Rayonier Inc. REIT

Welcome and thank you for joining Rainier's third quarter 2021 teleconference call. At this time, all participants are in a listen-only mode. During the question and answer session of today's conference, press star 1 on your touchtone phone. 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. Colin Mings, Vice President, Capital Markets and Strategic Planning,

Thank you and good morning. Welcome to Ray and Yer's Investor Teleconference, covering third quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our website at rayandyer.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 in Form 10-K filed with the SEC lists 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 two of our financial supplement. Throughout these presentations, we will also discuss non-GAAP financial measures, which are defined and reconciled to the nearest GAAP measure in our earnings release and supplemental materials. With that, let's start our teleconference with opening comments from Dave Nunes, President and CEO. Dave?

Thanks, Colin. Good morning, everyone. First, I'll make some high-level comments before turning it over to Mark McHugh, Senior Vice President and Chief Financial Officer, to review our consolidated financial results. Then we'll ask Doug Long, Senior Vice President, Forest Resources, to comment on our U.S. and New Zealand timber results. And following the review of our timber segments, Mark will discuss our real estate results as well as our updated guidance. We're very pleased to report our strongest quarterly adjusted EBITDA result since our separation into a pure play Timberland REIT in 2014. Specifically, we generated adjusted EBITDA of $115 million and pro forma EPS of 35 cents per share during the third quarter. Adjusted EBITDA exceeded the prior year quarter by 71%. fueled by solid contributions across our timber segments as well as an outsized contribution from our real estate segment due to the closing of two significant development transactions. We continue to capitalize on healthy domestic timber demand in the U.S., favorable log export pricing in New Zealand, and robust real estate market trends in the third quarter. However, wet weather conditions and trucking shortages in the US South constrained production during the quarter, while production in New Zealand was negatively impacted by a government-mandated shutdown in response to an outbreak of COVID-19. Given these headwinds, we were very pleased with the results delivered by our team. As Mark will discuss in greater detail, based on our performance over the first nine months of the year and our outlook for the balance of the year, we're modestly raising our full year 2021 adjusted EBITDA guidance to a range of $320 to $330 million. Drilling down to our different operating segments, our southern timber segment generated adjusted EBITDA of $24 million for the quarter, which was 7% below the prior year quarter. We were encouraged to see Net stumpage prices increased by 16%, but this lift in pricing was more than offset by a 20% reduction in harvest volumes due to wet weather conditions and trucking shortages. In our Pacific Northwest timber segment, we achieved adjusted EBITDA of $13 million, an improvement of 38% from the prior year quarter. This increase in adjusted EBITDA was driven by a 15% increase in sawmill prices as domestic lumber markets remained favorable. In our New Zealand timber segment, third quarter adjusted EBITDA increased 10 percent year-over-year to $20 million. Favorable pricing more than offset a significant increase in export shipping costs, as well as 14 percent lower production volumes due to the government-mandated shutdown, which prohibited harvest activity throughout the country during a two-week period in August. In our real estate segment, we generated record adjusted EBITDA of $64 million, up from $22 million in the prior year period, as we closed on a $38 million unimproved development sale in Kingston, Washington, and a $25 million improved development transaction in our Belfast Commerce Park project south of Savannah, Georgia. Switching gears from the third quarter results, I'd like to provide an update on our timber fund business, which we acquired last year through our merger with Pope Resources. As we previously communicated, the private equity timber funds business was not a good long-term strategic fit for Rainier. I am pleased to report that we have now completed our exit from the timber fund business. During the third quarter, as previously announced, we sold the rights to manage timber funds three and four, as well as our co-investment stake in both funds for an aggregate purchase price of roughly $36 million. We subsequently entered into three separate agreements to sell the remaining fund two timberland assets for an aggregate purchase price of $157 million. Note that one of these transactions closed on September 30th, and is reflected in our third quarter financial results, while the other two transactions close on October 5th and November 1st, respectively, and will be reflected in our fourth quarter financial results. All said, based on Rainier's 20 percent ownership interest in Fund 2 and factoring in the repayment of Fund 2 debt, proceeds to Rainier from the sale of Fund 2 assets will be roughly $24 million. In addition, we expect to receive a carried interest incentive fee with respect to Fund 2 of approximately $14 million. Overall, we view this as a favorable result for the sale process, particularly given the negative impact that last year's forest fires had on roughly 10,000 acres of Fund 2 and Fund 4 properties in Oregon. We believe the successful sale of our co-investments in funds three and four, as well as the properties in fund two, represent a positive outcome for our shareholders as the wind down of the fund business allows us to simplify our operations and allocate capital to other strategic priorities. With that, let me turn it over to Mark for more details on our third quarter financial results.