CatchMark Timber Trust Inc. recently revealed that it would acquire 1.1 million acres of prime East Texas timberlands for approximately $1.39 billion in a joint venture with a consortium of institutional investors, including BTG Pactual Timberland Investment Group, Highland Capital Management, Medley Management Inc., and a major Canadian institutional investor.
According to a prepared release, the property is being sold by Campbell Global, on behalf of the institutional owners of the property, in a transaction expected to be completed within 45 to 60 days, subject to customary closing conditions.
For an investment of up to $227.5 million, CatchMark will more than triple the number of acres under its control and management to approximately 1.6 million acres. This transaction fits CatchMark’s profile for acquiring interests in properties which can provide durable growth for its stockholders:
The highly productive timberlands have an attractive site index and feature a rapidly accelerating inventory profile, projected to grow from the current 2.8 million tons of annual harvest volume to more than five million tons by 2028, the release states.
The joint venture will assume existing long-term sawtimber and pulpwood supply agreements with Georgia-Pacific and International Paper, which run through 2029 and 2027, respectively. International Paper has an option to extend its agreement until 2032.
The timberlands are located near top quartile mills and within approximately 100 miles of three of the top five U.S. homebuilding markets: Austin, Dallas, and Houston. “These markets provide strong, growing, and compelling demand fundamentals,” the release says.
The acquisition is one of the largest U.S. timberland transactions since the 2007 sale of 1.55 million acres (including this asset together with other timberlands in Louisiana, Alabama and Georgia) by Temple-Inland to the current owner for $2.4 billion, the sale of TimberStar properties (described below) in 2008 for $1.9 billion, and the sale of 1.88 million acres by Forest Capital Partners in 2012 for an undisclosed price.
The approximately $1.39 billion transaction has been structured by Campbell Global as a sale of the general and limited partnership interests of the entities that own the timberland assets. CatchMark will fund its investment of up to $227.5 million in the joint venture through borrowings under its multi-draw term loan and cash on hand. CoBank ACB will act as the agent for a lender syndicate and provide a $750 million financing facility, of which up to $650 million will be funded at closing.
Jerry Barag, CatchMark’s President and CEO, said: “This milestone transaction with institutional partners accomplishes our strategic goal of participating in large, prime timberlands acquisitions and gaining long-term control over high quality assets with the opportunity to create superior returns. In addition, generating future asset management fees – and incentive based promotes – serves as an attractive way to deliver further income and value to our stockholders. Our intention is to integrate these properties expeditiously into our operations, taking advantage of our existing presence in East Texas and maximizing value through incorporating our exacting management standards and best practices.”
Atlanta-based CatchMark Timber Trust is a self-administered and self-managed, publicly-traded REIT that strives to deliver superior risk-adjusted returns for all stakeholders through disciplined acquisitions, sustainable harvests and well-timed sales.