PotlatchDeltic Corporation (PCH - Free Report) has agreed to divest 72,000 acres in Minnesota to The Conservation Fund for $48 million in cash. This deal — which is expected to close in the second half of 2020 — will boost its liquidity position and flexibility.
PotlatchDeltic stated that its Minnesota ownership was 330,000 acres when it started the rural land sale program more than 12 years ago. The timberlands currently owned by the company in Minnesota are heavily weighted to more remote areas, which is perfect for conservation and working forest protection. Almost all of its ownership in the state is now under contract, with a series of closings scheduled to occur through 2022.
This deal will be the catalyst to conserve more than 200,000 acres in the state of Minnesota for various conservation purposes. This includes working forests, protection of important habitats and public access.
Management’s outlook for second-quarter 2020 rural land sales activity remains resilient. For the second quarter, PotlatchDeltic expects to sell 5,500 rural acres at an average price of $1,800 per acre, with an average land basis of 30%. It also expects to sell 15 lots at an average price of $90,000 per lot, with an average land basis of 90%. PotlatchDeltic expects to sell 20,000-23,000 acres of rural land and 100-120 Chenal Valley lots in 2020.
Share Price Performance
Shares of PotlatchDeltic — a Zacks Rank #1 (Strong Buy) company — have gained 44.5% over the past three months compared with the industry’s 68.4% growth. That said, slow recovery of the housing market brings hope to timberlands and wood products businesses. Encouragingly, it has a strong liquidity position. Lumber prices have edged modestly higher over the past few weeks. You can see the complete list of today’s Zacks #1 Rank stocks here.
Although the rapidly evolving market conditions due to the pandemic outbreak have impacted wood product manufacturers like PotlatchDeltic, Weyerhaeuser (WY - Free Report) , UFP Industries, Inc. (UFPI - Free Report) and Trex Company, Inc. (TREX - Free Report) , market pundits are in favor of improvement in the second half of the year. Strong balance sheet and operational agility will help wood product manufacturers to address the rapidly changing market conditions.
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