was modestly higher than our average price realization in the second quarter.

In our Real Estate segment, we are pleased by the continued momentum in our sales activity and maintain a healthy pipeline of rural and improved development land sale opportunities as we move forward. Based on our current transaction pipeline and sales closed quarter-to-date, we expect an adjusted EBITDA contribution in the third quarter of $25 million to $35 million. For the full year, we continue to expect an adjusted EBITDA contribution from our Real Estate segment of $180 million to $200 million. As it relates to the land exchange with RMS that Mark discussed earlier, I'd note that our timber harvest guidance includes the impact of these transactions. In addition, the Washington sale will be treated as a large disposition and will have no impact on adjusted EBITDA.

We I'll now turn the call back to Mark for closing comments.

Thanks, Wayne. As I reflect on the first half of the year, I want to commend our employees for their focus and dedication during a period of significant change. Our team has navigated challenging market conditions while advancing key integration initiatives and I remain confident that our merger with PotlatchDeltic will create significant long-term value for our shareholders. While the macroeconomic backdrop remains uncertain, we believe the long-term fundamentals of our industry are promising, and we remain focused on optimizing the value of our land base.

In addition, we are continuing to build long-term value per share through disciplined capital allocation and active portfolio management as reflected in our recent share repurchase activity as well as the land exchange transaction with RMS.

In sum, I'm very pleased with our operational execution during the second quarter, and I'm proud of our team's resilience and determination. Before turning it back to the operator, I want to take a moment to acknowledge the tragic wildfires near Spokane, Washington. While these fires are not proximate to our timberland ownership, they are certainly impacting our team members based in the Spokane area where PotlatchDeltic previously maintained its headquarters.

We are monitoring the situation closely and working to support our team members, their families and the broader community as they cope with these events. Our thoughts go out to all those affected. That concludes our prepared remarks, and I'll now turn the call back to the operator for questions.

[Operator Instructions] Your first question comes from the line of Matthew McKellar with RBC Capital Markets.

Maybe first, on the timberland's transaction you've announced beyond the incremental timber EBITDA benefit that you've projected here. Can you give us a sense of how you're thinking about potential HBU real estate and land-based solutions upside opportunities that may exist in the acquired acreage? And is there anything specific on the land-based solutions side that you're looking at, at this stage that would involve that acquired acreage?

Matthew, this is Mark. I wouldn't say that there's anything particularly unique about these properties as it relates to land-based solutions upside. But recognize these are markets where -- we have a lot of experience, both on the real estate HBU side as well as finding opportunities on the land-based solutions side. So we really just see it as kind of additive to our portfolio in those areas.

Okay. Great. Congrats on the acquisition. Last for me, just outside of the benefit of the higher index sawlogs in Idaho that you noted. What trends are you seeing in sawtimber prices in the Pacific Northwest into Q3 here? And is the fire activity having any kind of noticeable impact on supply in the region.

Yes, certainly, you're right, with index sawlogs and where pricing is at, where we're seeing higher index log prices in Idaho. But as it relates to the Pacific Northwest? Yes, that is also having an impact. We see pricing increasing there as well slightly. So it's having a positive impact. As it relates to the fires, no, I don't think that's having a significant impact, whether it be on volume or transactions or pricing there. While it's unfortunate that the fires are happening there in the West. I think we've seen that kind of year after year and no real pricing impact from those fires.

Your next question comes from the line of Anthony Pettinari with Citi.

Mark, I think you said that pulpwood prices, you were seeing some improvement maybe exiting the quarter, and you referenced containerboard price hikes, which I guess we've seen. I'm wondering if you can give any kind of finer point on that into the second half of the year. And just given these outstanding hikes, given recycled fiber prices are, I think, I don't know, 50%, 60% higher than they were 6, 7 months ago, just how that dynamic impacts pulpwood and what you're seeing in that market?

Yes. I mean I wouldn't say that we have seen a significant amount of positive momentum on pulpwood pricing at this stage. But what we have seen is that markets have generally stabilized. Look, we've -- it's been a challenging few years for pulpwood pricing. We've kind of had this perfect storm of multiple mill closures, coupled with the elevated supply from the hurricane salvage and then just very dry weather conditions across the South.

And so we saw several successive quarters of declining prices. We think that, that's generally stabilized. And again, with some better end market dynamics for our customers, improving in containerboard prices, as well as improved operating rates at the mills. I'd say that we're seeing just some green shoots for some potential positive price momentum here in the coming quarters.

Got it. Got it. And then just switching gears to lumber. The Canadian import duties -- can you provide any thoughts on the reset, like the timing of when that will happen, sort of expectations for what the new duty level will be? And the administration has talked about additional 50% tariffs on Canada that I think would hit LVL. I'm not sure if they've hit other wood products, but any thoughts you can share on the import duty and tariff dynamic?

My understanding is that those incremental tariffs or potential incremental tariffs on certain Canadian imports would not attach to lumber. And look, while the preliminary AR7 would bring duties down modestly from current levels, it's worth putting that in context. Even at the modestly lower preliminary rate, AR7 would still be the highest -- or I'm sorry, the second highest combined rate since the softwood lumber agreement expired in 2015. And when you layer the Section 232 tariff on top of that, the all-in duty burden on Canadian lumber would still be roughly 35%.

So even at that lower duty rate, we expect that U.S. lumber producers will continue to gain market share from Canada. We just don't see the mills that have shut down in Canada coming back online, certainly not with the 35% duty and tariff burden. So perhaps we see some incremental volume from Canada at the margin, but it's just hard to envision that this would really move the dial relative to the current market dynamics. And in terms of the timing, my understanding is that one component of the duty actually just got extended by a couple of months. And so our expectation it's going to be a little bit later in the year perhaps than initially anticipated.

Your next question comes from the line of Buck Horne with Raymond James.

A quick question on the harvest volumes planned for the back half of the year. Just it feels like you had a little bit of extra activity in the second quarter. Maybe due to drier weather conditions. I'm just wondering to what degree there is some conservatism maybe built-in if the weather remains dry or if transportation were to free up, is there potential upside to harvest activity in the back half of the year?

Yes, Buck. I think certainly, we tightened our guidance range for the year just a little bit on both ends. But however, really, the midpoint is effectively remain unchanged. I think -- look, we're further through the year. Our team has had some additional opportunity to evaluate the combined harvest plan. They're continuing to optimize. So yes, while we were a little bit higher than we anticipated just given favorable harvest conditions, that doesn't change our overall outlook for the year.

Okay. Perfect. And just one quick one on just higher and better use outcomes. Congrats on the new solar activity and the pipeline there. Any conversations with potential data centers or data center developers or any sort of combination with solar arrays if there's any developments on that front?

Yes. As we discussed last quarter, we have seen increased interest from data center developers here recently. And I'd say that interest has been pretty varied. It ranges from developers looking to purchase maybe a few hundred acres for the actual data center footprint, other developers looking for several thousand acres for data center co-located power and perhaps even a buffer zone to address community concerns.

But needless to say, the site requirements and the due diligence for data center development are even more stringent than what we see for solar development. So these types of opportunities are invariably going to take longer to materialize. With that said, we're certainly focused on identifying these types of opportunities within our land base and really capturing some of that momentum that we see in data center development. We put together a cross-functional team internally to identify what we think are higher potential sites within the portfolio.

We've also listed some outside experts to help us with identifying those opportunities as well as marketing the potential side. So optimistic that we'll see this type of use contribute to our portfolio of HBU opportunities. But still a little early to speculate on just orders of magnitude in terms of pricing or number of acres that might ultimately be sold into that use.

Your next question comes from the line of Mike Roxland with Truth Securities.

First one, just over the last few years, you've been selling timberland in the Pacific Northwest. I think at one point, maybe 2 or 3 years ago, you had more than 400,000 acres in Washington. With the current 1031, you're now at, call it, 260,000 acres. So on the call, Mark, you mentioned optimizing the land base. So is there anything about the location relative to the Pacific Northwest, in particular, relative to the South that makes that region less appealing? Is it tough to get appropriate scale? Is it less attractive outlets for? Like what -- why have you been downsizing your position in the Pacific Northwest?

It's a great question. I wouldn't say that there's anything about the Northwest. It makes us want to necessarily shrink there. I think it's just a relative opportunity set. Look, in the U.S. South, there was just a lot more embedded option value around HBU Real Estate as well as land-based solutions. We just don't have much in the way of HBU Real Estate activity in the Pacific Northwest.

And likewise, the land-based solutions opportunities are pretty limited. You recognize that going back a number of years ago as well, we also generally had a younger age class in the Pacific Northwest and a much higher component of Hemlock within the portfolio. So some of the transactions that we've done on the disposition side in the last several years in the Northwest have really been seeking to upgrade the residual portfolio by minimizing the component of Hemlock in the portfolio and trying to kind of improve the overall age class balance.

So you still really like our position there. And I'd say our overall portfolio value on a per acre basis has improved by virtue of the transactions that we've done in the Northwest. And again, at this point, I think we still have sufficient scale to be meaningful in that market. But that's really what's been driving some of those decisions.

Got it. No, I appreciate the color there. And then just in terms of the share repurchases, obviously, there's been a very wide discount to NAV. You guys have a solid balance sheet post to trigger your transformation in the last few years. Why not be even more opportunistic in buying back an increasing amount of shares here? Obviously, there was a step-up in 2Q relative to 1Q. I realize that, but why not spend $100 million a quarter or more discount to NAV?

As we said in the prepared remarks, we continue to see buybacks as a very compelling use of capital based on where the stock price sits right now. The balance sheet is in good shape, and we do have capacity remaining under our current authorization. So we do expect to remain active buying back shares if we continue to trade in this range that we've been over the past several months.

That said, we also want to be measured as to how aggressive we are at any single point in time as market conditions have been pretty volatile of late. And we also want to maintain some balance sheet flexibility so that we can maintain that ability to be nimble and opportunistic around capital allocation. So again, I think we've been appropriately aggressive with our recent buybacks. I think last quarter was probably the -- our most active quarter ever in terms of buyback volume.

And again, I think we still have some balance sheet flexibility to continue to be aggressive. But you recognize our capacity isn't limitless either. We're still committed to maintaining our investment grade credit rating. And again, we want to maintain a conservative balance sheet and maintain that capital allocation capacity. And so again, I think we've been appropriately aggressive, and we want to continue to be opportunistic on that front.

Your next question comes from the line of Mark Weintraub with Seaport Global.

Mark, two questions. One, just sort of building on a little bit on the kind of the data center question. And just more generally, housing is not doing great, but we have this massive AI infrastructure build-out going on. And so I'm sure you're looking at all different types of ways in which you can participate and get your share.

Can you kind of speak to that beyond, obviously, selling land to data centers and then relatedly, I'm sure solar is a part of this answer. And we've also got energy costs going up and more uncertainties. Are you seeing that translate in any way to increased activity on the solar side? Or is it premature to be drawing any thoughts along those lines?

Yes, I wouldn't necessarily say we've seen increased activity on the solar option side of things. But I think what we have seen is that developers have really been focused on optimizing their pipeline rather than expanding. They're sorting through interconnection costs. We've obviously seen changes in the regulatory environment and some of the financial incentives around solar.

So we actually think our option portfolio could shrink a bit here in coming quarters, but likely with a higher quality mix of projects within that portfolio. So there's certainly momentum on the solar front. And we think that that's going to translate to a pretty favorable runway as it relates to long-term solar development. But again, we've been really focused on building out that solar option portfolio now for the last 4 or 5 years. But keep in mind that most of these options have terms in the range of 5 to 7 years.

So we're just now reaching that point where we think we'll start to see a more regular turnover of option maturities. 2027 is actually the first year that we see a big step up in those option maturities. So I think over the next 2, 3 years, we should start to get better visibility on what that long-term conversion rate might look like.

But again, very optimistic about the pipeline on both the renewable energy side as well as some of the interest that we're seeing on the data center development. And I guess one other point I'd make around just a pickup in energy demand because I think that could also translate to new opportunities around bioenergy and biofuels. That's an area where we've been spending a lot of time really trying to evaluate those types of opportunities, particularly in the U.S. South.

Great. And maybe just on the point you made about solar options expiring. Is there any reason why things can't happen before we're coming to the end of solar towards the end solar option expiration? And if not sort of how does -- why is sort of the timing tending to coincide with when things are coming to an end?

Yes, they certainly can happen before the end of an option expiration, and we've certainly seen that within our portfolio of options where counterparties have converted the option over to a purchase or a lease prior to that option termination.

But recognize what's underlying that typical 5- to 7-year term is just the interconnection studies, all the regulatory hurdles that have to be cleared before that project can really get underway. And so I'd say the limiter there is just the period of time that, that requires. There is a pretty protracted regulatory process. And so again, we don't expect that we're going to see really early terminations or really early conversions just because there is a duration of time required for that due diligence.

Got you. And is it the counterparty that's basically doing that due diligence? And if so, are you -- how much are you in the know as to how that's proceeding?

Yes, it's the counterparty that's doing that due diligence, and we usually do get periodic updates. Obviously, to the extent that the counterparty remains in the option and doesn't terminate it early, that suggests that they're making good progress on that due diligence and on that interconnection study and ultimately a power purchase agreement. But yes, we do get periodic updates from those counterparties, but we're not heavily involved in the actual process.

[Operator Instructions] Your next question comes from the line of Ketan Mamtora with BMO Capital Markets.

Maybe first question, coming back to capital allocation. Mark, you talked about keeping the balance sheet conservative, having some flexibility. How would you have us think about what that sort of conservatism looks like? You have us think about it on a net debt to enterprise value basis. Is it debt leverage? And what would be sort of the broad at levels that you are looking at?

I'd say we think about it on both fronts. To some extent, there's a leverage level that we're comfortable sustaining and recognize that, that has evolved over time. Given that we're in a much higher interest rate environment than we were a few years back. But we're also mindful of just how the rating agencies look at that because we are committed to maintaining that investment-grade credit rating.

And so I'd say we look at a host of different leverage metrics and making that determination of where our comfort level. And we published some of those in the past. I mean, most recently, we've said we want to maintain leverage net debt to EBITDA inside of 3x. And we're still, I think, within that range. But like I said, that capacity is not limitless either, and we're certainly mindful even more mindful of leverage levels today just given the higher interest rate environment that we're in.

Got it. That's helpful. And then share repurchase is loud and clear that that's kind of an area of focus. Outside of that, are there sort of opportunities for sort of investments maybe downstream in wood products, given that lumber fundamentals have started to improve. Curious if there are opportunities like that, that you see over the next 12 to 24 months?

Yes. We're going to -- we do look at those types of opportunities, but we're going to look at them through the same lens as we would any other capital allocation alternative. We're going to deploy capital really with a view towards building long-term value per share. As we discussed in the past, the bar for external growth, I'd say, is pretty high right now given the opportunity that we see in buybacks. But we'll certainly consider high-return capital projects or even M&A if we see a compelling opportunity that we believe will create long-term value for shareholders within that Wood Products business.

Got it. And then just one last one for me. On solar, Mark, can you -- just a rough order of magnitude, what percentage of that 77,000 portfolio comes due in 2027 in terms of the option agreement expiring?

We haven't disclosed that specific percentage. I don't necessarily want to get into the exact number of acres because that's going to change over time. But the point I was making is that 2027 is the first year that we see a much larger slug of option maturities. Again, just given that typical duration of 5 to 7 years and given that we've been building up this portfolio over really the last 3 to 4 years, 2027 is when we kind of start to see a pickup. And then I would say it becomes more normalized thereafter, just given how that option portfolio has built up over the period of the last 4 years.

There are no further questions at this time. I would now like to turn the call back to Collin Mings for closing remarks.

Thanks. I'd like to thank everybody for joining us. Please contact us with any follow-up questions.

And this concludes today's call. Thank you all for attending. You may now disconnect.

Thanks for joining us for the Rayonier session. My name is Buck Horne. I'm the housing and timber analyst for Raymond James and really happy to be able to introduce and host this session. To my left, Mark McHugh, CEO, Rayonier. Wayne Wasechek is the CFO, formerly of PotlatchDeltic, but now appointed to the Rayonier seat. And then to his left, Collin Mings, VP of IR. So lots of interesting things happening. And of course, most importantly, I think, is the stock price is the most compelling thing I can think of, which I continue to advocate and believe is one of the most deeply discounted value opportunities among all REITs, among all property types. So -- let's get the update from Mark, and then we'll dive into some Q&A. So with that...

Great. Thanks for the introduction, Buck, and thank you for hosting us today. I'm going to start off by providing a high-level overview of Rayonier for those that are less familiar with the story, including some highlights of our recent merger with PotlatchDeltic, which we closed just about 4 months ago now, and then we'll open it up to Q&A. Also, just for reference for those in the room as well as joining virtually, I'm going to be speaking to the presentation that was posted to the IR section of our website earlier this week under the heading Featured Presentation. All right. So let's start on Page 4, which lays out the rationale for our recent merger of equals with PotlatchDeltic. And really, the key theme here is that we believe that this combination creates a stronger enterprise that will be able to realize benefits that neither of the companies could have achieved independently. On our timber business, the combined company will enjoy much larger scale as well as significantly enhanced diversification. In Wood Products, we're adding a very well-positioned, low-cost lumber manufacturing business. It really provides us with upside to the housing cycle longer term.

On real estate and land-based solutions, we really see an opportunity here to share best practices across the newly combined organization and really leverage our resources over a much larger footprint of land. And then just as it relates to our future strategic flexibility as a combined company, we feel like the larger scale will just offer us a lot more optionality in terms of how we optimize the portfolio going forward. Moving over to the financial benefits. We're targeting annual run rate synergies of $40 million, which we expect will come primarily through optimization of overhead costs. The combined company is also very well positioned post closing with a strong balance sheet and significant capital allocation flexibility. And lastly, we expect that our increased market cap post closing should translate to a better trading liquidity and improved cost of capital over time. So again, really see a lot of benefits and upside potential from the merger going forward. Slide 5 provides an overview of our leadership team following the merger. The new team that we've assembled here reflects top talent from both organizations.

And I'm really pleased with how this group has come together and was really able to hit the ground running following the closing of the transaction back in January. Slide 6 provides an overview of the pro forma asset profile of the combined company. We now own approximately 4.1 million acres of timberland, including roughly 3.2 million acres spread across the U.S. South and just over 900,000 acres in the Northwest, which are primarily in Idaho and Washington. In addition, we own 6 sawmills with total capacity of 1.2 billion board feet annually as well as plywood facility that's co-located with our sawmill in Idaho. On the real estate side, we now have 3 real estate development projects with the addition of Chenal Valley. And we're also really looking forward to the opportunity to leverage what we see as a best-in-class HBU platform over a much larger footprint. And lastly, within land-based solutions, the combined company now has 80,000 acres under option for solar development as well as about 154,000 acres under lease for carbon capture and I'd also note that post-closing, about 3/4 of our combined portfolio is in the U.S. South.

So we see significant potential to expand this land-based solutions business over time, given that the vast majority of activity within land-based solutions is occurring in the U.S. South. On Slide 7, we've highlighted some of the key trends that we see driving value creation opportunities within our land portfolio. And they generally center around transitioning land use towards a higher-value purpose, and that can include rural HBU, real estate development or land-based solutions. Rural HBU is a business that's long been part of our strategy to optimize portfolio value. We generally sell anywhere between 1% to 1.5% of our Southern acreage annually into these HBU markets, typically at premiums ranging from 50% to 100% above timberland value. That's a business that's been pretty consistent and a steady contributor to cash flow for us over time. The land-based solutions and real estate development, these are really where we see the most significant growth opportunity for the company longer term.

Our land-based solutions business includes activities such as leasing land for utility solar development, leasing land or really the pore space underneath the land for carbon capture and storage as well as monetizing carbon stored in standing timber through the carbon offset market. Our real estate development business involves investing in entitlements and horizontal infrastructure improvements in very select areas within our portfolio. And really, those investments are designed to catalyze demand in those areas, significantly enhance the value of those lands as well as our surrounding land holdings. And this next slide illustrates why we're so excited about these new growth opportunities. What this chart shows is a potential value uplift per acre that we believe can be achieved by transitioning land use into one of these alternative uses. So for example, if you take an acre of U.S. South timberland that has a value of, say, $2,000 to $3,000 per acre, and you're able to transition that acre into a carbon capture and storage lease.

We think that has the potential to increase the value of that acre by up to 5x. If you're able to transition that acre into a solar lease or an unimproved development use, that has the potential to increase the value of that acre by up to 10x. And if you're able to transition that acre into an improved development use, like what we're doing in Wildlight, Heartwood and Chenal Valley, that has the potential to increase the value of that acre by up to 15x. So we see significant value creation potential from optimizing land use across the portfolio, especially as we grow the number of acres within the portfolio that can be converted into these higher value uses. And again, we also see the opportunity set really expanding here following the completion of the merger. Slide 9 provides an overview of the combined company's timberland portfolio. Again, roughly 3.2 million acres in the U.S. South and about 930,000 acres in the Northwest. And as you can see from this visual, the portfolio is very well diversified geographically in both regions.

As we discussed extensively in the past, timber supply-demand dynamics are highly localized in nature. So we think the combined company shareholders will benefit from both the geographic and end market diversification impact of this merger. Skipping ahead to Slide 13, we provided a snapshot of the combined company's wood products manufacturing operations. In total, we have roughly 1.2 billion board feet of lumber capacity across 6 sawmills, which positions the company as a top 10 lumber producer in the United States. Of course, Rayonier didn't own any manufacturing assets prior to the merger, but we're really excited about the opportunity to integrate this very large-scale, low-cost manufacturing platform into our portfolio. We really see this platform as another tool in our capital allocation toolkit with which we can optimize portfolio value over time. Skipping ahead to Slide 16, I'll just touch briefly on our real estate business and some of the trends that we've been seeing here. Over the last decade, both Rayonier and PotlatchDeltic have seen significant increases in our HBU value realizations.

And both companies have also seen a shift in their sales mix towards these much higher value development sales. So we're certainly encouraged by the fact that land values have continued to appreciate despite some of the challenges that we've seen in our core timber markets in the past couple of years. And again, we're really excited about the opportunity to combine these portfolios and leverage this best-in-class HBU platform over the much larger footprint. Skipping ahead to Slide 18. Here, we provide an overview of some of our focus areas within the land-based solutions business. We've been working very hard over the last few years to really build a pipeline of opportunities within land-based solutions. And we're optimistic that this pipeline is going to translate to meaningful cash flow growth in the coming years. As I noted earlier, we have roughly 80,000 acres under option for solar development and over 150,000 acres under lease for carbon capture and storage.

So as we see some of these solar options begin to convert into long-term leases, as we get closer to injection royalties on some of those carbon capture and storage leases, we expect that this will translate to significant cash flow growth on a per acre basis relative to what we're able to achieve through our timber operations. We also see a lot of upside potential in carbon markets. Key buyers of carbon offsets are increasingly looking for very large-scale projects to achieve their net zero ambitions. And so we feel like following the merger, we're much better positioned as a potential supplier of choice into this market. Lastly, I'll just wrap up with some of our capital allocation priorities following the closing of the merger. One of the key factors that really allowed this merger to come together is that both companies shared a very similar philosophy around capital allocation. Our mantra around capital allocation at Rayonier has always been to be nimble and opportunistic with a view towards building long-term value per share. And that's absolutely going to remain our approach going forward.

More specifically, we plan to focus on maintaining our investment-grade credit ratings, returning capital to shareholders through a sustainable dividend that grows over time, repurchasing our shares opportunistically when we see that disconnect between our share price and our view of private market intrinsic value and investing in accretive growth opportunities, but only if and when it makes sense to do so. As it relates to share buyback, I'd note that we repurchased about $31 million worth of shares in the first quarter, and we've continued to be active in buybacks in the second quarter under a 10b5-1 program. As we discussed on our first quarter earnings call, we really see share buybacks as one of the most compelling capital allocation opportunities available to us today, just given that ongoing disconnect between our stock price and our view of private market value. So we expect to continue to be active on that front. So in closing, I'll just reiterate, we believe we're very well positioned following the merger to create value for shareholders over the long term.

Merger integration is going quite well. I think we're making very good progress towards achieving our synergies targets, and we're really excited about the future opportunities that we'll have as a combined company. Again, I appreciate your interest in Rayonier and happy to open it up to Q&A.

Yes. All right. Great overview, Mark. Thanks. Appreciate that. So let's start with kind of the merger. I just kind of -- as you've had a few months here post closing to kind of learn and really dive into the Potlatch assets and the asset base and obviously, you've highlighted quite a few of the higher and better use and the land solutions opportunities. But yes, what's -- is there -- is it -- are you seeing anything that you didn't know about already or things that kind of surprise you to the upside in terms of potential optionality or opportunities, whether that's enhanced solar, carbon capture or is it potential revenue synergies that you see between the portfolios? Is there anything you've learned post integration?

Yes. I wouldn't say that there have been any big surprises either to the upside or to the downside following the closing. We did quite a bit of due diligence and the lead up to the announcement of the transaction. We certainly knew the company and the assets quite well. We're both in -- essentially, we're in the same businesses, continue to be in the same businesses but again, very excited about the opportunity to integrate the portfolios. You really see a lot of opportunity around adoption of best practices across the combined organization, really leveraging resources over a much larger footprint. And again, we think the synergies are pretty -- will be pretty compelling over time.

Yes. Great. Let's get a quick operating update on kind of what was happening in Georgia maybe with the -- there were some fires down there that were nearby some of your acreage. Was anything damaged or can you maybe compare and contrast what you think salvage operations might look like relative to -- because last year -- or let me, just 2 years ago now, we had that hurricane that came through and created quite a bit of salvage wood and that kind of influenced the pulpwood market. But yes, what's the status of kind of the fire situation in Georgia? Is that contained? And how do you think that impacts the salvage timber?

Yes, it is contained at this point. And just for context, I mean, the impact of the fires will be significantly less than the impact of the hurricanes we saw a couple of years back, just in terms of the magnitude of salvage volume that will come to market. Invariably, you have these types of casualty events from time to time. We deal with a number of fires every year. I think over the course of the 25 year -- last 25 years in Rayonier's history, we've had kind of 2 casualty events that have risen to the level of kind of $10 million or so of casualty loss. So in the grand scheme of things relative to the size of the company, these tend to not be very material events. We did announce we had about 10,000 acres that were impacted by the fires, and we will be conducting salvage operations on those stands. But we don't really see the overall market impact as being nearly as extensive as what we saw with the hurricanes a couple of years back.

Got it. Got it. Maybe just a quick kind of commodity price, lumber price update. It feels like lumber prices are holding in better than I think many expected. And we've actually seen a steady increase in lumber despite what's been pretty choppy housing market activity. So it feels like things are getting better. But are you back in the black in terms of lumber operations and manufacturing costs? Any challenges, whether it's fuel related or energy cost ahead of you? And kind of what have you learned, I guess, as you kind of integrated those operations post closing?

Yes. I mean we're certainly in the black. I mean we were in the black in Q1 and lumber prices have improved in Q2 relative to Q1. And so I'd say that the demand environment has continued to be pretty tepid, but the supply side of the equation has improved considerably. Just with the duties and tariffs on Canadian lumber imports to the U.S., that is certainly having the effect that was intended, and we have seen lumber prices improve and more of that market share is going to U.S. lumber producers. And so yes, we think that, that business is performing reasonably well. And like you said, we have seen lumber prices improve markedly from where we were 6, 9 months ago.

And how does that flow through to your Idaho operations in terms of potential upside? How does that pricing contract your Idaho logs are, I think, indexed and linked to the lumber prices?

Yes, I'll let Wayne touch on that.

Yes, you're right, Buck. So our -- we own over 300,000 acres in Idaho. And of our sawlogs that we sell, about 75% of those sawlogs are indexed to lumber. So currently, in this pricing environment, as pricing improves, yes, our indexing arrangement is more favorable and pricing, we do see pricing go up. And as we compare our Northwest operations compared to our operations in the South, we're much more heavy weighted towards higher-value sawlogs versus pulpwood. So well over 90% of our sawlogs in the Northwest is sawlogs. So certainly be favorable as we are in this stronger pricing environment.

Can you give us a rough order of magnitude sensitivity, like so if lumber prices were to continue an upward trajectory, every $10, $20, $30 increase, what does that do in terms of your -- holding all else equal, what does that do in terms of EBITDA sensitivity?

Yes. I think overall, it's about a $10 change in lumber price would equal upwards of $15 million in EBITDA on an annual basis. So if you think about our Wood Products business, as Mark mentioned, we have about 1.2 billion board feet of shipments and production every year. So $10 is -- that's $12 million in EBITDA just for wood products alone. So yes, that can certainly have a dramatic impact fairly quickly on pricing. And given our cost structure, that pricing change is a complete flow-through on margin.

Got it. Got it. I think there was -- going back to the land-based solutions briefly, there was a period of time not long ago where with one big -- some of the incentives, tax incentives for solar and wind and things like that were kind of rolling off. But it feels like the demand for energy of all types seems to be pretty insatiable here. So -- but have you had any regulatory impact? Are there puts and takes in terms of demand for solar leasing? Or is it just all kind of incrementally good at this point? How does that flow through right now?

No. I mean we've certainly seen puts and takes. I mean, like you said, the One Big Beautiful Bill Act did roll back some of the incentives for renewable energy, particularly solar. We never had a very significant business in wind, but the 45Q tax credits remained in place for carbon capture and storage and so look, solar continues to be, from a cost standpoint, one of the most cost-effective means of new electrical generation. And so we think that there will be continued momentum behind utility solar development kind of irrespective of the government incentives that are in place. And against that backdrop, we've obviously seen an explosion in demand for electricity just given the incremental needs of data centers and AI. And so again, some puts and takes there, but overall, still a very positive and favorable trajectory for that business.

And right now, you're mainly -- you're generating some revenue through some of these land options, but you're not fully getting the -- it's not fully integrated and getting the full royalty payments yet. But when do some of those contracts potentially start actually getting up to full value?

Yes. Most of these solar options have -- they typically have a 5- to 7-year term. We've really been building up that option portfolio. Over the last 3 or 4 years, I think 2021 was the first year that we saw any kind of step-up in that solar option portfolio. And so it's really going to be over the course of the next couple of years that we start to see a more regular turnover of those options or maturity of those options and conversion into leases. And so I think the next few years will be pretty telling in terms of what does that option to lease conversion ratio look like? And what can we expect in terms of the long-term cash flow growth from that business. I think we said on the last call, we have about 35,000 acres under option that will mature in the next few years. And so again, I think we'll have a much better visibility and data points around that option to lease conversion rate.

Got it. Got it. kind of wanted to also get your opinion on kind of the state of the pulpwood market. It's a key component of anybody that's operating in the U.S. South and the pulp and paper industry has been a challenge for many, many years, but it feels like there's maybe some alternative uses or whether it's a biocarbon or biomass or there's various engineered products that are being made with some of that pulpwood now. But do you feel like there's a stability kind of or we're getting to kind of a supply-demand equilibrium for pulp anytime soon? And what do you think about things like biocarbon?

Yes. I think we're certainly in a better place from a supply-demand equilibrium in just pulp and paper markets. With that said, we have seen a number of closures in the last decade, and that's translated to a pretty meaningful reduction in pulpwood demand in the U.S. South. And so like you said, we're very much focused right now on new market development. We see opportunities in bioenergy and wood pellets manufacturing and biocarbon and also in just carbon offset markets where you're essentially monetizing stored carbon and timber through that carbon offset market. So the pulp and paper market is going to continue to evolve the way that it has been to some extent. Graphic papers, printing and writing papers have been in a steady state of decline for a number of years now. We think the packaging side of the equation has stabilized. We've seen some mill shutdowns, but we're now seeing some investments in some of those remaining mills. And so we think that, that market is in a better state of equilibrium. But again, like you said, very much focused on new market development for pulpwood and wood chip residuals at this point.

Got it. Let me shift gears to capital allocation, just balance sheet management. You've highlighted the priorities, maintain that investment-grade rating, maintain the dividend sustainability. But it's hard to ignore the valuation disconnect here in terms of what the private market seems to be valuing timberland at versus what's implied in your current stock price and inflation adjust your price per acre. I mean I don't know if we've seen land in the U.S. trade at these levels that's implied by your stock price. So how does that -- how do you balance that opportunity in your own shares here with obviously the balance sheet like maybe just characterize what kind of dry powder you think you have out there, what kind of runway you have potentially for reinvesting in your portfolio or disposing of certain assets? Or how do you think about all those opportunities?

Yes. I mean, look, maintaining our investment-grade credit rating and protecting the balance sheet is always going to be top of mind. And we've identified a targeted leverage level of less than or equal to 3x net debt to over the cycle EBITDA. I don't argue that we're below mid-cycle EBITDA right now. So potentially some incremental capacity above and beyond kind of 3x on a trailing basis. But we have been very active in the buyback market as well. Like I said, we repurchased about $31 million worth of shares in Q1. It's worth noting as well in Q1, we were kind of frozen out of the buyback market for a good portion of the quarter. We couldn't be active while the merger was pending. So we closed the merger on January 30. By the time we closed the merger, we were kind of in a blackout period for Q1 earnings. And so really, that level of activity that you saw in Q1 was really more reflective of just half of the quarter. And so that gives you some indication of just kind of a pace of buyback activity that we've been on. We're operating under a 10b5-1 program right now.

So obviously, when the stock price moves to a lower point, we're buying back more. When it moves up, we're buying back less. But we do continue to see that as a very compelling opportunity, and we continue to be active in that market.

And the 3x number in terms of debt to EBITDA, I mean, that's pretty conservative relative to industry, whether it's different property sectors. I know timber is generally a lower cash yield asset class, but it's a very conservative target. But what's the rationale behind that particular threshold? And/or do you have potential flexibility to kind of go above that from time to time?

I mean we set that new threshold when we embarked on this asset disposition and capital structure realignment plan back in November 2023. And really, the rationale was we've obviously seen interest rates increase pretty significantly, and we are looking at the prospect of -- we've been very active refinancing when interest rates were very low. So both PotlatchDeltic and Rayonier had a weighted average cost of debt that was in the range of 2.5%, but we were looking at the prospect of refinancing that debt at 5%, 5.5-plus percent. And so we want to be mindful of just managing cash flow, kind of the cost of our debt relative to the underlying cash yield on the asset that we're primarily invested in, which is timberland. And so we do think a lower level of leverage is prudent in this interest rate environment. With that said, I mean, we certainly have the flexibility to go above that for a period of time if we see a very compelling opportunity.

And maybe just talk a little bit just the state of the transaction market in terms of who's out there buying timber, who's still interested. It feels like we've had a couple of years of fairly depressed transaction activity in the overall market. But are you seeing any upticks of different categories of buyers, whether they're TMOs or other institutional funds? Or who's out there potentially interested in adding to timberland these days?

I think it's really the same cast of characters that have been active in that market. With that said, I'd say we've increasingly seen interest from more kind of conservation or sustainability-oriented investors. Those tend to be the types of investors that are underlying some of these TMO, timberland investment management organizations. These are private equity vehicles that manage timberland assets. A lot of their underlying investors have some kind of sustainability angle. The transaction market has been pretty quiet here for the last 6 months or so. I do anticipate that it will pick up in the back half of the year. There are a number of larger portfolios that are going to be coming to market in the back half of the year. So I think we'll have some better data points just around M&A activity and kind of that bid-ask spread in the market in the back half of the year.

Okay. We've got a couple of minutes here. I'll open it up if anybody wants to chime in any quick questions off the top of your heads. Anybody? Okay. No worries. No worries. We'll just keep going here. Fuel costs, energy prices, diesel, log and haul costs, is that potentially any impact here in the upcoming quarters? How are you thinking the flow-through of kind of the energy price spike?

Certainly, that does have an impact. I think when we look at our businesses, not as meaningful on the wood products side, probably more in our timberlands business as it relates to where we do have delivered volume, so on log and haul costs, you think about diesel associated with that. So certainly, we do see that, but we're also very proactive on trying to pass as much of that incremental cost on to customers, and that's where we're very focused on that. So we do see that depending on where longer-term diesel prices go, and that will kind of ripple through. But again, we try to offset most of that as a pass-through.

And just kind of going back to the transaction market. Just can you go characterize -- I mean, I know these numbers, but for the audience that may be out there is not as familiar with how transaction pricing and the private markets has been trending here. Is there a range that you're seeing for U.S. South Timberland? What's a reasonable market average kind of cost per acre and maybe what you're seeing in the Pacific Northwest? Because I can tell you, the way we do the math, your portfolio is basically trading like implied $1,850 per acre or something like that or maybe even $1,900 per acre with 0 value ascribed to lumber manufacturing. So how does that compare to what you'd see in the private market?

Yes. I mean that's probably 0 value ascribed to lumber manufacturing and 0 value ascribed to our real estate development portfolio. I'd argue it's trading at well below that level with any reasonable assumption of value around those 2 businesses. In the private market, again, you have to be careful to look at any single transaction because there is a wide array of quality that you see in the private market. But in general, that range tends to be probably $1,500 per acre on the low end up to upwards of $3,000 per acre in the U.S. South. for higher-quality properties. I think the NCREIF index is a reasonably good indicator of average quality timberland in the U.S. South. I think it comprises about 9 million acres of institutionally managed timberland assets in the U.S. South. And I believe that today is at around $2,300 an acre. So that gives you an idea of kind of what the private market or appraisal value of Southern Timberlands on average is today.

Right. Right. All right. That's our time. Thanks again, guys. Really appreciate the update. Thanks, everybody, for joining.

Hello, everyone. Thank you for joining us, and welcome to Q1 2026 Rayonier Inc. Earnings Conference Call. [Operator Instructions]

I will now hand the conference over to Collin Mings, Vice President of Capital Markets and Strategic Planning. Collin, please go ahead.

Thank you, and good morning. Welcome to Rayonier's investor teleconference covering first quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our website at rayonier.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're 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 nearest GAAP measures in our earnings release and supplemental materials.

With that, let's start our teleconference with opening comments from Mark McHugh, our President and CEO. Mark?

Thanks, Collin. Good morning, everyone. Before turning to our first quarter results, I'd like to provide a brief update on the merger of equals with PotlatchDeltic. Since closing the transaction ahead of schedule in late January, our team has hit the ground running on integration efforts. I'm extremely proud of the collaboration and dedication that our people have shown as we work to align our cultures and business processes across the combined organization. The momentum we've built in such a short time gives me great confidence in the value this combination will deliver for our shareholders and other stakeholders.

Our leadership team has also made significant progress in optimizing our organizational structure and implementing changes that will drive meaningful overhead cost savings and operational efficiencies over time. We continue to expect $40 million of annual run rate synergies within 24 months of closing, with at least half of that achieved by the end of the first year. Since closing the merger, we've made significant progress toward these objectives, and we remain on track to achieve our synergies targets.

Also as it relates to the merger, we announced in late March that after completing a thorough review of alternatives, we would maintain the Rayonier name while also introducing a refreshed corporate logo that reflects the beginning of a new era as a combined company. During this review, we considered the rich history and established market presence of both the Rayonier and PotlatchDeltic corporate brands among customers, investors and other stakeholders. We ultimately concluded that retaining the Rayonier name would best position us to leverage our strong brand equity among stakeholders while also mitigating the cost, complexity and potential risk of confusion in adopting an entirely new corporate identity.

Now let's move to our first quarter results. I'll start with a review of our overall financial results as well as our segment level performance, after which Wayne will review key liquidity and balance sheet metrics as well as our outlook for the balance of the year.

Please note that our first quarter results captured 2 months of post-merger contribution from the legacy PotlatchDeltic operations following the January 30 closing of the merger. In addition, as a result of the merger, our reportable business segments have been updated to include a new Wood Products segment, which reflects PotlatchDeltic's legacy lumber and plywood operations.

For the first quarter, Rayonier reported a GAAP loss of $12 million or $0.05 per share. Adjusting for pro forma items, all of which were related to the merger, net income was $17 million or $0.07 per share. Adjusted EBITDA in the first quarter was $94 million, which was well above the $27 million reported in the prior year period, primarily due to the contribution from the PotlatchDeltic operations, along with strong operational performance across our segments.

Moving on to our segment results. Let's start on Page 8 with our Southern Timber segment. Adjusted EBITDA in the first quarter of $46 million was 68% above the prior year quarter as increased harvest volumes more than offset lower net stumpage realizations. Total harvest volumes increased 76% versus the prior year quarter, primarily due to the addition of roughly 1 million tons of volume from the PotlatchDeltic timberlands.

As it relates to pricing in the Southern Timber segment, please note that we have revised our price reporting to reflect delivered log prices rather than net stumpage realizations to reflect the prevalent mode of sale in our Southern Timber operations following the merger. Also, as we discussed last quarter, our reported pricing in the South is lower as compared to the prior year stand-alone realizations for Rayonier, largely due to the geographic mix shift associated with the merger.

In grade log markets, demand was steady as lumber prices rose throughout the first quarter following capacity curtailments last year. As we move forward, we are optimistic that some local markets will see improved demand as sawmills potentially ratchet up production in response to a more favorable lumber pricing environment.

In pulpwood markets, conditions remained challenging during the quarter as weaker demand following mill closures and maintenance downtime was compounded by historically dry weather conditions across the U.S. South, which allowed for the harvesting of typically inaccessible sites. As anticipated, this combination of increased supply and weaker demand resulted in continued pricing pressure to start the year.

On a positive note, end product pricing for many of our pulp and packaging mill customers has improved following recent supply rationalization, which should contribute to some stabilization of demand going forward.

I also want to touch briefly on the recent forest fires in the U.S. South. First and foremost, our thoughts go out to the individuals and communities affected by these tragic events. Over the past couple of weeks, Rayonier has been working alongside neighboring landowners and state and federal agencies to help contain the fires. To date, we have sustained property damage on roughly 10,000 acres, primarily in Georgia.

Our team is actively assessing the impact and preparing to commence remediation and salvage operations on the affected tracts as conditions allow. Based on the fire activity to date and our preliminary assessment, we do not currently expect the fires have a significant financial or operational impact to our business.

Moving on to our Northwest Timber segment on Page 9. First quarter adjusted EBITDA of $9 million was 45% above the prior year quarter. Harvest volumes increased 38% in the first quarter as compared to the prior year period, primarily due to the contribution of 116,000 tons of incremental harvest volume from PotlatchDeltic's Idaho timberlands. Notably, harvest activity in Idaho was limited during the first quarter due to extended spring breakup conditions following a relatively mild winter.

On a positive note, lumber pricing increased significantly throughout the first quarter in response to supply curtailments, which translated to an improved overall supply-demand balance. Moving forward, we expect some producers in the region to ramp up production in response to higher lumber prices, which should translate to positive log price momentum as well.

Turning to Wood Products on Page 10. This segment generated $7 million of adjusted EBITDA in the first quarter, modestly above our expectations for the 2-month post-merger period. During this period, our average lumber price realization was $437 per MBF and shipments totaled 199 million board feet. On a full quarter basis, including the premerger period, our average pricing was $427 per MBF and shipments totaled 288 million board feet. Notably, our average lumber price realization rebounded by roughly 11% from an average of $384 per MBF in the fourth quarter for legacy PotlatchDeltic.

The improvement in the lumber market to start the year reflected the impact of reduced supply due to mill curtailments and higher tariffs on Canadian imports as well as improved demand heading into the spring building season. This positive trajectory continued into mid-April. However, pricing in recent weeks across some products has moderated amid more balanced supply-demand dynamics.

Moving to our Real Estate segment on Page 11. In the first quarter, real estate revenue totaled $60 million on approximately 7,700 acres sold at an average price of $7,300 per acre. Sales increased significantly from the prior year quarter due to a higher number of acres sold, partially offset by a slightly lower average price per acre due to the sales mix. Real Estate segment adjusted EBITDA in the first quarter was $46 million, up significantly from $2 million in the prior year period.

Within improved development, sales totaled $7 million. Activity at our Wildlight and Heartwood development projects remains on a favorable trajectory as we continue to benefit from the investments we've made over the past several years in entitlements, infrastructure and market development. Meanwhile, the Chenal Valley development project in Little Rock, Arkansas, which we added through the PotlatchDeltic merger, further diversifies our platform and should remain a steady contributor to cash flow moving forward.

Moving to the rural category. First quarter sales totaled $49 million, consisting of roughly 7,650 acres sold at an average price of nearly $6,500 per acre. The most notable transaction was a 2,200-acre sale to a solar developer, which exercised an option to purchase the property for nearly $23 million or roughly $10,000 per acre. This sale underscores the continued interest we are seeing from solar developers across our Southern land portfolio. Our pipeline of land under option for lease or sale to solar developers currently stands at approximately 80,000 acres. More broadly, overall sentiment in the rural land market also remains positive as we approach midyear.

I'll now turn the call over to Wayne to cover key liquidity and balance sheet metrics as well as our outlook for the balance of the year.

Thanks, Mark. Moving to our capital resources and liquidity. Our cash available for distribution, or CAD, was $90 million in the first quarter versus $20 million in the prior year period. The significant increase in CAD was primarily driven by the contribution from the PotlatchDeltic businesses, coupled with significantly improved real estate results. A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on Page 7 of the financial supplement.

During the first quarter, subsequent to the closing of the merger, we repurchased approximately 1.5 million shares at an average price of $20.98 per share or $31 million in total. As of the end of the first quarter, we had roughly $198 million remaining on our current share repurchase authorization. We continue to believe that our stock price is trading at a significant discount to net asset value. In addition, the dividend yield is around 5% at the current stock price. As such, we continue to view share buybacks as a compelling use of capital and one of the most attractive ways to create value for our shareholders in the near term.

Turning to our balance sheet. We remain well positioned following the closing of the merger with a conservative leverage profile and a significant capital allocation flexibility. We finished the first quarter with $682 million of cash and roughly $2.1 billion of debt. Our net debt to enterprise value based on our closing stock price at the end of the quarter was 18%. During the quarter, we repaid $28 million of debt that matured in February. After quarter end, we also used cash on hand to repay a $200 million term loan at maturity, which we viewed as a more favorable capital allocation option than refinancing in the current higher interest rate environment.

Moving to our outlook. Consistent with the initial 2026 financial guidance we provided in February, full year metrics reflect a pro rata contribution from the PotlatchDeltic operations starting on January 31.

With respect to our individual segments, starting with our Southern Timber segment, we expect to achieve full year harvest volumes of 12.1 million to 12.6 million tons with anticipated harvest volumes of 2.9 million to 3.1 million tons in the second quarter. We expect regional sawtimber and pulpwood prices to remain relatively stable for the second quarter compared to the first quarter. However, full year and quarter average pine prices for the combined company Southern Timber segment are expected to be lower than the stand-alone prices for Rayonier in the prior year based on the geographic mix of the combined company.

In our Northwest Timber segment, we expect to achieve full year harvest volumes of 2 million to 2.3 million tons with anticipated harvest volumes of approximately 500,000 tons in the second quarter. We expect overall sawtimber prices to be higher in the second quarter compared to the first quarter, primarily due to the addition of PotlatchDeltic's Idaho timberlands. We also continue to expect that full year 2026 average sawlog pricing for the combined company's Northwest Timber segment will be higher than the stand-alone pricing for Rayonier in the prior year. However, as we previously highlighted, our pricing in the Northwest following the merger will be more sensitive to fluctuations in lumber pricing as a significant portion of our sawlog sales in Idaho are indexed to lumber prices.

In our Wood Products segment, we continue to expect lumber shipments to total approximately 1.1 billion board feet for the 11 months of contribution in 2026. We further expect lumber shipments in the second quarter of approximately 310 million to 320 million board feet. While we are encouraged by the positive trajectory in lumber prices through mid-April, pricing in recent weeks has moderated amid more balanced supply-demand dynamics.

Our average lumber price thus far in the second quarter is $505 per thousand board feet. This is based on shipments of approximately 125 million board feet of lumber. Based on our quarter-to-date price realizations and current lumber pricing, we expect the adjusted EBITDA contribution from the Wood Products segment to be higher in the second quarter compared to the first quarter results.

In our Real Estate segment, we are pleased by the continued momentum to start 2026 and maintain a strong pipeline of rural and improved development land sale opportunities for the balance of the year. Based on our current transaction pipeline and sales closed quarter-to-date, we expect an adjusted EBITDA contribution in the second quarter of $25 million to $35 million. For the full year, we continue to expect adjusted EBITDA contribution from our Real Estate segment of $180 million to $200 million.

I'll now turn the call back to Mark for closing comments.

Thanks, Wayne. In sum, it was an exceptionally busy first quarter. The team's hard work enabled us to close the merger ahead of schedule, advance several important integration initiatives and deliver solid financial results even in the face of continued market headwinds and a challenging macroeconomic backdrop. We remain focused on controlling the controllables, optimizing our financial performance and capitalizing on future growth opportunities.

On the real estate front, I continue to be impressed by our team's ability to unlock value across our land base. Within our rural HBU business, we see continued healthy demand for properties at significant premiums to timberland value, supported by broad-based interest from a variety of buyers. On the development front, we continue to see a long runway for value creation across all 3 of our development projects. As it relates to our land-based solutions business, while some opportunities have been slower to materialize than we anticipated a few years ago, long-term demand for land-based solutions continues to build, and our portfolio is uniquely well positioned to capitalize on these trends.

On that note, we are pleased to close a solar land sale during the first quarter at a significant premium to timberland value. Given the substantial capital flowing into AI and data center infrastructure, we expect solar land sales and leases to become an increasingly meaningful contributor to cash flow in the years ahead. We also remain optimistic about the long-term potential of carbon capture and storage, bioenergy and carbon offset demand, and we are continuing to develop a diverse pipeline of opportunities in these areas.

Overall, while macroeconomic conditions remain fluid, I believe the long-term fundamentals of our industry remain promising due to the structural deficit in U.S. housing, the positive trajectory of our real estate business and the broad optionality embedded within our land base. Moreover, I'm confident that our nimble and opportunistic approach to capital allocation will allow us to build long-term value per share throughout the economic cycle.

Before turning it back to the operator, I want to express my appreciation to our employees for their dedication and perseverance during what has been and will continue to be a transformative period for our newly combined organization. I'm excited about this next chapter and the opportunities ahead. Through this merger, we have created a company with significant scale, a well-diversified portfolio, a strong balance sheet, an exceptionally talented team and a shared commitment to shareholder value creation.

That concludes our prepared remarks, and I'll turn the call back to the operator for questions.

[Operator Instructions] Your first question comes from the line of Matthew McKellar with RBC Capital Markets.

First, there was that nice sale to a solar developer in the quarter. You also made a comment about solar-related leases and sales in the years ahead. Are you seeing any more interest, I guess, from developers in purchasing parcels rather than leasing? And how do you think about those 2 options from Rayonier's perspective?

Yes. Thanks, Matthew. That's a great question. I'd say that it's been pretty balanced between options to purchase and options to lease over the years. I will say that we made a concerted effort to really change over our philosophy to create a recurring revenue stream from that business. And so I'd say some of the earlier options we had entered into were probably more focused on the purchase side. Some of the more recent options are probably more focused on the lease.

And so there is some balance in there. I'd say it's probably heavier to lease in terms of that current option portfolio, but we have seen interest on both sides. And to some extent, it's specific to the developer. There are certain developers that really want to own the underlying land. There are other developers that prefer to not have that capital outlay and have a long-term lease. And so again, we played on both sides of that.

Great. And next, could you maybe just talk a bit more about what you're seeing in log markets in the Pacific Northwest across the legacy Rayonier portfolio, mostly in Washington in particular. I think you noted a supply response could play out with how lumber prices have trended. Are you seeing that so far maybe beyond the typical seasonal uptick? Or is that an assumption kind of looking forward based on what lumber prices have done? And I guess if it's something you are observing, how significant has that pickup been so far?

Yes. In the Northwest, timber markets have been relatively balanced from a supply-demand perspective, but they also do tend to be more sensitive to lumber prices. And we've seen some improvement here in lumber prices recently. But the overall market, I'd say, is still softer, more tenuous than it was a few years ago. But certainly, with this recent trajectory in lumber prices, that gives us some optimism about what the trajectory in log prices in that region will look like.

Your next question comes from the line of Landry Moore with Citi.

This is Anthony Pettinari actually. Mark, I was wondering if you could talk about log and haul costs and specifically, how the combined company uses diesel across the 2 timber segments and wood products. Is this just a pass-through for you? Are you implementing surcharges or absorbing them in parts of the business? I'm just wondering -- I think diesel is up 60% year-over-year. So I'm just wondering if you could kind of give us a tour of how that sort of impacts the business and how you deal with that?

Yes. Anthony, this is Wayne. I'll take that. Certainly, you're right. I mean higher oil prices certainly impacts the industry as a whole, and we're not immune from that. But in our timberland business, that does show up more in log and haul and diesel prices. I think for us, we tend to see that more now in prior northern region than in the South. I think the South, it's not as drastic. We do, where we can, pass that on to the customer. Sometimes we're very proactive in that, but that can take some time to work through log and haul contracts.

So now on the wood products side, we'll also see some inflationary cost pressures there as well. On operating supplies, there can be impacts of transportation costs and log procurement, but we don't think that will be significant. As far as transportation for wood products in lumber, that generally is a pass-through to customers. So any cost increases there, they absorb that.

Okay. That's very helpful. And then I'm just curious, Mark, in your comments at the end, I think you mentioned data centers. And obviously, there's a lot more discussion around land use for data centers, and you obviously have a lot of land. I'm just wondering, is this -- what does data centers mean to Rayonier? Is this an incremental opportunity? Has this been an opportunity all along? Or just -- maybe it was a throwaway comment, but I'm just curious how you think about the impact to the combined company?

We've definitely seen interest in land purchases from data center developers, and we continue to focus on trying to build out some of those opportunities. I wouldn't say that we expect it to be a huge use of land. I mean just again, relative to a solar farm, for example, a data center is just not generally going to require quite as much land, but they would generally come at higher price points as well. And so it's definitely an opportunity that we think is pretty promising, but I'd characterize it more as incremental more so than transformative.

Okay. Is it possible to kind of put any finer point on like the number of engagements or projects, 5, 10, 20? I don't know if you're able to kind of quantify in any way like...

Yes. I'd say that that's hard to quantify. I will say that we have identified a handful of parcels that we think have some appeal or could have some appeal for data center development, and we've actively marketed those. We've seen some interest. But I think it's a little early to say, quantify in terms of number of projects or a number of acres underlying those projects.

Your next question comes from the line of Mike Roxland with Truist Securities.

Mark, I just wanted to follow up on that solar developer sale, $10,000 per acre. Just can you provide a little more color on that? Is there something unique about that parcel that commanded such a premium? Or is it fair to say that, that is the going rate for those types of sales?

I'd say that's more the going rate for those types of sales. We've had a number of these over the last several years, and it's generally been in that -- around that price point. I'd say those sales have tended to occur in the $8,000 to $15,000 per acre range. And the lease rates that we've seen are probably in the $700 to $1,200 per acre range. So again, we've been focused on opportunities on both the sales side as well as the lease side, and that's kind of a general range of the economics that we've seen.

Got it. How many of these opportunities do you think could occur maybe this year and into '27? How many more do you have lined up or sight to in the near term?

Yes. It's hard to say because, again, we have an option portfolio of 80,000 acres. We expect -- we do expect solar land leases and sales to become increasingly significant within our cash flows in the years ahead. Right now, I'd say developers are primarily focused on optimizing their portfolios more than seeking expansion of those portfolios. They're really still sorting through interconnection costs and changes in the regulatory environment.

With all that said, we have a very strong pipeline of opportunities with what we think are high-quality counterparties. So we feel really good about that runway. And again, especially given the growing demand for power and the relative cost of solar energy. We've really been focused on building out that option portfolio for the last 4 or 5 years. But keep in mind, most of these options have terms in the range of 5 to 7 years.

So we're just now reaching that point that we should start seeing a more regular turnover of option maturities. So again, as we sit here, we have around 80,000 acres under option. Just for some context, about 35,000 acres of options are set to mature between now and the end of 2028. And so I think over the next few years, we should start to get better visibility on what that long-term conversion rate might look like.

Perfect. And one quick last one. The preliminary duties for AD/CVD are coming in about 10% below the current AR6 rate, so call it about 24%, 25%. Any thoughts on whether that -- if that preliminary ultimately comes final and what that means for increasing wood flows into the U.S. and Canada?

Yes, it could change modestly, but we generally expect that it will stay kind of in that range. Look, we continue to believe the U.S. lumber producers will gain market share going forward as demand improves given the duties and tariffs on imported lumber, recognizing this has been slower to materialize than we would have hoped for just given the demand environment.

As it relates to AR 7, again, while the preliminary results would bring duties down from the current levels, let's put that in context. Even based on the lower preliminary rate, the all-in burden on Canadian softwood is still roughly 35% when you factor in the 10% Section 232 tariff on top. So again, we don't see anything on the horizon that would really reverse the ongoing shift in North American production from Canada into the U.S.

Your next question comes from the line of Mark Weintraub with Seaport Research Partners.

Mark, you guys used to provide guidance for the different segments, fourth quarter, full year. I recognize business has changed. You've got lumber now in the mix, et cetera. But is -- what's your kind of intention on a go-forward basis? What we see this quarter? Is this what you're thinking will be the process? Or might that change?

Yes, Mark, I think what we're -- what we've disclosed this quarter is more akin to what we would show moving forward. I think giving guidance around volume and other metrics, yes, is really the direction we're heading, given there's more volatility associated with wood products, given lumber pricing and then also translates into the timberland side with our Idaho region as well.

Just to be clear, Mark, our intent is not to be less transparent than we have been historically, but recognizing that it's very hard to predict lumber prices next week, much less than the next 6 months out. And so putting an annual forecast out there or annual guidance would essentially be calling a lumber price. And we just don't think that it's prudent to do that because we not only have that variability in the lumber business, but now with the log prices in Idaho indexed to lumber pricing, that's going to create some variability around lumber prices within that business as well.

And so again, we think the volume guidance in the timber segment should provide some layer of detail in terms of what that annual EBITDA outlook would look like. If you just kind of look at historical EBITDA per ton metrics, you should be able to get reasonably close to an EBITDA guide. But again, we just don't think that it's prudent to put out an annual guide given the variability around lumber pricing.

Fair enough. And also, Wayne obviously on Potlatch before. But Mark, you now have been up close for a couple of months to see even more under the hood. Anything that's been different as you kind of look at the Potlatch business from what you might have been anticipating?

There really haven't been any notable surprises as we've been working through the integration process. As we said in the prepared remarks, I think the integration is going very well so far. It's been great to see the collaboration and cultural alignment as we brought these 2 organizations together. And we've really made a lot of progress, specifically on the organizational design of the new company. That said, it's going to take some time to work through the integration of our processes and systems. But again, we're making good progress there as well. And the team is really focused on implementing best practices as we move forward. Again, it's been really encouraging to see how everybody is working together.

And if anything, I think our conviction around the benefits of scale and just the opportunities that we think this merger will unlock by having a more diversified and larger portfolio, our conviction around that has only grown since we closed the merger. Clearly, there have been a lot of difficult conversations that we've had over the last couple of months. A lot of the synergies that we targeted are ultimately going to be achieved by eliminating overlapping positions and putting in place an efficient organizational structure to take the company forward. Both companies already ran pretty lean from a G&A standpoint, and we both have really exceptional people.

So a lot of the personnel decisions we've had to make have certainly been difficult. This wasn't a surprise, but it's without a doubt one of the more difficult aspects of the merger.

And at the risk of maybe getting too far in front of myself, have you kind of got thoughts to share on some of the land solutions part of Potlatch, be it the solar, the lithium and there are some other -- or Chenal, et cetera, some of the parts which outside of the core timber business and how your assessments might compare relative to maybe what people were thinking prior?

Yes. I wouldn't really say our perspective on those opportunities has changed following the closing. Recognize we did a fair amount of due diligence before the announcement. We've had a fair amount of time between announcement and closing to kind of work through the different opportunities embedded within both portfolios. So again, no real change there. Again, there are some differences in the portfolio. For example, if you look at Chenal, it's a much more mature project than what we have with Wildlight and Heartwood. So probably not the same type of trajectory in that business longer term, but it's been a very stable and steady contributor to cash flow.

So again, as we think about implementing best practices going forward, we think there are lessons to be learned from Chenal being 40 years into its development relative to Wildlight and Heartwood, which are kind of in the 10-year range. So again, we've really been focused on implementing best practices across the portfolio. We've seen a lot of opportunities in terms of blending those best practices. and the integration is going very well.

Your next question comes from the line of Roshni Athaide with BMO Capital Markets.

Mark, I just wanted to start with the North Timber trends. If you could just talk about like the big year-over-year drop you're seeing in EBITDA. Just wondering if you could point to what was driving that. Just to be more clear, like legacy PCH generated $21 million a year ago, Rayonier $6 million. And so just wondering like what's driving that drop?

Yes. I think one, year-over-year, keep in mind, lumber pricing last year is better heading into the year than we saw this year. While certainly, we're coming off a very low period at the end of Q4 and '25 and lumber pricing has been improving, and we're encouraged by that. I think when you look year-over-year, that is having an impact, especially in Idaho, where we're indexed to sawlog. So if you're looking at historical Potlatch and projecting that into this year, while we have seen improvement, lumber pricing isn't as strong as it was quarter-over-quarter.

So that's really driving kind of what we've seen in the Northwest, just where lumber pricing is at. But again, we're encouraged by where we've seen this trending. And as we look to Q2, I think we'll definitely -- we believe there's a it will be higher in Q2 just in the Pacific -- in the Northwest.

Yes. Just a couple of other points I'd add to that. Recognize that Q1 only had 2 months of the contribution from the PotlatchDeltic assets. We also, as we noted in the prepared remarks, we did see kind of an early spring breakup, so to speak, and that really translated to relatively limited volume moving in Idaho in the first quarter. And so some of that is going to be seasonal, and we do expect that volume to pick up here in the coming quarters.

Great. And then just going to the South, like could you just touch on pulpwood demand trends and the impact from pulp/paper mill closures that you're seeing?

Yes. We've certainly seen some pressure on pulpwood pricing across the U.S. South. And I'd say it's been most pronounced in our Atlantic markets here recently. Again, these areas have really faced this perfect storm of mill closures, hurricane salvage activity and here more recently, dry weather conditions, which have just further exacerbated that supply-demand imbalance. On a positive note, we do believe that some of these pressures are going to be transitory in nature. For example, we're essentially through the hurricane salvage activity at this point. With that said, with these recent fires, we are probably going to see some renewed salvage headwinds in the near term.

Longer term, though, the corollary of these large casualty events is that there will be less timber supply available in the system. And that should improve the overall supply-demand balance in that region longer term. It's also worth noting that even with these recent price declines, the Atlantic markets are still among the strongest in the U.S. South in terms of the relative pulpwood pricing. So as we emerge from some of these supply shocks, we do think that the long-term supply-demand fundamentals in these markets will improve, and they should remain among the most favorable in the U.S. South.

So again, it's been a pretty rough backdrop here for the last several quarters in terms of pulpwood pricing. But from a long-term perspective, we still see these markets as very attractive in terms of our overall portfolio.

There are no further questions at this time. I will now hand the call over to Collin Mings for closing statements. Collin?

I'd like to thank everybody for joining us. Please contact us with any follow-up questions.

This concludes today's call. Thank you for attending. You may now disconnect.

[indiscernible] session. This is the Rayonier presentation. My name is Buck Horne. I'm the Raymond James Housing, Timber and Residential analyst. Really thrilled to be able to bring back Rayonier. I think it's a very timely idea. In fact, we've added it to our analyst current favorites list. It's one of the most compelling value stories that I've got on my entire coverage list right now post the completion of the PotlatchDeltic merger. We've got Wayne Wasechek, the new CFO of Rayonier, the former CFO of Potlatch here; Mark McHugh, the CEO, to my left as well; Collin Mings, who's a great friend of the firm as well.

So happy to run through the story here, all the different news items from the merger as well as I just want to highlight for you the valuation of this story in particular. It is the second largest landholder in the United States, over 4.1 million acres as well as a top 10 U.S. lumber producer, which you get entirely for free. And basically, if you just value the land holdings alone, it is less than, I think, $1,900 an acre for some of the most prime U.S. forestry in the continent.

So with that, I will hand it over to Mark, and we'll run through the story.

All right. Thanks, Buck, and thanks, everybody, for joining us today. I'm going to give a brief intro on Rayonier referencing a few slides from the investor presentation that we posted to our website earlier this week, and then we'll open it up for Q&A.

So let's start on Page 4, which summarizes the rationale for our recent merger with PotlatchDeltic. And really, the key theme here is that we believe the combination creates a much stronger enterprise, and we expect to realize benefits from this transaction that really neither of us could have achieved independently. In terms of the strategic benefits, the deal significantly expands and diversifies our timberland portfolio, which now comprises about 4.1 million acres. The merger also enhances our platform to execute on real estate opportunities as well as land-based solutions.

Lastly, we now have exposure to a very well-positioned Wood Products manufacturing business, which we think gives us another lever with which to optimize our overall portfolio value. In terms of the financial benefits, first and foremost, we expect annual run rate synergies of $40 million. We also believe that the larger scale and better trading liquidity of the combined company will translate to an improved cost of capital over time. And lastly, from a balance sheet perspective, the combined company is very well positioned with a conservative leverage profile and significant capital allocation flexibility.

So skipping ahead to Slide 6. Here, we provide an overview of the asset profile of the combined company. Again, we now own about 4.1 million acres of timberland, including roughly 3.2 million acres in the U.S. South and about 930,000 acres in the Northwest, primarily in Idaho and Washington. In addition, we own 6 sawmills with total capacity of 1.2 billion board feet annually as well as one plywood facility.

On the real estate side, we now have 3 real estate development projects, including Wildlight, Heartwood and Chenal Valley. And we also have what we believe is really the market-leading rural HBU platform. And lastly, within Land-Based Solutions, the combined company now has 80,000 acres under option for solar development, about 154,000 acres under lease for carbon capture and storage. And we're also very well positioned to participate in the carbon offset market going forward given the much larger footprint of land that we have.

Slide 7 highlights some of the key trends that we're seeing driving value creation opportunities within the portfolio. And they all generally center around transitioning land use to a higher-value purpose, such as rural HBU, real estate development or land-based solutions. Rural HBU is a business that's long been part of our strategy. We generally sell 1% to 1.5% of our Southern acreage annually into higher and better use markets, typically at premiums ranging from 50% to over 100% above timberland value. And that's a business that's been a very steady contributor for us over time.

But land-based solutions and real estate development, that's really where we see the significant growth opportunity for the company going forward. Our Land-Based Solutions business includes activities such as leasing land for solar development, leasing land or really subsurface pore space rights for carbon capture and storage or monetizing the carbon stored in standing timber through the carbon offset market. Our real estate development business involves investing in entitlements and horizontal infrastructure improvements, really with a view towards significantly enhancing the value of very select portions of our land base as well as some of the adjacent lands within our portfolio.

And this next slide illustrates why we're really excited about these new growth opportunities. What this chart shows is the potential value uplift per acre that we believe can be achieved by transitioning land use from core timberland into one of these higher-value uses. So we generally think of Southern timberland as being valued in the range of $2,000 to $3,000 per acre. But if we're able to transition that acre of timberland into a CCS lease or solar lease or development use, that has the potential to increase the value of that acre by as much as 15x. So again, we see significant value creation potential from optimizing our land use, and we're spending a lot of time looking through the portfolio and identifying these types of opportunities that we can really execute on.

Slide 9 provides an overview of the combined company's timberland portfolio. Again, roughly 3.2 million acres in the U.S. South, about 930,000 acres in the Northwest. And as you can see from this visual, the portfolio is very well diversified in both regions. As we've discussed in the past, timber supply-demand dynamics are highly localized in nature. So we think our shareholders will really benefit from this diversification impact of the merger.

Skipping ahead to Slide 11, we provided a snapshot of the company's Wood Products manufacturing operations. As I noted earlier, we have roughly 1.2 billion board feet of lumber capacity across 6 sawmills, which positions the company as a top 10 lumber producer in the United States. Of course, Rayonier didn't own any manufacturing assets prior to the merger, but we're really excited about the opportunity to integrate this very large-scale, low-cost lumber platform into the portfolio.

Skipping ahead to Slide 14, I'll just touch briefly on our real estate business and some of the trends that we're seeing here. Over the last decade, both Rayonier and PotlatchDeltic have seen significant increases in our HBU value realizations. And both companies have also seen a shift in their sales mix towards these higher-value development sales. So we're certainly encouraged by the fact that land values have continued to appreciate despite some challenges that we've seen in timber markets over the past couple of years. So again, really excited about combining these operations and leveraging our HBU platform over a larger land base.

Skipping ahead to Slide 16. Here, we provide an overview of some of our focus areas within the Land-Based Solutions business. We've been working really hard over the past few years to build up a pipeline of opportunities in land-based solutions, and this pipeline should translate to meaningful cash flow growth in the coming years. As I noted earlier, we have about 80,000 acres under option for solar development, over 150,000 acres under lease for carbon capture and storage. So as we start to see some of these solar options convert into solar leases and as we start to see some of these CCS leases convert over to injection royalties over time, this should really drive significant growth in cash flow per acre relative to what we're able to achieve on those acres through our timberland operation.

So again, see a lot of upside potential here. We're also really excited about carbon markets going forward. Your key buyers of carbon offsets are increasingly looking for very large-scale projects to meet their net zero ambitions. And we feel like the combined company is going to be much better positioned with a larger footprint to be a supplier of choice into that market.

Skipping ahead to Slide 18, I just want to touch briefly on some of our capital allocation priorities. One of the key factors that really allowed this merger to come together is that both companies shared a very similar philosophy around capital allocation. Our mantra around capital allocation at Rayonier has always been to be nimble and opportunistic with a view towards building long-term value per share. And we're absolutely going to employ the same mindset going forward as a combined company. Specifically, we plan to focus on maintaining our investment-grade credit ratings, returning capital to shareholders through sustainable dividends, repurchasing our shares opportunistically and continuing to make strategic investments in the business when it makes sense to do so.

With all that said, as we discussed on our recent earnings call, we certainly see share buybacks as very compelling right now. So the bar for external growth is pretty high. And I would note that we have been active in the buyback market here recently.

And so that's a quick flyover of the newly merged company as well as some of the opportunities that we see ahead. Again, really excited about the value creation of the merger and looking forward to working through the integration here in the coming months.

With that, happy to open it up to Q&A.

Sounds good. Thanks. Let me back away from this amplifier. Thanks, Mark. I appreciate that. So let me start with your thoughts on -- as you completed the merger a little bit sooner than expected, I think, ahead of schedule. But as you've gone through the process in integrating these companies and really getting to know the Potlatch assets, is there anything that's come to your attention that is kind of surprising or getting you excited that you may not have fully appreciated in that portfolio or how it fits into the Rayonier scheme? Or -- what have you learned as you've gone through the process?

Yes. I mean, we're all about 4 weeks removed from closing the transaction. And so no major surprises thus far. I would say probably the biggest upside surprise has really been just the cultural compatibility of the 2 organizations. I've been really pleased with just the shared corporate values, again, shared philosophy around shareholder value creation. I think the new leadership team has really hit the ground running, has integrated very well. We had our first Board meeting as a combined company a couple of weeks ago. And again, really pleased with the Board chemistry and how everybody is really kind of rolling in the same direction. So no major surprises, but overall, really pleased with how the companies are integrating and really pleased with, again, that cultural compatibility of the 2 organizations.

That sounds good. And one of the things we've kind of struggled with is trying to figure out how both, all these timber REITs fit into the public markets longer term, try to close these NAV gaps relative to private market valuations. And it seems like that gap has only widened even further even post merger. So I'm just -- what are you thinking? How does this get addressed going forward? You've mentioned you're active on the buyback already. Can you maybe talk through the dry powder you have post merger? What's the strategy there? And what else do you want to do to kind of close this NAV gap?

Yes. No, it's a great question. And look, the timber asset class has been in the public markets for 25-plus years. And we've certainly seen these periods of dislocation where public market values have been below, but we've also seen periods of time when public market values have traded at a premium to private market values. Obviously, we can't control the stock market dynamics. All we can really do is try to capitalize on those opportunities when we see them. And so our mantra around capital allocation, again, is always to be nimble and opportunistic. So when the stock price was very strong, we were active under the -- our at-the-market equity issuance program, and we were acquisitive buying timberland. And here more recently, we've been active in the buyback market, trying to capitalize on that discount that we see. We believe right now, the cheapest place that we can buy timberland is in the public market by buying back our own stock.

And so like I said, that bar for external growth is pretty high right now. But we don't think that we'll be here perpetually. We've seen these cycles before. I will say that this most recent disconnect has probably been more pronounced and longer dated than we've seen in the past. But again, for the time being, we're going to try to capitalize on it. And we do think that longer term, look, I still believe in efficient markets. I don't think you should be able to buy timberland assets at a big discount in the public market versus what they cost in the private market. And so again, we're going to continue to focus on closing that gap and sort of controlling the controllables to get there.

Yes. No, it's remarkable. And just relative to basically any other what I'd consider a store value asset class, gold or silver and particularly other land asset classes compared to agricultural and farmland values, which seem to keep increasing every day and every week now. So timberland...

And again, just on that point, I mean, we've certainly seen that dynamic in the private market. We made the point on our last earnings call that land values and higher and better use values have continued to trend positive. We just haven't seen it in the stock market. So again, we're going to lean in when we have those types of opportunities to monetize land at significant premiums to both what we believe it's worth as timberland, but also what we're -- the implied value that we see in the public market and continue to try to take advantage of those opportunities.

Yes. No, absolutely. And you've highlighted the various categories of alternate uses, solar, carbon capture. Obviously, there's residential possibilities, commercial land leasing possibilities. So -- if we think longer term, if you're kind of thinking through the path of development for all your categories of land, realistically, what kind of percentage of the portfolio could fall into one of these higher, better use categories over a 10-year time horizon? I don't know if that's a hard -- that's a hard question to answer, but...

Yes, that's a really tough question to answer. But I guess I'd take a step back. I mean, as we think about the magnitude of value lift that we believe can be achieved by transitioning land use into these, again, much higher value uses, you don't need to transition a whole lot of acreage before it really starts to impact your portfolio value. Again, when you think about the prospect of converting 3%, 4%, 5% of your land into a use that's 10x more valuable, you do the math and that translates into 30%, 40%, 50% value lift for the entire company. And so just for some context there, again, we have 80,000 acres under option for solar development, 150,000 acres under lease for carbon capture and storage. Again, not all of those acres will ultimately get converted into solar land leases or injection royalties. But what we're really focused on right now is kind of building up that pipeline of opportunities.

And on the real estate development side, again, that's an arena in which we see even more meaningful value lift relative to underlying timberland value. And we have a very unique and high-value portfolio, particularly in this Northeast Florida area. Essentially, you go north from downtown Jacksonville and you get to the intersection of I-95 and A1A. And Rayonier owns a good portion of the land at the Northeast and Northwest quadrant of that intersection. So again, for those that have been on a timberland tour, I often tell people, you've probably never been on a timberland tour that's 15 miles from an international airport and 15 miles from Ritz-Carlton on the beach. And that's really what we own there in that area of Northeast Florida.

And again, the play for us in that area has always been really to catalyze value creation over a much larger land base. If we owned a 1,000 acres there, we never would have undertaken the Wildlight development project. But we own 50,000 acres within a 10-mile radius of the epicenter of that project. So really, the play for us has always been to create that catalyst for growth, create that catalyst for value creation and then realize the benefits of that over a very large footprint of land.

That's great. I wanted to just ask a little bit more about solar, just with the increasing demand for electricity on the grid strains on -- it seems like that could have long-term legs for growth possibilities. What's the -- you got the 80,000 under lease now. When does that start to convert to cash? Or what kind of -- what's the process of getting that hooked up, creating the royalty stream and then kind of growing the book of business from there?

Yes, we have 80,000 acres under option for solar development. We currently only have about 600 acres that are actually under solar lease. And so most of these options, they tend to be anywhere from 5 to 7 years in duration. And so the counterparty has to go through the interconnection study. They have to go through the permitting process. And so it is a pretty long-dated process. We've really been building up that pipeline in earnest for the last, call it, 3, 4 years. And so over the course of the next 2 or 3 years, we expect more of that option portfolio to start maturing. We'll see some portion of that convert into these long-term land leases.

And then longer term, we think this is a business that should be a steady contributor to cash flow growth. If you look at projections for utility scale solar development, it points to somewhere in the vicinity of 30 to 40 gigawatts annually. Just for context, 1 megawatt of generation capacity requires about 7 acres of solar panels. And so that 30 to 40 gigawatts of projected utility solar development translates to a land need of about 210,000 to 280,000 acres annually. So again, it's a very significant land need. And again, as a large landowner that owns 4 million acres, we think we're really well positioned to supply land into that purpose.

That's great. Very encouraging. Let me pivot to lumber just a little bit. In terms of what you're seeing so far with the spring construction season, it feels like we're off the bottom in terms of cash market pricing. Your thoughts on kind of the changing regulatory/tariff environment, how that's playing out with supply into the U.S. market or any imports, exports from Canada. What's your latest update we can get for the lumber market prognostication?

Yes. We have seen a lift here in lumber prices in recent months. And I'd say that, that has probably been more supply side driven than demand driven. I'd say demand has been relatively flat. I think most forecasts for housing starts in 2026 are pretty flat to 2025, if not even slightly down. But again, from a supply side standpoint, we've continued to see mill shuts in Canada. That production is being made up for with incremental production in the U.S. So even in a relatively flat demand environment, we think the supply backdrop is much more constructive for 2026 versus 2025.

And again, overall, I think if we continue to see some relief in mortgage rates, that could also open up some increased R&R spending. Again, people tend to spend on repair and remodel, either right after they buy a house or right before they sell a house. And so if we can continue to see mortgage rates trending in the right direction, we think that could also unlock some R&R spending.

Yes. Perfect. And can you just remind us what's the sensitivity level as lumber prices move higher from here? What kind of cash flow drop-through does that bring to the bottom line? Also, what's -- think through the cost basis or what's your efficiency level in terms of where you fit in terms of your cost to produce relative to some of the competition that's out there?

[indiscernible] you take that.

Yes. Thanks, Mark. Yes, for us, Mark talked about earlier our Wood Products portfolio. We have 6 softwood lumber mills. Our annual production capacity is 1.2 billion board feet. So for us, a $10 change in lumber pricing equals about $12 million of EBITDA on an annual basis. And so you can see that really in an increasing pricing environment, that can have really good flow-through for our Wood Products business. And there's also -- lumber pricing will flow through to the rest of our business as well on the timberland side. I mean, we would see pricing go up in Southern timber prices, but especially, we have a unique arrangement in our Idaho landholdings. We have a -- very unique to the industry, given our size in that state, we're the largest private landowner in the state of Idaho. We have over 600,000 acres. And given that relative size to the market, we have the ability to move pricing more, and we have an indexing arrangement. So we sell approximately 75% of our sawlogs are indexed to the price of lumber. So along with our Wood Products business increase in pricing on average would have a $10 increase in price and have about a $3 million impact to EBITDA just in that region alone. So yes, when we see rising prices, that will certainly elevate EBITDA and profitability across the business.

Yes. And I believe -- so just for context, everyone, so I think current composite lumber prices is around $430 per 1,000 board feet-ish, something around that range, kind of mix between Yellow Pine and the Northwest species, the Doug fir and the Hemlock, things like that. But remind me, Daryl, what do you think the Canadian cash cost to produce is marginal is like $550 maybe?

Yes. Shipping to the U.S. [indiscernible].

Yes. So we're probably well over $100 below breakeven for the Canadians. So rough math, $100 change if we can get back into the mid-500s, that's $120 million, $150 million of EBITDA?

Yes.

That's pretty healthy flow-through. And your -- where do you -- how do you feel about your competitive positioning in terms of like the efficiency of your mills versus kind of the private competition that's out there?

Yes. Our mills, we're definitely on the lower end of the cost curve. When we think about the mill set, we look at it in kind of a quadrant. So we're in the kind of first and second quartile of sawmills, which is on the lower end of the cost curve. And if you -- again, we're a top 10 lumber producer, but if you match us up against even some of the larger players, our margins are right in the same range or even better than larger players in the industry. So we're definitely on the lower end of the cost curve, very competitive from that standpoint.

Perfect. Perfect. And can you just maybe pivot a little bit away from lumber to pulpwood and think about the dynamics of that market in the U.S. South, it's a little different in terms of the dynamics from the Northwest. What are you kind of seeing in the -- are we stabilizing in the pulp markets? Have we worked through kind of the salvage timber from the hurricanes? What's the outlook going forward?

Yes. It certainly feels like things have stabilized relative to what we saw last year, which recognize 2025 was something of a perfect storm where you had a really elevated salvage volume in the wake of Hurricane Helene. You had very dry weather conditions, which really contributed to additional supply. What happens when you have these extraordinarily dry weather conditions is it makes timberland areas that are typically inaccessible, easier to access with logging equipment. And so when you have really dry weather, that tends to translate to a spike in supply as well. And so you had that against this backdrop of very elevated salvage volume.

And then on top of that, we had some mill shuts, most notably IP Savannah in that Atlantic region. So again, a lot of moving pieces in 2025 and really challenging environment. I will say that mill operating rates on the pulpwood side have ticked up a bit. It feels like that overall demand equation has stabilized, and we're optimistic that we'll see some pricing lift in 2026 relative to 2025.

Perfect.

And recognize as well another point that's worth making is despite some of the declines we saw in pulpwood in some of our key markets, those are still some of the strongest, if not the strongest pulpwood markets in the U.S. South. And so invariably, part of the reason that we saw some mill shuts there was the fact that pulpwood pricing was so high in that area. It's still very high on a relative basis if you look across the U.S. South. But again, we have seen some outsized declines there as well.

Perfect. Anybody want to ask a question in the audience? Yes, go ahead in the back.

You were an investor looking at this space [indiscernible] the competitive landscape, how can you differentiate Rayonier to [indiscernible].

Well, they're all of 2 timber REITs now post the merger with PotlatchDeltic. There were 3, and we merged, so there are now 2. So when we talk about the competitive space on the public side, it's really Weyerhaeuser. And look, I think there are a lot of similarities between the companies. I think one thing that's unique about Rayonier and the combined company is really some of the specific market areas where our land is located. And we talked about this development portfolio that we have. Again, it's a very unique high-value portfolio of HBU land that we have. If you look historically, I think Rayonier has a track record of generating some of the strongest HBU premium realizations within the sector. And so I think that, that's certainly a differentiator for the company. I think we're at a size that we can continue to be very nimble and opportunistic around capital allocation, and we can kind of better move the dial versus a much larger enterprise.

So I think, again, we're really at that sweet spot from a scale standpoint, where I think we have sufficient scale to be very efficient on the cost side, but we also can be very opportunistic around capital allocation. We have very attractive leverage profile that's probably better than the competitive peer set. And again, very low cost of debt, which is also very appealing relative to the peer.

All right. Anyone else? Quick ones.

I'm just curious, the transaction market for timber is always a little bit opaque for investors on the outside looking in. What are you seeing that you may -- in terms of portfolios or other pieces that are out there? And kind of what's the appetite right now for bidding on timber? Is it still a robust bidding environment? How competitive is it? Are people taking a step back? What's the private market for transactions like right now?

Yes. From our perspective, the private market remains very strong. By our account, there's somewhere in the vicinity of $10 billion available for timberland acquisitions. We continue to see very strong prices paid for -- particularly for high-quality timberland assets. So again, the private market has continued to trend up. It's continued to perform very well. There's a lot of capital really focused on more climate-oriented investments in timberlands, a lot of enthusiasm around this opportunity in land-based solutions in the carbon offset market. So again, a lot of positive momentum still behind the private market. We just haven't seen in the public equities.

Yes. And post-merger, your balance sheet is still among the strongest in almost any public REIT, quite frankly. And so you're still well below coverage levels for your credit ratings and whatnot. So what kind of flexibility would you have to potentially take leverage up and execute the buyback strategy before you'd even begin to need to think about dispositions or anything else to...

Yes. So we've guided towards wanting to maintain -- we'll certainly maintain our investment-grade credit ratings, but also maintain a net debt to adjusted EBITDA ratio of less than 3x. And we talk about that on more of a mid-cycle basis. So obviously, lumber is contributing or has contributed pretty de minimis EBITDA here for the last couple of quarters. And so we think about kind of managing to that 3x target, we're really kind of thinking of more of a mid-cycle contribution from the lumber business. We also said on the last call, we expect net debt to settle out around $1.3 billion to $1.4 billion here at the end of the quarter, still some moving pieces around transaction costs and whatnot. But that kind of gives you some sense of what type of capital capacity we may have. It's also worth noting we have about $230 million remaining under our prior share repurchase authorization. So again, without getting into specifics, that gives you some benchmarks out there in terms of what type of flexibility we might have.

Got you. And maybe just for clarification, there was a little noise, I think, with the stock dividend and the way the dividend rate had an appearance of being cut. Can you just walk us through how that -- what the dynamics were behind that particular adjustment?

Yes. No. I mean, we really kind of think of it very much as an adjustment and not a cut. And it was also exactly what we did the last time we had a significant stock dividend in -- I guess, it was late 2024. So we had a special distribution as a REIT, we have to distribute our REIT taxable income. And with the large disposition initiative that we've had underway for the last couple of years, we had a large special distribution. I believe it was $2 last year, $1.40 this -- $1.80 last year, $1.40 this year, of which 75% was paid out in stock.

And so when we announced that special dividend, we also announced that we anticipated adjusting the dividend to account for those new shares that were issued. And so the absolute dividend level remained the same from a dollar standpoint, but we adjusted the dividend to account for the new shares that were issued. We were clear about our intent to do that when we announced the special dividend concurrent with transaction with PotlatchDeltic back in October. It was exact same adjustment that we made last year when we had this large special distribution. And so again, it was really just adjusting that dividend to account for the new shares that were issued. But really on a shareholder level basis, we maintained the dividend.

All right. Perfect. We'll leave it there. Thank you, everyone, for joining us. Really appreciate it. Thanks, guys.

Thank you.

Welcome to Citi's 2026 Global Property CEO Conference. I'm Anthony Pettinari with Citi Research, and we're very pleased to have with us Rayonier and CEO, Mark McHugh; and CFO, Wayne Wasechek. This session is for Citi clients, and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go liveqa.com and enter code GPC '26 to submit questions. Mark, I want to turn it over to you to introduce Rayonier, and we'll get into Q&A.

Yes. Thanks, Anthony, and thank you to Citi for hosting us today. I'm going to start by providing a high-level overview of Rayonier for those that are less familiar with the story, including some highlights of our recent merger with PotlatchDeltic and then we'll make sure we leave plenty of time for Q&A. Just for reference, I'm going to be speaking to the presentation that was posted to our website on Monday, under the heading Featured presentation. .

All right. So let's start on Page 4, which lays out the rationale for our recent merger of equals with PotlatchDeltic. And really, the key here is that we believe that this combination creates a stronger organization that will allow the combined company to realize benefits that either of us could have achieved independently. In terms of the strategic benefits, the deal significantly expands our timberland portfolio, which now comprises about 4.1 million acres. It also enhances our platform to realize value from both land-based solutions as well as HBU real estate.

And lastly, it offers exposure to an efficient and scalable Wood Products manufacturing business, which really gives us another lever with which to optimize our overall portfolio value. In terms of the financial benefits, first and foremost, we're targeting annual run rate synergies of $40 million, which should translate to significant value upside. We also believe that the larger scale and better trading liquidity of the combined company will translate to an improved cost of capital over time.

And lastly, from a balance sheet standpoint, the combined company is very well positioned with conservative leverage profile and significant capital allocation flexibility. So again, putting that all together, we really believe that this merger creates a much stronger competitor in the space. We think this is going to enhance our strategic optionality going forward.

Skipping ahead to Slide 6. Here, we provide an overview of the asset profile of the combined company. Again, we now own approximately 4.1 million acres of timberland, including roughly 3.2 million acres across the U.S. South and about 930,000 acres in the Northwest primarily in Idaho and Washington. In addition, we own 6 sawmills with total capacity of 1.2 billion board feet annually as well as on plywood facility.

On the real estate side, we now have 3 real estate development projects with the addition of Chanel Valley from the PotlatchDeltic portfolio. And we now also have an opportunity to really leverage a leading rural HBU platform over a much larger footprint of land. And lastly, within land-based solutions, the combined company now has 80,000 acres under option for solar development as well as 154,000 acres under lease for carbon capture and storage.

And notably, over 3/4 of the combined company's portfolio is in the U.S. South, and that's really the area where we see the most long-term upside potential from land-based solutions. On Slide 7, we've highlighted some of the key trends that are driving really future value creation opportunities within the portfolio. And they all generally center around transitioning land use towards a higher-value purpose, such as rural HBU, real estate development or land-based solutions.

Rural HBU is a business that's been part of our strategy for a long time. We generally sell 1% to 1.5% of our land base into HBU markets. typically at premiums ranging from 50% to over 100% above timberland value. That's a business that's been very consistent for us over time. The land-based solutions and real estate development, that's really where we see the significant growth opportunity for the company longer term. Our land-based solutions business includes activities such as leasing land for solar development, leasing land or really subsurface poor space rights for carbon capture and storage or monetizing carbon stored and standing timber inventory into the carbon offset market.

Our real estate development business involves investing in entitlements and horizontal infrastructure improvements. really with a view towards enhancing the value of those lands and establishing a catalyst for growth in those areas. We only do this in very select market areas, really where we stand to benefit -- our portfolio stands to benefit from those investments in the adjacent portfolio.

And this next slide illustrates why we're so excited about these new growth opportunities. What this chart shows is the potential value uplift per acre that we believe can be achieved by transitioning land use into some of these alternative land uses. So for example, if you take a [indiscernible] U.S. South timberland that has a value of, say, $2,000 to $3,000 an acre, and you're able to transition that acre into a carbon capture and storage lease. That has the potential to increase the value of that acre by up to 5x.

If you're able to transition that acre into a solar land lease or an unimproved development use, that has the potential to increase the value of that acre by up to 10x. And if we're able to transition that acre into an improved development use like our projects in wild like Heartwood and Chenal Valley, we believe that has the potential to increase the value of that acre by up to 15x. So we really see significant value creation potential from optimizing land use especially as we grow the number of acres within the portfolio that we believe are suitable for these alternative land uses.

Slide 9 provides an overview of the combined company's timberland portfolio, again, roughly 3.2 million acres in the U.S. South and about 930,000 acres in the Northwest. As you can see from this visual, the portfolio is very well diversified in both regions. As we discussed in the past, timber supply demand dynamics are highly localized in nature. So we really see the -- and we really think there's a benefit in the diversification of this merger from our shareholders' perspective.

Skipping ahead to Slide 11, we provide a snapshot of the company's wood products manufacturing operations. Again, as I noted earlier, we have rough 1.2 billion board feet of lumber capacity across 6 sawmills, which positions the combined company as a top 10 lumber producer in the United States. And while Rayonier didn't historically own manufacturing assets prior to the merger. We're certainly excited about the opportunity to integrate what we see as a very low-cost and large-scale lumber platform into the portfolio going forward.

Skipping ahead to Slide 14. I'll just touch briefly on our real estate business and some of the trends that we've been seeing there. Over the last decade, both Rayonier and PotlatchDeltic have seen significant increases in our HBU value realizations. Both companies have also seen a shift in our sales mix towards these higher-value development sales. So we're certainly encouraged by the fact that land values continue to appreciate, despite some challenges that we've seen in timber markets here of late.

And again, we're very excited about the prospect of combining these operations and leveraging that HBU platform over a much larger land bases merger. Skipping ahead to Slide 16. Here we provide an overview of some of our focus areas within land-based solutions. Now we've been working very hard over the last few years to build up a pipeline of opportunities in land-based solutions. This pipeline should translate to meaningful cash flow growth in the coming years.

As I noted earlier, we have roughly 80,000 acres under option for solar development. and over 150,000 acres under lease for CCS as we start to see some of these solar options convert into long-term leases. And if some of those CCS leases ultimately convert over to injection royalties. This really should drive significant growth in cash flow per acre relative to what we're able to generate on those lands currently through our timber operations. So you also see a lot of upside in carbon markets long term. Key buyers of carbon offsets are increasingly looking for very large-scale projects to meet their net 0 ambitions.

We feel like the combined company is going to be much better positioned to be that potential supplier of choice into the carbon offset market. So lastly, I'll just wrap up with some of our capital allocation priorities on Slide 18. One of the key factors that really allowed this merger to come together is the fact that both companies shared very similar philosophy around capital allocation. Our mantra around capital allocation has always been to be nimble and opportunistic with a view towards building long-term value per share.

And that's absolutely going to remain our focus going forward. More specifically, just to touch on some of those priorities, we plan on maintaining our investment-grade credit rating, returning capital to shareholders through sustainable dividends, repurchasing our shares opportunistically and longer term, investing in value-accretive growth opportunities when it makes sense to do so.

With all that said, we certainly see buybacks as one of the more compelling capital allocation alternatives available to us today. And I note that we have been active in the buyback market here recently. So in closing, I'll just reiterate, we believe we're very well positioned post merger to create value for shareholders, and we're looking forward to getting through the merger integration. And with that, Anthony, happy to open up to questions.

Great. Great. Thanks, Mark. That was extremely helpful introduction. Maybe if we can go into the individual businesses in a little more detail, and I'd encourage people to jump in with questions. But maybe if we can just start off with timberlands and in the South. Can you talk about market conditions in terms of pricing activity, maybe broad thoughts on '26 for your core timberlands business, what you're seeing?

Yes. Sure, 2025 was certainly a tough year in the Southern Timber business. It was kind of a perfect storm of hurricane salvage volume in one of our larger market areas in the wake of Hurricane Helene late 2024, coupled with really dry weather conditions that just kind of exacerbated that supply imbalance. And then you couple that with some mill shutdowns we saw in the area. It was certainly a challenging year. We certainly saw some pricing headwinds. We feel as though that, that's largely settled out. We have guided toward modest uptick in pricing in 2026 relative to 2025.

So again, it kind of feel like we're bouncing off the bottom a little bit here. But overall, we think we're through some of the more challenging elements of what we've seen in the last 12 months.

Great. And is there any kind of distinction you'd make between kind of sawlog market conditions and pulpwood market conditions? And then within the South, are you seeing any kind of variation between maybe coastal markets, inland markets, any comments there?

Yes, sure. I mean in terms of sawlogs, I mean we certainly saw a greater stability in sawlog pricing in 2025 relative to pulpwood pricing. And again, we talked about kind of what the factors driving some of those declines that we saw in pulpwood pricing. The longer-term story or set up for sawlog markets, I think, is more constructive. We have seen a fair amount of capacity come out of Canada. We have seen U.S. mills ramping up production in response to that. And so even in a relatively flat demand environment, we would expect to see some momentum in sawtimber prices in 2026. .

And then just in terms of the geographic differences between inland and coastal, look, the coastal markets historically have been our strongest markets from a pricing standpoint, particularly pulpwood pricing there has historically been very strong. That's also where we've seen some of the greater weakness here of late in terms of those price declines. I will say that those markets remain some of the strongest markets in the U.S. South, the pulpwood pricing in those areas, even with these declines is still among the best in the U.S. South, but it's really been the area where we've seen some of these stiffer headwinds in the last 12 months.

Great. And I'm wondering if you can give us the same walk through for the Northwest and maybe touch upon the Idaho index pricing, which is a little unique.

Yes. I'll maybe turn it over to Wayne to touch on that.

Yes. Our Northwest region, the price data is a little bit different than the U.S. South, where especially in Idaho, we're the largest private land owner in Santa Vitale, we have over [indiscernible] about 25,000 acres. And in that [indiscernible] because of our large presence, we're able to have an indexing arrangements in that market. And what that does is we're indexed price of lumber. So approximately 75% of our sawlogs are indexed the price of lumbar and certainly that provides a benefit to us in markets trend upwards, but it also provides benefits to our customers as well because they have the dedicated supply of logs that they need to run their mills.

So it benefits both sides and certainly on our timberland business, where we've especially during that COVID -- post COVID, we saw a significant upside in log prices because of that indexing arrangement as compared to what we've experienced and what we experienced [indiscernible].

Just given the product mix in the Northwest, we're upwards of 85%, you saw timber relative to pulpwood, where that mix in the U.S. South tends to be more kind of a 50-50 balance. You certainly have more direct exposure to what's going on in lumber markets and you tend to see kind of a tighter correlation to what's happening in lumber pricing and log markets in the Northwest relative to the south. .

Great, great. I'm wondering if you could talk about -- we talked about logs. I wonder if you talk about the market for timberlands themselves in terms of trends you're seeing dollar per acre valuations sales activity, how you compare that versus the last couple of years?

Yes. Like we talked about on our last quarter earnings call, timberland values continue to be very strong in the private market. By our account, there's around $10 billion of capital available for Timberland M&A. We typically see $2 billion to $3 billion of timberland assets trade hands on an annual basis. There's not a lot in the market right now, but valuations have certainly held up very well. And again, we talked about how that impacts our business as well. We've seen a very strong trajectory in land prices and HBU values. We certainly haven't seen it in the stock price. But again, we've been catalyzing on that from a buyback standpoint here recently. .

Great. In terms of timberland returns, can you kind of level set us in terms of maybe what level of returns Southern on timberland owners are targeting and maybe the components of those returns, how that's changed? Or if there's a way to think about cap rate for timber?

Yes. Recognize that Timberland is generally underwritten on a discounted cash flow basis using real discount rates. And those real discount rates are generally kind of in the 4% to 5% range. And so kind of, call it, 4% to 5% real or on a nominal basis, assuming kind of 2% to 2.5% inflation, probably call it 6% to 7%. I guess the way the timberland return is quite different than other asset classes in the sense that your timber harvest cash flow is one component of that return, but then you have these other components of returns such as productivity enhancements.

The fact that stands that we're harvesting today were planted 25 years ago using then current treat genetics, then current silviculture applications, the stands that we're planting today, we expect to get greater productivity off of over time. Obviously, HBU is also incremental to that. The fact that within our Southern portfolio, we're typically selling 1% to 1.5% of that portfolio annually, again, at premiums, 100-plus percent above timberland value. So that's additive to that return as well.

And then really, the new component of growth that we've talked a lot about is land-based solutions, again, that ability to convert land that is timber is generating, call it, $75, $80 per year of EBITDA into these alternative uses that can generate 5, 10, 15x that. And so again, it's a little bit -- if you look at a pure EBITDA multiple on private market timberland transactions based on harvest cash flows, those multiples are typically 40x. But again, that doesn't really tell the whole story around what people are underwriting from a return standpoint.

I don't know if there's any questions. But if we can move to Wood Products and before we talk about kind of market conditions within Wood Products and lumber. Just wondering, PotlatchDeltic had the most sensitivity to lumber prices or leverage to lumber prices of the timber REITs, Rayonier didn't have a Wood Products business. As the 2 come together, I'm just wondering if you kind of philosophically how you think about the place of wood products within the portfolio maybe over the cycle?

Yes. Again, we find the addition of this manufacturing platform into the portfolio, we find that to be appealingly long term. I think our thinking -- Rayonier's thinking over the years has certainly shifted a bit in terms of openness to owning manufacturing assets. And some of that is just around our ability to control our own destiny in markets that are important to us. We've talked a lot about growth drain ratios and how those can impact timber economics in local markets. Historically, Rayonier didn't really have an ability to influence the drain or the consumption of timber in any given market area.

And particularly as we've seen some headwinds and some mill shuts in some market areas that are important to us, suffice it to say, I think we see some value in the ability to control our own destiny. Rayonier was never going to go out and build a greenfield mill or buy a mill on a one-off basis. We just -- that wasn't a core competency of the company. But now with this very efficient, low-cost, scalable with products manufacturing platform, that's at least something that we can look at on a go-forward basis. That's not to suggest that we have ambitions to meaningfully grow that business. But we kind of look at it as another tool in the capital allocation tool kit with which we can optimize the overall portfolio value of the company.

Great. Great. And then just moving to Wood Products, kind of market conditions, you guided to kind of 1Q EBITDA modest recovery. I think random lengths prices are up maybe 15% year-to-date. So we've seen this kind of a lumber recovery. Just wondering if you could talk about current market conditions and any kind of read-throughs as we get into kind of the spring building season.

Yes. I mean we saw a nice lift in lumber prices early in the year. It's kind of flattened off here in the last few weeks, but still kind of meaningfully higher than what we saw call it, 4 to 6 months ago. And so overall, I'd say a positive backdrop, certainly relative to the second half of 2025. But really, what I think is going to drive potential incremental price improvement. It's really some incremental relief in mortgage rates. Some incremental demand on new home construction and R&R activity.

Again, we talked a lot about the mortgage locking effect, the impact that, that's had on resale activity. and that certainly hampered R&R demand. People tend to remodel home, either right after they buy it, or just before they're about to split. And so the fact that there's been this sort of dearth of resale activity here of late, certainly been a headwind for R&R spend. But again, if we see some incremental mortgage rates kind of briefly drop below 6%. And so it's kind of a big headline that was sort of a psychological hurdle for a lot of people. I think we're modestly above that right now, but trending in the right direction. So again, overall, a more constructive backdrop, we think, than kind of where we were sitting 6, 9 months ago.

Great. Great. And then, I mean, last year, we saw tariffs, import duties, Section 232. I mean, Canadian lumber, I think it went to 35%, but we didn't necessarily see big improvement in U.S. lumber prices. And I'm just wondering if you could talk about the dynamic with Canadian lumber and the tariffs or the import duties if you're seeing maybe a lagged impact or how you think about that? And I don't know if there's a way to think about sort of cash cost for maybe some of these higher cost producers.

Yes. I mean we didn't see the immediate impact that perhaps some had anticipated. But I do think the more recent lumber price response that we've seen has been largely supply driven. I mean, demand has been relatively flattish. And so we have seen some lumber price growth here in the last few months, and I think that, that was supply driven. I do think that, that was related to the duties -- increase in the duties as well as the Section 232 tariffs.

So again, overall, Canadian mills are generally not profitable today with the duties and the impact of the tariffs. That has really accrued to the benefit of U.S. mills. And again, that's translated to some lumber price improvements. We ultimately think that, that will translate to some sawtimber price improvements as well.

Great. And you talked about real estate, but I'm wondering, I guess, 2 questions here. First, the guide that you gave for, I think, $180 million to $200 million of EBITDA, if there's any sort of finer point that you can put on mix, property types, sort of HBU values that are embedded in that guidance.

Yes. We generally don't provide a breakdown within our real estate guidance. As we talked about extensively in the past, real estate results tend to be pretty lumpy. They tend to be driven by a handful of larger transactions. We're always kind of generally managing to kind of an overall annual target. There is some cadence to this business when you own millions of acres, some portion of it invariably falls out into this HBU market. And so there is some level of predictability there. But again, when we're trying to kind of guide to what is a kind of reasonable expectation of what the next year looks like, we generally point to the historical averages.

And that's we're going to sell 1%, 1.5% of our land base in the U.S. South and generally targeting 50-plus percent premiums above timberland value. But like I said on the earnings call, those have more recently been trending well higher than that. I mean for the Rayonier portfolio, we've been realizing premiums well in excess of 100%. So that business has really been a bright spot in the portfolio. Like I said, land values have continued to appreciate, which makes sense kind of in the environment that we're in, kind of [indiscernible] hard asset value.

Again, it's logical that land values have continued to move up, and we're really trying to capitalize on that through our HBU business. But no real kind of color on the specific breakdown within that real estate guidance.

Maybe sticking with real estate. I mean you have these unique development properties with Wildlight, Heartwood, Chenal Valley. Can you just talk a little bit more about those and sort of Rayonier's role like what you're doing, what the earnings contribution, what...

Yes. Our role is really to get entitlements on the land and to make investments in horizontal infrastructure improvement. So we're not doing any vertical development. We're not looking to produce income generating assets through that business. We're really creating that catalyst for growth, investing in those horizontal improvements and then meaningfully enhance the values in that area. And just to be clear, our strategy here has always been about really enhance value of our larger footprint of land.

When we initiated that Wildlight project, we said, look, if we own 1,000 acres here, we would never undertake this project. We don't aspire to be real estate developers. Candidly, at the time, it wasn't really a core competency to the company. I think it has become a core competency of the company over the last decade. But really, the play for us was always, we own this very unique high-value portfolio of land. But importantly, we own 50,000 acres within a 10-mile radius of Wildlight. And so the play for us has always been to have those investments stand on their own from a competitive return standpoint.

But really, the broader play for us is enhance the outer that surrounding land that we own in that area. And so if you look at -- you go north from downtown Jacksonville, 20 miles, you get to A1A -- intersects of A1A and 995, Rayonier essentially owns the vast majority of the land in the Northeast and Northwest quadrant of that intersection of A1A 995. So it's a very unique portfolio of land. It's an area where it really was poised to benefit from these types of investments, and we've been really pleased with the momentum that we've seen in that project. And again, Heartwood was a very similar story, proximate to Savannah, Georgia.

Chenal Valley is a bit of a different play in the sense that, that project started back in, I believe, in the mid-80s. And so it's in the relatively late stages of its life cycle. But it pretty consistently generates 100 to 130 finished lot sales annually. And so it's a pretty steady contributor to earnings at this point. but relatively stable, whereas Wildlight and Heartwood are certainly kind of more early innings, and we're anticipating a pretty meaningful growth trajectory from where we are currently.

Great. Great. And then land-based solutions, can you talk more about solar, CCS, I guess, mineral land resources and carbon markets. If you were to frame those opportunities from kind of a near-term perspective and then a long-term perspective? Can you just walk us through your exposure and where you may be the kind of the most upside?

Yes. I mean from a -- I'll start with the near-term perspective, I think solar probably has the most kind of visible growth opportunities as we sit here today. As I noted in the presentation, we have roughly 80,000 acres under option for solar development. We currently only have 600 acres that are actually in a solar lease. And so really, the opportunity is that as those options mature and the -- some portion of those options are ultimately converted and sold our land leases that will translate to a very meaningful lift in cash flow.

Again, generated, call it, $75, $80 per acre of EBITDA last year in our Southern Timber business. The rents that we're seeing on the solar land leases are upwards of $800 or even $1,000 an acre. So a very meaningful lift in cash flow, and we're solely acting as a land lessor. So it's essentially 100% EBITDA free cash flow conversion for us. We don't have any capital obligations associated with those leases. and they generally have some form of a CPI-type escalator in them typically with 25-plus year terms with multiple extension options.

So we view it very high quality and probably high multiple cash flow. So that's a very meaningful opportunity for us. And given all the work that we put into building up that option portfolio really in the last 3 years, we expect that that's going to start to turn over and start to materialize in leases here of course in the next couple of years. So again, that's probably the most visible, tangible near-term opportunity.

In terms of carbon markets, I'd say that's an area where we've probably gotten more bullish in the last couple of years. Candidly, for Rayonier, economics of selling carbon credits just hadn't ever really worked for our portfolio just given the relative price point that we could sell timber for in most of the markets that we're in, you recognize you have to do something different on the land base to generate carbon credits. You can't just continue to harvest timber and sell carbon credits on top of that. You need some form of harvest deferral or investment in incremental carbon stocking on the land in order to merit the carbon credits.

We're now seeing with some of these large-scale buyers coming into the market and again, really wanting these large-scale projects, they're willing to pay for quality projects. And that pricing and that sort of relative to TV map, I'd say it's getting much more compelling relative to what we saw even just 2, 3 years ago. So doing a lot of work on that front right now and again, pretty optimistic about the long-term prospects for that business.

And again, also optimistic about our ability to be a meaningful supplier into that market with the combined company. Again, the large-scale buyers. They want very large-scale projects, and that necessitates a large land base to support that. So again, we think the merger really positions us as well in that market. Carbon capture and storage, that's one that we're, again, likewise, very optimistic about, but it's taking longer to materialize. These classics injection well permits, just take a long time to kind of work through.

Again, we have 150,000 -- 154,000 acres under lease for CCS currently, but we're working through the process of getting those sites with the counterparties to get those sites ultimately permitted. And where we see the big lift on those or potentially the big lift on those is when those lease payments convert over to injection royalties. But again, there's a long process to get to that point. So probably longer dated as we kind of think about how that might contribute to cash flow, but very optimistic about the pipeline we have currently to support that over the long term.

Great. Have policy changes with the administration have change the opportunity set for solar CCS or credits or has not been impactful? Or how would you characterize it?

I don't think that it's been significantly impactful. I mean, certainly, all else being equal, the rollback of some of those economic incentives, particularly around solar development has necessitated some kind of reanalysis of NPV and kind of IRR expectations. But overall, solar is still very competitive with pretty much any other form of electricity generation. And so we're still -- we haven't seen kind of these option agreements get canceled at scale. We're still seeing a lot of momentum behind that business by most estimates or something like 30 to 40 gigawatts of new solar capacity additions are expected to come online annually for the foreseeable future.

And just to put that in context, it requires about 7 acres of solar panels per megawatt of generation capacity. And so again, that annual estimate of utility solar additions of 30 to 40 gigawatts implies a land need of about 210,000 to 280,000 acres per year. So again, a very significant land need for these -- for the build-out of these solar projects.

Great. Great. And maybe kind of saving the best for last. On capital allocation, I mean you do have balance sheet capacity. Can you just talk a little bit more about optimal leverage maybe the opportunity buybacks? And then on dividend, would products profitability historically is kind of volatile? Like how do you think about dividend in -- given potential volatility or product pricing?

Yes. I mean starting with leverage, we've been pretty clear around our leverage target of wanting to maintain net leverage at less than or equal to 3x net debt to EBITDA. And so -- and we stated that on mid-cycle EBITDA. So recognizing that we'd characterize what products contribution is being more of a trough in the cycle currently. We'll kind of measure that long-term [ large ] target more around our view of mid-cycle EBITDA. In terms of dividend funding, we feel pretty comfortable with where the dividend sits today, certainly from funding standpoint, and that's with the lumber business lead at a trough point in the cycle.

We're going to have some organic cash flow growth around the synergies realization through the merger. And obviously, long term, we want to grow the dividend. We want to grow cash flow to support the dividend, but some of that is going to have to kind of come from pricing growth in sawtimber in lumber, which we think will come over time, but we are very comfortable with where the dividend level is today.

Great. Well, we're coming up on time, but I'm wondering if there's any kind of final take-home messages that you'd leave folks with on Rayonier and the opportunity of the combined company?

Yes. Again, I think we feel really good about the recent merger with PotlatchDeltic. We think there are some pretty meaningful synergies opportunities there, really optimistic about just the prospect about improved cost of capital over time with the larger platform. We feel really good about where the balance sheet is at in terms of capital allocation flexibility. Like I said earlier, we have been buying back stock here of late and really try to capitalize on that disconnect that we see between private market values and where the stock is trading. So still a lot of work to do around the merger integration, but we think we're off to a very good start here. .

Great. Great. Well, Mark, Wayne. Thank you.

Thank you.

Hello, everyone. Thank you for joining us, and welcome to the Q4 2025 Rayonier Inc. Earnings Conference Call. [Operator Instructions] I will now hand the call over to Collin Mings, Vice President of Capital Markets and Strategic Planning. Please go ahead.

Thank you, and good morning. Welcome to Rayonier's investor teleconference covering fourth quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our website at rayonier.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.

Earnings release and Forms 10-K and 10-Q filed with the SEC with 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 nearest GAAP measures in our earnings release and supplemental materials.

With that, let's start our teleconference with opening comments from Mark McHugh, our President and CEO. Mark?

Thanks, Collin. Good morning, everyone. Before turning to our fourth quarter results, I'd like to provide an update on our transformative merger of equals with PotlatchDeltic, which successfully closed ahead of schedule on January 30. Achieving this milestone required an incredible amount of work and collaboration. Since announcing the proposed merger in October, teams across both organizations have worked tirelessly to complete the transaction and begin the process of integrating our operations. I want to personally thank everyone involved for their dedication and commitment throughout this process.

The combination of Rayonier and PotlatchDeltic has created a premier land resources company with a high-quality, well-diversified timberland portfolio, spanning over 4 million acres, a dynamic real estate platform and a well-positioned wood products manufacturing business. As our integration efforts continue, we remain confident that this transaction will deliver significant strategic and financial benefits beyond what either company could have achieved independently. While we have initially retained the Rayonier name, we plan to announce a new name and ticker symbol for the company later in the first quarter.

Our leadership team is working diligently to execute key integration initiatives, including optimizing our organizational structure and implementing best practices from both companies. Despite challenging market conditions to start 2026, we are energized by the opportunities ahead of us, and I continue to be encouraged by the strong cultural alignment across the combined organization. As we continue to work through the integration process, we remain focused on creating long-term value for our shareholders through synergies, operational efficiencies and a relentless focus on disciplined capital allocation.

Moving to our fourth quarter financial results. I'll start with some high-level comments before turning it over to April Tice, Senior Vice President and Chief Accounting Officer, to review our consolidated and segment level financial results. Following April's review of the fourth quarter, Wayne Wasechek, our newly appointed Executive Vice President and Chief Financial Officer, will discuss our 2026 outlook for the combined company. We are pleased to finish 2025 with better-than-expected fourth quarter financial results, which allowed us to deliver full year adjusted EBITDA of $248 million, representing an 8% increase over 2024 and exceeding the high end of our prior guidance range. This outperformance was primarily driven by the record contribution from our Real Estate segment which delivered full year adjusted EBITDA of $127 million amid continued strength in our rural HBU markets and further growth in our real estate development business.

Full year pro forma net income was $89 million or $0.57 per share. In the fourth quarter, we generated adjusted EBITDA of $62 million and pro forma net income of $32 million or $0.20 per share. Adjusted EBITDA exceeded the high end of our previous guidance range, but was down compared to the prior year period as real estate closing activity in 2024 was heavily concentrated in the fourth quarter. In our Southern Timber segment, we generated fourth quarter adjusted EBITDA of $32 million, which was down 8% from the prior year period as the decline in weighted average net stumpage realizations and lower revenue from land-based solutions, was partially offset by higher harvest volumes. The increase in harvest volumes versus the prior year quarter reflects drier weather conditions as well as the normalization of green log demand as salvage activity in the Atlantic region subsided.

Turning to the Pacific Northwest Timber segment. Fourth quarter adjusted EBITDA of $5 million was roughly $2 million below the prior year quarter, primarily due to a 26% decline in harvest volumes resulting from the Washington dispositions that we completed at the end of 2024. In our Real Estate segment, we generated adjusted EBITDA of $33 million in the fourth quarter, down $31 million from an exceptionally active fourth quarter of the prior year.

With that, let me turn it over to April for more details on our fourth quarter financial results.

Thanks, Mark. As we highlighted last quarter, please note that all periods presented have been retrospectively adjusted to recast the historical results of the former Trading segment into the Southern Timber and Pacific Northwest Timber segments, as we eliminated the trading segment following the sale of our New Zealand business last year.

Moving to the financial highlights on Page 5 of the supplement. For the fourth quarter, sales totaled $117 million, while operating income was $27 million, and net income attributable to Rayonier was $26 million or $0.16 per share. On a pro forma basis, net income was $32 million or $0.20 per share. Pro forma items in the quarter included $6 million of costs related to the merger with PotlatchDeltic. Our adjusted EBITDA was $62 million in the fourth quarter, down from $95 million in the prior year period.

Moving to our capital resources and liquidity at the bottom of Page 5. Our cash available for distribution, or CAD, was $199 million in 2025 versus $141 million in the prior year. The significant increase was driven by a combination of higher adjusted EBITDA, lower cash interest expense, higher interest income and lower capital expenditures. A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on Page 8 of the financial supplement. During the fourth quarter, prior to the announcement of our merger with PotlatchDeltic, we repurchased approximately 110,000 shares at an average price of $26.31 per share or $2.9 million in total. Following the announcement of the merger in mid-October, our ability to repurchase shares was generally restricted through the close of the transaction. As of year-end 2025, we had roughly $230 million remaining on our current share repurchase authorization.

During the fourth quarter, we also paid a $1.40 per share special dividend and a combination of cash and shares as a result of the taxable gains arising from the sale of our New Zealand joint venture interest earlier in the year. By issuing shares to satisfy a portion of our retaxable income distribution requirements, we retain significant flexibility around future capital allocation priorities. We finished the fourth quarter with $843 million of cash and roughly $1.1 billion of debt. Our net debt to enterprise value based on our closing stock price at the end of the quarter was 6%, and our net debt was less than 1x of our 2025 adjusted EBITDA.

Now moving on to our segment results. Let's start on Page 9 with our Southern Timber segment. Adjusted EBITDA in the fourth quarter of $32 million was 8% below the prior year quarter as lower net stumpage realizations more than offset higher harvest volumes. Total harvest volumes increased 10% versus the prior year quarter due to drier weather conditions and increased demand for green logs as salvage operations subsided. Average sawlog net stumpage pricing was $25 per ton, a 2% increase compared to the prior year quarter, which was negatively impacted by salvage operations. Pulpwood net stumpage pricing of roughly $12 per ton was 27% lower than the prior year quarter, driven by weaker demand following recent mill closures in the Atlantic region, an unfavorable shift in geographic mix and dry weather conditions across much of the U.S. South. Overall, weighted average net stumpage realizations decreased 9% as lower pulpwood pricing was partially offset by a higher proportion of sawtimber volume.

In great markets, sawmills contended with tepid demand throughout the fourth quarter. As we move through early 2026, we are optimistic that some local markets will see improvement in demand and pricing as sawmills ramp up production in response to improved lumber pricing. In pulpwood markets, conditions were challenging throughout Q4. Dry weather across the U.S. South allowed for the harvesting of typically inaccessible sites, which contributed to elevated supply in our Atlantic markets, while salvage operations from the 2024 hurricanes have now fully concluded, recent mill closures resulted in weaker overall demand. This combination of increased supply and weaker demand resulted in significant pricing pressures, especially in our Atlantic markets.

On a positive note, we are starting to see improved operating rates at some pulp and packaging mills as production levels are being recalibrated following recent mill closures. However, we expect that dry weather conditions and upcoming maintenance shutdowns will continue to create near-term headwinds to pulpwood pricing. Looking further ahead, we remain confident that the supply side will tighten meaningfully over the coming years. As we've noted previously, the Georgia Forestry Association estimates that approximately 26 million tons of pine and 30 million tons of hardwood were impacted by Hurricane Helene in 2024. This should translate to a significant reduction in regional supply, which we expect will support improved market conditions over time.

Moving to our Pacific Northwest Timber segment on Page 10. Fourth quarter adjusted EBITDA of $5 million was 24% below the prior year quarter due to lower harvest volumes and log prices. Total harvest volumes decreased 26% in the fourth quarter as compared to the prior year period, reflecting the impact of the Washington dispositions we completed in late 2024. At $87 per ton, average delivered domestic sawlog pricing in the fourth quarter decreased 3% from the prior year period due to softness in mill demand given market conditions. Meanwhile, at $38 per ton, pulpwood pricing was up 26% versus the prior year quarter due to the reduced availability of sawmill residuals. After a relatively lackluster fourth quarter, lumber pricing has been on an encouraging trajectory in recent weeks in response to constraints on Canadian supply.

Moving forward, we expect some producers in the region to ramp up production in response to higher lumber prices, which should translate to positive log price momentum as well. All things considered, we are optimistic that log markets in the Pacific Northwest will tighten as we move through 2026 with improving demand from sawmills, the lifting of China's log export band and Canadian mill curtailments all contributing to increased market tension. Further, we remain confident in the region's positioning for the structural changes ahead as lumber produced in the Pacific Northwest competes more directly with Canadian production, making mills in the region well positioned to capture market share as import duties and mill shutdowns constrain the supply entering from Canada.

Now moving on to our Real Estate segment. As detailed on Page 11, real estate adjusted EBITDA totaled $127 million in 2025, which was well above our original guidance range of $86 million to $96 million and represents a record contribution from the segment. The strong results in our Real Estate segment were fueled by successful closing of a large conservation sale during the third quarter as well as continued strong demand for our rural and development properties throughout the year. In the fourth quarter, Real Estate revenue totaled $42 million on roughly 3,800 acres sold at an average price of $9,700 per acre. Sales decreased significantly from the prior year quarter, which included $495 million in large dispositions. Excluding the large dispositions, pro forma sales in the prior year quarter were $72 million. On a pro forma basis, revenue decreased $30 million due to fewer acres sold, partially offset by a higher average price per acre. Real Estate segment adjusted EBITDA in the fourth quarter was $33 million.

Drilling down, sales in our improved development category totaled $15 million with our Wildlight development project contributing $9 million and our Heartwood development project contributing $6 million. Sales in Wildlight consisted of a residential pod totaling 112 acres, an average price of $80,000 per acre, generating roughly $9 million in base land sales revenue with additional upside from builder participation and other fees over time. The next phase of Wildlight known as the Garden District is now well underway with homebuilders planning to complete construction of models and begin sales this summer.

In Heartwood, sales consisted of 2 residential pods totaling 143 acres at $33,000 per acre, along with a 7.1 acre commercial parcel at $140,000 per acre. Overall, activity at both Wildlight and Heartwood remains on a favorable trajectory. The investments we've made over the past several years in entitlements, infrastructure and market development are translating into sustained interest from top homebuilders and prominent commercial end users. Unimproved development sales of $2.1 million consisted of 3 transactions averaging $28,000 per acre. In the rural category, fourth quarter sales totaled $20 million, consisting of approximately 3,500 acres at an average price of roughly $5,800 per acre. We continue to see healthy demand for HBU properties across our land base. Overall market sentiment remains positive, and we're seeing consistent demand for properties at significant premiums to timberland value.

I'll now turn it over to Wayne to discuss our 2026 outlook.

Thanks, April. Turning to our outlook for 2026. Given the merger closed less than 2 weeks ago, we are initially providing limited segment guidance for the combined company for 2026 as our team continues to advance through the integration process. This guidance reflects the anticipated pro rata contribution from PotlatchDeltic's operations starting on January 31, 2026.

With respect to our individual segments, starting with our Southern Timber segment, we expect to achieve full year harvest volumes of 12.1 million to 12.6 million tons, reflecting the increase in our sustainable yield as a result of the merger with PotlatchDeltic. We further expect that regional pine stumpage realizations will trend modestly higher from fourth quarter levels during the year as supply-demand conditions normalize. However, we expect that full year 2026 average pine stumpage realizations for the combined company's Southern Timber segment will be lower than the stand-alone realizations for Rayonier in the prior year based on pro forma geographic mix of the combined company.

In our Northwest Timber segment, we expect to achieve full year harvest volumes of 2 million to 2.3 million tons, likewise, reflecting the increase in our sustainable yield due to the merger. We further expect that full year 2026 average log pricing for the combined company's Northwest Timber segment will be higher than the stand-alone pricing for Rayonier in the prior year based on improving demand conditions, a higher mix of sawtimber and the pro forma geographic mix of the combined company. However, we anticipate that the combined company's pricing in the Northwest will also have increased sensitivity to lumber pricing compared to legacy Rayonier as a significant portion of our sawlog sales in Idaho are indexed to lumber prices.

In our Wood Products segment, we've been encouraged by the positive momentum in lumber prices to start the year. For the 11 months of contribution from this segment in 2026 following the merger, we expect lumber shipments to total approximately 1.1 billion board feet. Based on quarter-to-date price realizations and current lumber pricing, we would expect the Wood Products segment to have a slightly positive contribution to overall adjusted EBITDA in the first quarter.

In our Real Estate segment, we are seeing continued momentum to start 2026, supported by a strong pipeline of rural land sales and improved development transactions. Based on our current transaction pipeline, and sales closed to date, we expect an adjusted EBITDA contribution in the first quarter of $30 million to $35 million. For the full year, we expect an adjusted EBITDA contribution from our Real Estate segment of $180 million to $200 million. We expect to provide additional updates on guidance as well as our progress on synergy targets as the year progresses.

Turning to our balance sheet. We remain well positioned following the closing of the merger with a conservative leverage profile and significant capital allocation flexibility. As April noted earlier, we were generally restricted from repurchasing shares during the pendency of the merger. However, we continue to believe that our stock price is trading at significant discount to net asset value. In addition, the dividend yield is over 4.5% at the current stock price. As such, we believe that share buybacks represent a compelling use of capital and one of the most attractive ways to create value for our shareholders in the near term.

I'll now turn the call back to Mark for closing comments.

Thanks, Wayne. As we wrap up our prepared remarks, I'd like to commend our team for their extraordinary focus and dedication during this transitional period for the company. Throughout 2025, our team navigated difficult market conditions while identifying and executing on opportunities to enhance long-term value. In particular, we had an exceptional year in our Real Estate business, which allowed us to deliver full year adjusted EBITDA ahead of our original guidance.

Following our merger with PotlatchDeltic, we now have an enhanced platform to unlock HBU value in our Real Estate business, and we're excited about the opportunities we see ahead for the combined portfolio. While timber and lumber market conditions were certainly challenging throughout 2025, I'm proud of how both companies stayed focused on near-term execution. With the merger now complete, we believe that our shareholders will benefit from a more diversified timberland portfolio, along with an integrated Wood Products manufacturing business that is well positioned to benefit from positive long-term fundamentals. To this end, we've been encouraged by the recent improvement in lumber prices, and we expect further upside as end market demand continues to improve, especially given the supply constraints in Canada.

On the land-based solutions front, our combined team continues to advance solar, carbon capture and storage and carbon offset project opportunities with high-quality counterparties. We remain very optimistic about the long-term value creation potential from this business as substantial capital continues to flow into AI and data center infrastructure, thereby driving increased demand for clean energy solutions. As I discussed at the beginning of the call, merger integration activities continue to advance, and our leaders are already starting to implement best practices as we cross-pollinate our teams. I'm excited to see how these efforts progress as we look to grow our future revenue opportunities and improve our operational efficiency.

On the cost side, we continue to estimate run rate synergies of $40 million by the end of year 2, which will be driven primarily by corporate and operational cost optimization. While many of these decisions are extremely difficult, especially when they involve personnel reductions, we believe they are necessary to maintain an efficient overhead structure and to maximize the long-term value creation potential of this merger. In sum, while timber and lumber markets continue to face some headwinds, our recent results underscore the resilience of our portfolio and our business model. As we move forward as a combined company, I'm confident that our well-diversified portfolio, our exceptionally talented team, our strong balance sheet and our disciplined approach to capital allocation leave us well positioned to navigate the current market environment with a view towards building long-term value per share.

Lastly, I want to take a moment to recognize the significant contributions of our outgoing Executive Vice President and Chief Resource Officer, Doug Long, who's retiring from Rayonier after 30 years of dedicated service. Doug has been an exemplary leader of our Timber business as well as a valuable contributor on our earnings calls for the last 12 years. On behalf of the Board and the entire company, I want to thank Doug for his invaluable contributions and wish him well in his future endeavors.

That concludes our prepared remarks, and I'll now turn the call back to the operator for questions.

[Operator Instructions] Your first question comes from Mark Weintraub of Seaport Research Partners.

Great. Can you hear me?

Yes, Mark, can you hear us?

Yes, I can. Congratulations, obviously, all the hard work, et cetera. So first, just on real estate, 2025 was a very strong year actually for both companies, and you're looking for another strong year in 2026, perhaps not quite as much as on 2025 on a pro forma basis. Just curious if you could give a little bit more color on puts and takes and what you see as drivers on the rural side, the development side improved. Anything you can provide to help us kind of assess changes and potential trajectories?

Yes. Sure, Mark, I'll take that. As we've discussed in the past, real estate sales are invariably going to be lumpy quarter-to-quarter, year-to-year, results tend to be pretty significantly impacted by a handful of larger transactions, and we had a number of those in 2025. That said, it's been a number of years now here where we've had a pretty good run on HBU, and we've been able to continue to monetize properties within the portfolio at very strong premiums to underlying timberland value. I'd say we used to think of that rural HBU premium as being around 50%, give or take, relative to timberland value on average. But look, underlying land values have just continued to appreciate. And over the last few years, I'd say our rural HBU premiums have been more like 100-plus percent. So this is a part of our business that we actually think is a bit underappreciated.

Every time we sell an acre of land, at that kind of premium to underlying timberland value, we believe we're generating NAV accretion, especially when you look at that public-private arbitrage, that continues to exist in the stock price. You've often heard us say that, that HBU business is really all about premium. And so that's what we're really focused on in terms of measuring our success in the business. And notably, it's really been premium more so than volume that's been driving our outperformance in real estate over the last several years. We really haven't had much in the way of elevated volume. It's really been stronger pricing, particularly in our rural business as well as the folding in the development business in a more meaningful way in the last few years. So look, we're going to continue to try to take advantage of those types of opportunities within the portfolio, and that may ultimately translate to a higher long-term trend line in terms of the contribution of that real estate business relative to what we've seen historically.

Great. And certainly, it has been very visible this much higher accretion. I'm just curious -- so do you think that sort of -- it's the overall market as opposed to the mix that you've chosen to be selling in the last little bit?

I'd say it's more of the overall market, but certainly a big factor within that is just where we own lands. Again, Texas and Florida, in particular, have been very strong HBU markets for us and stand-alone Rayonier historically owned a lot of acreage in that region. But across the board, we're seeing strong HBU premiums, very strong land values. Certainly, despite the challenging timber market conditions, that we're seeing land values have held up very well and have just continued to appreciate. So again, we're going to continue to take advantage of those types of opportunities.

Super. And then just one second one, if I could. You talked about -- you gave us kind of where your net debt was Rayonier end of the year, and you talked about the attractiveness of continued share repurchase. I think you said you had $230 million left on the authorization. So just -- I guess when we think about gating factors for how much share repurchase, you're inclined. Obviously, one is going to be where the stock price is in the relative discount to your view of value. But what can you share with us perhaps about your capital structure? And any other factors that would sort of be an important determinant of how much share repurchase under different circumstances you might be willing to think about in the year ahead?

Yes. No, it's a great question. As we discussed in the prepared remarks, closed the merger less than 2 weeks ago. So still some moving pieces there as it relates to balance sheet, transaction and integration expenses. I'd say the initial wave of kind of big-ticket deal expenses are largely out the door in terms of advisory fees, the dividend, special dividend to Rayonier shareholders, the cash consideration, the legacy Potlatch shareholders as a result of that as well as some other transaction costs. So those have all been paid, but recognize there's still some costs like organizational restructuring that will phase in over time.

As we sit now kind of immediately post close, we expect pro forma net debt to be in the range of 1 -- probably $1.3 billion to $1.4 billion. So that would put us comfortably inside of our 3x net debt to mid-cycle EBITDA leverage target that we've laid out in the past and laid out in connection with the merger announcement. So again, while timber and lumber markets remain challenging, we think the balance sheet is in really good shape, and we still have a lot of financial flexibility around capital allocation. And again, just in terms of what that appetite might be going forward, we certainly think we have some balance sheet capacity currently. Certainly, as we see synergies phase in, that should improve leverage as well. And so we think we have the opportunity to be opportunistic on that front here moving forward.

I don't know if you're willing to hazard, but -- so is there kind of a type of mid-cycle number we should be thinking about in terms of EBITDA?

Yes. Again, with the merger just closed a couple of weeks ago, we're not in a position to put that out there quite yet. But look, if you look at the different components of the portfolio, the timber business has obviously been much more stable historically than the Wood Products manufacturing business. And the Real Estate business, again, as we've talked about, it tends to be lumpy. And so historically, the peers with lumber manufacturing assets haven't generally put out kind of annual guidance around that business just given the variability and unpredictability of lumber prices. But I would continue to expect that our timber business would be relatively stable. And so we can certainly kind of talk through some historical benchmarks and kind of how we think that might look on a go-forward basis. But 2 weeks removed from the merger closing, I don't think we're quite ready to put out a view of mid-cycle EBITDA.

Understood and look forward to those conversations.

[Operator Instructions] Your next question comes from Buck Horne of Raymond James.

Congrats again on completing the merger ahead of schedule. A lot of hard work went into that. So a great job. I wanted to touch on the initial harvest guidance for the combined companies. Just thinking through the numbers a little bit, just based on Potlatch's old projections and kind of where you guys are shaking out. Just kind of wondering kind of what went into those assumptions? It looked like it's a little lighter than we would have put together combined. But I'm wondering if that's just baking in a little extra conservatism or if this is just kind of the new sustainable run rate going forward?

Yes. I guess, first and foremost, recognizing that -- recognize that we're only getting a partial year granted 11 out of 12 months, but a partial year contribution from the PotlatchDeltic timberland portfolio. And so it won't necessarily be a full pro forma run rate that's reflected in that forward guide. But I think if you look at kind of what Rayonier has disclosed the sustainable yield has been in the different regions, recognizing that we've had some portfolio moves as well during the course of the last year or so. We think it's kind of generally in line with how we've guided in the past.

Okay. I appreciate that. And then I just want to talk a little bit about the pulpwood markets and the pricing that you're seeing there and just the kind of the continued deterioration of demand, at least in the U.S. South, for containerboard and other mill products. Just -- is there any signs that we're reaching a bottom in terms of that demand? Or is there still more pressure to absorb in terms of just working through the excess log volume that's out there? How do you kind of way the puts and takes in pulpwood and kind of what can stabilize that market?

Yes. Certainly, these past several quarters have been pretty challenging in the Southern Timber segment. We've had this perfect storm of weaker demand driven by mill closures, coupled with elevated volume first due to the hurricane salvage last year and then kind of drier weather conditions as the year progressed. But as we discussed in the prepared remarks, we think that salvage volume is largely behind us at this point. And longer term, we think the amount of standing inventory that was destroyed by the hurricane is ultimately going to translate to a tightening of supply in those market areas that were impacted. So overall, we're still optimistic that market fundamentals should support growth in housing starts and timber demand over the long term. We still have a significantly underbuilt an aging housing stock, and that's got to be addressed at some point.

And we also expect that even if overall construction demand remains flat, we're going to see U.S. mills gain market share, which bodes well for timber demand and pricing. Again, as we've talked about in the past, timber supply demand dynamics are highly localized. So we think that's another reason that the merger with PotlatchDeltic makes a lot of sense from a shareholder perspective as we're going to benefit from a more diversified portfolio that's less reliant on one particular market area. But as it relates to pulpwood, in particular, I'd say most of that downward pressure has been in those Atlantic markets. Again, we just had a lot of elevated supply in the last year with the hurricanes and the dry weather. We'd obviously like to see higher pricing, but we believe that some of these pressures, again, are going to be transitory in nature.

It's also worth noting that even with those recent price declines that we've seen, these Atlantic markets are still among the strongest in the U.S. South and just in terms of that relative public pricing. So we still think that these markets are desirable from a long-term perspective. Recall that during COVID, we saw those markets really shoot up significantly from a pricing standpoint when we saw elevated demand. So again, I still think that those markets are highly attractive. And we think as those pressures subside, particularly on the supply side, we should see some improvement in pricing there. But like you said, it's certainly been a challenging dynamic in the last 12, 18 months.

Your final question comes from Ketan Mamtora of BMO Capital Markets.

My congratulations as well. I have to start with -- you talked about sort of share repurchases. I'm curious also on the M&A side. Are you seeing kind of opportunities at this point, whether it is on the timberland side or on downstream wood products, given how depressed lumber prices have been for the last couple of years? Or do you think that at this point, share purchases present kind of the best opportunity for you guys?

Yes, certainly, just to comment maybe broadly on the timberland M&A market, I'd say that it remains quite competitive, especially for higher-quality assets. We're continuing to see very strong values being paid for assets in both the U.S. South and the Northwest. There's still a lot of private capital that's looking to invest in Timberland by our estimate. I think there was about $10 billion of dry powder or capital available for timberland acquisitions. And I'd say a significant portion of that is really targeting carbon or climate-focused investments. And so again, that timberland M&A market we expect is going to remain active.

As it relates to our appetite, for acquisitions on the timberland side, given our overall cost of capital right now and again, a very competitive timberland market, it's tough, candidly, for us to make the math pencil on those transactions. That said, we're going to continue to evaluate acquisition opportunities as they become available, especially in regions where we already have an established presence. We've had some success historically in finding opportunities around bolt-on deals that we think add value to the portfolio. So we'll continue to look for those types of opportunities. But again, overall, we think the best place for us to buy timberland assets right now is in the public market by buying back our own stock.

Of course, as we fold in the Wood Products manufacturing business into the portfolio, we'll also look at opportunities on that front in terms of investing in debottlenecking capacity expansion projects and the like. But again, we're going to look at those with the same lens as we look at any other capital allocation alternative. It's really going to be with a view towards building long-term value per share and comparing that to the other alternatives that we have available. And so again, we see that as another tool in the capital allocation tool kit, but we haven't -- we're not going to be prescriptive about how we go about that going forward.

No, that's fair and that's quite helpful context. And then, Mark, and I know you don't want to sort of -- this is not like a quarterly update. But curious, any update you have around any of the other opportunities around carbon or anything else that you'd like to highlight, how that opportunity is evolving? And how should we think about sort of ramp up as you move through '26 and into '27?

Yes. I mean, broadly, in our land-based solutions business, I'd say we continue to be very focused on growth opportunities in that business. We're allocating resources to building out those platforms and really trying to approach these opportunities with a long-term mindset. With the recent closing of the merger, we're also really excited about what we see as an enhanced platform to tackle those opportunities as a combined company. Both Rayonier and PotlatchDeltic, we both already made some pretty significant strides in the solar arena and reach gaining exposure to some new markets and revenue streams through the merger on the land-based solutions front. Rayonier had more exposure to carbon capture and storage. PotlatchDeltic has had the lithium and the brine opportunity. So again, we're retaining exposure to some new opportunities there.

And on the carbon market, again, I think that's an area where we continue to see a lot of opportunity long term. And we think that this larger platform and the larger portfolio really positions us well to be a supplier of choice into that carbon offset market. So again, overall, I still see a lot of upside in that LBS business. With all that said, there have obviously been a lot of moving pieces on the public policy front, and I think the market is still digesting the current regulatory environment and kind of a long-term impact on project underwriting of the One Big Beautiful Bill Act, et cetera. So definitely seeing the timetables on both solar and CCS projects getting pushed out due to various factors. But again, still very optimistic about the long-term trajectory of that business. And I think we're going to see some progress on that front in 2026.

Got it. That's very helpful. Good luck as you integrate as a combined company.

Your next question comes from Anthony Pettinari of Citi.

Mark, Wayne, April, congratulations on the combination. I just had a quick -- I just had a quick follow-up on Buck's question on pulpwood pricing and understand there's a few things going on there, and you listed some reasons why that market might tighten. It seems like for a long time, pulpwood prices were maybe averaging, I don't know, $15, $16, $17 a ton. You obviously went higher during the pandemic. From your comments, Mark, I mean, is the expectation that you could get back to kind of more of a normalized range in the next couple of quarters or more in like 2027? Or I know you're not giving kind of precise guidance around this, but I'm just trying to understand whether this is more of like really a transitory thing or whether you have to see maybe some things that would play out maybe more into next year?

Yes. I think it's tough to say. I certainly wouldn't anticipate kind of a near-term bounce back to the type of pulpwood pricing levels that we saw 2 or 3 years ago. As it relates to the different factors that are impacting pulpwood pricing, I would say some of them are transitory and some of them are more sustained in nature. We think some of the weather impacts, in particular, the pickup in salvage volume, more recently, the dry weather, which just led to accessibility of a lot of sites that were in more normal weather conditions are not accessible. So that translated to a pickup in volume. And that again came on the heels of that hurricane salvage volume.

And so the supply side effects we certainly think are transitory in nature. And if anything, again, just given the magnitude of the devastation from Hurricane Helene, we think the longer-term impact in those markets is that we're going to see a fair amount of inventory come out of the system, which should be a long-term positive for pulpwood supply demand dynamics and pricing in that region. But look, some of the mill shuts on the other side, I'd say, are more perpetual in nature. So kind of hard to say where that ultimately settles out, but it certainly feels as though we've kind of bottomed here recently, and we do expect some positive momentum through the year, but certainly not a bounce back to the levels that we saw a couple of years ago.

Got it. Got it. That's very helpful. And then just maybe last one. You were asked about sort of relative attractiveness of Timberland investments versus Wood Products. And obviously, whatever has the highest return wins, and that makes a lot of sense. But I'm just wondering if there's anything you can add in terms of maybe philosophically how you think like a Wood Products business could fit within the Timberland's portfolio. I mean is it something where your investors are saying, we kind of want maybe a little bit more cyclical exposure or maybe you're more positive or less positive on U.S. lumber long term? Or other than just return maximization, which is obviously the most important thing, is there any sort of way that you think about Wood Products within the broader Timberland's portfolio?

Yes, it's a great question. As we said in our prepared remarks, I'd say we're very encouraged by some of the recent pricing gains that we've seen in the lumber market, and we're optimistic that we're going to continue to see some momentum there, particularly given the supply constraints on Canadian lumber. PotlatchDeltic team, I say, did a great job of investing in their facilities over time to really keep them well positioned on the cost curve. We think that that bodes well for the future opportunities in that business. And look, we ultimately think our shareholders are going to benefit from having that integrated model over time.

And so on the capital allocation front, given some of the headwinds that we're seeing in Wood Products and Timber business currently, again, not anticipating any large-scale near-term investments there, but we certainly see those facilities as being part of the combined company over the long term. And we'll certainly continue to evaluate incremental investment opportunities in the mills over time. But like I said, we're going to evaluate those opportunities through the same lens. It's where can we get the highest return, how do those alternatives compare to other capital allocation alternatives that we have available. And like I said, the bar is pretty high right now for any external growth or any kind of capital investment projects kind of relative to the opportunity that we see in buybacks.

Your next question comes from Mark Weintraub of Seaport Research Partners.

Some real quick follow-ups, if I could. Just one, I assume the indexes in Idaho are unchanged related to the transaction?

Mark, yes, this is Wayne. You're correct. No change in the indexing in Idaho. We're still -- that volume in Idaho for sawtimber is still approximately 75% is indexed.

Okay. Super. And then second, is it fair to say that in Wood Products, it's really just sawmills and lumber that you would look to grow in or given need to find homes for pulpwood, would you consider some other products as well? Is that possibly within your bandwidth?

Yes, again, Mark, 2 weeks removed from the merger closing. I don't want to get kind of too far out there in terms of speculating on investments outside of our core business areas. But again, like I said earlier, we see that platform is just another kind of tool in the toolkit, and we'll evaluate those opportunities as they become available.

And then just -- since I got you, just kind of synergies, I think you said $40 million run rate by the end of year 2. Have you provided kind of a number for how much you expect to run -- to show up this year? And then lastly, -- and obviously, we had some pretty harsh wintery type storms down in the South. Did that impact your business at all?

Yes, Mark, this is Wayne. I'll take those. As it relates to synergies, yes, we laid out the $40 million target. We expect to achieve on a run rate basis, half of that in the first year. So $20 million on a run rate basis here in year 1. Moving forward, we'll give updated updates on where we're at with those synergies and how we're achieving those. But as you would expect, the initial ones on consolidation of executive teams and Boards, we're already hitting those synergies. So things are moving forward as planned.

As it relates to your second question, yes, the storm is certainly fairly severe for the South, but all in all, not a significant impact to production or the results for the year. We laid out in guidance 1.1 million board feet of shipments and that's on an 11th month basis. So really no significant impact to the business.

There are no further questions at this time. I will now turn the call over to Collin Mings for closing remarks.

This is Collin Mings. I'd like to thank everybody for joining us. Please contact us with any follow-up questions.

This concludes today's call. Thank you for attending. You may now disconnect.

Welcome, and thank you for joining Rayonier's Third Quarter 2025 Conference Call. [Operator Instructions] 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, and good morning. Welcome to Rayonier's investor teleconference covering third quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our website at rayonier.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're 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 nearest GAAP measures in our earnings release and supplemental materials.

With that, let's start our teleconference with opening comments from Mark McHugh, our President and CEO. Mark?

Thanks, Collin. Good morning, everyone. Before turning to our third quarter results, I'd like to briefly touch on the proposed merger of equals transaction that we announced with PotlatchDeltic on October 14. As detailed on our joint conference call a few weeks ago, we believe that this transaction will deliver significant strategic and financial benefits beyond what either company could achieve independently, including roughly $40 million of estimated run rate synergies. The combination will create a premier land resources company with a high-quality and well-diversified timberland portfolio spanning over 4 million acres, a dynamic real estate platform and a well-positioned wood products manufacturing business.

The merger will drive -- will further drive enhanced opportunities to grow our land-based solutions and Natural Climate Solutions business, given our increased scale and complementary revenue streams. The combined company will benefit from a strong balance sheet, exceptional talent pool and a shared focus on disciplined capital allocation. I'm both excited and confident about the long-term value creation potential of this merger for our shareholders.

The merger remains on track to close in late first quarter or early second quarter of 2026, subject to the satisfaction of customary closing conditions, including the receipt of required regulatory approvals and the approval of Rayonier and PotlatchDeltic shareholders. I've been pleased by the progress made during the initial phases of our integration planning, which is a testament to the cultural alignment of the two companies. Both organizations are very focused on the opportunity to create value for our shareholders through synergies, operational efficiencies and the sharing of best practices, and we look forward to providing further updates as we get closer to closing.

Moving to our third quarter financial results. I'll make some high-level comments before turning it over to April Tice, Senior Vice President and Chief Financial Officer, to review our consolidated financial results. Then Doug Long, Executive Vice President and Chief Resource Officer, will comment on our Timber results. And following the review of our Timber segments, April will discuss our real estate results and our outlook for the balance of the year.

In the third quarter, we generated adjusted EBITDA of $114 million and pro forma net income of $50 million or $0.32 per share. Adjusted EBITDA roughly doubled compared to the prior year quarter, driven by strong performance in our Real Estate segment, improved results in our Southern Timber segment and favorable overhead costs, which were partially offset by lower results in our Pacific Northwest Timber segment.

In our Southern Timber segment, we generated third quarter adjusted EBITDA of $43 million, which was up 13% from the prior year period as increased harvest volumes more than offset a modest decline in weighted average net stumpage realizations. The 24% increase in harvest volumes versus the prior year quarter reflects drier weather conditions as well as the normalization of green log demand following significant salvage activity during the first half of the year. While overall market conditions continue to be challenging, we are pleased with our operational execution and financial results during the quarter.

Turning to the Pacific Northwest Timber segment. Third quarter adjusted EBITDA of $6 million was roughly $2 million below the prior year quarter as higher log prices and lower costs were more than offset by a 34% decline in harvest volumes due to the Washington dispositions we completed at the end of last year.

In our Real Estate segment, we generated adjusted EBITDA of $74 million in the third quarter, up $54 million from the prior year period. The significant increase in adjusted EBITDA reflects a large contribution from a conservation sale in Florida as well as strong results in our real estate development business.

Turning to our outlook for the balance of 2025. We are on track to achieve full year adjusted EBITDA at or above the higher end of our prior guidance range, driven largely by the continued strong momentum in our real estate business.

With that, let me turn it over to April for more details on our third quarter financial results.

Thanks, Mark. As you review our financial results for the quarter, please note that all periods presented have been retrospectively adjusted to recast the historical results of the former Trading segment into the Southern Timber and Pacific Northwest Timber segments as we have eliminated the Trading segment following the sale of our New Zealand business.

Moving to the financial highlights on Page 5 of the supplement. For the third quarter, sales totaled $178 million, while operating income was $42 million and net income attributable to Rayonier was $43 million or $0.28 per share. On a pro forma basis, net income was $50 million or $0.32 per share. Pro forma items in the quarter included a $7 million asset impairment charge associated with the fair value assessment of certain real estate assets that were part of the Pope Resources acquisition. Our adjusted EBITDA was $114 million in the third quarter, up from $57 million in the prior year period.

Moving to our capital resources and liquidity at the bottom of Page 5. Our cash available for distribution, or CAD, for the first 9 months of the year was $154 million versus $77 million in the prior year period. The significant increase was driven by a combination of higher adjusted EBITDA, lower cash interest expense, higher interest income and lower capital expenditures. A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on Page 8 of the financial supplement.

During the third quarter, we repurchased 1.2 million shares at an average price of $24.55 per share or $30 million in total, as we continue to believe that share repurchases represent a compelling use of capital. As of September 30, we had $232 million remaining on our current share repurchase authorization. However, given our pending merger with PotlatchDeltic, our ability to repurchase shares has been and will continue to be limited prior to the closing.

We finished the third quarter with $920 million of cash and roughly $1.1 billion of debt. At quarter end, our weighted average cost of debt was approximately 2.4% and the weighted average maturity on our debt portfolio was approximately 4 years. Our net debt to enterprise value based on our closing stock price at the end of the quarter was 3%, and our net debt was less than 1x the midpoint of our adjusted EBITDA guidance.

As a result of the taxable gains arising from the sale of our New Zealand joint venture interest, we declared a $1.40 per share special dividend on October 14, which will be paid on December 12 in a combination of cash and shares. The number of common shares issued as a result of the dividend will be calculated based on the volume weighted average trading prices of the company's common shares on the New York Stock Exchange on December 1st, 2nd and 3rd. Similar to the dividend paid earlier this year by issuing shares to meet part of our REIT taxable income distribution requirement, we have retained significant flexibility for allocation priorities.

I'll now turn the call over to Doug to provide a more detailed review of our Timber results.

Thanks, April. Let's start on Page 9 with our Southern Timber segment. Adjusted EBITDA in the third quarter of $43 million was 13% above the prior year quarter as higher harvest volumes more than offset lower net stumpage realizations. Total harvest volumes increased 24% versus the prior year quarter as production improved due to drier weather conditions and increased demand for green logs as salvage operations in our Atlantic region subside. Meanwhile, non-timber revenue was modestly lower compared to an exceptionally strong prior year period due to lower pipeline easement revenue.

Average sawlog net stumpage pricing was $27 per ton, a 3% decrease compared to the prior year period, primarily due to reduced sawmill demand, coupled with the lingering market impacts of elevated salvage volume earlier in the year. Pulpwood net stumpage pricing of roughly $14 per ton was 20% lower than the prior year quarter, driven by weaker demand following recent mill closure announcements, excess supply due to prior salvage operations and an unfavorable shift in geographic mix.

Overall, third quarter weighted average net stumpage realizations fell 5% versus the prior year quarter to roughly $20 per ton as lower pulpwood pricing was partially offset by an increased proportion of sawtimber volume. Last quarter, we noted that salvage volume from hurricanes in 2024 was normalizing in our Atlantic markets, with mills shifting back to a green log procurement. While salvage operations are largely in the rearview mirror, pricing improvements to date have been limited as recent mill closure announcements have tempered the pulpwood demand outlook in certain market areas.

Looking beyond the current market headwinds, we continue to expect the supply side of the equation to tighten significantly in these markets over the next several years. The Georgia Force Association estimates that approximately 26 million tons of pine and 30 million tons of hardwood were impacted by last year's hurricanes, a substantial hit to regional supply that the market will contend with for years to come.

In gray markets, soft in-market demand, coupled with weaker residual markets, led some sawmills to reduce production during the quarter. Although construction activity is slowing seasonally, we expect U.S. lumber production to eventually ramp up in response to higher duties on Canadian lumber imports, the recently announced Section 232 tariffs of 10% on all softwood lumber imports and the prospect of additional interest rate cuts and improved housing demand as we move forward.

In pulpwood markets, conditions remain challenging through Q3. Mill closures announced earlier this year in the Gulf region, followed by more recent announcements in Atlantic markets have reduced regional demand and weighed on pricing. In our Gulf markets, dry conditions led to softer pricing but allowed us to harvest some difficult access areas. In the Atlantic, recent mill closures have resulted in some pricing pressure as wood flows adjust to these new demand patterns. As we move forward, we are optimistic that the recent capacity reductions to support improved operating rates across the remaining containerboard mill base, although the benefits will vary by region given the localized nature of pulpwood markets.

Moving to our Pacific Northwest Timber segment on Page 10. Third quarter adjusted EBITDA of $6 million was 26% below the prior year quarter due to lower harvest volumes, partially offset by higher log prices and costs. Total harvest volumes decreased 34% in the third quarter as compared to the prior year period, reflecting the impact of the Washington dispositions we completed late last year. At $100 per ton average delivered domestic sawlog pricing, the third quarter increased 5% from the prior year period, primarily due to a favorable species mix. Meanwhile, at $36 per ton, pulpwood pricing was up 20% versus the prior year quarter.

While lumber prices softened during the quarter, leading mills to build inventories, reduce production and implement quotas, we remain confident in the region's positioning for the structural changes ahead. Lumber produced in Pacific Northwest competes more directly with Canadian production making those in the region, particularly well positioned to capture market share as higher duties constrain the supply hearing from Canada. The region should also benefit from the Section 232 tariffs on imported lumber further supporting domestic producers over time.

I'll now turn it back over to April to cover our real estate results. April?

Thanks, Doug. As detailed on Page 11, the contribution from our Real Estate segment during the third quarter was significantly above the prior year quarter due to a higher number of acres sold, partially offset by a lower weighted average price per acre. Real estate revenue totaled $91 million on roughly 23,300 acres sold at an average price of $3,500 per acre, which included a 21,600 acre conservation sale in Florida. Real Estate segment adjusted EBITDA in the third quarter was $74 million, above our prior guidance range of $50 million to $65 million due to the successful closing of the large conservation sales as well as better-than-expected results in our improved development category.

Drilling down, sales in our improved development category totaled $21 million, with our Wildlight development project contributing $17 million, and our Heartwood development project contributing $4 million.

Sales in Wildlight consisted of 3 residential pods totaling 212 acres at an average price of $78,000 per acre. These sales represent the first closings within the second phase of entitlements at Wildlight or DSAP 2, which allows for the development of about 15,000 homes and 1.4 million square feet of commercial uses.

Key infrastructure supporting DSAP 2 was completed during the third quarter, and we were excited to announce the initial builders involved in this new face of Wildlight during September. As we have discussed in the past, we will capture additional value from these pod sales through participation fees received from the homebuilders as deliveries occur based on the final home sale prices.

Heartwood sales in the quarter consisted of a 14-acre parcel for the development of a senior living community for $4 million or $271,000 per acre. We also sold a 2-acre commercial used parcel in Kitsap County, Washington, for roughly $400,000 or $200,000 per acre. Overall, we continue to see a favorable growth trajectory for both Wildlight and Heartwood moving forward. The work we've done over the last several years to build our entitlements pipeline, enhance infrastructure and catalyze these markets continues to translate into strong interest from both commercial and residential end users.

In the rural category, third quarter sales totaled $7 million, consisting of approximately 1,500 acres at an average price of roughly $4,800 per acre. We experienced a fairly light quarter of closing activity, but our pipeline for rural land sales remain strong, and we continue to see healthy interest from potential buyers.

Timberland and nonstrategic sales during the quarter totaled $53.5 million, which consisted of a 21,600 acre property in Levy County, Florida, sold to a conservation-oriented buyer for roughly $2,500 per acre. We view this property as nonstrategic as it was only 55% plantable, had an average plantation age class of just 7 years and was fairly distant from our core holdings in the region. The pricing we achieved on this sale reflects a strong premium to timberland value and a strong return on our original investment, and we're pleased that the property will now provide a unique recreation and conservation area in the state of Florida.

Now turning to our outlook for the balance of 2025. As Mark discussed earlier, we are on track to achieve full year adjusted EBITDA and pro forma EPS at or above the higher end of our prior guidance range of $215 million to $235 million and $0.34 to $0.41, respectively.

With respect to our individual segments, starting with our Southern Timber segment, we expect full year adjusted EBITDA will be modestly below our prior guidance range, due to continued softness in end market demand and lower anticipated harvest volumes. In our Pacific Northwest Timber segment, we expect full year adjusted EBITDA toward the lower end of our prior guidance range, as the anticipated improvement in lumber markets from the increase in duties on Canadian imports has been slower to materialize than previously expected.

In our Real Estate segment, we expect full year adjusted EBITDA to exceed the high end of our prior guidance range due to our strong third quarter results and our transaction pipeline for the remainder of the year.

And as in recent quarters, we are providing quarterly guidance for our overall adjusted EBITDA and EPS to help manage expectations around quarter-to-quarter variability. For the fourth quarter, we currently expect net income attributable to Rayonier of $13 million to $17 million, EPS of $0.08 to $0.11 and adjusted EBITDA of $50 million to $60 million.

I'll now turn the call back to Mark for closing comments.

Thanks, April. As we wrap up our comments on the quarter, I'd like to commend our team for their relentless focus on operational execution amid challenging market conditions. We continue to focus on optimizing our near-term financial results while also advancing important strategic initiatives and allocating our capital with a view towards building long-term value per share. As we discussed last quarter, housing starts and repair and remodel activity have underwhelmed in 2025. However, we are optimistic as we approach 2026 that a combination of factors, including higher duty rates, new tariffs stemming from the Section 232 investigation and lower mortgage rates will collectively drive increased U.S. lumber production, which should be a positive for U.S. timberland owners.

In addition, with greater clarity on tariffs, and anticipated improvements in pulp and paper mill operating rates, we're optimistic that our pulpwood customers will see fundamentals improve next year as well. In our real estate business, we are on pace for another strong year in 2025. We continue to capitalize on opportunities to unlock value across our portfolio given the continued strong demand for our rural properties, the healthy interest from conservation-oriented buyers and the favorable momentum at both our Wildlight and Heartwood development projects.

On the land-based solutions front, our team continues to advance solar, carbon capture and storage and carbon offset project opportunities with high-quality counterparties. I remain very encouraged about the long-term value creation potential from our land-based solutions business. In particular, the substantial capital that continues to flow into AI and data center infrastructure is driving significant growth in energy demand and utility solar remains poised to play a major role in meeting the need for cost-effective renewable energy.

Turning to the merger with PotlatchDeltic. I see a tremendous runway for the combined company as significant strategic and financial benefits will be realized by combining our portfolios and our teams. Our shareholders will benefit from a more diversified timberland portfolio, a complementary Wood Products manufacturing business and an enhanced platform to unlock value through HBU real estate opportunities as well as natural climate and land-based solutions. We continue to estimate run rate synergies of $40 million by the end of year 2, which will be primarily driven by corporate and operational cost optimization. Integration planning is progressing well, and our teams are working to position the combined company to hit the ground running following the closing of the merger.

In sum, while timber markets continue to face some headwinds, our team is focused on navigating the current environment with a long-term perspective and we're energized by the significant value creation potential that we see on the horizon.

That concludes our prepared remarks, and I'll now turn the call back to the operator for questions.

[Operator Instructions] The first question in the queue is from Mark Weintraub with Seaport Research Partners.

So definitely lots of positive developments, it seems on the real estate side. And maybe I wanted to get a little bit of an update on how sustainable some of like the increased activity in the various categories might be as you see it? And then separately, though, also on the pulpwood side, it's quite challenging. And in the past, there has been conversations about alternative demand sources. And just curious whether or not you have any updated views on whether there might be any developments there to help offset some of the lost demand we've seen as mills have shut.

Mark, this is Mark. I'll take the first question on real estate, and then I'll turn it over to Doug to address the pulpwood question. As we discussed in the past, real estate sales are invariably going to be lumpy. And in this particular quarter, we had a large conservation sale as well as a pretty strong results in our development business. Recognize that it can take quite a while for a conservation transaction of this scale to come together, this particular transaction has actually been in the works for about a year now. So even though it's a lower price per acre than we typically see for some of our smaller rural HBU transactions, we still felt that the value was pretty compelling given the timberland attributes relative to the conservation potential of this particular property. And look, if we can realize a significant premium to underlying timberland value and even more significant premium to the implied public market trading value of our lands, we see that as a smart arbitrage opportunity. So this level of real estate activity is certainly not going to be the type of thing we're going to see on a regular basis. But we were very pleased to have a couple major transactions get over the finish line in the third quarter.

Mark, this is Doug. I'll take the second part of your question around the pulpwood. Yes, as you know, we're always looking at other strategic alternatives to diversify our pulpwood markets, kind of beyond our traditional domestic pulp and paper customers. And while not new as meaningful as it was before China ban logs from the U.S., we started to see some renewed export activity to other markets, particularly in that Port of Savannah area. And as part of the larger trade barrier negotiations, the Trump administration is actually involved in seeking some regulatory relief for timber exports to Europe, specifically challenging the EU restrictions on fumigation for Southern Yellow Pine chips. So this was an important market for pulpwood chips. And so we're kind of actively involved in that and seeking to see what happens there. But there's also been renewed interest from the European side as we're looking for European deforestation, free regulation compliant fiber. So I think there's definitely a push from our side and there's some interest from the other side, and we'll see how that plays out.

But probably going more to what you're talking about. The volatility and the policy shifts that have happened over the last year or so, I guess, let's say, put more risk or large-scale investments for biofuel refineries and things like that currently. But we're still seeing growing demand globally for products such as same as fuel and biofuels for those industries are hard to abate like the aviation shipping. And so this opportunity continues to work, but I'd say it's much more behind the scenes now. So you don't see as many press releases about it and things like that as folks are keeping their head down and trying to work through that. So announced projects in Louisiana and East Texas, totaling over $10 billion investment, and they're backed by major airlines and then some Japanese investors could collectively consume several million tons of woody biomass annually in that area. And to date, best of our knowledge, others have achieved final investment decision, but successful execution of them, [indiscernible] facilities will establish the biofuels market and be significant demand for Southern Timber markets.

In addition to that, our land-base solutions team continues to see strong interest in the voluntary carbon market, but not only for IFM projects also for uses pine biomass for carbon dioxide removal credits. And you think of things like biochar or biocoke and different things like that. While these individually won't be as a multibillion-dollar refinery, they are a fraction of the cost to establish and they're replicable. So you can build one of these for something in the tens of millions of dollars. And so if you have those specific wood basket to be meaningful for that area. So we continue to work with folks on projects like this and seek that and believe that there's a good opportunity for those in the near future.

The next question in the queue is from Matthew McKellar with RBC Capital Markets.

First for me, the comment about the volume of timber destroyed in Georgia through last year's hurricanes was pretty interesting. Do you have a sense in percentage terms of how much less potential supply there should be in that market over the next few years?

Yes. I don't have a quantitative percentage. I just have more of an anecdotal from driving around and seeing the devastation. And I would say -- it's definitely significant. I mean Georgia is a large timber production state. So I don't think wrong, there's still a lot of timber there for the existing mills, but it's definitely put a significant dent when you drive around, there's a lot of stands that were younger harvested than they should have been and a lot of mature stands that they were harvested. So I can't quantify it, but qualitatively, I can say it's definitely going to be impactful for the near term for sure.

That's fair enough. That's helpful. And then just a quick one on real estate. Are you seeing any differences in strength of rural real estate sales by geography compared to maybe 1 or 2 years ago?

Yes, I wouldn't say it's really changed. I mean our strongest HBU markets continue to be Texas and Florida. And really, that's where we see the most opportunity. And again, I think it's worth noting that we have a large portfolio in both areas. And so if you look at our historical HBU realizations, I think that they've generally been sector-leading. And so we expect that, that will continue.

And the next question in the queue is from Ketan Mamtora with BMO Capital Markets.

Maybe to start with, on the Southern Timber, there was a pretty nice uptick in that non-timber sales line. Can you just give us some sense of kind of what is driving that? And how should we think about it going forward?

Yes. This is Doug. I'll take that. Yes. So that nice uptick in Q3 was probably around pipeline easements. We had similar kind of uptick last year in that. So -- these are kind of episodic as they happen, but we do tend to have them almost every year, they come through. And so just coincidence, they happen to be both in the same in the Q3. But -- so that's something we see, and particularly as we've seen growth in the area and support for the kind of oil and gas industry as well as carbon capture storage industries, we see there's opportunities for pipelines to continue on going forward. But that was kind of a onetime in Q3. That said, we expect to have more of those. We're in negotiations talking to folks about those. So they kind of continually are in discussions year-over-year on these things, and they just happen to be when they occur. It sound like real estate, they happen at one time.

Understood. Okay. No, that's helpful. And then just one more on the pulpwood dynamics, you kind of mentioned a lot of other potential revenue streams. Do you have a sense on how should we think about the timing of some of these things materializing for actual pulpwood demand? Is it -- are we talking about a couple of years? Are we talking about 3 to 5 years? How would you have to think about it? Because you've seen a number of these mill curtailments on the pulp paper side here in the U.S. South. So beyond -- if you just keep the cyclical element aside, just structurally, there has been a lot of demand pressure on the pulpwood side.

Yes. I think the traditional expansion we've heard about it, Georgia-Pacific Alabama River and IP Riverdale and places like that. Those are going to be more immediate. Obviously, those are traditional manufacturing where they're making adjustments. And so I think those are going to be very short term. When you talk about things like the biofuels biorefineries, you're right, those are still -- I mean, I think those are 5 years out, those are not quick. The other ones I mentioned that the smaller ones are generating other uses from biomass, I believe those are shorter term. Those could be in that several year type of opportunity. I think that's -- one of the things I would say also, just with respect to pulpwood markets, they are very regional. And one thing, while we never want to see mills close down as we've seen in one area, it tends to help the operating rates in other areas. So we have seen other areas of the opportunities where mills have started operating 5% and 10% more than they were before. So hopeful to see those end markets recover for them and then we see them really start to make progress.

Got it. And that in the short term, so I'm talking about, let's say, 1 to 2 years, is there anything you can do to modulate harvest for pulpwood here given sort of the current pricing dynamics? Is that -- do you have kind of much flexibility to do that?

There's some ability, I'd say it's probably more on the sawlog side of things and that a lot of times, the pulpwood is coming along. We don't typically go out and harvest pulpwood stand. So it's often part of the harvest of a sawlog stand or it's part of our culture regime for thinning. And so you can do some things there, but the reality is, a lot of that is part of the process we're working through. So I would say it's more on the sawlog side we have there. What more we have is flexibility to move it geographically with our kind of spread from South Carolina to Georgia across -- to Texas across the South. If we see weakness in a particular market, we can shift away from that market for a period of time and harvest in other areas and hope to see some more balance come back in place. So I'd say really being able to shift volumes around across the diversity of the asset is an important part of that process.

Ketan, this is Mark. I would note that we've also been continuing to shift our product mix increasingly towards sawtimber. So while we saw a pretty material decline in pulpwood pricing on a period-over-period basis, that the mix of sawtimber improved. So the weighted average decline was actually quite a bit less than that. So that's a trend that we continue to -- we expect to continue to increase in that direction. And so that's a positive just in terms of long-term outlook.

And the next question in the queue is from Buck Horne with Raymond James.

Just a quick question on capital allocation thoughts going into year-end. I fully appreciate that you guys are somewhat limited on repurchases until the deal closes, and you still have to get through the special dividend process and all those calculations. But thinking out maybe into early next year, if this massive public versus private market timber disconnects were to persist. I'm wondering as you've had a chance to kind of evaluate both the combined portfolios, what would your thoughts be around potentially accelerating some noncore timber dispositions to try to either prove out this disconnect or reallocate capital to more accretive uses?

Yes. Maybe just at a high level from a capital allocation standpoint, recognizing that we're anticipating the merger with PotlatchDeltic to close early next year. As we discussed in the merger call a few weeks ago, I'd say the Rayonier and PotlatchDeltic share a very similar philosophy on capital allocation. I'd say we've both been nimble and opportunistic with a view towards building long-term value per share. We both shied away from putting out prescriptive targets as market conditions and the merits of different capital allocation strategies can certainly change over time. And sometimes it can change pretty rapidly.

I'd say the playbook we've followed historically as two separate companies will likely be very similar going forward as a combined company. We laid out some of those key capital allocation priorities in the presentation materials for the merger call. That includes maintaining an investment-grade balance sheet, growing our dividend over time and investing in growth opportunities, when we think it makes sense to do so. To your point, we also see share buybacks is very compelling at the current share price, and we expect to have ample flexibility to be opportunistic on that front after we close the merger as well, recognizing that at least in the near term, we will be navigating some of these regulatory hurdles.

Appreciate that. And just kind of as a follow-up. I mean as it stands today, obviously, the stock price is dynamic and things like that. But if we were in a similar position a few months out from now, what would be a more accretive or attractive use of incremental capital for you potentially repurchases? Or reinvesting or growing the Potlatch Wood Products division?

Yes. Again, our philosophy on capital allocation is to play the hand that we're dealt. Certainly, in the current environment, assuming kind of status quo, where the stock price is today on a post-closing basis, we continue to believe that buybacks are very compelling. But again, we view the Wood Products manufacturing business is just another tool in the capital allocation toolkit. And if we see an opportunity for high return projects there, we will certainly evaluate that. But we're going to look at that through the same lens as we look at and any other capital allocation priority, it's really with a view towards building long-term value per share and what's the best alternative. Hard to -- it's a pretty high bar, though, for external growth right now, kind of given where the stock price is.

[Operator Instructions] The next question in the queue is from Michael Roxland with Truist Securities.

Congrats on all the progress. Doug, I just wanted to follow up, not trying to beat this topic to death here. But just on pulpwood in the U.S. South, you mentioned the potential for -- once some of these mills are closed for the remaining assets of these companies to run at higher utilization rates and they will consume more pulpwood. But that's -- you're still going to be -- it's going to be a net loss, right? So you're not going to see one for one. Is that fair to say?

Yes, that's fair to say. I'd say we've seen growth in both the pulp business and the OSB business over time and continue to see more investments in that. But to your point, in specific markets, there's going to be excess pulpwood over demand.

Got it. All right. Perfect. And then just on the Pacific Northwest. Last quarter, you mentioned not seeing any tension there. It sounds like that those conditions have persisted in 3Q as well. Or are there any signs of things that are going to change? What are you seeing in the Pacific Northwest? Is there -- I mean, I think one of the overhangs was maybe going back a quarter or so is -- there's lumber inventories in the channel. I think a lot of -- from what I've been hearing, a lot has been worked through. Wondering if the Pacific Northwest is now positioned in a better place where you could start to see some tensioning whether it be through less supply or just for maybe housing picking up in near term sometime next year. So I think you have the Pacific Northwest and what's happening and why still -- why it's not as tension as I think it should be...

Yes, sure. Kind of hit two questions there. I think one thing kind of on -- just going back on the pulpwood side of things, and obviously, a lot of questions around that. I think we're -- on that -- my question has been around basically how we see those things. And one thing I talked about is that one of the things we've seen where we've had the pulp mill closures in non-operating area is that like the IP mills that closed in [indiscernible], we have 8 other major pulpwood outlets within 100 miles of that shuttered mill basically. So kind of different in some places where a mill shut down and then there wasn't much demand there. We still have quite a few mills that are within a short distance of our -- or short minimal haul distance of our operating region there in that northeast corner. So while we see those impacts are significant, I think the hurricane impacts have also been a major impact in that area. And so we're still working through what that looks like and contend there. So it's kind of -- we're optimistic that there's improved operating rates that I mentioned before, these other mills, will help in some of that process of offsetting that and fiber will find its way around, just kind of following up on that one.

But moving to the Northwest, you're right, that market has softened a little bit in recent months, and that was not what we kind of thought was going into here. Earlier there was a pretty substantial premium on Douglas for lumber, and that helps support log pricing, but that premium has eroded as we haven't seen that in demand really grow as much as we thought. Last call, we talked about before the tariffs went in place that there was a considered amount of lumber that came from Canada into the Pacific Northwest and really all the way into Houston basically into the United States. And so I think we're still seeing with a more muted demand working through that as we go forward. So I think that's part of why we haven't seen that kind of response we thought we'd see.

The good news is most facilities, they have spare capacity and they can ramp up quickly to your point. So we start to see that in demand happen, I think we'll see some improvement there. Log inventories kind of this type of year typically start to get constrained by weather. So -- and so that's an important part of this process. But lumber inventories right now in that area in particular still remain a bit elevated. And so that's something we need to see work through. In the South, I've heard of some mills basically taking some slower production time going through the holidays basically and trying to come out of the year with lean inventories as they move forward, just don't want that inventory in the books. I think we're seeing a little bit in the Northwest also. We've heard about some recent mills talking about taking some downtime and some shifts down. So I think what we're seeing is folks are trying to kind of constrain and restrict that lumber inventory. They built up thinking things are going to go great when tariffs put in place. We've seen that kind of muted demand still need the housing and repair and remodeling to step back, which we see these -- hopefully, we see these forecasted reductions in rates going into next year, and we'll see that happen. So I think there is some optimism, but at the same point in time, people don't want to just keep cutting wood on top of what they have. So I think you mentioned that the China markets and that has historically been something that provided pricing support.

And while we don't have that now. I do believe that the Douglas fir, the SPF market is a strong market, and it can recover very quickly. We've seen this happen before in that market where things can swing quite quickly. So if we see a housing demand kind of start to rebound, I think it's going to be the first places with the well-tensioned markets where we'll see that response come back.

And I'm showing no further questions at this time, and we'll turn the call over to Collin Mings.

All right. This is Collin Mings. I'd like to thank everybody for joining us. Please contact us with any follow-up questions.

This concludes today's call. Thank you for your participation. You may disconnect at this time.

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Rayonier and PotlatchDeltic Merger of Equals call. [Operator Instructions]

I would now like to turn the call over to Collin Mings, Vice President of Capital Markets and Strategic Planning of Rayonier.

Sir, please go ahead.

Thank you, and good morning. Welcome to this morning's teleconference discussing the Merger of Equals between Rayonier and PotlatchDeltic. This call is being webcast at rayonier.com and potlatchdeltic.com.

The presentation slides for today's call can be found on both companies' websites and have been filed with the SEC.

I would like to remind you that in this presentation, we include forward-looking statements made pursuant to the safe harbor provisions of the federal securities law. This morning's press release as well as Form 10-K and 10-Q filed with the SEC by Rayonier and PotlatchDeltic list some of the factors that may cause actual results to differ materially from the forward-looking statements we may make.

Throughout today's presentation, we will also discuss non-GAAP financial measures, which are defined and reconciled to the nearest GAAP measure where possible in our materials.

With that, let's put our teleconference with opening comments from Eric Cremers, PotlatchDeltic's President and CEO. Eric?

Well, thanks, Collin, and good morning, everyone. Thanks for joining the call on relatively short notice.

Earlier this morning, Rayonier and PotlatchDeltic issued a joint press release announcing that we have entered into a definitive merger agreement under which the companies will combine in an all-stock Merger of Equals transaction. I'm excited to be in Atlanta, Georgia this morning with Mark McHugh, Rayonier's President and CEO; and Wayne Wasechek, Chief Financial Officer of PotlatchDeltic to discuss this announcement, as we believe that the merger between our 2 companies will result in significant strategic and financial benefits beyond what either of us could achieve independently.

Rayonier and PotlatchDeltic share complementary business models, similar cultures and a long-standing commitment to sustainability. This merger significantly increases the scale of both companies, as we will own nearly 4.2 million acres of timberlands across 11 states. The combined company will have an efficient and scalable wood products manufacturing business with 1.2 billion board feet of lumber capacity and 150 million square feet of plywood capacity. In addition, the combination will result in a diverse real estate portfolio and robust opportunities to provide land-based and natural climate solutions, such as leasing land for solar development or carbon capture and storage.

Under the terms of the agreement, PotlatchDeltic shareholders will receive 1.7339 shares in Rayonier for each PotlatchDeltic share. This represents an 8.25% premium to PotlatchDeltic based on the closing stock price for both companies as of October 10th.

Importantly, this structure will provide both Rayonier and PotlatchDeltic shareholders the opportunity to participate in the upside potential of this combination. The pro forma ownership will be approximately 54% Rayonier shareholders and 46% PotlatchDeltic shareholders.

The merger has been unanimously approved by both of our Boards and is expected to close in late first quarter or early second quarter of 2026, subject to the satisfaction of customary closing conditions, including receipt and required military approvals and the approval of Rayonier shareholders and PotlatchDeltic shareholders.

The name of the combined company will be determined prior to closing, and the company's headquarters will be in Atlanta, Georgia, where PotlatchDeltic already has an established presence. Notably, the combined company will be the largest private land owner in Georgia with nearly 900,000 acres of timberland. In addition, Heartwood Real Estate development project is located near Savannah, Georgia, and we see significant future opportunities associated with our combined portfolio in the state. Regional offices will be maintained in both Wildlife Florida and Spokane, Washington.

On the financial front, the combined company will have a strong pro forma balance sheet as well as an enhanced capital markets presence. Through this combination, there is also a significant opportunity to create value through synergies, operational efficiencies and the sharing of best practices. We estimate synergies of $40 million, which will be primarily driven by corporate and operational cost optimization. We anticipate having half of these synergies by the end of year 1 and the remainder by the end of year 2. We expect the transaction to be accretive to cash available for distribution per share as run rate synergies are achieved. Over time, we will strive to identify additional synergy opportunities through the sharing of best practices and a continued focus on optimizing costs across the combined organization.

Follow closing of the merger, I will serve as Executive Chair of Board of the combined company, and Mark will serve as President and CEO. Wayne Wasechek, Chief Financial Officer, of PotlatchDeltic will serve as CFO of the combined company. In addition, Rhett Rogers, currently Senior Vice President of Portfolio Management for Rayonier, will serve as Executive Vice President, Land Resources, overseeing Timberland operations, rural land sales and land-based solutions. Ahslee Cribb, current Vice President of Wood Products and PotlatchDeltic will serve as Executive Vice President, Wood Products, overseeing the manufacturing operations. The Board of Directors of the combined company will be comprised of 5 existing directors from Rayonier, including Mark and 5 existing directors from PotlatchDeltic, including myself. Lead Independent Director will be selected by Rayonier.

Our team of PotlatchDeltic has been impressed by the actions taken by Rayonier to bring value for its shareholders over the past several years through nimble capital allocation and active portfolio management. Likewise, I'm proud of how our team, at PotlatchDeltic, has executed on opportunistic M&A to create value for shareholders over time and how have engaged evolving low market dynamics with a strong focus on operational excellence and discipline.

Building on these successes, Mark and I see a tremendous runway for the combined company. As a result of the merger, our collective shareholders will benefit from a more diversified timberland deal, a complementary Wood Products manufacturing business and an enhanced platform to unlock value through HBU real estate opportunities as well as natural climate and land-based solutions. We believe now is the right time to combine our portfolios and teams and to strive to unlock even more potential for our investors as a company with more scale and liquidity, a larger and more diversified geographic footprint and complementary businesses.

With that, I will now turn the call over to Mark.

Thanks, Eric. I appreciate your comments. And likewise, the Rayonier team has long admired PotlatchDeltic's focus on shareholder value creation through disciplined capital allocation. I'm very excited by the opportunity to partner with you as we lead the combined company through this transformation.

I'll start by offering some perspective on the road that led us to this transaction and then expand on the unique opportunities we see to create long-term value for all shareholders through this merger of equals. In November 2023, Rayonier outlined an asset disposition and capital structure realignment plan to reduce leverage and capitalize on disparity between public and private timberland valuations.

With the closing of the sale of our New Zealand business this summer, we disposed of $1.45 billion of assets since late 2023, exceeding our original disposition goal and achieving our new leverage target in a manner that was both accretive to CAD and NAV per share, while also further concentrating our assets in regions with the most long-term optionality. At the same time, as we consider the path forward, following our disposition initiative, we became increasingly mindful of the advantages offered by a larger portfolio, especially as we look to grow our land-based solutions business and unlock value through land use optimization. We also consider the potential benefits associated with having some direct exposure to wood products manufacturing as well as the importance of scale when operating a public company in the current capital markets environment. Naturally, this led to discussions regarding potential merger with PotlatchDeltic. During the course of these discussions, the merits of a potential combination with PotlatchDeltic became increasingly clear, and we believe that our portfolios and our teams fit together quite well. In addition, we saw a strong alignment in our corporate values and our philosophy around capital allocation and shareholder value creation. Following the completion of our disposition and capital structure realignment plan as well as the strategic moves made by PotlatchDeltic to expand its portfolio in the U.S. South over the past several years. We and our respective Boards determined that the circumstances were well aligned to explore a potential combination. Ultimately, we both saw a compelling opportunity to create a premier land resources company with a strong balance sheet that will be well positioned to grow and create shareholder value going forward.

Expanding on this point, in Eric's comments earlier, Slides 4 and 5 of our presentation outline key strategic and financial benefits of this merger as well as the key terms of the transaction which Eric reviewed. The executive leadership of the combined company will reflect a roughly equal balance of talent between the 2 companies. Initial executive appointments are shown on Slide 6. I'm looking forward to partnering these exceptional leaders upon the closing of the merger to integrate our organizations and advance our line strategy. Additional decision on key leaders for the combined organization will be announced between now and closing.

Slide 10 lays out some key metrics on the pro forma company. The combination of the 2 platforms will result in a leading land resources company with roughly 2x the scale that either of us has independently. The pro forma EBITDA mix comprises a large component of relatively stable cash flow, but also still has meaningful leverage to the longer cycle.

Moving to Slides 8 and 9. These slides illustrate what the asset profile of the combined company will look like in more detail, including roughly 3.2 million acres in the U.S. South, spread across 8 states, roughly 1 million acres in the Northwest, primarily in Washington and Idaho, 7 wood product facilities and 3 real estate development projects.

Slide 9 offers a great vision as it highlights the diversification benefit of the merger. While the assets of both companies are in the same regions, they are concentrated in different markets with different supply-demand dynamics. So both of our shareholders will benefit from the diversification impact of the merger. Also most of the combined company's acreage is in the U.S. South, where we see meaningful long-term optionality and upside potential.

Turning to Slide 10. PotlatchDeltic's existing platform for Wood Products will be the combined company well positioned to benefit from an eventual ramp-up in U.S. lumber production in response to higher duties on Canadian lumber imports new tariffs recently announced on wood products imports, the prospect of additional interest rate cuts and improved housing demand as we move forward.

PotlatchDeltic's existing wood products facilities are largely top quartile levels that are poised to benefit from the targeted capital investments that PotlatchDeltic has made under the leadership of Eric and Ashlee over the past several years.

Moving forward, the combined company will have a strong balance sheet with additional flexibility to make synergistic investments in the Wood Products business over time. We believe that this platform provides another lever with which to optimize the value of our overall land portfolio.

Slide 11 highlights how both of our respective teams have been focused on increasing the premiums achieved on higher and better use land sales as well as the shift of both companies towards higher value development sales over the past decade. The larger portfolio will inherently create more opportunities for our teams to leverage their expertise to identify and execute on HBU opportunities across our mined land base.

As it relates to our development projects, Slide 12 provides some additional detail on the 3 existing projects across both companies. As we discussed in the past, Rayonier's Wildlight and Heartwood projects have a significant runway ahead of them, and we anticipate that the contribution from these projects will grow significantly in the years ahead. While PotlatchDeltic's Chenal Valley project is relatively more mature, we expect to remain a steady contributor to cash flows moving forward. In addition, we look forward to the sharing of best practices among our teams as this project is in a different phase of its life cycle.

Moving to Slide 13. On the land-based solutions and natural climate solutions front, we believe there's a lot of value in leveraging and diversifying the combined platform. Both companies have already made great strides on the solar front over the past few years. And through this transaction, both companies are gaining exposure to additional revenue streams. In fact, just a few days ago, PotlatchDeltic signed a new lithium lease for approximately 4,200 surface acres in the Smackover region of Southwest Arkansas. Further, we see a lot of upside potential in carbon markets over the long term. Key buyers of carbon offsets are increasingly looking for large-scale projects to meet their NetZero ambition, but we believe the combined company will be much better positioned as a potential supplier of choice.

Turning to Slide 14. This chart offers additional perspective on the increased scale in capital markets relevance achieved through this transaction. The combined company will be among the largest publicly traded timber and wood products companies in North America. By mining forces, we believe we will be able to better leverage our costs, increase our portfolio diversification and optionality and realize an improved cost of capital over time, all of which will further enhance our ability to create shareholder value in the future.

On Slide 15, we outlined our pro forma capital structure and debt maturity profile. On a trailing 12-month basis, our combined adjusted EBITDA has totaled roughly $439 million, resulting in conservative pro forma net debt to LTM adjusted EBITDA of 2.5x, before factoring in the upside from synergies. The combined company will further have a well-staggered debt maturity profile as well as a significant cash position to deploy opportunistically.

To this end, as detailed on Slide 16, similar to the track record established by Rayonier and PotlatchDeltic as separate companies, the combined company will have a financial strategy focused on nimble capital allocation and prudent financial management. This strategy will focus on maintaining investment-grade credit ratings, returning capital to shareholders through a sustainable dividend that grows over time, opportunistic share repurchases and capital investments in our portfolio.

Moving to Slide 17. We provided details on our anticipated pro forma dividend as well as the special dividend that was also announced this morning. Notably, the combined company plans to maintain Rayonier's current quarterly dividend level as adjusted to reflect the increased number of common shares issued in the special dividend. The special dividend is being paid to meet REIT taxable income distribution requirements in connection with Rayonier sale of its New Zealand business in June. The $1.40 per share special dividend will be paid to Rayonier shareholders in a combination of cash and shares during December. To equalize the economic impact of the Rayonier special dividend, the merger consideration payable to PotlatchDeltic shareholders at the closing of the transaction will be adjusted so that PotlatchDeltic shareholders will receive consideration of equivalent value. Additional details regarding the adjustment mechanism are provided in the press release and the 8-K filed in connection with the transaction.

Slide 18 provides some highlights regarding our shared commitment to sustainability and corporate responsibility. Both companies have similar values and a long-standing commitment to the responsible stewardship of our land resources, which we look forward to continuing and further strengthening as a combined company.

On Slide 19, we summarize the opportunity we see to bring these 2 great companies together. We believe that this combination will create a premier land resources company with a high-quality, well-diversified timberland portfolio, a dynamic real estate business, an established wood products platform that is poised to benefit from improving housing market conditions. Further, both organizations have a strong track record and commitment to safety, sustainability and the stewardship of our land resources, which I'm optimistic will serve to align our cultures and make this merger a success.

I'll now turn it back over to Eric for some closing remarks.

Well, thanks, Mark. We both see this combination as a compelling opportunity in watershed moment for our companies, and we are committed to ensuring a successful transition.

Before opening it up to questions, let me say again how energized we are to be combining 2 great companies with tremendous talent as well as a shared commitment to sustainability and legacy of excellence in delivering land resources to their highest and best use. We are confident about the financial underpinnings of this merger and its benefits for the shareholders of both companies, and I'm excited to work together with Mark to great value for our shareholders through this merger of equals.

This concludes our prepared remarks, and I'll now turn the call back to the operator for questions.

[Operator Instructions] Your first question comes from the line of Kurt Yinger with D.A. Davidson.

Congrats on the deal. Mark, just wanted to start with a 2-parter for you. First, historically, Rayonier has sort of positioned the lack of wood products exposure as an advantage in terms of not being subject to that volatility. So I'd just love to hear your thoughts around how that plays into the vision of the combined company? And then second, with the improvements that have been made with the Rayonier balance sheet, a lot of capital allocation flexibility going forward. Just curious how you thought about this transaction in combination from a returns perspective, relative to maybe other alternatives or private timberland acquisitions that you're seeing out there in the market.

Yes, sure. Happy to take that. As we discussed in the prepared remarks, coming out of our disposition plan, we considered the potential benefits of having some direct exposure to wood products manufacturing. As you know, lumber mill economics can be quite volatile, but well-positioned lumber mills, we think can also generate strong returns over the cycle. We've also become increasingly mindful of the value inherent in being able to influence demand in markets that are important to our overall portfolio value. What we find attractive about PotlatchDeltic lumber business is that it generates relatively strong margins and it's a scalable platform. So overall, we think that this business will be a really nice complement to a 4.2 million acre combined timberland portfolio. And it really gives us another lever with which to optimize our portfolio value. As it relates to the second question, like you said, we have a lot of flexibility with the current balance sheet profile that we have. We're not going to get into details on overall process or other things that we considered. There will be a fair amount of disclosure around that in the merger proxy when it's filed. But suffice to say, we felt that this transaction was the best way to create value for both of our shareholders.

Got it. Okay. I appreciate the color. And then just lastly for Eric. At recent prices, at least the current exchange ratio, still a gap relative to where I think a lot of us have NAV. What about this transaction and combination, maybe gives you more confidence around crystallizing that value relative to how you thought about that opportunity on kind of a stand-alone basis.

Well, we're -- yes, Kurt, we're both trading at significant discounts to NAV. So I think from a starting position, we're both kind of in the same boat, if you will. But I would say, given the comparable size, the complementary asset profile, strong culture alignment of the 2 companies, we really saw this as an opportunity to create a win-win for both sets of our shareholders. By combining our assets, our talented teams, we're going to be able to realize benefits beyond what either 1 of us could achieve independently. And through the MOE structure that we've executed on here with relatively comparable pro forma ownership, our collective shareholders are going to be able to share equally in the economic value created by this merger. So that $40 million of synergies, for example, our own shareholders are going to benefit 46% from that and Rayonier shareholders are going to benefit 54% from that. So this really is a win-win for both sets of shareholders at the end of the day.

Your next question comes from the line of Anthony Pettinari with Citi.

Following up on Kurt's question on wood products. I guess the other publicly traded timber REIT with a meaningful lumber exposure has this kind of base plus variable dividend structure, which I think was put in place to kind of reflect or manage the volatility of wood products earnings. And I'm just curious how you think about that. I mean in the very -- over the very long term in terms of sustainability of a fixed but growing dividend given that wood products earnings have been historically somewhat volatile in recent history, very volatile.

I'd say that both Rayonier and Potlatch have always been very committed to a sustainable and growing dividend and neither has felt the need to implement a variable dividend strategy. So we really see this merger as an opportunity to grow cash flow over time and ultimately grow the dividend.

Okay. And then maybe just 1 follow-up. I mean, when looking at Southern sawlogs, it seems like Rayonier's message has been you're going to see sawlog price improvement given you're in some of these coastal regions that have pretty tight supply-demand balance. And with Potlatch, it seems like log price improvement was maybe not as much of a focus given sort of more of an indolent positioning. I'm just curious if you can just talk about sort of the general outlook for Southern sawlog price improvement over the midterm? And then just how the portfolio is positioned in that regard.

I don't think we're going to get into forecasting September price improvements on this call. What I will say is 1 thing about this transaction that was particularly appealing is just the diversification benefit that it offered to both sets of shareholders. We're in the same broad regions as we said in the prepared remarks. We're actually in quite different markets within the South and the Northwest. And so those markets don't always move in tandem. And so we think that, that diversification benefit is quite significant for both the shareholders.

Your next question comes from the line of Mark Weintraub with Seaport Research Partners.

Congratulations. Apologies, I'm a little late to the call, so hopefully, I don't ask something that has already been asked and answered. So compelling logic, totally understood. And this may be getting a little far out there. But -- so as you think about growing the business over time, would you anticipate that there'll be a fair bit of scope and/or focus to increase on the wood products manufacturing side, given the -- if the price arbitrage between private and public market timberland values were to consist? And if that's the case, would the focus be mostly on sawmills, or is there room to consider other types of wood products manufacturing as well?

Yes, this is Mark. Look, I think that we view that as creating another option within the capital allocation toolkit. We've both been pretty clear that we think it's tough to make the economics on private market timberland acquisitions, [indiscernible]. Again, just given that disconnect, between private market values and where the stocks have been. That said, I think the PotlatchDeltic mill system continues to have some pretty high return investment opportunities within it. And so I don't think that we're going to specify kind of different go-forward capital allocation strategy here. But again, it certainly gives us another arrow in the quiver, so to speak, as we think about deploying capital allocation strategy to maximize value per share.

Yes. When you think about it, Mark, this is Eric. The 1 thing that PotlatchDeltic is getting out of this transaction is we're partnering with somebody that's got a super strong balance sheet. And so to the extent that we do have those options to grow wood products, and it may not be growing with products volume. It could be investments to improve wood products cost structure. We're partnering with somebody who can really help us implement that kind of a strategy. So again, it really is a win-win when you think about it.

Okay. Great. And then please just tell me asked and answered, if that's been the case, again, I was late getting in, but in terms of the synergies, could you give kind of more specifics of how you get them and the timing of how they will come through?

Yes, Mark, this is Wayne. In our prepared remarks, we did mention $40 million of annual cost synergies, which really will primarily be driven by corporate and operating overhead savings. And there are several functions and costs associated with being a public company that can be consolidated and better leverage through our increased scale. And we have a detailed plan, we'll execute. We did a bottoms-up analysis. And over time, we think we'll even identify additional benefits based on our previous experience with previous deals. But yes, from a timing perspective, we think at least half of it will be achieved in the first year with the remaining in the second year.

Your next question comes from the line of Ketan Mamtora with BMO Capital Markets.

Maybe a question for both. We've seen this kind of discount to NAV, a pretty wide level for an extended period of time. From your respective perspective, can you talk about sort of what will help to drive or narrow that discount with this combination, right? I mean we've seen even larger peer trading at a significant discount, so I'm just curious, as you think about the potential benefit of this, how do you think about kind of the discount to private market timberland is? How does that narrow?

Yes. Ketan, this is Eric. I'll give my remarks and then Mark can chime in. From my perspective, public market investors are very focused on the near term. And for our businesses, we're really tied to the housing cycle at the end of the day. It's all about sawlog prices and to some extent, lumber prices. And as long as we're tied to that housing cycle, public company investors look at us, and they just found with such a relatively weak housing backdrop. Now that being said, I do think the tide is turning, the 10-year treasury was at 4% this morning. There's talk of it going down to 3 as we can get lower mortgage rates and lower finance costs for multifamily developers, I think demand will come back. It's not a question of if, but when. So when I think the housing story improves, I think investors will come back in the housing, and we're a great deep discount way to play the housing cycle.

Yes. I'd just add to that. Both of us have been pretty clear that we believe our stock prices are trading up pretty wide discount to intrinsic value. That said, because we're both trading at a significant discount. We thought that the relative valuation, you ultimately work for this deal to come together. Look, we think that this transaction is going to give the combined company a lot of flexibility to be nimble and opportunistic around capital allocation. In addition, as we said, with $40 million of estimated synergies, we think this alone will translate to a pretty material value uplift for the combined company. Of course, there are also benefits here in terms of a larger scale, which will translate to a better trading liquidity, and we think an improved cost of capital over time. So again, we really see a lot of value creation potential in this merger, and we believe that the combined company will be better positioned to close that NAV gap moving forward.

Understood. No, that's helpful perspective. And then 1 more. I mean, clearly, balance sheet coming out of this or the combined something will be really strong. As you sort of think about Tampa allocation, can you talk about sort of how would you think about whether it is growing in the wood product side or on the timberland side or kind of repurchasing stuff. Can you just lay it out for us in terms of where you think is -- you see the most relative attractiveness at this point.

Ketan, this is Mark. Look, our view around capital allocation has always been to be nimble and opportunistic with a view towards building long-term value per share. We don't go into any period of time with prescriptive capital allocation targets. We really try to play the hand that we're dealt. And I think PotlatchDeltic has really employed a capital allocation strategy with a very similar mindset. So we're very much align on that front. And so again, we're going to continue to execute a strategy on a go-forward basis as much as we have in the past. We're going to look at the opportunities we have available. Look at what we think is the best opportunity for our shareholders to deploy capital, and we're going to look to execute on that. And that could be investments in wood products mills, that can be timberland acquisitions. Right now, obviously, the buyback opportunity is still quite compelling. But the pro forma company will still have a quite strong balance sheet about 2.5x pro forma net debt to EBITDA. So we'll feel have a fair amount of capital allocation capacity. And look, as we realize synergies and grow the cash flow over time, that capital allocation capacity will just expand.

You have a follow-up question from Mark Weintraub with Seaport Research Partners.

So Mark, you just mentioned there how at the end of the transaction, you're about 2.5x net debt to EBITDA. How should we think about longer-term target levels for financial leverage or obviously, there's volatility in the earnings stream, so I don't know if it's necessarily just net debt to EBITDA. But what are kind of the longer-term debt levels that you think are optimal?

Yes. We laid out a high-level financial strategy in the IR deck that was published this morning. And I think, look, our mindset is relatively similar as it was coming into this. We had indicated a new leverage target of less than or equal to 3x net debt to EBITDA alongside our asset disposition and capital structure realignment plan. Obviously, we're going to be combining the Board. We'll be kind of reassessing overall strategy and financial policy. But I think we're both very committed to a conservative balance sheet as well as investment-grade credit ratings. It's obviously the introduction of the wood products manufacturing business. We'll introduce some more volatility into that kind of over-the-cycle earnings stream. But our general thinking is that we would still look to maintain very conservative leverage profile, factoring in having more of an over-the-cycle view of that lumber contribution.

Super. And I mean I believe Potlatch in the past has shared a view of kind of the over-the-cycle lumber contribution. Is it fair to say that, that's sort of the base understanding that you'll be using as you think that through as a combined company.

Yes, Mark. Our view is, over the cycle, lumber margins average $100 per $1,000. We're obviously nowhere near that level right now, but I do think the cycle is turning with these duties, with these tariffs, with interest rates coming down and improved housing backdrop. I saw the Senate put forward some bill this morning to improve housing conditions in the United States. So I do think there's going to be a turn here. And eventually, we'll get we'll get prices back up, and we'll get margins back up to $100 a $1,000 over the cycle.

Great. And 1 last 1 for me. I assume the merging of these companies has no implications for the pricing structure contracts that you have out in Idaho for sawtimber, is that correct?

Yes. No, that won't be affected by this.

That concludes our question-and-answer session. I will now turn the call back over to Collin Mings for closing remarks.

Thank you. I'd like to thank everybody for joining us this morning. Have a good rest of the day.

Ladies and gentlemen, this concludes this call. Thank you all for joining. You may now disconnect.