All good. I see our green lights on, so I'm going to go ahead and get us started so we keep the trains running on time. Appreciate everybody's participation. My name's Buck Horne, the Raymond James Housing Analyst, also covering all things not only residential but timber as well. Happy to have the team from Rayonier to talk timber, trees, and tariffs, and all sorts of other fun stuff. I wish I had better news to report on the housing market, but it's been a slog. You've seen the turbulence in consumer sentiment and volatile mortgage rates, and kind of seem to have a kind of a housing starts pattern that seems kind of stuck in neutral at the moment.
But with that all being said, we think it's created some interesting pricing dislocations in the timber REITs, you know, with stocks like Rayonier's trading north of 30% discounts to our estimated net asset value, one of the deepest discounts I think we've seen historically on record, quite frankly, for the stock. Really compelling value, interesting time to be talking about it. With that, I'm going to—we've got Mark McHugh to my left, April Tice to his left, and then Collin Mings over there. We'll do some opening, I guess, presentation, and then we'll have time for Q&A. Let me turn it over to Mark.
All right. Thanks, Buck, for hosting us today. Thanks for everybody joining here at Nareit as well as those joining on the webcast. I'm going to start by providing a high-level overview of Rayonier for those that are less familiar with the story, and then we'll leave plenty of time for Q&A. As I flip through the slides here, I'm going to be referencing the investor conference presentation that's available on our website as the featured presentation. All right. Diving in on page three, here we provide a brief snapshot of where Rayonier is today. We are one of three publicly traded timber REITs, but we tend to think of ourselves as the only pure play timber REIT in that we don't have exposure to downstream wood products manufacturing assets.
That is generally going to translate to less cyclical volatility in our cash flows over time relative to the peers. The company was founded in 1926, so almost a 100-year history. Today, we own or lease about 2.5 million acres of timberland, generating a sustainable yield of about 10 million tons annually. Of course, we recently announced an agreement to sell our New Zealand business. Once this transaction closes, that will reduce our acreage by about 400,000 acres and our sustainable yield by about 2.5 million tons. The chart on the right here shows our adjusted EBITDA breakdown in 2024. As you can see, about 70% of our adjusted EBITDA came from our timber segments, with the balance of 30% coming from our real estate segment.
That has been pretty consistent over time, where typically we are generating anywhere from 2/3 to 3/4 of our adjusted EBITDA from timber, with the balance coming from real estate. That said, with the pending New Zealand disposition, we do expect that that weighting will shift a bit heavier to real estate sales going forward. That is a snapshot of where we are today. I want to spend the next few minutes talking about how we see our business evolving into the future. It starts with a couple of major trends that we believe are going to drive increased demand for land and timber over the long- term. The first is the energy transition. The need for renewable power and decarbonization solutions continues to grow. That is especially true today with the rapid development and deployment of AI and the power-hungry data centers required to support this technology.
Despite some near-term political uncertainty around renewable energy incentives, we do see this as a long-term secular trend that we think is going to drive increased demand for land-based solutions going forward. The second trend is the favorable long-term outlook for the U.S. housing market. As Buck discussed, we're certainly facing some near-term headwinds, but the U.S. housing sector remains significantly underbuilt. Depending on what study you look at, by most accounts, there's anywhere from 3-6 million units of underbuilt supply in the market. Despite the challenging financing environment that we currently find ourselves in, we do think that the long-term outlook and trajectory of housing starts will be quite constructive. As these trends reshape our industry, they're also really reshaping how we think about our business and our portfolio.
Increasingly, we've come to see ourselves as not just a timber company, but really more of a land resources company. As a land resources company, we become increasingly focused on maximizing the value of our portfolio and our lands in a multitude of different ways. In particular, we think that over time, a small portion of our lands will become much more valuable for our alternative land uses, such as land-based solutions as well as real estate development. Why does this matter? This next slide, six, illustrates why we're so optimistic about these new opportunities. What this chart shows is the potential value uplift that we believe can be achieved from transitioning land use. For example, if you take an acre of U.S.
South Timberland that has an average value today of, say, $2,000-$3,000 per acre, and you're able to transition that acre into a carbon capture and storage lease, that has the potential to lift the value of that acre by up to five times. If you're able to transition that acre into a solar lease or an unimproved development use, that has the potential to lift the value of that acre by up to 10 times. Lastly, if you're able to transition that acre into an improved development use, we think that that has the potential to increase the value of that acre by up to 15 times. We see significant value creation potential from optimizing land use across the portfolio.
As we grow the number of acres within our portfolio that can be converted into these higher value uses, we really see this translating into significant value creation for us over the long term. Moving on to page seven, we have laid out our vision for Rayonier. It is really pretty simple. Our vision is to realize the full potential of our land resources in meeting the needs of society. What that really means is that we want to be in a position to identify and execute on the highest value end use for every acre within our portfolio, whether that is timber production, land-based solutions, or higher and better use real estate. We think if we can achieve this, there is tremendous value creation potential across the portfolio.
Moving on to slide eight, I want to briefly touch on some of our key competitive advantages. First, Rayonier has a best-in-class timberland portfolio located in some of the most attractive timber markets in the world. Second, we have a differentiated real estate platform with a demonstrated track record of optimizing HBU values and premiums across our footprint. Third, we believe our portfolio is uniquely well-positioned to capture these transformative land-based solutions opportunities over time. Let me drill down in each of these in a bit more detail. Slide nine provides an overview of our timberland holdings by region. As I noted earlier, we own or lease roughly 2.5 million acres on some of the most attractive softwood markets in the world. That includes 1.8 million acres in the U.S. South, about 310,000 acres in the Pacific Northwest, and about 410,000 acres in New Zealand.
Now, as it relates to our New Zealand portfolio, again, we announced an agreement earlier this year to sell this business. We expect this transaction to close by the end of the year, at which point our portfolio will be exclusively focused in the U.S., in the U.S. South, and the Pacific Northwest. Moving on, another key feature of our portfolio is our concentration in some of the best markets in the U.S. South. As you can see on slide 10, over 70% of our timberlands are located in the U.S. South, and the majority of these lands are located in top quartile markets, as measured by TimberMart South Composite Average Pricing. The chart on the right here shows our EBITDA per acre performance relative to the NCREIF South Index.
As you can see, over the past six years, our average EBITDA per acre has been over 40% higher than the NCREIF South Index. This chart really highlights that relative quality differential of our southern portfolio. Now turning to our real estate platform, slide 11 shows the range of real estate categories that we participate in. The first two, non-strategic and rural, these are really the bread and butter of our real estate business. Historically, we have sold anywhere from 1-2% of our southern land annually, typically at premiums ranging from 50%-100% above timberland value. That really forms the core of that recurring HBU business. The next two categories, unimproved development and improved development, this is really the area where we see the most significant growth opportunity longer term.
Unimproved development consists of properties where we've invested in entitlements and some land use planning, but we haven't made that next step of investing in horizontal infrastructure improvements. We tend to do this in areas where we have high-value lands, but they tend to be relatively isolated parcels. Alternatively, also within improved development, these are areas where we've actually taken that next step and invested in horizontal infrastructure improvements. We really do that in order to catalyze value creation across a very large footprint of land. We only make those investments in areas where we tend to have large land holdings, like Northeast Florida and Southeast Georgia. These are the major categories that comprise our real estate business. Now moving on to our performance in the HBU business on slide 12.
The chart on the left here shows how our HBU values and premiums have evolved over the last decade. As you can see, we generated a significant increase in both our average HBU price per acre as well as a premium to NCREIF Index. So that value per acre went from about $2,800 per acre in the period from 2015 to 2017 to $4,500 per acre in this most recent period from 2021 to 2024. We also generated a significant increase in the premium. That premium went from 55% to almost 120% over those same time periods. We've also seen a significant uptick in the shift or, I'm sorry, a shift in the mix of the development sales, those higher value development sales. They've gone from just over 15% in 2015 to 2017 to about 44% in the last four years.
What's really driving this mix shift is the momentum that we've gained in our Wildlight and Heartwood development projects. Slide 13 provides a high-level overview of our 120,000-acre development pipeline, as well as a map of our holdings in Northeast Florida and Southeast Georgia. We only pursue these improved development projects in areas that have both strong market-ready demand as well as areas where we have a significant land holding. The two primary areas where we've done this are in Wildlight, our project north of Jacksonville, Florida, as well as Heartwood, our project south of Savannah, Georgia. For example, in Wildlight, we own about 25,000 acres within a five-mile radius of the epicenter of that project and about 50,000 acres within a 10-mile radius.
The strategy here is really about creating a catalyst for value creation and demand across a very large footprint of land. Now let's shift gears and talk about land-based solutions. This next slide illustrates the global path to achieve net zero by 2050. It shows what's going to be required in terms of reduction of carbon emissions as well as carbon offsetting. The reality is, as we all know, we're not currently on this path. I don't think anybody knows exactly what this path is going to look like over the next 25 years. What we do know is that there's significant global action underway currently to reduce carbon emissions. Over 70% of countries and over 50% of the 2,000 largest global companies have made net zero commitments.
As a result, there's a tremendous amount of capital currently being put to work to decarbonize the economy and to create sources of renewable energy. For example, between 2020 and 2030, utility-scale solar capacity is projected to grow by seven times. Carbon capture and storage demand is projected to grow by 11 times. Voluntary carbon market issuance is projected to grow by six times. As a large owner of timberlands, which also comprise a massive carbon sink, we really think that this creates a significant opportunity for our company. When we talk about land-based solutions, what exactly do we mean? Slide 15 provides an overview of how we broadly think about this business. We generally think of land-based solutions as falling into three categories. The first is alternative and additional land use.
That would include things like leasing land for solar or leasing land for wind farms. It would also include leasing land and pore space for carbon capture and storage, which we tend to think of as an alternative land use, I'm sorry, an additional land use because we continue to operate the surface for timber production. The second category would be carbon markets. That would include regulated markets like the New Zealand Emissions Trading Scheme that we participate in there, as well as voluntary markets where corporations can purchase carbon offsets to meet their net zero claims. That is primarily what we are dealing with here in the U.S. The third category is fiber for bioenergy and biofuels.
That would include things like using wood fiber for bioenergy with carbon capture and storage, or BECCS, or using wood fiber for the production of biofuels such as sustainable aviation fuel, SAF, or green methanol. Long- term, we actually think that all of these different categories present a pretty significant opportunity. That said, we really see solar and CCS as being the most meaningful near-term opportunities for Rayonier. Let me spend a few minutes and drill into those in a bit more detail. Slide 16 highlights the projected growth in utility solar development as well as the underlying land use math for utility solar. As you can see in the chart on the right, we're expecting about 30 GW-35 GW of new utility solar capacity additions per year through 2030.
Now, in terms of land use, each megawatt of utility solar capacity requires about seven acres of land. To put that in context, that pace of solar development translates into an incremental land use need of about 200-200,000 acres annually. That implies about 1.5 million acres through 2030 that will need to be converted into utility solar. Again, there is a big opportunity here for large landowners like us. Moving ahead to slide 18, this chart shows here on the right how our pipeline of solar options has grown over the past few years. As you can see, in 2021, we only had about 7,000 acres under option for solar development. At year-end 2024, that number had grown to about 39,000 acres. We feel really good about how this pipeline is developing.
As some of these options start converting into leases over the next few years, we really see that translating into pretty significant cash flow growth over time. Now let's shift gears and talk about carbon capture and storage. Slide 19 highlights a projected growth trajectory for CCS demand. As you can see, CCS demand in the U.S. is projected to grow from about 25 million tons today to over 300 million tons over the next decade. Of course, this is going to require a lot of suitable land and pore space, and that's really where we come in. On slide 20, we've outlined the key considerations for cost-effective CCS. Essentially, you need three things for CCS to work. You need a concentrated source of high-purity emissions that can be cost-effectively captured. You need suitable geologic storage capacity to store the carbon.
You need access to pipeline infrastructure to move the liquefied carbon from the point of capture to the point of storage. As you can see here, Rayonier has significant ownership across our land base that checks these three boxes. If you look at kind of where that demand exists, initial interest in our land has been within Louisiana and Texas primarily. We have also seen more recently that interest expand to Alabama and Georgia. Very optimistic about how the pipeline is evolving here. Skipping ahead to slide 22, here we have shown how our CCS leases have grown over the last couple of years. This is something that, again, we are very encouraged by. Over the last two years, we have gone from having essentially no acreage under CCS lease in 2022 to having over 150,000 acres at year-end 2024.
We're very encouraged by the interest that we've seen in our land base. Like solar, we're quite optimistic about the long-term cash flow growth potential of this business for us. In the interest of time, I won't go into detail on carbon markets and bioenergy here, but suffice it to say we see meaningful longer-term opportunities here as well. With respect to carbon markets, I note that we continue to evaluate a range of opportunities. We're actively engaged on a handful of pilot projects that we expect will come to fruition over the next couple of years. I'm going to skip ahead to slide 28 now, and I'll touch briefly on some of the key results as it relates to our asset disposition program.
Recall that in November of 2023, we announced an asset disposition and capital structure realignment plan along with a $1 billion disposition target. There were really two key factors that drove us to this decision. First, we wanted to reduce our target leverage from four and a half times net debt to EBITDA to three times net debt to EBITDA in anticipation of what we saw as a higher-for-longer interest rate environment at that point in time. Second, we felt that our stock was trading at a pretty wide disconnect relative to our view of private market value. We wanted to take advantage of that arbitrage opportunity. Overall, we've been very pleased with how this program has evolved over the course of the last 18 months.
To date, we've completed or announced about $1.4 billion worth of dispositions at multiples that are well in excess of where our stock has been trading over that period of time. We really believe we've captured a significant value arbitrage opportunity here. We've also generated significant CAD and NAV accretion along the way. I'm just going to skip ahead now to slide 32. I'll wrap up by just reiterating a few key elements of our strategy. Again, we have three key focus areas in our business. First, we're focused on continuing to optimize our core timber operations. Second, we're focused on growing our land-based solutions business with a near-term focus on solar and CCS and a longer-term focus on carbon markets and bioenergy. Third, we're focused on leveraging our real estate platform really to maximize those real estate premium realizations across our land base.
Ultimately, we believe as we execute on these strategies that this is really going to translate to value optimization and value creation across the portfolio. That is a very quick flyover of our business, and I am happy to open it up for questions.
Sounds good. Great overview. Thanks for the time, Marc. I'm going to back up a little bit to New Zealand and just talk through maybe just help us understand the background of that transaction, the thought process, and rationale for why to exit New Zealand now. Of course, that frees up a lot of capacity on the balance sheet. You're going to get a significant influx of cash from that. What are the priorities for that capital allocation? Can you almost deploy almost all of it back into repurchases and when?
Great questions. Just in terms of the strategic logic of divesting New Zealand, I'd start by saying that the collection of assets we have in New Zealand, it really is a strong set of assets. We've got a fantastic team in New Zealand managing those assets. As we are looking at the best areas to potentially divest within the portfolio, we recognize that there's really not a lot of synergy between our New Zealand business and the balance of our portfolio. It largely operated independently of our U.S. business. Again, we've got a great team there managing that asset, but we really didn't see the synergy in continuing to own it. It was also owned through a joint venture structure, so it had some governance complexities. When you put that together, I think the U.S. public markets have never really fully appreciated that asset.
I think it was a source of complexity in our story. Again, we're the only public company that owns New Zealand timberland assets. I think it was a part of our portfolio that just wasn't that well understood. We ultimately determined that we would look at divesture opportunities for that portfolio. We ultimately were able to secure a transaction that we thought made sense both for Rayonier as well as the New Zealand business and the buyer of that business. Again, we think that there are great longer-term opportunities there, but just didn't really fit with our portfolio or public form of ownership. As it relates to how we intend to deploy that cash, you recall that we set out with a $1 billion disposition target when we laid out the plan back in November of 2023.
With the New Zealand transaction, we ultimately landed at total announced divestitures of $1.45 billion. New Zealand was always going to be the big swing factor in terms of where that landed. By the end of 2024, we had divested about $750 million of assets in the U.S. When we announced New Zealand, that obviously took us well over that original target. I think we're encouraged by just the flexibility that's going to afford us going forward. After we close New Zealand, before any special distribution associated with New Zealand, we expect to be sitting on roughly $1 billion of cash. Right now, we think share buybacks continue to be a very compelling opportunity and a very compelling use of capital given the disconnect that you alluded to earlier, Buck.
I think by your math, we're trading in excess of a 30% discount to a private market view of NAV. I'd say that that's certainly the near-term priority. We announced on our last call that we have completed our last earnings call. We'd completed some buybacks through April. We've also alluded to a 10b5-1 plan that we've put in place to be able to kind of act opportunistically on that through different periods of time. Again, very encouraged about the value creation opportunity there. I'd say buybacks continue to be a priority. We're going to continue to be flexible and opportunistic as we think about capital allocation. I wouldn't foreclose acquisition opportunities. Again, the bar is relatively high right now kind of given that opportunity on buybacks.
Makes sense. One of your competitors is out there actually doing some acquisitions recently. Just maybe a lay of the land in terms of this disconnect in terms of pricing. I think the public market has a hard time seeing through timber transactions and/or the effective pricing. You get a price per acre in one region, but it has to compare to another region. Sometimes you get different stocking levels and weird comparisons out there. What's a good basis or thought process on where you think the private market is at? What is it that the private market is seeing in the value of timber that the public market is not?
Yeah, no, it's a great question. Look, when you're comparing public market valuations to the private market, it can always be a bit challenging because I think there tends to be the lowest common denominator tends to be per acre values. Recognize that those per acre values can range pretty widely depending on the quality of any individual tract of timberland. On average in the U.S. South, we tend to look to the NCREIF South Index as being reasonably indicative of average qualityS southern Timberland values. That's a private equity-based index comprised of, I think, 8 or 9 million acres, about $17 billion-$18 billion of value. It is probably the most broad base and kind of best reflection of a portfolio of average quality timberland because there is a reversion to the mean when you're talking about millions of acres.
I think at year-end 2024, the average per acre value of the NCREIF South Index sat just over $2,200 an acre. As we kind of think about the relative portfolio quality, our relative portfolio quality as well as when we're looking at acquisitions, again, there are a number of factors that go into that. It's in what market those assets are located. Like I said earlier, the majority of our assets are located in top quartile markets from a pricing standpoint. You'd also look at the underlying productivity of the land, which again can range from probably 3 tons per acre per year, probably up to 5 tons per acre per year for more productive lands. All those factor into kind of how to think about the per acre value of land.
By almost any measure, again, you'd kind of look at where the timber REITs are trading today relative to any objective measure of where the private market is. You'd say there's a pretty pronounced disconnect there. It's going to vary pretty widely in the Northwest as well. As we kind of look at our portfolio, we think, A, we have a well above average portfolio quality in the U.S. South. We think with the divestitures we've completed in the Northwest, we really brought up the average portfolio quality there as well. We have a real estate development business that we think has really grown in value over time also. Like I said, we think that there's a pretty significant disconnect with where the stock price is trading right now. We've been capitalizing on that through our buyback program.
Definitely agree. Let me go to the thought process around environmental climate change risk in terms of just managing timber. You absorbed a hurricane last year, and that created an influx of damaged trees and damaged saw logs. Where are we at in terms of the salvage activity and how do hurricanes play into your forecasting going forward and/or even fire risks? How do you manage for potential fire risks when you're managing millions of acres of forestry?
Yeah, I'd say the biggest natural mitigant to any kind of casualty loss within a large portfolio of timberlands is just the geographic dispersion of those assets. When you hear a number like 1.8 million acres, you tend to think the scale of that is just being enormous. You tend to think of these big locked-up chunks of land. The reality is if you look at any large timberland owner's portfolio and you actually look at a map of those lands, it more often looks like you've sprinkled sand on a map. These are quite geographically dispersed lands and acreage. We deal with casualty risk all the time. We deal with hurricanes. We deal with forest fires. When we have had impacts, they've tended to be relatively minor.
I think in the last 25 years, Rayonier's had two casualty events that were just over $10 million in aggregate each. Again, that's a 25-year history, $5, $6, $7 billion portfolio of lands. We deal with these risks. They're not, unfortunately, insurable risks, but they tend to be relatively minor in terms of how they actually impact us. You alluded to Hurricane Helene, and we've certainly seen impacts from Hurricane Helene, but they weren't direct impacts. We actually had relatively minor direct impacts to our portfolio. The impact that we've seen is just that caused a lot of devastation of timberlands in that area. What that's translated to is an elevated level of salvage volume in the market currently. There's a shelf life to that salvage volume.
When we have these casualty events, there tends to be a 6-9 month shelf life to go and salvage and harvest that timber. The longer-term impact is that that timber has now come out of the market. It needs to be replanted. There is going to be a long period of time before it becomes harvestable again. We will often see a pretty meaningful bounce back when you kind of get through those salvage activities. That is certainly what we have been contending with in Georgia here recently. We do think that longer-term, we are going to see those markets normalize.
Gotcha. We've got a minute left, so it's going to be a lightning round question for you on tariffs and impacts and things like that. I guess the question is related to we have duties coming theoretically, countervailing and anti-dumping, which should raise the production costs on Canadian producers. Potential Section 232 could be applied at some point. We'll see. It feels like Canadian supply is going to be challenged in terms of lumber production. That means there's just going to be more production shifts to the U.S. South. When do you think we kind of reach an inflection point in terms of seeing that increased production or taking advantage of the increased capacity in the U.S. South and having that actually translate to better pricing power for saw logs and pulp?
I certainly think that the increase in duties, the countervailing and the anti-dumping duties that is expected to come into place later this year, that's expected to go from 14% currently, I think, to roughly 30%. We certainly think that that's going to have an impact on the market. The net effect of that should be less lumber production in Canada and more lumber production in the U.S., which should bode well for demand for saw timber and saw timber prices. There is obviously talk of incremental tariffs around the Section 232 investigation. That remains to be seen when or if those come into play. Kind of irrespective of the Section 232 tariffs, we do think that as these duties come into play later in the year, that should be a tailwind for saw timber prices.
Sounds good. We'll have to leave it there. Thank you, everyone, for participating and joining. Thanks again to the Rayonier team. Thank you.
Thank you.