The market seems to have slowed, aside from a handful of large deals – According to RISI, activity levels have slowed significantly, in-line with market commentary as of our April Timberlands report that indicated slowing market conditions. Timberland owners seem to be content holding onto existing positions and reaping healthy timber revenues in the current environment. Meanwhile, interest in timberland investing has increased given the perception of timberlands as an inflation hedge, while there also seems to be a significant amount of surplus capital available to bidders, which together are tailwinds to transaction values. While some industry contacts stated that they believe that timberland owners may be holding onto existing positions while waiting for potential carbon-related benefits to emerge, RISI also noted that interest seems to be shifting toward in-ground carbon capture and solar.

REIT M&A: PotlatchDeltic combining with CatchMark – Potlatch announced on May 31 that it was offering 0.23 of its common shares for each common share of CatchMark, equivalent to a price per share of $12.88 for CatchMark (a 55% premium to its share price of $8.30 as of May 27, 2022). The transaction will add approximately 350,000 acres of timberlands in Alabama, South Carolina, and Georgia to Potlatch’s portfolio. Pro-forma the transaction, the company will have approximately 2.2 million acres of timberlands, including 626,000 acres in Idaho and over 1.5 million acres in the U.S. South (please click here and see page 2 for more information). The transaction metrics map to Potlatch paying ~$2,600/acre for CatchMark. While this would be on the high end for recent US South timberland transactions (please see Exhibit 2), management noted potential HBU opportunities given that some of CatchMark’s timberlands are located near population centers. For context, Potlatch’s combination with Deltic (announced in October 2017; please click here) implied a $2,300-2,400/acre valuation. We believe that a significant motivator for Potlatch in this acquisition was to maintain its REIT status, given the exceptional Wood Products cashflow of late.

Court-ordered sale of Texas property could fetch a big valuation – According to RISI, a 41,000 acre pine property in East Texas near Houston is likely to fetch a valuation in the $3,000-4,000/acre range given significant HBU opportunities. RISI also noted the property is well-stocked with timber and is expected to be sold to a private buyer. Bids are due on June 3.

Hancock’s Chattahoochee package sold; three-state Triptych plantation under contract – According to RISI, Triptych, which is a one-piece, three-state, 86,100-acre plantation in Oklahoma, Mississippi, and Texas, is under contract and should close in early July. Hancock, the current owner, also recently sold its 31,420 acre Chattahoochee package in northeast Alabama and northwest Georgia to TIR for $64.8 million, or ~$2,064/acre.

Ceres pricing in the $2,150/acre range. Hancock’s 238,200 acre Ceres plantation in East Texas and Louisiana will be sold to Molpus and BTG (with each acquiring half) for $512 million. This implies a valuation of approximately $2,150/acre, which is slightly above the ~$2,000/acre estimate for general timberland we included in our February Timberlands market report (please click here). Detailed pricing will be available following the closing of the transaction.