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On Wednesday, 04 June 2025, PotlatchDeltic Corp (NASDAQ:PCH) presented at the Nareit REITweek: 2025 Investor Conference. The company highlighted its strategic focus on sawmilling, timberland, and real estate, with a positive outlook on solar development and lithium extraction. While timberland M&A activity remains muted, PotlatchDeltic is leveraging market inefficiencies for strategic acquisitions and share repurchases.
Key Takeaways
- PotlatchDeltic is actively pursuing solar development on timberland, with plans to expand solar option acreage from 38,000 to over 45,000 acres this year.
- The company has signed its first lithium lease for 900 acres in Arkansas, with further agreements anticipated.
- Timberland M&A activity is muted, yet high-quality transactions are fetching strong prices.
- Real estate operations in Chenal Valley remain stable, with strong demand and consistent lot sales.
- Regulatory hurdles pose challenges for solar projects, but the company remains optimistic about its renewable energy initiatives.
Operational Updates
PotlatchDeltic is focusing on its sawmilling, timberland, and real estate operations. The company reported a positive outlook for sawmilling due to limited expansion in the sector and a disconnect between public and private timberland market perceptions. It is actively managing its timberland portfolio, selling non-core assets and reinvesting in strategic acquisitions and share repurchases.
Natural Climate Solutions
The company is prioritizing natural climate solutions, particularly solar development. PotlatchDeltic has 38,000 acres under solar option contracts, with a net present value of nearly $475 million, equating to over $12,000 per acre. The company aims to increase its solar option acreage to over 45,000 acres this year and potentially reach 75,000 acres in the future. Regulatory challenges, especially grid interconnection and approvals, are the main obstacles for developers.
Lithium Extraction
PotlatchDeltic is exploring lithium extraction opportunities in Arkansas. It has signed its first lease agreement for 900 acres and is pursuing additional leases. The extraction process involves brine water, which minimizes surface disruption, and the company earns royalties from independent parties conducting the extraction.
Real Estate Activities
In Chenal Valley, PotlatchDeltic maintains a 10% market share in the Little Rock region. The company expects to sell around 130 lots this year, in line with initial guidance. Demand for rural land is robust, driven by diversification needs and recreational uses, with sales expected to exceed guidance.
Future Outlook
PotlatchDeltic is optimistic about its strategic initiatives, particularly in renewable energy. The company is monitoring government policies on renewable energy incentives, having already closed two solar deals before IRA subsidies. It anticipates strong demand for rural land and potential outperformance relative to guidance.
Q&A Highlights
During the Q&A session, PotlatchDeltic discussed the structure of its lithium leases, which are similar to oil and gas leases, with royalties based on extraction volume. The company emphasized that the demand for rural land is at an all-time high.
For a deeper understanding, readers are invited to refer to the full transcript of the conference call.
Full transcript - Nareit REITweek: 2025 Investor Conference:
Unidentified speaker: What I would tell you is that any kind of a demand increase or supply reduction, especially coming out of Canada, is likely to result in in price tension. So the fact that nobody is expanding right now, it bodes well for the future is the way we think of it. And I think the smaller competitors probably are less likely to put capital back into their mills, unlike the larger competitors like us that understand you need to keep these mills in good tip top shape, put your capital back into them, keep them super competitive. That’s the answer to long term success in sawmilling. But everybody’s going be a little
Lee: bit different in that regard, Buck.
Buck: Like to shift gears maybe to the timber side of the portfolio and there’s some interesting transactions that are starting to finally percolate through the system right now. So one of your competitors with a major acquisition announced the Carolinas and Virginia. Looked like a kind of a top tier price, but obviously some high quality timber. Maybe there’s another portfolio out there being marketed, I’m not sure. But what are you seeing in terms of M and A activity?
And just obviously, it appears there’s just this massive disconnect between public market perceptions of what timber is worth versus what the private market is bidding in right now. Maybe walk us through kind of what you’re seeing on the private side since we don’t have quite as much transparency about what those other players are looking at for the long term value.
Unidentified speaker: You want that one, Lee? Yes. What we’ve seen probably over the last couple
Lee: of years from Timberland M and A is certainly much more muted than it’s been. I think we’re pricing certainly we’ve seen strong pricing on timberland values.
Unidentified speaker: I think in the current environment, a lot of people are, I think
Lee: waiting to see how natural climate solution opportunities are going to play out. We don’t see as many transactions coming to market, but the ones that do, the high quality transactions are getting very strong pricing. And yes, I think as Eric mentioned, from a capital allocation standpoint, we think we only look at timberlands that really exceed our cost of capital. And because of that, we haven’t been very active the last couple of years. We think it’s better to do share repurchases.
Certainly the market has been muted from an activity standpoint. Now on the kind of the disconnect between public and private markets, yeah, I think that’s been challenging. I mean, certainly we’ve taken advantage of that like last year for example, we sold 34,000 acres for over $58,000,000
Unidentified speaker: It
Lee: was we sold three average year old trees, dollars 1,700 an acre, probably high value and then return we turned around and we found a deal to acquire 16,000 acres at $1,900 an acre. So there are certain instances where we find strong deals there and really take advantage of that disconnect. But yes, certainly, that’s in existence.
Buck: Yes,
Lee: it’s an interesting dynamic.
Buck: Would you strategically look to accelerate any additional noncore dispositions and or you’ve got plenty of balance sheet capacity to start leaning into even more share repurchases, would you are there trade offs you would consider in terms of shrinking the portfolio to do more stock buybacks?
Lee: Yes. I mean, look, we think Timberlands is a great asset and we’re not looking to dispose of a large portfolio of our portfolio, but we’re also portfolio managers. So where there is instances where we can take advantage like we did last year on this $58,000,000 transaction, certainly we’re going to do that. And when we did that, we purchased Timberlands, we also did share repurchases last year, we’ve done share repurchases this year. So look, if it’s at the right price, certainly, we’ll strongly consider it.
Buck: And on climate solution, I mean, kind of walk through these. I mean, it’s obviously a lot of controversy, question marks whether this administration will continue to provide for certain of the IRA subsidies or things, whether it’s 45Q or various initiatives, maybe kind of one by one, we can walk through like the carbon credit business or how do you think this kind of plays out and what can any value be ascribed to these things in this environment?
Lee: Yeah. Well, certainly, we think there’s a lot of opportunity in Natural Climate Solutions. Currently we don’t feel that’s being incorporated in the value of our stock, but I think there’s a lot of strong opportunities there for us. The number one opportunity that we’re seeing is on the solar side. So we have currently 38,000 acres that are under solar option contracts with solar developers.
So the option periods usually four to five years, we’re currently receiving option payments and then once solar developer will complete their due diligence, then they would convert that option into a long term lease or in certain instances we have set up as a land sale. That is our kind of number one opportunity on the natural climate solutions. With that 38,000 acres on a net present value basis, it’s just under $475,000,000 which is just a little over $12,000 an acre. So you think about the multiples that we’re getting on potential solar transactions, it’s 10 to 15 times what we would get from just managing it as kind of normal timberland operations. And so we have 38,000 acres currently under option.
We think that’ll grow this year to in excess of 45,000 acres and we think we have the potential for somewhere near 75,000 acres that have the right characteristics for solar. So it’s flat, obviously you have ample sunshine and then a large contiguous areas, solar developers like larger projects and ones that they don’t have to piece together. So we have long strong attributes for solar. Think back to your question on where the current administration is from a kind of renewable energy standpoint. Yeah, I think there is some discussion and we’re closely monitoring that.
I know solar developers are closely monitoring where the administration is going with these incentives. But we do we’ve been talking to our solar developers and they remain optimistic about these projects. I mean, I think I would highlight that we’ve already closed two solar transactions and that was even pre IRA subsidies. So, you know, these projects pencil out even without a lot of these projects pencil out even without incentives. Solar is a much cheaper form of energy to develop.
You know, we all know the the demand for energy is is growing. I think about the need for data centers and other demand needs like that. The US is continuing to move for energy independence. So the energy need is really strong and solar is part of that solution, we believe. And yeah, I think our developers remain optimistic environment.
And we’re also seeing that with even potential more deals coming. So while I think transactions have kind of slowed a bit, but they’re certainly moving forward and we expect to have more transactions this year.
Buck: What would be the biggest hurdle for those developers to get their projects? I mean, it an entitlement process at the local and county level or is it an infrastructure issue about getting equipment to the hook up to the grid or is it some of both? What’s the impediment? I think
Lee: the biggest challenge or why it takes so long for these projects to get a shovel in the ground is more on the regulatory side. So working through the regulatory agencies to figure out where you know, on the grid they can tap into and and also getting the interconnection agreements with utilities. So that that’s really the biggest kind of period of time that that it takes to get Deals off the ground.
Buck: And what about the lithium side of the equation?
Unidentified speaker: I mean,
Buck: how does that play out in Arkansas? And what kind of support are you getting from the state government there or in terms of response to doing something like that? Or what’s the feedback been on on expanding lithium? You know, know, and maybe just explain, you know, what exactly is it you’re you’re doing with the with with extracting lithium deposits?
Lee: Yeah. So we with our Timberland ownership in Southeastern or Southwestern Arkansas, there’s a kind of a region, the smack over formation. It’s found to have one of the largest lithium deposits in the world. So there’s a lot of interest by companies that are developing lithium extraction, some very large companies looking to really expand their operations in Arkansas. Arkansas is a very it’s a great state to do business and they’re very supportive of the industry.
So that’s rapidly evolving, we have probably about five to 7,000 acres currently that we’ve identified that are in this kind of prime smack over region where there’s a high concentration of lithium. And and not only the the beauty is is that, you know, it’s the extraction, which would be done by
Unidentified speaker: an
Lee: independent party and we would only earn a royalty from that. But if we can continue to operate the surface rights for timberland management and harvesting activity, so really just an additive that we would get. But yes, so seeing a lot of activity there. We’ve signed our first lease agreement earlier this year for 900 acres that’ll go through a planning exploration process. We’re also underway with additional signing up additional leases.
We expect more this year for additional acres. But yes, I think we’re excited about the opportunity and ultimately, where what’s the size of the benefit will really depend on truly defining, you know, the size of the deposit and what ultimately would be extracted. Got it. Got it.
Buck: Any questions? Anybody want to jump in?
Unidentified speaker: Do they work like oil and gas leases? Are they structured differently? How does that work?
Lee: Yeah. I would say that’s a very similar comparison. Yeah. There’s there’s a royalty rate involved and also, you know, depending on volume actually mine your
Unidentified speaker: lab with the least kind of venturing rate because
Lee: Yeah. Correct. Yep. Yeah. But it’s it’s structured, I think, very similar to a oil and gas lease.
And and that’s why, for example, in the state of Arkansas, the the royalty is is being determined by the oil and gas commission in the state of Arkansas. So it’s it’s very similar,
Unidentified speaker: I guess,
Lee: I would say.
Unidentified speaker: They’ve recently set that rate at two and a half percent. Yeah. Well, I guess I’m I’m having a tough time envisioning you’ve got some beautiful southern pine trees on the land above it. You know, if they’re doing underground mining, that’s fine. But, like, how does that essentially work?
Unidentified speaker: So essentially, lithium is in solution.
Unidentified speaker: Oh, solution. It’s basically taking up the bribe water.
Buck: Yeah. Yeah. Yeah.
Unidentified speaker: And then it sends it to
Unidentified speaker: a process. Exxon is very active in
Unidentified speaker: the area. So it’s not like hard
Lee: rock with No.
Unidentified speaker: No. Yeah.
Lee: Minimal disruption to surface area.
Buck: Got another minute, you want to talk about Chenal Valley and real estate side real quick and just what’s how is that progressing relative to obviously, it’s been a little bit tougher, but is Chenal Valley kind of going against the grain in terms of spring selling season?
Unidentified speaker: No, I’d say it’s comparable to what we’ve seen over the past couple
Unidentified speaker: of years. It is the place to live in Little Rock. It’s got about
Unidentified speaker: a 10% market share in the
Unidentified speaker: Little Rock region. We see pretty healthy demand, to be honest with you. We’ll sell about 130 lots this year. They are trending down to the lower end. And we are starting to see a bifurcation in terms of the higher end lots, the better lots are moving faster than the lower end lots.
But, yeah, we gave guidance
Unidentified speaker: at the start of the year for one hundred
Unidentified speaker: and thirty lots, one hundred and thirty five lots, and I think that’s where we’ll wind up again.
Buck: Steady, steady as she goes. What about other rural real estate activity? You’re seeing steady demand for whether it’s hunting or leasing lands or how does the rural recreational side of the business look?
Unidentified speaker: Yeah. I’ll tell you, the demand for rural land in my view is it’s never been higher. There are just an endless array of possible uses for raw land. And I don’t know if it’s people wanting to diversify their investment portfolio away from stocks and bonds and into hard asset like like rural land, but rural land demand continues to go up. And it could be for conservation purposes, could be for rural recreation, could be for somebody wanting to build a vacation home.
It’s just incredible the demand that we’re seeing. So we have guidance for one percent of our acreage, but I wouldn’t be surprised if we exceed that for the year because pricing is really good. All right.
Buck: Well, we are out of time there, so I’ll leave it there. Thank you guys so much for joining us. Thanks for your participation. Really appreciate it. Thanks to Potlat.
Thank you.
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