Pulp and Paper Canada

CatchMark to acquire 1.1 million acres of Texas timberland

May 15, 2018  By Mike Jiggens

May 15, 2018 – CatchMark Timber Trust Inc. will 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.

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 innovative 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 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 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.

Deal Structure and Objectives
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.

“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,” Jerry Barag, CatchMark’s president and CEO, said. “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.”

Acquisition Highlights
The transaction provides CatchMark with the following attractive investment attributes:

• High Quality Asset: The timberlands feature an above-average site index (74 feet at age 25) and a maturing age class profile with access to top quartile mills and strong nearby end markets (Austin, Dallas, and Houston).

• Attractive Basis: A $1,264 per acre acquisition cost basis, before transaction costs, compares favourably to regional industry benchmarks and positions the joint venture to generate potential premium returns.

• Value-Add Opportunity: A rapidly improving inventory profile will result in enhanced harvest potential and provide the opportunity to restructure operations to optimize future cash flow and value.

• Significant Growth to Existing Investment Management Business: In partnering with new, blue-chip institutional investors which are making a substantial capital commitment, this latest venture complements and expands CatchMark’s joint venture strategy which has produced strong financial results in its first year.

• Immediately CAD Accretive: The transaction is estimated to be two to three per cent CAD accretive in year one. The joint venture will deliver to CatchMark contracted income from asset management fees and the potential for attractive promotes.

Leadership and Governance
John Rasor, CatchMark’s current chief operating officer, will transition to serve as president of the newly formed joint venture company, which will be named TexMark Timber Treasury (Triple T Timberlands). CatchMark’s Senior Vice President of Forest Resources Todd Reitz will transition to oversee operations for CatchMark’s existing properties.

Rasor has strong existing relationships with the largest wood supply customers in the East Texas market and both he and Barag have familiarity with the to-be-acquired Texas timberlands after operating in proximate markets when they ran TimberStar. At TimberStar, Barag and Rasor acquired more than 1.2 million acres of timberlands in Texas, Louisiana, Arkansas, and Maine on behalf of a consortium of institutional investors for $1.35 billion. They structured the acquisition, using the first and only timberland REMIC securitization completed to date totaling $800 million, and sold the properties for $1.9 billion less than four years later.

Forest Resource Consultants and American Forest Management will execute land management and accounting functions on the Triple T Timberlands, respectively, as they do at other CatchMark-owned properties.

Raymond James acted as financial adviser to CatchMark in the transaction; Alston & Bird LLP and Smith Gambrell & Russell, LLP served as legal advisors to CatchMark. Gibson Dunn and Proskauer Rose served as legal advisers to the group of institutional investors.  Perella Weinberg Partners LP acted as financial adviser and Greenberg Traurig, LLP, Schwabe, Williamson & Wyatt and Polsinelli PC served as legal advisers to Campbell Global and its institutional investors in the transaction.

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