Rayonier Inc. recently announced that the company has entered into two separate agreements to acquire approximately 172,400 acres of high-quality commercial timberlands located in Texas, Georgia, Alabama, and Louisiana for an aggregate purchase price of approximately $474 million from Manulife Investment Management, a leading timberland investment manager.
The Acquisitions comprise well-stocked and highly productive timberlands located in some of the strongest timber markets in the U.S. South. Approximately 80% of the Acquisitions consist of fee ownership, and the remaining 20% consist of a long-term lease.
Key attributes of the Acquisitions include the following:
Enhances scale in strong markets – the Acquisitions are located across four of the strongest U.S. South timber markets (as measured by average composite stumpage price by region), with a weighted-average ranking of 4.9 out of 22 markets.(1) Pro forma for the Acquisitions, 72% of Rayonier’s two million-acre U.S. South portfolio will be located in top quartile markets, reflecting a competitive and diverse customer mix, balanced timber inventories relative to demand, and strong pricing tension.
Highly productive timberlands – for the acquired fee lands, 72% are plantable with an average expressed site index of 73 feet. This translates to an expected sustainable yield* of approximately 670,000 tons per year, or 4.8 tons per acre per year.
Well-stocked timber inventory with mature age-class – the acquired fee lands contain 7.5 million tons of merchantable timber inventory,* or 54 tons per acre, 66% of which consists of higher-value grade products. Average plantation age of the acquired fee lands is 18 years.
Significant near-term harvest potential – based on the strong productivity, stocking, and age-class profile of the acquired fee lands, combined with the expected harvest from the leased lands, the Acquisitions are expected to generate an average annual harvest volume of approximately 860,000 tons over the next 10 years.
Complementary to existing landholdings – the Acquisitions offer an extraordinarily strong fit with our existing footprint across the U.S. South, which should provide for minimal execution risk and significant operational synergies.
Accretive to cash flow – average annual Adjusted EBITDA** contribution of approximately $25 million expected from timber operations over the next ten years, with additional upside potential from higher-and-better use real estate sales and natural climate solutions (which are not included in the projected financial contribution).
Significant upside / optionality – no wood supply agreements encumber the properties, thus enhancing operational flexibility. In addition, we believe portions of the Acquisitions are well-positioned to capitalize on emerging ecosystem services / natural climate solutions opportunities, including bioenergy, biofuels, and carbon capture and storage.
The Acquisitions are subject to customary closing conditions and expected to close in the fourth quarter of 2022.