Rayonier Inc. REIT

Hello everyone, thank you for joining us and welcome to the Q2 2026 Rainier Inc. Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. 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 Ray Anear's Investor Teleconference covering second quarter earnings. Our earnings statements and financial supplement were released yesterday afternoon and are available on our website at rayanear.com. Thank you for joining us. Thanks, Colin. Good morning, everyone. Before turning to our second quarter results, I'd like to provide a brief update on our merger of equals with Potlatch Deltic, 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 six 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 comprise 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're 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, Rainier reported gap 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 Potlatch-Delta operations, along with solid operational performance across our segments. Moving on to our segment results, let's start on page nine 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 potlatch deltic 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 saw log markets, demand was steady as lumber prices climbed throughout the second quarter. Looking ahead, we expect that sawmills in the US 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 saw log 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 container board 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 of Jessedy Bedop 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 Potlatch Deltax, 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 saw log prices higher in Idaho in the quarter, as a significant portion of our saw log 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 Potlatch Delta'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 pre-merger period. The improvement in lumber markets during the second quarter was driven primarily by supply side factors as milk 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. Thank you for joining us. 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 two 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 at 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 portfolios. Thanks, Mark. Moving to our capital resources and liquidity.

Our cash available for distribution, or CAD, was $177 million through the first six months of 2026 versus $47 million in the prior year period. The significant increase in CAD was primarily driven by the contribution from the Potlatch Delta businesses coupled with significantly improved real estate results. A reconciliation of CAD to cash provided by operating activities and other gap 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. Robert Schwartz, Mark Bridwell, Rhett Rogers, Thank you for joining us. 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 Potlatch Delta operations starting on January 31st. With respect to our individual segments, starting with our southern timber segment, we expect to achieve foliar harvest volumes of 12.2 to 12.5 million tons, with anticipated harvest volumes of 3.1 to 3.3 million tons in the third quarter. We expect regional saw timber and pulpwood prices to remain relatively stable for the third quarter compared to the second quarter. Thank you for watching. In our northwest timber segment, we expect to achieve full-year harvest volumes of 2 to 2.2 million tons, with anticipated harvest volumes of approximately 600,000 tons in the third quarter. We expect overall saw timber prices to be modestly higher in the third quarter compared to the second quarter, primarily due to higher index saw log prices on a portion of the volume coming from our Idaho timberlands. Thank you for watching. We further expect lumber shipments in the third quarter of approximately 320 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 of 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 continuing 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 to $35 million. For the full year, we continue to expect an adjusted EBITDA contribution from our real estate segment of $180 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. Thank you for joining us.

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 Potlatch Delta 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.

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. Your line will remain open after your first question for follow-up questions. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality, and if you are muted locally, please remember to unmute your device. Please stand by now while we compile the Q&A roster. Your first question comes from the line of Matthew McKellar with RBC Capital Markets. Your line is open. Please go ahead.

Hi, good morning. Thanks for taking my questions. Maybe first, on the Timberlands transactions 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? Thank you.

Hey 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 solution 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 saw logs in Idaho that you noted, what trends are you seeing in saw timber prices in the Pacific Northwest into Q3 here? And is the fire activity having any kind of noticeable impact on supply in the region? Thank you.

Yeah, Matt, thanks to Swain. Yeah, certainly you're right with index saw logs and where pricing's at, we're seeing higher index log prices in Idaho. But as it relates to the Pacific Northwest, yeah, 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.

Thanks. I'll turn it back. Appreciate the perspective.

Your next question comes from the line of Anthony Pettinari with Citi. Your line is open. Please go ahead.

Good morning. Good morning. Good morning. Mark, I think you said that pulpwood prices, you were seeing some improvement, maybe exiting the quarter, and you referenced container board price hikes, which I guess we've seen. I'm wondering if you can give any kind of finer point on that. Thank you for joining us.

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. It's been a challenging few years for pulpwood pricing. We've 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 container board 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, 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 LBL. 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 AR-7 would bring duties down modestly from current levels, it's worth putting that in context. Even at the modestly lower tariffs, 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, Robert Schwartz, Robert Schwartz, Robert Schwartz, 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 months. And so our expectation, it's going to be a little bit later in the year, perhaps than initially anticipated.

Okay, that's very helpful. I'll turn it over.

Your next question comes from the line of Buck Horn with Raymond James. Your line is open. Please go ahead.

Hey, good morning, guys. Quick question on the harvest volumes planned for the back half of the year. Just feels like you had a little bit of, you know, extra activity in the second quarter, maybe due to drier weather conditions. I'm just wondering to what degree there's some conservatism there. Robert Schwartz, Robert Schwartz, Robert Schwartz,

I think, look, we're farther through the year. Our team has had some additional opportunity to evaluate the combined harvest plan. You know, they're continuing to optimize. So, yeah, while we were a little bit higher than we anticipated, just given favorable harvest conditions, you know, that doesn't change our overall outlook for the year. Okay.

Perfect. And just one quick one on just, you know, 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?

Yeah, 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 Thank you for joining us. Thank you so much for joining us. Perfect. Appreciate it, Collin. Thanks, guys. Congrats.

Your next question comes from the line of Mike Roxland with Truist Securities. Your line is open. Please go ahead.

Yeah, thank you, Mark, Wayne, Collin, for taking my questions. First one, just, you know, over the last few years, you've been selling timberland in the Pacific Northwest. I think at one point, maybe two or three years ago, you had more than 400,000 acres in Washington. With the current 1031, you now have, you know, 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? 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 that makes us want to necessarily shrink there. I think it's just the relative opportunity set. Look, in the U.S. South, there's just a lot more embedded option value around HB real estate as well as land-based solutions. Thank you for joining us. Seeking to upgrade the residual portfolio by minimizing the component of hemlock in the portfolio and trying to improve the overall age class balance. You'll still really like our position there. I'd say our overall portfolio value on a per acre basis has improved by virtue of the transactions we've done in the Northwest. 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 call there. And then just in terms of the share purchases, obviously, there's been a wide discount to NAV. You guys have a solid balance sheet post-trigger transformation the last few years. Why not be even more opportunistic and buy 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 on a discount to NAV?

Robert Schwartz, Robert Schwartz, Thank you for joining us. 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.

Got it. Thank you.

Your next question comes from the line of Mark Weintraub with Seaport Global. Your line is open. Please go ahead.

Thank you. Mark, two questions. One, just sort of building on a little bit on the kind of a data center question and just more generally, housing's 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, you know, obviously selling land to data centers and then relatedly, I'm sure solar is a part of this answer and we've also got, you know, 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 dots along those lines?

Yeah, 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 it. They're sorting through interconnection costs. We've obviously seen changes in the regulatory environment and some of the financial incentives around solar. Robert Schwartz, Robert Schwartz, Robert Schwartz, Robert Schwartz, Robert Schwartz, Robert Schwartz, Robert Schwartz, I think over the next two, three 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 interests that we're seeing on the data center development. And I guess one other point I'd make around 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? You know, towards the end, solar option expiration. And if that was sort of how does, why is sort of the timing tending to coincide with when things are coming to an end?

Yeah, they certainly can happen before the end of an option expiration. And we've certainly seen that within our portfolio of options where, you know, counterparties have, you know, have converted the option over to a purchase or lease prior to that option termination. But recognize, you know, what's underlying that typical five to seven 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. You know, there is a pretty protracted regulatory process. And so, you know, again, we don't expect that we're going to see, you know, Really early terminations or really early conversions just because there is a duration of time required for that due diligence.

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

Thanks for the call, Eric.

and a reminder that if you would like to ask a question, please press star 1 now on your telephone keypad to join the queue. Your next question comes from the line of Ketan Mamtara with BMO Capital Markets. Your line is open. Please go ahead.

Thank you. Thank you. Good morning, Mark, Wayne. Maybe first question, coming back to capital allocation, Mark, you talked about, you know, 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 sort of 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, you know, leverage metrics and making that determination of where, you know, our comfort level. And we've published some of those in the past. I mean, most recently we've said we want to maintain leverage, you know, net debt, EBITDA inside of three times. And, you know, we're still, I think, you know, within that range. But like I said, you know, that capacity is not limitless either. And we're certainly mindful, you know, even more mindful of leverage levels today, just given the higher interest rate environment that we're in.

Carter. Now that's helpful. And then, you know, Sherry Purchase is loud and clear that that's kind of an area of focus. Outside of that, are there sort of opportunities for 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.

Yeah, 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 from me on Solar. Mark, can you just 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. and given that we've been building up this portfolio over really the last three to four 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 is built up over the period of the last four years.

Got it. That's helpful. Good luck in the back office.

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.