RYN - NYSE

Welcome, and thank you for joining Rayonier's Third Quarter 2023 Teleconference 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 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 Dave Nunes, our CEO. Dave?

Thanks, Collin, and good morning, everyone. Before reviewing our results for the third quarter, I'd like to first discuss two announcements made concurrent with our earnings release yesterday afternoon. the executive succession plan as well as a review of our initiatives to enhance shareholder value. Then I'll provide some high-level comments on the quarter before turning it over to Mark McHugh, President and Chief Financial Officer, to review our consolidated financial results. We'll then ask Doug Long, Executive Vice President and Chief Resource Officer, to comment on our U.S. and New

Thanks, Dave, and thank you for the kind words earlier. I'm truly honored that the Board has entrusted me to lead Rayonier into the future, and I know that I'll have very big shoes to fill. It's been a privilege to work alongside you and the rest of the outstanding team at Rayonier for the past nine years. And I'm very excited about the opportunities that lie ahead. That said, we still have one more earnings call and plenty of work to get done before you retire, so I will save the formal congratulations for next quarter's call. But I did want to take a moment to acknowledge the extraordinary leadership and commitment that you've given to this organization over the past decade. We appreciate you more than you know. Now moving on to our financial highlights on Page 5 of the supplement. Sales for the third quarter totaled $202 million, while operating income was $35 million and net income attributable to Rayonier was $19 million or $0.13 per share. Pro forma EPS was also $0.13 per share as we had no pro forma items in the quarter. Adjusted EBITDA was $79 million in the third quarter, up from $65 million in the prior year period. On the bottom of Page 5, we provide an overview of our capital resources and liquidity. Our cash available for distribution, or CAD, for the first nine months of the year was $114 million versus $159 million in the prior year period. The decrease was driven by lower adjusted EBITDA, higher cash interest paid and higher capital expenditures, partially offset by lower cash taxes. A reconciliation of CAD to cash provided by operating activities and other GAAP measures is provided on Page 8 of the financial supplement. We closed the third quarter with $108 million of cash and $1.5 billion of debt. At quarter end, our weighted average cost of debt was approximately 3.2% and the weighted average maturity on our debt portfolio was approximately five years with no significant debt maturities until 2026. Our net debt of approximately $1.4 billion represented 25% of our enterprise value based on our closing stock price at the end of the quarter. Pro forma for the Oregon disposition and the planned paydown of debt, our leverage ratio will decline by 0.7 turns to roughly 4.2x net debt to adjusted EBITDA, an important first step toward achieving our new credit ratio targets. Following this debt pay down, we will have no unhedged floating rate debt, and our weighted average cost of debt will decline to approximately 2.8%. Within the supplemental presentation posted to our website, we detail the key aspects of the Oregon sale as well as provide a detailed review of our debt and interest rate swap maturity profile. As Dave discussed earlier, we are adjusting our leverage target from less than or equal to 4.5x to less than or equal to 3.0x net debt to adjusted EBITDA. And we are commensurately reducing our net debt to asset value target from less than or equal to 30% to less than or equal to 20%. With a long-dated and well-staggered debt maturity profile as well as a low-cost primarily fixed rate debt structure, we can afford to be selective and opportunistic in achieving our enhanced leverage targets over the next 18 months. I'll now turn the call over to Doug to provide a more detailed review of our timber results.

Thanks, Mark. Let's start on Page 9 with our Southern Timber segment. Adjusted EBITDA in the third quarter of $38 million was $1 million or 3% above the prior year quarter, driven by higher volumes and non-timber income, partially offset by lower net stumpage pricing and higher costs. Total harvest volume rose 21% versus the prior year quarter, primarily driven by an increase in pine sawtimber volumes from the successful integration of acquisitions we completed in late 2022. Average sawlog stumpage pricing was $29 per ton, a 13% decrease compared to the prior year period. The moderation in pricing reflected reduced market tension across our operating areas due to drier weather conditions, softer demand from sawmills and less competition from pulp mills for timbersaw volume. Meanwhile, pulpwood net stumpage pricing fell 27% versus the prior year quarter to roughly $17 per ton as weaker end market demand and dryer weather conditions contributed to softer market conditions. Overall, weighted average stumpage prices in the third quarter fell 17% versus the prior year quarter to roughly $21 per ton. Market conditions, particularly for pulpwood, have been challenging this year as customers reduced operating rates to both destock finished product inventories and reduced production levels for a weaker end market demand environment. However, we have been encouraged by recent improvements in mill operating rates, which have led to pricing stabilization across our U.S. South footprint. We believe that the work we've done over the past several years on strategically positioning our Southern portfolio towards the most tension wood baskets will continue to be a competitive advantage. Moving to our Pacific Northwest Timber segment on Page 10. Adjusted EBITDA of $8 million was $5 million below the prior year quarter. The year-over-year decrease was primarily driven by lower net stumpage realizations, higher costs, lower harvest volumes and lower non-timber income. Volume decreased 6% in the third quarter as compared to the prior year period, primarily driven by a 27% reduction in pulpwood volume. At $108 per ton average delivered domestic solid pricing in the third quarter fell 10% from the prior year period, primarily due to weaker demand from domestic lumber mills, coupled with reduced tension from export markets. Meanwhile, at $33 per ton, pulpwood pricing decreased 35% versus the prior year quarter as end market demand deteriorated relative to the favorable market dynamics seen last year. Moving to New

Thanks, Doug. As detailed on Page 12, our Real Estate segment delivered strong third quarter results. Real Estate sales totaled $31 million on roughly 4,300 acres sold at an average price of $5,800 per acre. Real Estate segment adjusted EBITDA in the third quarter was $19 million. Drilling down, Sales in the improved development category totaled $3 million. In our Heartwood development project south of Savannah, Georgia, we closed on $1.8 million of sales during the quarter, consisting of 24 residential lots at an average base price of $45,000 per lot and 1-acre quick service restaurant site for roughly $530,000 per acre. In our Wildlight development project north of Jacksonville, Florida, sales consisted of a 2-acre convenience store site for $1.4 million or roughly $735,000 per acre. We also generated $6.4 million of other revenue, which consisted of deferred revenue recognition upon the completion of post-closing construction obligations as well as lost revenue true-ups in our Wildlight and Heartwood development projects. Overall, we continue to believe that both our Wildlight and Heartwood development projects are well positioned and will continue to benefit from favorable migration and demographic trends, relatively affordable price points and a diverse mix of residential, commercial and industrial end uses that each help to catalyze demand for one another. Unimproved development sales during the quarter consisted of a 10-acre site in Nassau County, Florida for $114,000 or roughly $11,000 per acre. Turning to the rural category. Third quarter sales totaled nearly $20.5 million, consisting of approximately 3,800 acres at an average price of roughly $5,400 per acre. Key transactions included a 1,300-acre sale in Polk County, Texas for $6.1 million or roughly $4,900 per acre and a 460-acre sale in Walker County, Texas for $2.8 million or roughly $6,100 per acre. Overall, we are encouraged by the continued strong demand for rural land despite the higher interest rate environment. Lastly, during the third quarter, we also closed on $1.1 million of nonstrategic timberland sales consisting of approximately 500 acres at an average price of roughly $2,300 per acre. Now moving on to our outlook for the balance of the year. As Dave mentioned earlier, we are on track to achieve the higher end of our prior full year adjusted EBITDA guidance of $275 million to $300 million. With respect to our individual segments. In our Southern Timber segment, we expect full year harvest volumes consistent with the 7.2 million to 7.4 million ton range we provided in August. While we remain encouraged by recent conversations with our customers and the stabilization in pricing we've seen across most of the operating areas in the U.S. South, we expect that our weighted average log pricing will soften a bit in the fourth quarter as compared to the third quarter due to a shift in regional sales mix. Overall, we expect to achieve full year adjusted EBITDA in our Southern Timber segment at the higher end of our prior guidance range of $150 million to $155 million, driven by improved outlook for non-timber income. In our Pacific Northwest Timber segment, we expect full year harvest volumes toward the lower end of the 1.4 million to 1.5 million ton range we provided in August. Following a brief uptick in lumber pricing, which boosted log demand in the third quarter, we expect that fourth quarter weighted average delivered log pricing will decline modestly. However, we expect that lower per unit cut and haul costs will translate to modestly improved net stumpage realizations versus first half levels. Overall, we expect to achieve full year adjusted EBITDA in our Pacific Northwest Timber segment toward the lower end of our prior guidance range of $30 million to $34 million due to continued softness in end market demand and lower anticipated harvest volumes. In our New

Thanks, Mark. I'd like to wrap up our prepared remarks by first acknowledging the pressure our stock has been under this year and in particular, the second half of the year, in which our share price has declined by approximately 20%. While we can point to a host of potential reasons for this, such as continued macroeconomic headwinds, softening markets for lumber and pulp or the recognition that interest rates will be higher for longer, the bottom line is we can't just sit on our hands. As we have done in the past, we plan to proactively respond to current market dynamics with a view toward building value per share, even if that means shrinking our portfolio over the intermediate term. To this end, the rollout of our initiatives to enhance shareholder value, which I touched on at the outset of the call, is intended to capitalize on the current dislocation in the public markets. As evidenced by the pricing of our pending Oregon sale, there is a wide disconnect between private market timberland values and the public market valuation of Rayonier. Our plan is to sell $1 billion worth of timberland assets is designed to capture some of this value arbitrage and to use the proceeds to reduce future debt refinancing costs, improve our debt metrics and return capital to shareholders. The scale of our portfolio and our pure play timber REIT structure afford us the flexibility to pursue this plan, and we are confident that we can execute on the objectives that we've laid out. While ambitious in scale, this initiative is entirely consistent with our long-standing commitment to nimble capital allocation and active portfolio management, both of which have always been key cornerstones of our strategy to create long-term value for our shareholders. Importantly, compared to many other capital recycling initiatives companies undertake that ultimately prove dilutive to shareholders, we believe that we are uniquely positioned to engage in a process that will allow Rayonier to reallocate capital and reduce future debt refinancing costs in a manner that will be accretive to both CAD and NAV per share. Fundamentally, while there continues to be challenges presented by the downward pressure on lumber prices, rationalization of pulp production and an uncertain economic outlook, we are seeing encouraging signs of stabilization and improvement across many of the markets served by our timber operations. We are fortunate to be in some of the most tensioned wood baskets in the U.S. South with 72% of our southern acreage located in top quartile markets. We think this provides for both downside protection in soft markets and stronger upside potential in rising markets. Our Pacific Northwest Timber segment, while facing near-term market headwinds, nevertheless, is well positioned going forward with a heavier concentration in Washington, a strong Douglas fir mix and diversification across both domestic and export markets. In our New

[Operator Instructions] And our first question for today will come from Mark Weintraub of Seaport Research Partners. Your line is open, sir.

Thank you. First, Dave, congratulations. I really appreciated your insights and your steadiness over the years. I know you're going to be on for another call, too. So I'll just stop there and obviously, congrats to Mark and April. So first question is, so you -- you're talking about $1 billion in asset sales. Have you, at this point, identified what's likely going to be the acreage that's going to be a part of that program? Or is that more still a conceptual target at this juncture?

This is Dave, and thanks for your opening comments. In terms of that question, I'd say that we're in the process of that identification. It's part of the reason that we laid this out as an 18-month exercise is that we're not announcing this with a known set of targets, but we have a pretty rich array of criteria that we use for all portfolio moves. And so that's the way we're approaching it right now other than the fact that we've obviously closed on this -- or we've reached contract on this Oregon property that was laid out.

Okay. Great. And can you share with us what some of those key criteria are? And perhaps why $1 billion was the right number in your judgment for the program at this juncture?

I'll touch on the first part, and I'll let Mark kind of pick up on the scaling of the target. But we look at a lot of factors. We talk a lot about understanding optionality. We look at log markets. We look at cost. We look at the tension, the growth drain relationships, the higher and better use land. We look at our scale in the region. We looked at alternative uses for land. And so it's a pretty wide array of things that we will regularly consider when we think about portfolio moves. So all of that will kind of come into play. And I'll let Mark touch on the second part of your question.

Yes. Sure, Mark. Just in terms of the sizing of that asset disposition program. If you look at -- well, first, I'd start by saying that there are really two main objectives. One was to reduce leverage, just simply given the interest rate environment that we believe that it makes sense to maintain a lower leverage profile on the company in this environment. And secondly, obviously, we see a significant disconnect between private market values and public market values today and we felt compelled to capitalize on that. So in terms of the sizing, based on the midpoint of our 2023 EBITDA guidance, and if you assume a pro forma adjustment for dispositions, we would need to deploy about $600 million towards debt pay down to achieve our new leverage target of less than or equal to 3x net debt to EBITDA. So that implies that there could be up to $400 million available for return of capital to shareholders. Of course, we could choose to delever beyond three times and our outlook for EBITDA could translate to more or less proceeds being applied toward debt paydown as we look to achieve that new target. It's also worth noting that as a REIT, we generally look to distribute 100% of our REIT taxable income to avoid any corporate-level tax. And to the extent that we sell low-basis assets in this program, that's going to generate significant retaxable income, which would also dictate a need for one of more special distributions. And so as we thought about kind of the overall sizing of that program towards kind of both achieving our leverage targets, as well as capitalizing on that disconnect, that felt like the right scale to proceed.

Okay. That makes a lot of sense. So recognizing that there are going to be some of these special distributions likely required, would you be anticipating there would be also cash available for share repurchase if the stock remains depressed relative to your view of valuation?

Yes. Sure. We'll look at both alternatives certainly. And given the disconnect that we see today, we recognize the value accretion that can be realized through share buybacks. And so we will continue to evaluate both alternative forms of returning capital to shareholders, really with a view towards building long-term value per share. Just recognizing that some portion, there may be a distribution requirement for certain portions of those assets that we may look to divest.

Okay. And just to confirm, if you are selling core timberlands, that's considered good REIT income. So for tax purposes, there would -- is it correct to say there would be no tax leakage, if it's in the U.S. I guess...

Actually is assuming you distribute -- I mean we're required to distribute 90% of our REIT taxable income as a REIT. But to the extent that you retain that 10%, you owe corporate-level taxation on that. And so it doesn't make sense to do that. That leads to tax leakage. And so like I said earlier, generally, we are looking to distribute 100% of that tax income. But yes, portfolio dispositions like this would constitute good REIT taxable income.

Right. And of course, that's going to be -- the REIT income is the gain, not the entire sale of the timberlands to...

That's correct. I recognize we have different bases in different regions and different states. And so depending on where we choose to proceed with dispositions, there could be a differential level of income associated with that. There's not sort of one percentage that I could give you that would kind of translate to what is the margin on kind of basis relative to sale value.

Super. I'll turn it over. Thanks so much.

Thanks Mark.

The next question will come from Anthony Pettinari of Citibank. Your line is open.

Good morning. Congratulations to Dave, Mark and April on the transitions. And Dave, thanks for your leadership really in the industry over the past decade. Thank you. I guess maybe just on the disposition. I think the sale in Oregon really reduces your presence in the state. And I'm just wondering if you could talk a little bit about the Pacific Northwest footprint, obviously, with the Pulp acquisition and I think mostly exiting Oregon. How do you think you're positioned there with the remaining footprint?

We've always liked our footprint in Washington. And certainly, the Pope transaction greatly strengthened that in a number of ways. The move that we did into Southwest Oregon in 2016, when we acquired these assets was really designed to create a beachhead. It was not considered kind of the sufficient scale that we like to see. But it was a nice beachhead and it had some nice age class complementing ages relative to our then legacy holdings. And as we discussed in the prepared remarks, a, there has been less deal flow in that region. And b, it's just been at pretty strong pricing. And so we've been unsuccessful in growing in that region. And so that is why this translated into a good candidate. We still have a small holding in Northwest Oregon that's tributary to Longview that we really like that market. And we think that our Washington Holdings certainly have a nice scale and now an improved Doug-fir mix and lower operating costs with more ground-based logging. And so we think it will be fine in terms of how that Northwest portfolio performs.

Great. Great. And with the strategic initiatives, can you talk about kind of the long-term positioning of the dividend and the dividend coverage? And the strategic initiatives seem very logical in terms of taking advantage of the arbitrage between public and private markets. But I guess just devil's advocate, looking back at some other timber owners, Plum Creek would sell land and buy back stock, and there was sort of perception that they were selling land to support the dividend. I'm just wondering if you could kind of talk about the dividend and stress testing it into '24?

I mean, just to start, just to be absolutely clear, we do not intend to include proceeds received from this disposition program as part of our cash available for distribution. We obviously characterize asset portfolio moves like this as large dispositions, which we specifically exclude from adjusted EBITDA and our calculation of cash available for distribution. So this is not a strategy of churning land to generate otherwise unsustainable cash flow. As it relates to the dividend funding, we've been very consistent in our message as well as our actions over the years. Even during the pandemic when visibility was very limited, we maintained our distribution. We previously indicated that we expect our dividend this year to be modestly underfunded. However, with the actions that we've taken, coupled with our updated outlook for EBITDA towards the higher end of the range, we've largely closed that funding gap on a pro forma basis. As we said in the past, our approach to the dividend is one that focuses on a payout ratio over time and not in a given quarter or even a given year. We're really focused on setting the dividend at a level that we believe can be sustained over the long term, recognizing that we're going to go through different business cycles and economic cycles from time-to-time. We also want to have the ability to grow the dividend over time as the cash flow from our portfolio improves, and we certainly see those opportunities over the longer term with growth in our land-based solutions business, in particular. The plan that we announced yesterday is very consistent with the goal of improving our cash flow profile over time. We expect to complete this plan in a way that is going to be accretive to cash available for distribution. And to that end, as we noted in our prepared remarks and illustrated in the presentation on the website, the Oregon disposition and the application of those proceeds is expected to generate CAD per share accretion of approximately 6%. And we expect that these additional dispositions will generate further CAD accretion, which will ultimately accrue to improving dividend funding capacity over time.

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

The next question will come from Paul Quinn of RBC Capital Markets. Your line is open.

Yes. Thanks so much. Good morning, guys. And congratulations, Dave, on the retirement and Mark on the promotion. Maybe just taking a look at following this Oregon transaction, you'll have no floating debt and it sounds -- and your debt cost is down at 2.8%. Maybe you can just remind us of what you've got over the next couple of years in terms of refinancing.

Yes. Sure, Paul. I'll take that. We posted a detailed presentation to our website in conjunction with the announcement of the asset disposition and capital structure realignment plan. that lays out our debt maturity profile as well as our swap maturity profile over the next several years. And so just to be clear, we have $150 million debt that is currently floating that we intend to repay with the proceeds from the Oregon disposition. We have another $150 million of debt that's actually due 2028, but it becomes floating through a swap maturity next year. So August of 2024. And that's the only floating rate debt exposure that we have through 2025. So our next debt maturity is not until 2026. And so we really feel very well positioned in terms of our ability to manage this targeted leverage reduction and really maintain a very low cost of debt along the way.

Okay. That's helpful. And then I'm just trying to understand this -- these carbon markets in New

Yes. So first of all, we have always sort of taken somewhat of an opportunistic approach on selling carbon credits in New

I think you did a good job at that, Dave. I'd just say that like you mentioned earlier on, there were some comments made, there was an election year in New

Okay. Great. And then if we could contrast that with what you're experiencing or what you're seeing in the North American market in terms of carbon pricing and when you expect to monetize some of that?

Yes. Keep in mind that in the North American market, you're dealing with voluntary markets. And the pricing is substantially lower than in the New

Yes. I would just add that with our experience over a decade in New

All right. That's all I had. Good luck on the asset sales.

The next question will come from Ketan Mamtora of BMO Capital Markets. Your line is open, sir.

Thank you. And I'd like to offer my congratulations as well. Dave, we've always enjoyed your thoughtful responses and enjoyed listening to you. And Mark, congratulations as well. Maybe to start with on the asset sale program. Are there any regions or wood baskets that you would think that you think are not part of this asset sale program? Or it really kind of just depends on what kind of value you get out of potential sales from any of these baskets or regions?

Yes. I think right now, our mindset is pretty open, and we expect both some inbound interest as well as our own internal assessment of things. And I'd go back to the range of features that we have described. And certainly, there's areas that tick more of those boxes than others, and that will factor very much into our thinking.

Yes, I'd just add to that, Ketan. We noted in our release that we expect to concentrate capital in markets with the strongest cash flow attributes and most favorable long-term growth prospects. And certainly, one of the areas that we're seeing long-term growth potential is really around this land-based solutions business and particularly solar and CCS. We're seeing potentially very meaningful opportunities there in the long term. But those opportunities are geographically concentrated in some select areas. And so as we kind of think about where the growth is likely to come in the business, particularly in the U.S. South, certainly, there are specific areas that we would look to preserve really to kind of capture that nature-based solutions upside over time.

Got it. Okay. So is it fair to say that you would also consider New

Again, as Dave said, we're still going through the process of looking at which assets are going to best suit our objective. So we're not going to comment beyond that at this time.

Okay. No, that's fair. And then just second question, Mark, you talked about sort of $600 million that would get to sort of the pro forma net leverage target, what you guys just talked about. So should we be thinking about as initial proceeds to all go towards the repayment or not necessarily? It would depend following the $150 million that you talked about already. After that, does it depend on kind of what opportunities do you have? Is that the way we should be thinking about it?

Yes, absolutely. I mean we've always preached a nimble approach to capital allocation. and we absolutely expect to stick with that during the course of this disposition program. As I said earlier, we have $150 million of the floating rate debt that's currently far and away, our most expensive debt in the portfolio. We expect to retire that immediately upon completion of the Oregon sale. We have another $150 million that will become floating next year. And so certainly, that $300 million of floating rate exposure will be our highest priority for repayment. But again, as I said earlier, we don't have another debt maturity until 2026, and all of our debt will be fixed at very low rates through that period of time. So we have a lot of flexibility in terms of the timing of deployment of these proceeds, and we're going to, of course, focus that allocation of proceeds on whatever way we think is going to build value per share for our shareholders over this period of time.

Got it, that's very helpful. I've done it. Good luck.

Thanks. The next question will come from Michael Roxland of Truist Securities. Your line is open.

Hi, guys. This is [indiscernible] on for Mike. We had conflicting calls today. Thank you all for taking my questions. and congratulations, Dave. And Mark, I was hoping you could comment on what's happening with pulpwood pricing, particularly in the South. Just given the backdrop and some of the comments we've heard from the major paper players given potentially improving demand looking forward and in the face of capacity closures or some economic downtime. And again, saying the stocking is like included. Could you just talk about how it's played out during the quarter and how you maybe see it playing out into 4Q?

Sure. This is Doug. I'll take that question. So as we discussed on our last call, while there's been some fluctuations kind of imported pricing based on geography or harvest type or mix. We think on an apples-to-apples basis, that pricing period to bottom out in Q2, and we're increasingly encouraged by some of the signs we're seeing in our price negotiations through Q3 and really into Q4. And so I think has historically been the case, we're going to see a shift of volume that goes to our Gulf states from our Atlantic kind of states in Q4. So that improvement pricing that we have seen in some places will be moderated because of the shift and we typically have lower price in the Gulf states. But overall, we feel like we kind of saw the bottom in Q2. Q3 was moving forward in the right direction. And we've seen with some of the mill announcements, you mentioned some of the closures, we've also seen some of the current ones that are an operating area actually step back up and move from 60% to 100% capacity. So we've actually seen increased demand in some of our wood baskets with those closures. And thankfully, our direct exposure to most of the mills that no closures there was very limited. And so we have seen the upside being portrayed in some of the mills that we do have closer relationships too.

Perfect. Thank you. That's very helpful. And then you guys -- we've touched on it briefly during the call today, but could you give maybe a more detailed update on your land-based solutions pipeline or any progress you made during the quarter?

Yes. Sure. Happy to do that. We're going to have an earnings call in February, so I won't go too in depth, but we've continued negotiations with the counterparties, both on the carbon capture storage as well as the solar that Mark mentioned. And those continue to go well and extreme interest in those. We're pleased with where that process goes. Like I said, probably we're really talking more about this in February, so I don't have a lot to quote. We have had increased options on our solar. So we've increased another 2,000 acres added over the quarter and our solar business, bringing us up to about 28,000 acres to the our lease or options. So we have had some move in our solar business.

Again, just to reiterate that point, we do expect our land-based solutions business and kind of the upside potential we see there as being a focal point of our Investor Day that we announced for February 28 of next year. So more to come on that front.

Perfect. Thank you. That's it from me. I’ll turn it over. Thanks, guys.

And our last question for today will come from Buck Horne of Raymond James. Your line is open.

Hi, thanks. Good morning, guys. Most of my questions are answered, but also congrats to everybody on the team and all their promotions and thanks to David for all the hard work over the past decade. Just on the Oregon transaction, do you guys have an expectation for a taxable gain or loss versus your cost basis and what you think the total IRR on that transaction versus the 2016 purchase is going to work out to be?

Yes. We won't disclose the basis around that transaction until it's ready to close, but there will be a substantial gain on that transaction. Recognize that when we acquired that asset, it was pooled with our broader portfolio in the Pacific Northwest. And so that won't necessarily be reflective of a book gain on that specific asset, but rather the pooling effect of combining that asset with the other lands in the Pacific Northwest. And recognize as well that this was a subset of the broader acquisition of the Menasha properties in 2016. And so we haven't provided any specific details around the IRR on that.

The balance of that being in Washington, but...

Got it. Got it. That's helpful. And I guess a broader question about just longer-term dividend sustainability. I understand you're certainly going to be CAD accretive paying down this first tranche of floating rate debt, I think I had to define it for the next tranche, that certainly probably is cash flow accretive as well. But then the rest of the proceeds potentially paying down fairly low-cost fixed-rate debt and/or quite a few large portion of those proceeds also going to special distributions. How you reconcile the longer-term dividend sustainability post the full disposition program?

Yes. So keep in mind that a lot of this design is really not necessarily around the existing debt portfolio. During COVID, we restructured almost all of our debt portfolio, extending the maturity and lowering the cost and essentially other than this one tranche of floating, it was all hedged. And so we feel like we have a very attractive cost of debt today. The issue is as that debt matures and we have to refinance it if we are still in a higher longer interest rate environment, it will substantially change the character of funding that debt. And so what we're trying to do by this measure is get out ahead of that and really prepare for that and have that flexibility, and that's part of why we plan to do this over 18 months. We do not have a gun to our head. We're simply trying to do this in a very thoughtful and deliberate way over that time period.

And Buck, I'd just kind of add to that. As we said in the prepared remarks, we expect to execute this plan in a way that will be CAD accretive on a per share basis. And if you just look at the assets that we just sold in this Oregon transaction and the EBITDA that we've generated over the last three years from that asset. It's very much in line with what we're seeing in private market valuations that those asset level yields can be as low as 2%, 2.5%, 3%. And so as we're looking to execute this disposition program, like we said, we're going to be focusing on concentrating capital in markets that have the strongest cash flow attributes and really looking to divest of markets that have weaker cash flow attributes. And so we do believe that this will be accretive to CAD per share as we move through this program.

All right, guys. Thanks. Good luck.

Thanks Buck.

And that was our final question for today.

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