Ed Kiker - CFO Dave Nunes - President and CEO Lynn Wilson - EVP of Forest Resources Chris Corr - SVP of Real Estate.

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Michael Roxland - Bank of America Merrill Lynch Chip Dillon - Vertical Research Partners Collin Mings - Raymond James & Associates Mark Wilde - Bank of Montreal Steve Chercover - D. A. Davidson Paul Quinn - RBC Capital Markets Daniel Rohr - Morningstar Mark Weintraub - Buckingham Research Group Chip Dillon - Vertical Research Partners.

Welcome. And thank you for joining Rayonier’s Second Quarter 2014 Teleconference Call. At this time all participants are in listen-only mode (Operator Instructions). Today’s conference is being recorded, if you have objections you may disconnect at this time. Now I’d like to turn the meeting over to Mr. Ed Kiker, CFO. Sir, you may begin..

Thank you and good morning. Welcome to Rayonier’s investor teleconference, covering second quarter earnings. Our earning statements and presentation materials were released this morning and are available on our website at rayonier.com.

I would like to remind you that these presentations will include forward looking statements made pursuant to the Safe Harbor provisions of Federal Securities laws.

Our earnings release as well as our Form 10-K filled with the SEC lists some of the factors which may cause actual results to differ materially from the forward-looking statements we may make. They are also referenced on page 2 of our presentation materials.

With that, let’s start our teleconference with opening comments from Dave Nunes, President and CEO. .

Thanks, Ed, good afternoon everyone.

I’ll make a few overall comments and then I’ll turn it back to Ed to review our financial results and then following that we’ll Lynn Wilson, our Executive Vice President of Forest Resources to discuss in greater detail the results from our Forest Resources segment after Chris Corr, our Senior Vice President of Real Estate will discuss results from the Real Estate segment.

I’d like to start off by just saying how excited I am to be stepping in as the new CEO of Rayonier following the successful spin off of the Performance Fibers business as Rayonier Advanced Materials.

We have a great portfolio of assets with exposure to diverse markets in the US and Asia, a strong balance sheet that will help us grow and an experienced team that will play its expertise in both managing those assets and adding value to our asset while also bringing a disciplined approach to growing our portfolio.

With the spin off now complete Rayonier’s well positioned as an international peer play timber and land-resources company poised for growth. This morning we reported second pro forma earnings of $10 million or $0.08 per share as Ed will detail later these results include a number of impacts associated with the spin-off of Rayonier Advanced Materials.

Switching to our Forest Resources segment, we benefited from a continued strong timber demand and improving prices across our major operating regions in the US South. Across the South we’re encouraged by improving demand and prices associated with gradual improvement in housing starts as well as a tight supply due to continued wet weather.

Despite the increased log inventories in China which resulted in lower delivered log prices in our New Zealand operations, we were able to maintain strong pricing in the Pacific Northwest as a result of stumpage sales awarded during the first quarter.

Lynn will also detail the progress we’re making on the acquisitions front where year to date we currently have either closed or under contract nearly 47,000 acres of quality timberland for total value of $93 million.

Real Estate results improved significantly over the last quarter primarily reflecting the closing of one large non strategic timberland sale in Florida as well as improve rural and development sales volumes. And as Chris will discuss we’re making good progress on strategic initiatives regarding our development properties.

We continue to generate solid operating cash flows with second quarter cash available for distribution that was comparable to the prior year period and excluding results of discontinued operations and other costs on the spin-off. So with that I’ll turn it back to Ed and we’ll take a deeper dive on the financial results..

Thanks, Dave. Let’s start on page 3 with our financial highlights. Overall, as Dave noted, we got strong operating results in the second quarter which Lynn and Chris will cover in more detail. Sales totaled $163 million while operating income totaled 40 million and pro forma net income was $10 million.

All of the Performance Fibers after tax operating results, interest expense associated with the Performance Fibers business and separation related costs have been presented as discontinued operations in the income statement. There was one special item this quarter.

The special write-off of a $4 million asset associated with a director’s charitable award program that was transferred to Rayonier Advanced Materials. The prior year’s quarter included a $16 million gain related to the consolidation of the New Zealand joint venture.

These items along with the results of discontinued operations have been excluded to arrive to a pro forma amounts used for the comparisons throughout this call. Now three other notable items impacted this quarter’s results.

First, our corporate expenses directly attributable to performance fibers and normally charged to the segment were included in results of discontinued operations Generally Accepted Accounting Principles require that all unallocated corporate G&A expenses incurred before separation be included in Rayonier’s results from continuing operations, so none was allocated to discontinued operations.

Second, late in the quarter we extinguished $113 million in installment notes prior to their maturity in December of this year incurring $5 million in accelerated interest and makeover expense. This early payment was made to facilitate the new capital structures of Rayonier and Rayonier Advanced Materials.

Third, income tax expense this quarter include a $16 million valuation allowance against Cellulosic Biofuel Producer Credits that due to the spin-off of performance fibers along with its taxable income are then likely to be utilized by Rayonier going forward.

Moving to the bottom of the page three, we provide an outline of capital resources and liquidity with comparison to second quarter 2013. Just prior to its spin-off, we received a $906 million cash distribution from Rayonier Advanced Materials. With that $906 million we paid off $750 million in revolver and term credit loans.

A portion of the cash proceeds is also intended to repay the $131 million of senior exchangeable notes that are due August 2015. Rayonier closed the quarter with cash of $222 million and restricted cash of $75 million.

Now the restricted cash is earmarked for dividends most of which will be paid in a special $0.50 per share dividend next month separate from our $0.30 per share third quarter dividend.

Following the spin-off Rayonier has a strong balance sheet with net debt of approximately $0.5 billion, a modest net debt to EBITDA ratio of 2.1, a low 17% of debt to total market value ratio and the flexibility to grow.

Note that the balance sheet at June 30 also reflects the acquisition of $75 million in timberland closed in the first half of the year. In addition, our cash available for distribution based on operating cash flows is expected to be more than sufficient to cover a regular dividend of $0.30 per share going forward.

Our usual variance analysis are provided on pages four and five of the financial presentation material and cash available for distribution is shown on page six. We are now going to move right into markets and operations on page eight, so let me turn the teleconference over to Lynn Wilson to cover our Forest Resources segment..

Thank you, Ed. Good afternoon.

In the Atlantic and Gulf regions on page eight average pine stumpage prices continued at first quarter level, 20% higher than second quarter last year due to increased pulpwood and saw-log demand coupled with restricted supply as a result of weather across the south with over 80% of our annual volume committed and sales locked in, we expect prices to remain at first half level, 10% to 15%, higher than 2013.

We anticipate that 2014 pine harvest volumes will be 5% higher than 2013 as we integrate recent acquisition. We expect volumes from already completed 2014 acquisitions alone will contribute 3% of the annual increase. Now let’s move to page nine and the northern region which comprises our Washington State operations.

Wood log prices were equal to the first quarter even though China log inventories were high as we were able to divert volumes to the domestic market. This quarter only 21% of our delivered saw-longs were sold in the export market while we capitalize on higher export prices earlier in the quarter.

Our ability to switch volumes to domestic customers capture higher pricing as domestic prices generally lag export pricing. As a result, price exceeded second quarter last year by 4%.

We expect third quarter prices to remain flat at first and second quarter levels as we take advantage of commitments made earlier in the year as well as domestic supply agreement with prices lagging the market.

We are beginning to see log inventories in China ports decline from their recent peak levels and expect export prices to begin recovery late in the third quarter. For the full year, we believe overall demand will remain strong in the northern region driven by steady domestic log markets and overall increasing demand from Asia.

Based on current market conditions we expect delivered log prices will increase at least 5% in 2014 even with the currently less favorable supply demand balance in Asia. Currently, pricing for over 70% of the 2014 volume is under contract and is locked in at first quarter level.

We anticipate that 2014 volumes will be slightly above 2013 however depending on export prices during the second half of the year we may consider deferring some fourth quarter volume until stronger pricing environment return. Now on page 10, let’s focus on our joint venture at New Zealand in which we own 65% interest.

Export prices fell sharply in the quarter as China log inventory reached an imbalance due to strong worldwide supply. For the quarter, average export prices declined 6% from the prior quarter, however due to the robust New Zealand economy; domestic prices increased 8% from the first quarter.

For the full year, we believe export demand will continue and now that signs if reduced supply are evident, we expect to see prices begin rising later in the third quarter.

Overall, we anticipate forest resources 2014 operating income will be somewhat below our previous guidance due to lower Asia log prices but still well above 2013, reflecting continued strong demand across all markets. Now, I will provide a brief update on timberland acquisitions.

So far this year, we have evaluated 360,000 acres and have either closed or have under contracted nearly 47,000 acres for a total of $93 million.

The largest transaction came in the second quarter acquisition of well thought property in Georgia located near some of our existing timberland that benefit from strong competitive pulp wood and saw log market. Now let me turn it over to Chris Corr to cover the real estate segment..

Thank you, Lynn and good afternoon everybody. Real estate earnings for the second quarter were significantly higher than the first quarter and higher than the same quarter last year due primarily to the completion of a large non-strategic timberland sale in Florida.

Rural sales remain steady and we continue to make good progress on selected properties with potential to transition more of our sales mix from non-strategic timberland to rural, to development properties over time. The sales pipeline is solid and we noted on our previous call, we expect results for the full year to be somewhat comparable to 2013.

Now turning to Slide 11, rural HBU pricing was higher in the second quarter of this year than the same quarter last year with sales such as a recreational property in Western Nassau County, Florida totaling 658 acres at $2750 an acre.

In our development sales, the elevated pricing is the result of a sale of approximately 6 acres in Nassau County, Florida for a $174,000 an acre to the Florida Department of Transportation for highway expansion. Volume for HBU sales can be found on page 12.

As indicated by my remarks, the variety of sales and pricing overall reflects the diversity of our land resources portfolio and the fact that all real estate markets are local with sales mix vary in widely for non-strategic timberland to rural recreation, to rural residential, to conservation, to development.

Our focus is to constantly evaluate, upgrade and manage to optimize the highest and best use of all of our land holdings. Now, let me provide a brief update on progress in our development sector.

We are excited to report that earlier this month we closed on the transfer of 27 acres to Nassau County, Florida District School to provide land for the construction of the new K5 elementary school in the heart of our property in the East Nassau portion of the county which is north of Jacksonville.

As part of our agreement, the Nassau District School Board will plan, design and construct the new elementary school as well as a road in utilities to service it. The school district’s investment in our East Nassau County area is estimated to be approximately $20 million with a new school expected to open on the fall of 2017.

This is an important milestone as we know from experience and market research that a school can be a very powerful driver of demand for residential real estate. Over the past few months, we have been focusing on master planning the wider area to optimize the location of the school and to program adjacent properties for complementary uses.

We have been coordinating with high quality community developers and homebuilders to develop the strategy and are encouraged by the interest we are receiving. Slide 13 illustrates the significant activity we had in the second quarter attributable to a planned non-strategic timberland sale.

As we have discussed on previous calls, we are always looking for opportunities to upgrade our portfolio by divesting properties of lesser strategic importance and investing in higher potential properties when it make sense.

Through our land classification process, we identified a track totaling approximately 19,500 acres located in Gilchrist County, Florida that had lower site characteristics and market potential for the bulk of our core timberland portfolio.

To be clear this was a good timberland asset but not as productive as the vast majority of Rayonier’s portfolio, not in our more desirable ballpark is. We conducted a competitive bid process and sold this property at a sales price of $1125 an acre.

The proceeds from this non-strategic timberland sale effectively were reinvested in the new timberland properties with a superior relative investment attributes in targeted markets such as in the recent acquisition in Georgia that Lynn noted earlier. In summary plan, timberland sales led to big sales quarter.

Our rural pipeline remains steady and sales reflected diversity of our portfolio. We consider our disciplined approach to evaluating prospective land sales of core competency and will continue to scrutinize timing, terms and strategy on an opportunity-by-opportunity basis.

In addition to a quality sales quarter, we continue to advance our real estate strategy for our East Nassau property, catalyzed by the construction of the new elementary school now in the planning and design phase on a land just north of Jacksonville, Florida.

For the balance of the year, we anticipate a consistent rate of sales based upon transactions in the pipeline and therefore as we have noted, still expect 2014 results to be comparable to 2013. Now let me turn it back to Ed Kiker. .

The financial summary on page 14 provides updated 2014 guidance for key financial metrics by segment.

Now this guidance is consistent for the most part with our earlier guidance but does reflect moderated expectations for Forest Resources for the remainder of 2014 as Lynn discussed due to weaker export log prices from our New Zealand and Pacific Northwest operations.

We continue to expect full year 2014 CapEx excluding strategic investment and timberland acquisitions of $65 million to $70 million and DD&A of $115 million to $120 million. EBITDA and DD&A do not include the non-cash cost basis of real estate land sold which we anticipate will be approximately $9 million for 2014.

The segment guidance showed on the summary table excludes estimated corporate expenses which were significantly impacted in the second quarter by spin-off related costs. Going forward on a normalized basis we continue to expect the annual total G&A cost non-directly associated or allocated for segments will approximate $20 million.

Now to provide you with updates and other key metrics for your models, we expect interest expense for the second half of 2014 will be $18 million. Income tax expense will be dramatically lower for the new Rayonier now that the taxable earnings from the performance fibers business are with Rayonier Advanced Materials.

Going forward in the normal course of business we expect the taxable subsidiary to be a loss company and that only the company’s New Zealand joint venture will be subject to income tax. New Zealand taxes to JV at a rate of 28%.

On a cash tax basis, we expect to the company overall be subject to minimal amounts of income taxes as the New Zealand JV has significant net operating losses with no expiration and the U.S. taxable subsidiary is expected to generate losses.

However large high value sales of real estate development property above its tax basis and the taxable REIT subsidiary could generate income tax expense in the future. I’ll now turn it over to Dave for some final comments..

Thanks Ed. So in summary as we look at each of our two business segments we’re excited about the quality of our assets and the strategies we have in place for growing shareholder value. Within our Forest Resources segment we believe we’re well positioned to capitalize on gradually recovering U.S.

housing starts which should translate to significant improvement in log pricing as mills increase operating rates and production. We have a broad exposure to diverse end markets with recovering saw log and strong pulpwood markets in the U.S. south and great exposure to Pacific RIN markets and our Pacific Northwest and New Zealand timberland.

In addition, we expect strong contributions in the years ahead from the timberland acquisition at recent years and we’re pleased with the smaller acquisitions of high quality timberlands that we either closed on or have under contract thus far this year.

In our real estate segment we’re confident that our strategic direction including the focus on identifying catalyst for growth in selected markets well situated HBU properties steady roll recreation and roll residential business and improving demand which generate long term shareholder value.

In summary we’re excited to have the spin-off of Rayonier Advanced Materials now behind us. I’d like to acknowledge the hard work by the management teams of both companies the spin-off was completed on schedule and with minimal business disruption which is really a tribute to the dedication of all involved.

As we emerge as the new Rayonier post spin-off I am excited to lead a more focused timber and land resources company with great team, great assets and a tradition of adding shareholder value.

We’re well positioned to utilize our strong balance sheet to grow the company while maintaining our disciplined acquisition due diligence approach to create additional long term shareholder value. So I’d like to thank you all for taking your time to join the call.

And with that we’ll close the formal part of the presentation and turn it back to the operator for questions..

Thank you (Operator Instructions). The first question today is from Michael Roxland with Bank of America..

Good afternoon. Thanks very much. Good afternoon, and congrats, Dave, on your new role and also the spin. I know that you guys are regarding Southern saw log prices to be flat in the second half. Obviously, there's been a lot of capital investment that has gone into lumbers mills in the US South.

Just wondering, if ignoring the benefits from weather, are you starting to see tension that would warrant higher saw log prices? Even though you are guiding flat prices, I guess at what point do you start to see those prices or the dynamic in the South get tense enough to really drive Southern saw log prices higher?.

Thanks Mike. I am going to ask Lynn to address that question..

Just wanted to break it down into several different markets, so in addition to the wet weather we have seen a change in ownership in some of our key facilities across the south investment by our Canadian mills and companies in the southeast so capital investment has started with those facility, as well as we’ve seen some key restart and additional shift.

And so the tension that we have seen to-date has been very market and driven by our local conditions. So within 75 to 100 miles of those key facilities we have started to see that tension built and that demand increase.

So we do see that already occurring but then from a soft log perspective we think that it will take time to see all of that increase come back on line. So we really have moderate approach to how we view that response in the marketplace..

Got you.

Let me ask you this then, where are you seeing those pockets of weakness to drive your overall average or to keep your overall average flat in the second half? So if you are seeing pockets of strength, where are the pockets of weakness to bring down that average?.

I’ll turn that around and say what we’re seeing, the pockets of strength are in coastal Florida-Georgia markets and in our East Texas markets and in our lower Alabama market, so that’s where we’re seeing our strongest markets at this point in time..

Got you. And then just one quick follow-up. Just one of your peers recently lowered their own forecast for Southern timber harvest this year.

I guess, can you comment on the demand situation in the South? Do you expect to hit your own internal target, internal harvest level for the South at this point?.

Yes, we have very strong pulpwood demand in our markets and we are going to continue to stay on track with that, we will be at a point where we will continue to manage our mix as you know traditionally our harvest profile has been a 50-50 soft log-pulpwood mix.

Over the past few years to protect value we have shifted to a higher percentage of pulpwood 70% to 80%, this year we’re going to be on track at about 66% pulpwood but we’ll manage our harvest levels to that about that for the remainder of the year to make sure that we’re in balance with the demand and ease into our soft log mix over the next three to four years..

Got you. Thank you for that. And then one last question before I turn it over.

Chris, as you've gone through analyzing land and restratifying the acreage, can you just give us an update on the various buckets? Of the 2.6 million acres that Rayonier owns, how many are non-strategic HBU and rural Real Estate? And also, the Company obviously over the last couple of years has been targeting about 200,000 acres for sale in the I-95 corridor.

As you've gone through the restratification process, are you still comfortable with that number? Is it higher? Is it lower?.

Hey Mike, I’ll try to take that one on -- the first question; we have been through a very detailed and elaborate land classification process over the last six months or so, so we’ve been through a complete re-evaluation of the portfolio.

New definitions, new process, it was a bottoms up look that included over 65 people in the company, lot of boots on the ground and folks that know the land very well, so we, we think we’ve got a good handle on it, and it’s a promising story, I’ll sort of summarize it that way, you can also say that it’s also an analysis that’s constantly evolving, you know we’re always looking at opportunity on our portfolio at this scale and markets change, things change, situations change and it’s a process that continues to go.

One note on land classification from this process, we’ve have intentionally managed the process to look for what we call overlap, so it means that there may be more than one potential kind of opportunity for any number of classifications so when you think about it, simplistically you know lands wouldn’t neatly fall into necessarily any one given bucket they can, there can be opportunities for more than one use in a lot of different places, certainly from timberland to conservation to rural recreation and properties like that, so we’ve set up a fair amount of portfolio that we see as being able to go in different directions over the long term and we see that as good news because it just means optionality.

To your question about, Mike about the corridor I think the way I would characterize it is, is we got to, you know these are, these are timberland assets of course and have been managed as such and they don’t tend to be you know in the middle of urbanization or growth, they are weak.

The good news is we’ve got some lands that are, are however starting to feel a little bit of the pressure from bigger markets like in North East Florida and I think I mentioned Nassau County, Florida, the county north of Jacksonville a couple of times that the trajectory is starting to sort of press in that direction so it provides us some opportunities there, certainly overt the long term and we’ll continue to look at opportunities to catalyze that and then maybe up further north toward Savanna similarly so there’s some growth pressures that give us some opportunity there so the bigger opportunities are longer term and will continue to manage in that direction but what I’m seeing I like and I think we’re making progress to continue to look for specific opportunities.

.

Thanks for all the color, good luck in the second half..

Thank you, the next question is from Chip Dillon with Vertical Research Partners..

Yes, and good morning and again congratulations Dave on your new position..

Thanks Chip..

First question I guess is for Lynn. I think who turned around the first question, but just to make sure I'm right on where the offsetting weakness might be. You mentioned the strength, and we heard that from a competitor along the Atlantic Coast.

But would that I guess by the process of elimination be basically in Alabama, Mississippi and Oklahoma? Or is it really more just what you're really saying is you're seeing -- or did you really mean to say that the West Coast is where that's offsetting the decline in the export log prices? Or were you just talking about the South where the strength is the east -- along the coast, and that's offset by the Alabama, Mississippi and Oklahoma activity?.

I was primarily focused on south Chip when I made that comment. So when you think about south wide it’s much more granular than that when you think about the supply demand dynamics 1.1 million acres in Florida and Georgia really our five distinct markets not just one.

And so in within those for example the inquirer of Georgia has somewhat lower demand than the coastal part of Georgia if you move into our Gulf State region from Alabama West, Alabama and Mississippi are three distinct markets within that 400 plus thousand acres that we have within that part of our ownership.

And one of those is weaker than the other two. So that’s how I was thinking about that south log demand..

Okay. That's helpful. And Ed, I didn't quite -- I must have missed an element. But you were helping us on the taxes, and I know you said the TRS would probably I think you said run at a loss, and then there would be taxes in New Zealand. If it's sort of -- and I know there's no such thing as a typical quarter or a typical year.

What would the end result be? Would it be like a zero tax rate, or could it be negative? I guess that can't be perpetual.

Or would it be slightly positive like a percent or two?.

Yes, it will be slightly positive Chip it would be pretty minimal the order perhaps couple of million dollars a year depending on a number of things but it would be a pretty small number of course the REIT properties are not REIT income is not subject to tax the prequalifying income and then in our taxable subsidiary as I mentioned that does generate some level of loss.

So unless you have large sales and we do expect over time to have some log or sales of development property from our TRS. But unless we have a particularly large sale in a given year we would not expect to have taxable income in our taxable REIT subsidiary.

So going forward now that we’re separated we would expect to have fairly minimal tax expense and on a cash basis virtually mill except for few small items..

I see. That's very helpful. Let's say as you sell land, obviously, if there's any kind of I guess improvement, if I hear you right in the development in the TRS -- or I guess you've transferred the land so that makes sense. So then as it gets improved, there would be a corporate tax there. But I know, and I don't want to get my terms wrong.

But I know that back in the you day, that when a REIT would buy land there was like a 10 year period where there was some kind of recapture if you sold it. And I know it's been a very long time since I think you bought -- like the late 1990's, some Smurfit (ph) land, but you did make those two big acquisitions a few years ago.

So, is there any risk on any of your let's say non-development, non-TR -- lands that you would have a significant tax because you bought it recently?.

No, I think Chip you are referring to the built on gains period that is in place 10 years after conversion to a REIT. We converted January of 2004 so we’re beyond the build and gains period. In fact in ’12 and ’13, just under more general tax relief we’re free from that as well in those years.

So we’re passed that built and gains period and don’t expect or do not anticipate any tax issues related to those years..

Okay. And then one more quick one. Yes, now I totally remember.

As you look at the future, and I know, Dave, you've been there for a relatively short period of time, how should we think about sort of normalized CapEx and DD&A? Is the $65 million to $70 million you're looking at this year, and I guess the $115 million to $120 million in DD&A, is that a normal year? Could you see some variability notwithstanding some big acquisitions that might change the character of the Company?.

Recognize that that excludes timber acquisitions and so it’s really designed to kind of give you more of a look into the timber business..

Okay, I see. That's helpful.

And I guess anything -- one last one for you, Dave, is the -- in your time there at Rayonier, can you tell us what you would regard as your biggest positive surprise, and maybe what you think is more of a challenge than you thought when you were taking the position?.

Sure, good question. I think that on a couple of fronts I’ve been very impressed by the people and the culture here. And I also have been very impressed by the acquisition diligence effort it’s a very disciplined process and a really well functioning team on that front.

And so the announced things that we’re able to look at any one point in time is quite large. And so we have a pretty good system there. In terms of areas where I think we need more work I’d say that as part of the downturn during the global financial crisis like a lot of companies we pulled back on resources.

And I think we saw that particularly in the real estate side where we were pretty hunkered down and so I think one of our challenges going forward is to build upon the land classification work that Chris talked about and we are going to start putting more resources into some of these targeted projects to try to build on some of the catalyst that Chris talked about and work those things to where we can start unlocking some of that value.

So, that’s an effort that we are working on actively as we speak in terms of adding some more expertise to our existing staff..

Thank you. The next question is from Collin Mings with Raymond James & Associates..

Hey, good afternoon. Dave, congrats again on the new role at Rayonier. I guess my first question is for you. Can you maybe touch a little bit about how your thinking about the current acquisition environment? The general consensus right now is that the most opportunities exist in the US South.

But just given your background in the Pacific Northwest and the background you have there, how do you see the relative opportunities between the US South and the Pacific Northwest right now?.

I think it certainly is a competitive acquisition environment. It’s one thing as we indicated earlier in the call to have a balance sheet that’s got a room for a lot of growth but it’s important that we keep our discipline.

And I think that’s part of what I was referencing when I referred to the team, I have been impressed by the discipline that I have seen and thinking about this more in or how do we allocate this capital most effectively.

In terms of the various regions, I think that we are certainly seeing more deal flow out of the South than we are out of the West but the West has always had slightly less deal flow than in the South. And in terms of how we think about various opportunities, I would say that we are somewhat agnostic.

We like to expand in geographies where we already have a footprint and some view of market expertise and then as we look at geographies where we have less of a presence that’s where we will take a little bit different look and look at some potentially larger beachhead type opportunities where we can establish that market presence in those markets.

But we are looking at it on a market-by-market basis and we are looking at opportunities really in all of the markets right now and we are going to let our financial discipline really ultimately detect where we are successful..

Well, I guess on that disciplined approach, looking at the acquisitions, I made rough math, you guys have closed or have under contract I guess about 10% or so or a little bit more than 10% of the 360,000 plus acres you guys have looked at year-to-date.

I mean what has been the biggest, even you haven’t closed on some of the deals, has it just been pricing? You enter a new wood basket or a new state, what’s caused the 85% of that not to end up be something you guys pursue?.

Well, I would say this is one of those times to borrow a baseball analogy.

We are really happy with our low batting average and I think that generally in a number of these transactions where we are in more of an auction environment certainly a portion of those are going to be not successful from our standpoint due to relative price expectations that we might have versus others.

It’s considerable that there could be some differences in discount rates or inventory level. I think in the areas where we have been successful, we have looked at a number of smaller bolt-on transactions that are sort of below the radar screen of the larger auction environments.

And while those individually aren’t moving the needle very far, I have been impressed by how many of them in the team has been able to close and get done and they are all additive acquisitions, even though they are a lot smaller.

Lynn, what more would you add to Collin’s question?.

Collin, the first part of that question would be of that 360,000 acres, about 50% of those didn’t fit our criteria for our investments, so we either didn’t have the productive timberland, the HBU component or other property attributes that we would not want to bid on or participate in a process.

So, we set those aside for the remainder of the properties that we participated in a process. It was a very competitive environment and we stay very disciplined to, Dave’s point and stayed with where we thought the values would be and our own internal benchmarks but we were not the successful bidder on some of the properties.

So, I will break it down that way. With the remainder of the properties we had a significant number of the ones we have closed, that have been negotiated..

Okay. And that 47,000 acres, is that all in the U.S.

South, Lynn?.

All but one small transaction in the Pacific Northwest..

Okay.

And then just rough number, how much of that Georgia property that you guys have referenced either in terms of value or acreage did that represent of that total?.

One-third..

Okay and in terms of acres or value or both?.

In acres..

Okay. And then Lynn, just as it relates to the commentary in the prepared remarks around the pine prices, you reiterated the guidance of from earlier this year of up 10% to 15%.

In recognizing that, again, your outlook that saw log pricing as stable through the back half of the year, can you maybe just give us a better way of thinking about what you guys are seeing this year, year-over-year, up specifically in pulpwood versus year-over-year in saw logs in the US South?.

We are seeing a significant shift based on both wet weather and then increased demand in the pulpwood market.

So, we are in a situation where what we’ve seen is that as OSB facilities come on line and chip and saw and other solid wood facilities come on line as well as wood facilities that all prices in our pulpwood markets have been continued to increase.

So one of the things that we’ve seen over a period of time is that in market where there was already strong demand adding one more facility in that market like an OSB facility in Greater Georgia as that continue to press on all other market same in East Texas where you see increased demand from a biomass facility and a wood pallet facility.

That put pressure on the pulpwood pricing. So overall we’re seeing that that will continue to be the case in all of our pulpwood market..

Okay.

So I guess thinking about it another way, as we think about pulpwood pricing, is it safe to say as you guys are looking at it year-over-year, that's probably north of up 15% year-over-year, while saw log pricing is going to be maybe somewhere up 5% to 10% year-over-year? Is that a fair way to think about the two different buckets?.

Correct..

Okay. And then just really one last one. Just going back to the -- I'm just curious, I'm trying to get a better feel for how all the timber REITs are thinking about the housing environment for 2015.

Internally, how do you think about the progression from this year to next year as you guys are doing your internal planning? During the summer, you guys have your strategic view, long-term strategic review.

How are you thinking about that going into 2015?.

Well I mean I’d say first of all there has generally been as a lot of people have noted kind of a slowing down of reaching kind of 1.5 million level I mean housing starts are lower there is expectation for this year is lower than it was at the beginning of the year and I think everything is getting pushed out a little bit more.

I’ll let Ed speak a little bit more specifically to the planning process but this continues on a theme that we’ve heard just we’re probably getting pushed out and being slower as we go..

Right, in terms of housing starts, it seems that most estimates are in the for 2014 are in the range of 1,025,000 to 1,050,000 and things do feel like they’re pointing more towards the lower end of that range for 2014.

And as Dave mentioned for our planning purposes we initially thought that say the year still go that we may be back to the 1.5 million starch level at about same 2016. It looks now like that might be 2017 or beyond but it all seems to be moving out a bit and our planning will reflect that accordingly..

Thank you. The next question is from Mark Wilde with Bank of Montreal..

Just curious, Ed or Dave or even Lynn, if I look back in around the 11th of June, you had a filing. And at that point, you were still thinking Forest Resources EBIT would be up about 30% to 35%. Now we're at 20%.

When did you really start to realize that things had changed either in the Northwest and things had changed down in New Zealand?.

We certain saw the China inventory situation was certainly evident in Q2. I’d say our results are impacted that with somewhat differential by geography as Lynn had described in her comments. We saw that more quickly in New Zealand where we have a heavier delivered log mix in the northwest where there is more of a mix of stumpage.

Our second quarter pricing was really more reflected in as first quarter pricing so I think we saw that coming but I think that the inventory stayed up higher than lot of people thought they were they state high long than a lot of people though they would.

And so we’re part of the reason for our pulling that back is just the fact that we haven’t seen the type of reduction in those inventory levels that we had hoped for earlier in the quarter..

And to add on to that Mark one of the things that we noted in June was that the increased impact higher than we anticipated from the April deliveries.

If you look back at the numbers through June 2014 all of the -- it surged as much as 20% in April and that was the highest peak this year and then it started to come down somewhat in May, and then dropped a little bit more in June but those imports into China really are hard to measure until you’re already there so internally we thought about mid June, that we saw the pricing started becoming questioned because there was a slowdown in off take.

And that’s really that supply demand is the key to it, how many ships are going to leave New Zealand or the Pacific Northwest, those orders started to change though, the impact is going to be in third quarter specifically for New Zealand as I stated in my prepared remarks, and the reason we’re staying flat in the Pacific Northwest is that we still have commitments and sales from the first quarter that are going to carry us through that period of time, but that’s really when we thought the biggest change in, as you know, data is not as transparent and so it was about mid June when we saw that that big imbalance between the supply and demand in the ports was a result of that peak in April..

Okay. It sounds like somebody did a great job of selling forward up in the Northwest.

Just when you try to read China, and you try and get a sense of where these inventories, what do you really rely on? Is it just boots on the ground that are walking the docks down there, or how do you read the Chinese market?.

Mark, there are three ways that we put together and triangulate within Rayonier and within our New Zealand team to bring together that, because it’s not one direct place that you can go to get that data from.

The primary internal way that we look at that is we do have two team members in Shanghai that are part of the New Zealand team and that log trading business is very key to keeping that pulp on what is going on.

Secondly our specific Northwest team has a direct relationship with our brokers in the Pacific Northwest and they’re the ones who are selling logs in China and a lot of very experienced people within those brokerage businesses and that ship off take, we get a ship report of how many ships are scheduled every month ahead and that’s updated every month, so we keep that on timely basis and finally we use reports that come to us that are published so we look at China customs information and we look at Dragonomics which is published by Gavekal and then several other published reports and usually there’s a lag with those, what we try to do is triangulate with those three pieces of information..

Sounds like kind of being an analyst.

So just to be clear, in the third quarter then, Lynn, in New Zealand log prices are going to -- export log price is going to be stable at the second quarter levels? Or is there -- did they continue down through the second quarter, such that the third quarter price may actually be lower than what you show for the second quarter?.

They’ll be where we ended the second quarter is where our prices will be flat in third quarter, on average they’ll be a bit lower but where we ended June is where we’re going to stay for the third quarter and we expect in the tail end of the third quarter that’s when it will pick up starting in September with those orders. .

Okay, all right, but not the average kind of quarter to quarter will down a bit..

Yes..

Okay. Dave, I just had kind of following on that question Chip asked about where the surprises have been.

What are really the three key priorities for you over the next 12 months?.

Well, I think certainly one of them is to get to know all the people in the company and get to know the assets better, you know we operate in 10 states and New Zealand so I look forward to getting out and meeting the balance of our folks, I’ve started some of that but certainly have more of it to go, that’s one piece.

I think two setting some of the stage for operating as more of a peer play timber and land resource company and so working with our new board and recognizing you know roughly half of our board is new and so sort of coming, developing a operating rhythm both with our board and our management team across this narrower business focus.

And then I think lastly really working at developing and implementing strategies to utilize our balance sheet so that we can grow the company and grow the company in a smart way..

Okay. All right. That's helpful. And then finally, I was just curious, do you have any sense, Dave, from managing timber investments, you had separate business up at Pope, do you have any sense for just how much money might be sitting out there in the private market looking for a home in timberland right now? And how that might compare --. .

The short answer Chip, is too much..

Everybody excuse me, there’s, that always a hard one to peg just in the sense that you have a mixture if committed capital in front as well as discretionary capital that’s out there, so you know, there are people who have made estimates of such numbers, but those are difficult things to peg, but there’s plenty of capital just based by the, on the number of players that we see out there in the transactions market..

Thank you. The next question comes from Steve Chercover with D. A. Davidson..

Thank you, and welcome, Dave. A lot of these have been pretty well flogged to death. But I wanted to ask a little bit on the criteria for timberland acquisitions as well. Presumably, they've got to be quickly accretive, maybe not instantly. And then Lynn invoked having some sort of HBU potential in there.

Do you really think that HBU is often not embedded in valuations already at this stage?.

Well, I will give my answer and Lynn can add to it.

I think that it really depends on the particular sales transaction and the geography and certainly as look at southern ownerships that are more spread out with smaller, personal sizes, there is going to be a natural mix of some of those parcels that either from a market demand or a timber quality or growth side are natural candidates to dispose off.

And I think that to be competitive in some of these processes, you need to look specifically at that aspect and place some values on it, depending again on the property to be successful.

And this is an area where I think, Chris’s team and Lynn’s team do a very good job of working hand-in-hand and coming up with a joint perspective on property and making some specific underwriting assumptions as it relates to how much or little of the HBU is really there and then you layer in the competitive element of how properties are sold to decide how much of that are you going to include in a bid value and how much of that are you going keep for yourself..

Steve, I would add to that.

A lot of the industrial timberland that is trading and lot of the plan that’s out there in the bid environment may already have the real estate value embedded in it but many of the successful transactions that we have had over the last few years have been with long held acquisitions, so 63,000 acres in Texas that we acquired at the end of 2012.

What we have found is as we built road, as we commenced timber harvest and open up that property and a lot of that was natural pine hardwood mix. As we commenced that what we found is that there was the pent-up demand because that property have been held by the prior family for about 80 years.

And that Chris’s team had a very successful rural real estate and rural development types land sales programs since we acquired that property because of the pent-up demand and the fact that it was within 50 miles of Houston and this wasn’t on the market before and it needed capital investment in roads to make it count for that typical market.

So, some time it takes time but it also has to do with the nature of the property. I do agree with you that some properties, the trade already have that in there but some of the ones that we have been successful on are ones that we have invested upfront. .

You probably want to make sure that the people who might be selling aren't listening to these conference calls. And then, of the, I think you said you evaluated several hundred thousand acres thus far this year. You've pulled the trigger on just under 50,000 now, and I think about another 100,000 has transacted.

So does that mean that the remainder of them just didn't hit some sort of reserve price, or we just missed the transaction?.

Well, recognize that we didn’t place bids on all of those and so there are quite a few that, as Lynn discussed earlier, that a number of them either didn’t fit our criteria or there were some aspects that where we chose not to participate.

And so Lynn, what was sort of the count in terms of the transaction, can give Steve sort of an idea as we have sort of described the 40 some..

For example last year we looked at over 40 properties and we placed bids on 11 and we are successful on four.

This year we looked at significantly more than that we have already looked at almost 30 properties this year just in the first half and we have negotiated or placed bids on nine and many have been very small except for that one last transaction that we bid on.

So, to your point, there has been a lot in the pipeline and a lot of have been privately traded as well as the bids that you are well aware of..

Okay. And my last question, I suppose, is for Chris Corr. Forgive me if I missed it.

But did you give us an update on what's going on in the two mega sites in Georgia and Florida?.

No, Steve, quickly the Belfast Commerce Centre near Savannah, Caesarstone which broke ground in November of last year is well under construction, a building that’s framed and have skin on it and schedule to open in early part of next year. Remember it’s a 265,000 foot manufacturing facility that will employ about 130 people.

So, that’s under construction along with the infrastructure and utilities to service it plus an additional 400 plus acres around it. So, we see it as a catalyst, it’s getting some exposure in the marketplace and with the State of Georgia and good traffic as a result, so a positive there..

And do those lead tenants spur development the same way a school would for a residential area?.

It’s hard to say I mean certainly you better have it but not and it just brings traffic in eyeballs and that sort of thing and certainly the infrastructure that serves it that’s the potential for others to come as a positive. But so we’ll see.

And again this is we’ve always said that kind of business is it’s very competitive these big users look at a lot of states and a lot of sites and we think we’re well poised..

Thank you. The next question is from Paul Quinn with RBC Capital Markets..

Thanks very much. Just a couple questions, and congratulations on the spin. One is, your realizations on the log price line seem to be better than benchmark prices in a number of jurisdictions.

Just wondering whether that's really your selling forward, or it's just a lag in prices and that will eventually catch up to you?.

So Paul you focused right now on Pacific Northwest primarily or south log?.

I noticed that in New Zealand where I've got benchmark prices down 15% to 20% quarter-over-quarter, where you saw a much lower drop in pricing. And I would say the same thing in the US South..

Well, some of the New Zealand stuff has to do with the fact that we’re doing the direct marketing into China so you’re cutting out that broker piece of the business. So that certainly explains a portion of the New Zealand piece..

So really to break it down Paul in New Zealand we have direct exposure because we are the ones brokering the ships we are selling the logs in China. So when we see a price change we have an immediate impact to the business. And so it’s very real time.

In the Pacific Northwest and then part of is our strategy is that we have invested over the last five years a significant upfront capital investment in our roles to be well positioned to sell and we think the markets are the best.

So there are some companies that only do summer logging because that the least capital investment we’ve gone in the opposite direction and said that we know that when peak pricing we need to have all weather roads and be able to do weather hauling in the Pacific and Northwest because all of our properties are within 75 miles off the coasts and proximal to five port so we see things that’s our competitive advantage.

So to do that we have sold a very high percentage of our stumpage is already sold and then we are already committed on our delivered programs to some of our key customers that puts us at 70%.

We can say where price lagging but it’s also strategy that we’ve implemented primarily since 2010 it took us almost two years to get to that point because we’re now at 18 to 24 months roles ahead position and that’s an important part of the way that we look at our business.

So that it really is also the point that we slow down our stumpage sales whenever we began to see the drop in pricing because we think we have an opportunity in the back half of the year. One of the things that we also have is a lag with our pricing index.

So one of our key customers it’s only every two months that we recalculate and it’s a lagging price index, so that’s also an indicator. Certainly, when we’re heading in the other direction and prices are slighting we’re on the opposite side of that but right now as the prices come down it eases that direct impact. So those are all of those things.

And then to get down to the south, it really is wet weather driving the pricing.

And we don’t have long term supply agreements in the south and we’ve been able to position sale after sale of stumpage sales when key customers that needed that volume and we’re capturing that in those key markets and it’s primarily driven by OSB, pulpwood and all of those facilities that are looking for that same size log meeting volume on an immediate basis..

Okay. Thanks very much for the detail. And then one other thing that really was curious that I found, to some in New Zealand log sales, obviously New Zealand has really stepped up the export into places like China. And you obviously had inventories back up in China into Q2.

I'm curious that you had a domestic price rise from Q1 to Q2, and is that -- that surprises me, because I would have thought that more of that export oriented would have had to stay home and supply would have offset the rising demand..

Well, some of that, you’ve got the rebuilding of Christchurch after the earthquake that I think that had some impact in the domestic market..

And some of it has to do with timing of sales but just to compete many of the domestic mills have had to go after those same logs so it’s just the fact that you don’t see that impact until they start favoring or taking delivery of those logs.

So they are very closely tied to each other in that competitive nature because they have the demand the domestic sawmills are willing to get in there and compete which in some quarter they don’t do that..

Okay, thanks. And just the last question.

Are you guys doing any log exports out of the US South to tighten markets there?.

Paul, we have shipped logs out of Beaumont, Texas, Savannah, Georgia and Jacksonville, Florida and they are going in different directions, some of them are polled and some of they are logs and some of it pulp wood, depending upon the fact and it’s primarily going to either China or India but yes we have..

And you're making money and just a volume estimate is what do you think you'd do and exports this year? Is it material?.

No, it’s material at this time. Paul, we have had customers approach us to export that volume and we have for example our volume out of Beaumont has been trial and seeing if we can make it work and working closely with key customer to, who have the will to do this and interest to do this.

And at this point in time, many of our domestic destinations have a higher timber margin and that’s where we are focused but we want to make sure that we understand all aspects of the cost part of this as well as operational challenges and the way to do it.

So, we feel that we understand and can do it, remember it’s primarily a container opportunity at this point in time which is lot of handling, a lot higher cost for piece as compared to our Pacific Northwest operations which are bulk and very efficient at this point in time.

So, we are still working at it but we can do it tomorrow where we still have our domestic customers that were achieving a higher net timber margin..

Thank you. The next question is from Daniel Rohr with Morningstar..

Thanks a lot.

Could you share with us your thoughts on long-term volume and mix expectations for the Atlantic region, versus the Gulf region?.

Daniel, one of the things that we look at south-wide is that our mix expectations at this point in time are quite consistent from the Atlantic to the Gulf, so right now we are at 56% to 67% pulp wood south-wide and 33% grade.

We expect that in concert with and aligned with the housing recovery, we are going to ship the 50-50, 50% grade and that is a value, we have that volume out there on the stump. So, we will align our harvest with that in given years we will exceed 50% of grade just because we have that inventory out there, so that’s where we are headed.

I would say the only place where that’s a little bit different is in our Oklahoma property. We are almost 70% saw, timber at this point in time on our holdings in Oklahoma but south-wide we are at about 50-50 because of the thinning and a fast distribution of our properties..

Thanks, that's helpful.

And then just really briefly on the log demand you're seeing right now in the Atlantic region, the 23% decline in volumes we saw versus the second quarter of 2013, was that wholly attributable to the unusually wet weather?.

It is, we have had the 100% thinning operation. We have had anywhere between 6 and 25 inches of rain during the quarter depending on where you are and one of the things we have had to because of the potential damage to the ground conditions on the site.

We have had to seek those in given week and that is we could sale a significant more volume as operational conditions allow..

Just back to that two-third spinning volume..

Thank you. The next question is from Mark Weintraub with Buckingham Research Group..

Thank you. Lynn, you had mentioned in your comments that the pricing in Pacific Northwest domestic tends to lag the export markets.

Does that mean that it is highly likely that we are going to see softness in the domestic Pacific Northwest? And if so, when, and if not, why not?.

I think there is lag but the lag has gotten less and less, so I mean you absolutely see the domestic mills follow the lead of the export mills and so I would say that you are seeing that already in the Pacific Northwest and I think the difference from a Rayonier standpoint gets back to what Lynn was describing earlier where we went out made kind of some tactical moves to sell a large proportion of stumping sales during the first quarter.

And so that protected us a little bit from some of those declining log prices that began in the second quarter..

Okay. So the mark-- you were delayed from the market, because of that move you made in the first quarter.

A lot of it's already -- so you've already seen it in the domestic market what had happened in the export market? Is that how I should interpret your comments?.

I would like to break it into two parts, one is that a significant portion of our delivery volume is in this calculation that lags for a period of time, so as it’s recalculated it’s in the rear view mirror looking.

So, we have this constant move every few months where as we look back, so we are still living off those higher prices from that calculated portion of our delivered volume on the domestic side. In addition, we have sold enough volume that many of the other customers are going to want to buy, so there is a natural tension there.

So, pricing has come down and the market conditions are one thing but the pricing that we’re going to achieve that will be reflected in our actual sale will be somewhat muted.

So it will come down somewhat but not to the extent when you read market reports because of that weighted average of what we’ve already sold prior being averaged in with what’s being sold real time in the next two quarters on the domestic side..

Thank you. (Operator Instructions) The next question is from Chip Dillon with Vertical Research Partners..

Hello. I promise I'm not asking a question to make this the longest Rayonier call ever. But I will say that, maybe you guys should do more restructuring because it certainly must be contributing. But seriously, I had just one quick he question.

I think it was mentioned earlier that an OSB plant or start-up had you affected the Georgia operations, and I just wanted to be clear. This wasn't a new mill, right? This was the restart or the start-up of one that had been built maybe over in South -- across the Augusta River in South Carolina.

Is that fair?.

It’s really ignore board I’ll call it out as the customer name. It’s in Greater Georgia, they were running at smaller volumes and they’ve ramped up significantly as they are leading indicator of building products out there ahead of the U.S. housing recovery and so modest. But it had a direct impact in those markets..

And so that would be in Cordell, Georgia, then. .

That’s of existing facility..

Yes. Exactly. Well thanks for that clarification..

Thank you. And I am showing no further questions..

This is Ed Kiker. We’d like to thank everyone for joining us and please contact me with any follow up questions. Thanks again..

Operator:.

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