All right, I think we can go ahead and get started here. So thank you again for joining us for the late session for Day One of Nareit, and appreciate you hanging out with us for the PotlatchDeltic discussion. My name is Buck Horne, the Raymond James Timber Analyst, also covering all things housing, multifamily home building, and the like. To my right, Eric Cremers, CEO of PotlatchDeltic, and then Wayne Wasechek, CFO over there to his right. We'll do a couple of minutes of introduction and just maybe a quick operating update if you wanted to run through that or any other introductory comments, and then we'll save plenty of time for Q&A. Yeah, just a quick overview of the company. So we're headquartered in Spokane, Washington. We have about 2.2 million acres of timberland and manufacturing assets and real estate. So we have three business units. The first one is our wood products manufacturing business. We have seven mills, six produce lumber, one produces industrial-grade plywood. We produce about 1.1 billion board feet of lumber per year. Our second business unit, Timberlands, with our 2.2 million acres of timberland, we have about 1.6 million acres in the south, 600,000 acres up in Idaho, and we harvest about 7.5 million tons per year, about 20% up in Idaho and 80% in the U.S. South. And then our real estate business, we really have two product offerings. We have a rural real estate program where we sell properties for higher and better use values at significant premiums to timberland value. And then we also have a development business. It's a master plan community in Little Rock, Arkansas, that we picked up from the Deltic merger back in 2018. And with that product offering, we create residential lots and commercial lots for sale in Chenal Valley. We've got an emerging national climate solutions business, so think solar farms, think carbon offsets, carbon capture and storage, lithium, a wide variety of new business opportunities that are presenting themselves to the company. So I will stop there and turn it over to you, Buck, for some questions. Sounds good. Well, let's dive into a couple of these different topics. Let's maybe start with the lumber markets and just commodity pricing. It's been a tough year. Would have thought we would have started to see a little bit more traction given that single-family housing production seems to have actually held up reasonably well. Builders are still doing pretty well despite 7% mortgage rates. But there's some other puts and takes to the market. Obviously, the R&R market is one of those factors. But what are you seeing out there in terms of industry supply, either on the sawmill side or demand patterns in terms of where lumber stands? Yeah, so it has been a rough slog for much of the past year in the lumber business. Our most recent quarter, we just broke even. And to think we've got, I don't know, $700 million-$800 million worth of assets breaking even is not fun. The pressure in the industry right now is really multi-faceted. Multifamily starts are relatively soft right now. They've dropped about 50% from where they were a year ago. And I think that's really a reflection of all the overbuilding that might have been taking place 12-18 months ago. That multifamily now has to get absorbed by the market. That's the first issue. And the second issue is just higher financing costs. As you know, mortgage rates have ticked up. We'll still have project financing costs for developers. Multifamily starts a year ago, we're running in the 600,000 per year kind of range, and now they're down around 300,000. I do think this is a temporary phenomenon as the units that have been constructed or are being constructed now get absorbed by the marketplace. I think in 6-18 months, multifamily will be back and growing again. The other market segment that has been under pressure is the repair and remodel market, as Buck mentioned. There's different ways to think about the repair and remodel market. The one segment within repair and remodel that we think is under a little bit of pressure is the do-it-yourself projects that are larger in size. Perhaps these are projects where somebody might have been choosing to finance those projects. Again, going back to interest rates, they might be pausing on doing those larger projects. Could be a deck finishing off a basement, who knows. The pro segment seems to be doing okay. If you listen to the commentary from Home Depot and Lowe's and Menards, what you'll hear from them is that the pro segment is hanging in there pretty good. So it's just the DIY large project segment that seems to be under a little bit of pressure. So getting back to your question, demand has been a little bit weak here of late, but I think things are starting to turn for the business. We've seen a number of mills close down since the start of the year, 13 mills across North America representing 1.6 billion board feet of capacity. Roughly 2% of industry-wide capacity has now come off the market. At these prices, while most of the larger companies like us and even I think Weyerhaeuser had break-even results in the first quarter, I'm guessing the smaller operators that have mills that are not as cost competitive are probably losing a lot of money right now. My guess is we will see more mill closures over the next several months as people adjust to the market reality of not wanting to lose a lot of money. Capacity is going to continue to come out of the industry, and I think slowly demand is going to come back. As As we work through the glut of multifamily and as we see interest rates come down later this year, I think that'll bring demand back to the forefront. I think there's a lot of recognition that the industry is underbuilt. Housing is underbuilt in the United States anywhere from 4-5 million units. That's a number that's universally quoted and recognized by folks. The underlying demand is there. It's just an affordability question, and I think that'll come back as we get to late this year, as we get to an interest rate cut cycle. Just diving on the supply. So I totally agree with you that we're seeing certainly some of that supply. It It seems to be somewhat coming from Canada. There was also some surprising mill closures in the Southeast as well. But on net, are we still seeing, are we still going through a period where there's more industry capacity this year than last year? Or it seems like there was a lot of interest in expanding capacity in the U.S. South when lumber prices were up towards $800 per thousand board feet. This is kind of like the multifamily thing. It's like all those multifamily starts from two years ago are now showing up in deliveries in 2024. Is there a similar phenomenon happening in terms of sawmill capacity in the U.S. South? Yeah, you raise a good point. There has been a lot of new mill construction in the U.S. South. You think back to COVID, we had lumber that got all the way up to $1,500, in some cases $1,800 per thousand board feet. Today we're sitting $400 if we're lucky. Back when the industry was flush with cash, a lot of new mills were built. I think just about all of that new mill construction is behind the industry at this point. You don't hear of new mill announcements. You're hearing of closures. I think that capacity has probably peaked, and maybe it's even starting to roll over a little bit. Got it. Speaking of capacity, so let me switch gears on you just a little bit because we talked a little bit about your own capacity expansion in Arkansas. So how's the Waldo project going in terms of timeline? And are you on budget, on schedule? And how long is it going to take to ramp that up? Yeah, the Waldo project is coming along exceptionally well. This is a $130 million project we have to expand and modernize our Waldo, Arkansas sawmill. It's going to take capacity from roughly 200 million board feet per year to 285 million board feet per year. Cash processing costs at the mill are going to come down roughly 30%. And recovery, which is the amount of logs it takes to produce a given amount of lumber, is going to improve at the mill by 6%, which really moves the needle on the mill's P&L. So at the end of the day, this $130 million investment we think is going to yield us an incremental $25 million per year in EBITDA. We're on track. We're on schedule. We're on budget. And this will come to fruition, completion in the third quarter. There will be a ramp-up period after we flip the switch and start up the new modernized mill. We're anticipating that it'll take us somewhere between 3-9 months, I think, to get the mill up to its new capacity. There's always kinks that have to be worked out. But we hope it's on the shorter end, obviously, more like 3 months as opposed to the 9 months. But it'll be a top 10 mill in the U.S. South when it's done. Outstanding. Let me switch gears on you a little bit and shift into the log markets and the timber side of the equation. Can you maybe just highlight for us the different dynamics between your North region and what you do in the South and kind of how pricing is different between your two different geographies? Wayne, you want that one? Yeah, definitely. Yeah, there are definitely different dynamics with our northern markets compared to our southern markets. In our northern market, which is Idaho, 75% of our volume is indexed to lumber. So as you might imagine, that can be more volatile than our southern pricing. Our southern pricing tends to be pretty stable, definitely with where the growth drain dynamics are. Now, we have pricing differences from different wood baskets in the South. Notably, our southeastern market, that market tends to be more tension. So we see more pricing premiums there compared to the Gulf South. But overall, it's much more a stable pricing environment compared to our Idaho market where it's indexed to lumber. In the South, to what extent do you depend on pulp and paper end-use demand? Or it's been a market that's been under some sort of stage of secular decline for a while now, but are we starting to see some stabilization in terms of demand for pulp logs? And is that kind of stabilizing pricing for U.S. South logs? Yeah, I think, Buck, that's a good word. I would characterize it as stable in the pulp markets. Certainly, we saw with COVID during that period of time, the demand for products and people purchasing products. I think that drove certainly demand in pulp and paper products that kind of waned when consumer sentiment shifted from products to more services. I think we've seen that now moderate back more into products. And I think that's created stability in the pulp and paper markets. And kind of in the near term, I think we certainly see stability in those pulp markets, especially in the South. M&A opportunities. You guys have been out there looking for deals. Timber pricing has not, it seems like it's been more competitive than we would have anticipated in terms of the pricing dynamics that are out there. So how do you weigh your opportunities against your cost of capital? And how do you, whether that's either you add more timber, do you add maybe some more sawmill capacity? What's the most attractive option M&A-wise? Yeah, so M&A markets, particularly in Timberland, have been very, very challenging. Our cost of capital has gone up like just about everybody's cost of capital here over the last 12-24 months with interest rates moving sharply higher. I think the simplest way to describe it is that it's made us uncompetitive in Timberland M&A markets. We looked at something like 12 deals last year, and we did not win a single transaction, which is very unusual for us. It doesn't really bother me a whole lot if others want to "overpay" for Timberland and perhaps destroy shareholder value. It just means we look at other capital allocation opportunities for us, which include share repurchases and things like the Waldo expansion. We had a $200 million authorization, of which we've used $75 million up. So we still have $125 million left on that authorization. There is an occasional M&A transaction that we can get done when it's a privately negotiated deal when it doesn't go to auction. We did one of those in the first quarter. We got an exceptional deal done. It was an 8.5% real IRR. That may not sound high to the crowd, but in Timberland investing, 8.5% is off the charts high. I've been with the company 17 years. It's the best, highest return project I've ever seen. So you can find those deals. They're few and far between where you've got a seller that doesn't want to take something to market, to auction. It's a privately negotiated deal. So we got a sweet deal with that one. But getting back to your question, Buck, in general, Timberland M&A markets are incredibly competitive. There's no shortage of demand for high-quality Timberland, and prices are at very, very high levels. I think a lot of it's driven by the excitement around natural climate solutions, carbon offsets, carbon capture and storage, solar, those types of things. Speaking of which, one of your competitors is actively in a disposition program to an extent to deleverage, but your balance sheet is in a position where you really don't need to do that. But given the disconnect between public market valuations and what you're seeing in the competitiveness of the private market valuations, would you consider maybe some non-core, other dispositions that could be funneled into stock repurchases? Yeah, it's a good question. We did actually announce along with our first quarter earnings call that we're going to sell 34,000 acres of timberland in Arkansas and Alabama to a TIMO. TIMO is private equity at Timberland Investing, of course. And we're going to sell these trees are less than four years old, so they're not but a couple feet tall. They'll produce no meaningful cash flow for 20 years, 22 years. We're selling them for $1,900 per acre or $58 million. So that transaction has not closed yet. It's going to close here in the second quarter. And certainly, once we have that cash on our balance sheet, we're going to go back and revisit capital allocation because we do have a strong balance sheet. And we are interested in putting our capital to work to the benefit of shareholders. Certainly, with Timberland M&A markets being incredibly tight, share repurchases, when we're trading at such a significant discount to NAV where we're at today, we estimate we're trading at a 25%-30% discount. Certainly, share repurchases look attractive to us. Makes sense to me. So let's talk a little bit about climate solutions and maybe kind of we can take each one of these categories one by one because it is a little complex. And sometimes even I have a hard time understanding all the dynamics between, for example, forest carbon credits versus carbon capture sequestration and then the solar leasing and the wind leasing. So what's the, if you were kind of ranking each of these opportunities in terms of near-term monetization or what can contribute the most soonest, where do you see the most opportunity? Yeah, I mean, there are several opportunities for us in natural climate solutions, really ranging from solar, carbon credits, carbon sequestration and storage. We also have lithium deposits, brine and lithium deposits. So definitely a lot of attractive opportunities. I would say from the spectrum of more near-term to longer-term potential, really solar and carbon credits, I think, are really the near-term areas where we think we can monetize the opportunity sooner. We're very excited about solar. There's a lot of capital in the marketplace being invested in solar. I think it's estimated that solar will expand like 3 times by the end of the decade. A lot of, yeah, a lot of attractive capital going into that. It's been incentives provided by the IRA Act really driving a lot of green energy demand in solar. We think that's really the premier attractive opportunity for us in natural climate solutions. I think that's followed by carbon credit and capture or, sorry, carbon credits. We are currently in the midst of completing a project. We expect to monetize that transaction, probably looking by the fourth quarter of this year. We're expecting to bring about 500,000 credits to the market. We estimate anywhere between $25-$30 per credit. And that's just year one. Now, we have a significant amount of credits coming in year one because we've deferred harvest for over three years now. But on an ongoing basis, we expect that to continue to generate between 100,000-150,000 credits. So that's another attractive opportunity. And then, like mentioned earlier, carbon credit or carbon capture and storage, that's certainly an area we're exploring in discussions with counterparties on. But that's more in the kind of longer-term opportunity for us. Can we dive into that? Let me start with solar just as an example. Can you walk us through the economics of a solar lease as opposed to the economics of using that for acreage for timber purposes? So how does that entitlement process work? When do you kind of get the full fee income stream or royalty income stream? And what's the value uplift on kind of the acreage relative to timber outcome? Yeah, certainly, Buck. We're looking at both solar leases and solar land sales. Both are very attractive to us. We like the lease option just with the longer-term revenue stream, cash flow stream that that brings. But certainly, we're looking at both options. And some developers prefer one option over the other. But the initial phase as we enter into an option agreement can be anywhere between three to five years. And that generates, I would say, a lower amount of cash flow just for that option agreement. And then once that option agreement, if the developer were to exercise, then that goes into a lease or a full land sale. And now, why do you enter into an option period? Well, to get these projects established, there's kind of certain phases that a developer has to go through. 1, first and foremost, they need to secure the land through the option. And then once they do that, then they start to work with the utility to secure an offtake agreement, procuring equipment, infrastructure. And that takes a period of time. There may be local zoning and permitting required. And that takes time. And so once a developer would work through those various phases, knowing what the next steps are, then they would turn to exercising that option agreement and then turning that into a longer-term lease, which our leases would currently structure at around, say, 30 years. So it's a longer-term cash flow stream. What percentage of the portfolio theoretically could be suitable for, whether it's a solar outcome or if you've measured the CCS outcomes? Or what kind of acreage total are we talking about? Yeah, on the solar front, we look at it in three different buckets right now where we currently sit today. The first bucket, we have about 20,000 acres under option agreement with solar developers. And that's both, as I mentioned, land sales and lease agreements. And anywhere around on a net present value basis, that's valued at about $200 million. And then we have a second bucket, about another 20,000 acres, which we're actively in discussions with solar developers on. And that is also valued in the ballpark of $200 million on a net present value basis. And then we have a third bucket where we've identified another 20,000 acres that we think have a very strong possibility for a solar outcome, but we're not in active discussions yet. We're trying to work through the first two buckets with solar developers. We'll turn to this third bucket once we work through the first two. In total, about 60,000 acres of solar potential at about $600 million on a net present value basis. That's less than 3% of our total timberland portfolio of 2.2 million acres at $600 million on a net present value basis, which is somewhere in about the ballpark of 15% of our enterprise value. We think it's a very attractive opportunity for us, and we're really excited about it. All right. So what are the major pushbacks that you're hearing from investors these days? Or what's the catalyst that's needed to close this NAV gap? If there's a thought you can provide. I don't know if there's a magic bullet or solution, but is there something that's concerning people right now as to why they're avoiding timber as an asset class right now? Yeah, I don't think it's an issue that's unique to us. I think Weyerhaeuser has the same issue. Rayonier's got the same issue. I think a lot of it goes back to where housing is at. Housing is not in a great place right now. It's not horrible. It's been a lot worse. But clearly, not making any money in lumber for us is a drag on our financial performance. Weyerhaeuser's got a sizable lumber business. They've also got a drag on their business not making money in lumber. And Rayonier's situation is different because they're in a deleveraging situation right now. So they've got a different reason why they're trading at a sizable discount. But I think what needs to happen is lumber prices and housing need to come back, number one. And then number two, we need to see more of these natural climate solutions deals get done. So more solar farms get signed up, and we need to get more carbon credit deals completed. And I think as we get more of these natural climate solutions, or for us, lithium, for example, as we see these natural climate solutions projects start to yield real cash flows and not just be, well, modest cash flow from an option agreement, I think the analysts will then take their NAV models up. They'll start taking their models up to reflect the cash flows that we're getting from these natural climate solutions projects. And I think that, in turn, will get investors excited about our financial performance and our stock price. This is an ongoing debate, so this may be a loaded question for you. But there's a question over whether or not it makes sense for the lumber and wood products business to be wrapped in the REIT wrapper to have these two businesses integrated. And one of your peers has chosen to go with the pure-play-only timber REIT strategy. What are your thoughts around maintaining the business that has this cyclicality component to it? And how does that, what are your thoughts in terms of how that benefits the timber side of the business? Yeah, I mean, there are arguments that could be made either way. The competitor that's gotten rid of their sawmills, saying it's too volatile business, just missed out on $1,800 lumber two years ago. We made $800 million in our lumber business over the last three years, just staggering profits. So I think the one thing you have to bear in mind when you manage a lumber business is there's enormous volatility in those cash flows, which is the exact opposite of what you find in the timberland space. The timberland space produces enormously stable cash flows. But as long as you manage your company recognizing that Wood Products is going to have a volatile earnings stream, in other words, don't let your balance sheet get out of shape, don't let your dividend policy get too far away from your core stable cash flows, you can manage the business having both business segments. The reason why you want to have both is because there are natural synergies that accrue to folks that own timberland and own mills in the same wood baskets. When you separate those two, you lose those operating synergies. And we don't want to lose those operating synergies. So we've chosen to keep our mills. And I'm really glad we did because, like I said, we've made $800 million over the past couple of years running those mills. By the way, so as we sit here today, so like I said, Weyerhaeuser and us, we've got pretty similar business models at the end of the day. Rayonier does not have Wood Products manufacturing facilities, yet they too trade at a sizable discount to their Net Asset Value. So they have the same issue that we and Weyerhaeuser have got as well. There's no free lunch here. Fair enough. Anyone have any questions out there? Anybody? Yeah, go ahead. The $25 million from the Waldo expansion, what's your assumption with regards to lumber prices? So when we did the modeling for that, we did a long-term average of lumber prices. I can't remember what the number is. I think it was in the mid-4s when we did that modeling. That was an assumption that we made. All the returns aren't just from lumber prices. It's from incremental volume. It's from the improved recovery. We're in the process of taking headcount down from 160 to 130 people. It comes from a whole wide variety of factors, not just. So assuming 450, it's about $25 million. Yeah. That's the way to think of it. We're not at $450 today. But we could be at, I mean, RISI's forecasting $600 lumber in two years. So you kind of have to take the good, the bad in stride. All right. Anyone else? Yep. Do you regularly analyze the manufacturing assets in terms of whether or not, you know, you said there's synergies, but how do you think about it? Do you think about it regularly or, you know, you're steadfast in how the business is structured? I'd say every couple of years we take another look at it and we think about it and make sure we're doing the right thing. We're not that steadfast. I mean, I tell investors all the time, analysts, we're portfolio managers. We're looking over a bunch of acres and a bunch of mills, and we're here to do our best to maximize shareholder value at the end of the day. And if maximizing value meant selling the mills, which, by the way, they wouldn't be worth a whole lot right now because there wouldn't be a lot of buyers stepping up, we'll do what's right for investors. Let me one last quick one. When you look at the existing mill set as it stands today, obviously you're doing the Waldo expansion. But what are the other opportunities to modernize and implement new technology to lower production costs? What meat is still left on the bone in terms of what you own today that could be significantly improved? Yeah. So at each of our mills, there's discrete projects that we can put in place. We can put a new kiln somewhere. We can put a new debarkers somewhere. We can put a new planer somewhere. Those are relatively small, discrete projects in the, call it, $3-$10 million kind of range. We'll always have those pretty much year in, year out. The type of project we've got at Waldo is unusual because we're dramatically increasing the volume of the mill. And in lockstep with increasing the volume of the mill, we obviously need a bigger log supply going forward. So not all of our mills are going to have the same opportunity because they don't have wood baskets that can supply that incremental fiber. Some of our mills do have that opportunity, and we're actively looking at those possibilities. But these are typically multiple-year kind of studies to get them to fruition. And Waldo has far and away stood out to us as the most logical mill to expand, which is why we chose to do the Waldo mill. Frankly, it was a no-brainer for us. But to look at expanding another mill right now, we got to get Waldo behind us first. Fair enough. All right. Last questions? Anybody? Go ahead. Yeah. Let me just ask you a question about the lumber market because it just seems you're breakeven up, REIT'ed. You're low cost. All your mills are evened in the first or second quarter. So this has been going on for quite a while. And some of these mills, particularly if you look at the manufacturers that are in Canada and the mills in the U.S. South, and they also have mills in Canada. I mean, why does this persist? I mean, I don't understand operating. Why are they still running? Well, so. Why do you operate a mill that's negative even that? This was even before maintenance CapEx. It's still negative. This has been going on for a while. It's been going on about a year and a half now. Well, that's a long. But if you made $800 million a couple of years ago, so I think there are a couple of things here. One is owners of those mills are living off profits that they made when things were really, really good. That's the first thing. The second thing is you're always hoping your competitor curtails so that pricing will come back and that you're not the one that has to do it. Because once you decide to close your mill, whether permanent or temporary, your employees are gone. They're going to go find work. It's very easy for skilled labor to find jobs in this country right now. And if you lose your employees because you decided to curtail, it's really hard to start back up again. So I think people are getting pushed to the point where they break. And those 13 mills that have closed, that's just this year. There was another 12, 13 last year. So it's happening. It's just not happening maybe as fast as some would like. All right. With that, we have to leave it there. Thank you all for joining us and staying up late with us. Thank you again to the Potlatch team.