Rayonier Inc. Reit · NYSE:RYN
Rayonier Inc. Reit — Rayonier — Investor Day (September 2019)
57 slides from Rayonier Inc. Reit's investor day presentation, Sep 26, 2019
Slide 1: U.S. South Timberland Tour and Teach-In Session September 2019
U.S. SOUTH TIMBERLAND TOUR AND TEACH-IN SESSION SEPTEMBER 2019
Slide 2: Safe Harbor Statement
Safe Harbor Statement Forward-Looking Statements - Certain statements in this presentation regarding anticipated financial outcomes including Rayonier’s earnings guidance, if any, business and market conditions, outlook, expected dividend rate, Rayonier’s business strategies, including expected harv
Slide 3: Agenda
Agenda 11:30 am Introduction / Timberland Economics 11:40 am Market Intelligence Teach-In 12:40 pm Lunch 1:25 pm Portfolio Management Teach-In 2:40 pm Real Estate Update 3:45 pm U.S. South Timberland Tour 5:15 pm Formal Session Adjourn 2 Investor Tour and Teach-In Session | September 2019
Slide 4: Introduction / Timberland Economics
Introduction / Timberland Economics 3 Investor Tour and Teach-In Session | September 2019
Slide 5: Risk Scale Components of Timberland Return – U.S. South
Risk Scale Components of Timberland Return – U.S. South Low High Return Component Value Range Risk to Achieve Comments Cash Return Expectation EBITDA yield for Southern timber, including EBITDA Return 2.0% – 4.5% timber harvest and non-timber income Average annualized cost of replanting / (–) Capex
Slide 6: Market Intelligence Teach-In
Market Intelligence Teach-In 5 Investor Tour and Teach-In Session | September 2019
Slide 7: Globalization of Wood Trade: Softwood Logs and Lumber
Globalization of Wood Trade: Softwood Logs and Lumber . China is the largest importer of softwood logs and lumber − Log volume to China: New Zealand (42%), Russia (19%), and the United States (13%) − Lumber volume to China: Russia (62%), Canada (17%), and Europe (12%) 2018 Global Trade in Softwood L
Slide 8: Globalization of Wood Trade: Pulp and Woodchips
Globalization of Wood Trade: Pulp and Woodchips . China is the largest importer of pulp and woodchips − China recently surpassed Japan as the top woodchip consumer − Hardwood pulp exports are driven by Brazil while Canada is the largest softwood pulp exporter − Eucalyptus and Acacia chip exports fro
Slide 9: Current Issue: European Spruce Beetle Epidemic
Current Issue: European Spruce Beetle Epidemic Map of Central European Spruce Forests . Spruce inventory (2018E) − ~2.89 billion m3 − ~41% of growing stock inventory − 2018 damage total: ~67mm m3 − 2019 damage in some areas estimated to be 40x 2018 impact . Salvage volumes have flooded the market an
Slide 10: Current Issue: Epidemic Driving Europe Exports to China
Current Issue: Epidemic Driving Europe Exports to China Log Exports to China by Impacted Country (thousand MT) 500 Germany Czech Republic Others (18) 400 300 200 100 - J '18 F '18 M '18 A '18 M '18 J '18 J '18 A '18 S '18 O '18 N '18 D '18 J '19 F '19 M '19 A '19 M '19 J '19 J '19 Lumber Exports to
Slide 11: Current Issue: China Log Sourcing Competitive Landscape
Current Issue: China Log Sourcing Competitive Landscape China Log Price Ranges and Delivered Costs by Source Group ($ / M3) $200 (1) Total Delivered Costs Delivered Price Floor (LTM) Delivered Price Ceiling (LTM) $150 $100 $50 – Russia / Canada U.S. SYP U.S. SYP Uruguay / European European New BC /
Slide 12: Current Issue: U.S. South Softwood Inventory Build
Current Issue: U.S. South Softwood Inventory Build . Timber markets across the South have experienced differing levels of inventory and demand changes . US South removals are at pre-recession level; however, inventory has increased by over 1 billion tons . Standing timber inventories have increased
Slide 13: Current Issue: Atlantic Region Strongest in U.S. South
Current Issue: Atlantic Region Strongest in U.S. South . Local supply / demand dynamics are driving a hierarchy of timber price performance, as logs generally travel less than 100 miles . Disparities in local market pricing has increased, and this trend is expected to continue TMS 2018 Composite Pri
Slide 14: Current Issue: South Market Quartiles Relative Position
Current Issue: South Market Quartiles Relative Position Current Inventory Status (Years of Harvest) and Inventory Trend (Growth / Drain) 2.6 2.4 % U.S. South Inventory by Market Quartile* First Quartile 17% 2.2 Second Quartile 2.0 Third Quartile Fourth Quartile 1.8 1.6 26% 1.4 24% Growth Drain / Rat
Slide 15: Current Issue: U.S. South Lumber Capacity Additions
Current Issue: U.S. South Lumber Capacity Additions Active Mill Expansion in the U.S. South (1) Production Growth Supports Incremental Capacity (BBF) 25.0 100% 22.5 95% 20.0 90% 17.5 85% 15.0 80% 12.5 75% 10.0 70% 7.5 65% 5.0 60% 2.5 55% – 50% 2006 2014 2000 2001 2002 2003 2004 2005 2007 2008 2009 2
Slide 16: Illustrative Market Case Study: Demand Scenarios
Illustrative Market Case Study: Demand Scenarios . Rayonier conducts detailed analysis of supply / demand in formulating market-specific price forecasts − Price forecasts are critical to informing RYN’s internal view of NAV and for capital allocation decision-making . The charts below illustrate hyp
Slide 17: Illustrative Market Case Study: Inventory and Growth / Drain
Illustrative Market Case Study: Inventory and Growth / Drain Inventory Dynamics by Demand Scenario (tons) (growth / drain) 1.6 900 Forecast 1.4 800 1.2 700 Balanced 600 1.0 500 0.8 400 0.6 300 0.4 200 0.2 100 - - Inventory - Base Case Base Case G/D Low Case G/D High Case G/D Projected demand can t
Slide 18: Illustrative Market Study: Price Expectations by Scenario
Illustrative Market Study: Price Expectations by Scenario Timber Product Stumpage Price Forecast – Pulpwood and Grade ($2018 / ton) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Grade Historical Grade Base Case Grade Low Case Grade High Case Pulp
Slide 19: Portfolio Management Teach-In
Portfolio Management Teach-In 18 Investor Tour and Teach-In Session | September 2019
Slide 20: Creating Value Through Active Portfolio Management
Creating Value Through Active Portfolio Management Identify key drivers of value Position assets in best market locations Identify mispriced assets Improve through addition and subtraction Generate NAV accretion and industry leading financial returns We actively manage our portfolio of properties to
Slide 21: Key Tenets of Active Portfolio Management Process
Key Tenets of Active Portfolio Management Process . Tap into the institutional knowledge of subject matter experts Leverage Institutional Knowledge . Share knowledge freely . Debate merits of each transaction . Identify properties located in strong markets with favorable price tension Target Negotia
Slide 22: Active Portfolio Management Improves Sustainable Yield
Active Portfolio Management Improves Sustainable Yield . Rayonier has acquired a total of 363k acres Acquisitions and Land Sales by Year and sold 340k acres since 2014 (000 acres) Acquisitions +363 150 . During the same period, acreage under Land Sales (340) management decreased by 132k, primarily a
Slide 23: Leveraging Cross-Disciplinary Team to Improve Decisions
Leveraging Cross-Disciplinary Team to Improve Decisions Timber Price Forecast Non- HBU timber Screening Income GIS Legal and Analysis Risk and Mgmt. Mapping Financial Decision Growth & Land Yield, Records Harvest and Title Schedule Cost Forest Forecast Research 22 Investor Tour and Teach-In Session
Slide 24: Staged Gating Process Streamlines Decision Making
Staged Gating Process Streamlines Decision Making . Prepare high level assessment Gate A . Assess fit based on size, location, asset quality, age-class profile, strength of end markets, risks and encumbrances (1-2 days) . Is this something we should pursue? GO . Prepare preliminary discounted cash f
Slide 25: Portfolio Management Valuation Framework
Portfolio Management Valuation Framework Cost Approach: Comparable Sales: DCF Analysis: . Quickest valuation methodology . Backward looking, but good to . Underwriting assumptions . Current market prices used to bracket value developed by subject matter value merchantable timber . Helpful to identif
Slide 26: Importance of Biological Growth in Timberland Returns
Importance of Biological Growth in Timberland Returns Components of Return – % of NPV by Source (1) Biological Growth Focus Areas . Commercially operable acreage by land type Inventory . Tree measurements (e.g. basal area) Data . Quality and accuracy of data 15% Biological Growth . Product specifica
Slide 27: Forest Analytics for Timberland Underwriting
Forest Analytics for Timberland Underwriting 26 Investor Tour and Teach-In Session | September 2019
Slide 28: Overview of Rayonier's Forest Analytics Team
Overview of Rayonier’s Forest Analytics Team Forestry Geographic Growth and Yield, Forest Inventory Information Systems (GIS) Harvest Scheduling . Utilize state-of-the-art GIS . Advanced analytic platforms . Leverage applied research to technology (ESRI) to perform for data analysis and review impro
Slide 29: Predicting Biological Growth – Key Challenges
Predicting Biological Growth – Key Challenges Forestry GIS Data . Spatial data integrity . Gross vs. net forested area . Accuracy of forest condition data . Land records and title issues Forest Inventory . Lack of industry standards and transparency with supplied data . Adoption of untested methods
Slide 30: GIS Analysis is Critical in Identifying Data Discrepancies
GIS Analysis is Critical in Identifying Data Discrepancies . GIS is primary source to determine total area for an acquisition or disposition . GIS analysis is also used to calculate commercially operable harvest area . Imagery analysis allows evaluation of stand typing and treatment accuracy . Slope
Slide 31: Inventory Validation is Essential to Mitigate Risk
Inventory Validation is Essential to Mitigate Risk Stand Level Tabular Data Example Sampling to Estimate Population Totals Stand# Plantability Age Acres TPA (1) BA (2) Tons/Ac 303219 Plantable 21 64.9 190 114.2 107.8 303220 Plantable 27 100.6 79 73.4 102.6 303221 Plantable 70 6.5 37 55.3 63.2 303222
Slide 32: Mobilizing Resources to Validate Inventory for Acquisitions
Mobilizing Resources to Validate Inventory for Acquisitions Acquisition Case Study A Acquisition Case Study B . Sampled 20% of merchantable acres over . Sampled 30% of merchantable acres over two weeks using internal resources five days using internal resources . Results confirmed overall accuracy o
Slide 33: Applying Tests of Biological Realism to Data
Applying Tests of Biological Realism to Data Acquisition Case Study C: Acquisition Case Study D: Benchmarking Predicted Density by Age Benchmarking Predicted Volume by Age Growth and yield reference lines Bubble size = acres Bubble size = acres Volume Increment Increment Volume Volume Increment Volu
Slide 34: Benchmarking Against Local Observations
Benchmarking Against Local Observations Tree Density Comparison from Three Different Sources Density Age Comparing seller’s data to nearby Rayonier data and other sources can identify evidence of understated or overstated inventory. 33 Investor Tour and Teach-In Session | September 2019
Slide 35: Process for Simulating Forest Growth and Yield
Process for Simulating Forest Growth and Yield Data Preparation . Fill in gaps in forest measurement data . Project tree size over time using a system of statistical equations Forest Growth . Equations are developed in-house using public and proprietary data . Estimate the shape of trees from base t
Slide 36: Illustrative Final Harvest Schedule
Illustrative Final Harvest Schedule Illustrative Acquisition – Timber Harvest & Standing Inventory Forecast . Harvest scheduling (tons in 000s) integrates inventory and growth / yield 250 1,200 . Objective – optimize harvest to maximize 1,000 200 present value based on operational and 800 environmen
Slide 37: Creating Value Through Active Portfolio Management
Creating Value Through Active Portfolio Management 36 Investor Tour and Teach-In Session | September 2019
Slide 38: Key Objectives of Active Portfolio Management
Key Objectives of Active Portfolio Management Process . Target acquisitions that upgrade and complement existing portfolio Improve the Portfolio . Ability to enhance returns through intensive silviculture and genetics Grow Scale in Target . Comprehensive analysis used to guide target investment regi
Slide 39: Leveraging Internal Expertise to Determine Intrinsic Value
Leveraging Internal Expertise to Determine Intrinsic Value Land Expectation Value (LEV) . LEV is the net present value (NPV) of a perpetual series of rotations for a stand starting with unplanted, bare ground . RYN maintains LEV models by region, species, and site index to inform our view on the val
Slide 40: Extracting Maximum Value on Land Sales
Extracting Maximum Value on Land Sales Consumption Utility Considerations . When selling land to private individuals, value is often placed on things not considered in traditional industrial timberland management . Example – retail purchasers often prefer limited stocking: – A few trees makes a big
Slide 41: Accounting For Risk In Underwriting
Accounting For Risk In Underwriting Project Expected Return Risk Type of Risk Idiosyncratic Systematic Non- Biologic Market HBU Timber Inflation Source of Return Growth Pricing Sales Income Forecast Normality Usually Usually Occasionally Occasionally Forecast Variance Lower Higher Lower Higher Timbe
Slide 42: Reinvesting Premiums from Land Sales Creates Long-Term Value
Reinvesting Premiums from Land Sales Creates Long-Term Value Sell / Hold Value Analysis (1) Break-Even Price Continues Appreciating Timberland HBU Break-Even Timberland Reinvestment Forgone $4,000 $400 Year Value (EOY) Premium Market Value Return Return Return (Periodic) $/AC 0 2,000 1,000 3,000 - -
Slide 43: Case Study: North Florida Portfolio Repositioning
Case Study: North Florida Portfolio Repositioning In the past two years, Rayonier has sold ~12.0k acres for $55.3 million and purchased ~30.8k acres for $51.1 million in Northeast Florida. 42 Investor Tour and Teach-In Session | September 2019
Slide 44: Real Estate Update
Real Estate Update 43 Investor Tour and Teach-In Session | September 2019
Slide 45: Real Estate Strategy: Optimize Value & Create Optionality
Real Estate Strategy: Optimize Value & Create Optionality Timberlands Real Estate Large Non-Strategic / Rural Places + Unimproved Improved Dispositions Timberlands Properties Development Development Strategic sales of Sale of non-strategic and Sale of rural Sale of properties with Sale of developed
Slide 46: Strategic Focus on Maximizing HBU Premium
Strategic Focus on Maximizing HBU Premium 2011 – 2015 Price per Acre 2016 – 2018 Price per Acre ($ per acre) Average Price: $2,209/ac ($ per acre) Average Price: $3,352/ac +52% +121% +38% $8,444 $18,672 +60% (1) $2,410 $1,810 (1) $2,891 $3,330 Non-Strategic / Rural Development Non-Strategic / Rural
Slide 47: Strong Pipeline of Rural Market Opportunities
Strong Pipeline of Rural Market Opportunities Rural HBU sale opportunities are concentrated in three primary markets: East Texas, Southwest Louisiana and Northeast Florida. 46 Investor Tour and Teach-In Session | September 2019
Slide 48: Rural HBU: Who are the Customers, What are the Products?
Rural HBU: Who are the Customers, What are the Products? lower Investment / Premium higher Recreational and Investment Estate Lots to Mini-Farms Rural Communities . Play on your investment . First-time homeowners to . Sell direct to homeowners . Weekend getaway retirees or to builders . Potential to
Slide 49: Real Estate Development: The Bigger Picture
Real Estate Development: The Bigger Picture . RYN has significant landholdings along the Interstate 95 Corridor in Florida and Georgia . Higher quality assets & markets for all RYN businesses: Forestry, Land Resources, Real Estate Richmond Hill, GA . Two significant population centers: ̶ Savannah, G
Slide 50: Real Estate Development: Core Opportunities
Real Estate Development: Core Opportunities Savannah Wildlight New I-95 interchange 15-mile radius 15-mile radius Jacksonville RYN Landholdings Rayonier has significant landholdings along the I-95 Corridor in Florida and Georgia proximate to the fast-growing Savannah, Georgia and Jacksonville, Flori
Slide 51: Real Estate Development: Focused Strategy
Real Estate Development: Focused Strategy Florida HBU Portfolio Georgia HBU Portfolio ~24,000 acres north of Jacksonville, FL ~20,000 acres south of Savannah, GA Strategy . Manage two unique “One Rayonier” HBU land portfolios . Invest capital and execute projects to catalyze value to optimize long-t
Slide 52: Significant Progress in Recent Years
Significant Progress in Recent Years 2016 2019 Wildlight, FL Richmond Hill, GA 51 Investor Tour and Teach-In Session | September 2019
Slide 53: Richmond Hill, Georgia – Status Update
Richmond Hill, Georgia – Status Update Focus Area Remaining ~3,200 acres ~16,800 acres ~$180 million of catalytic public infrastructure projects are currently underway. 52 Investor Tour and Teach-In Session | September 2019
Slide 54: Richmond Hill, Georgia – Multiple End-Use Opportunities
Richmond Hill, Georgia – Multiple End-Use Opportunities Shifting Strategy from Public Infrastructure to Real Estate Opportunities Five Development Pods Targeting WEST EAST Different Market Opportunities Targeted Est. ID # Land Use Acres 16 Interstate 15A 30 Commercial 15A Belfast Commerce 16 180 Par
Slide 55: Wildlight, Florida – Strategic Context
Wildlight, Florida – Strategic Context . Objective: Execute a catalytic, mixed-use Wildlight ~2,900 acres community development project within significant RYN landholding – ~20 miles north of downtown Jacksonville just one-half mile east of the interchange of Interstate 95 and A1A / SR 200 – ~13 mil
Slide 56: Wildlight, Florida – Status Update
Wildlight, Florida – Status Update . ~261 net acre Wildlight Village Center commenced development Spring 2016 . Capital investment to date: ~$30.8MM* . Sales to date: ~$15.7MM* – Commercial: ~$11.9MM (~55 acres) – Residential: ~$3.9MM (84 lots) . Wildlight Elementary School & Rayonier HQ Office Buil
Slide 57: Wildlight Village Center – Catalytic Uses and Design
Wildlight Village Center – Catalytic Uses and Design Pool Amenity designer’s preconception UFUF Health Health / YMCA at W ildlighYMCAt early concept diagrams 12/13/2017 Rayonier Office The Lofts Apartments Shopping & Dining Wildlight Elementary School Marriott Branded Hotel Florida Public Utilities