Mark McHugh: That’s correct. I recognize we have different bases in different regions and different states. And so depending on where we choose to proceed with dispositions, there could be a differential level of income associated with that. There’s not sort of one percentage that I could give you that would kind of translate to what is the margin on kind of basis relative to sale value.
Mark Weintraub: Super. I’ll turn it over. Thanks so much.
Mark McHugh: Thanks Mark.
Operator: The next question will come from Anthony Pettinari of Citibank. Your line is open.
Anthony Pettinari: Good morning. Congratulations to Dave, Mark and April on the transitions. And Dave, thanks for your leadership really in the industry over the past decade. Thank you. I guess maybe just on the disposition. I think the sale in Oregon really reduces your presence in the state. And I’m just wondering if you could talk a little bit about the Pacific Northwest footprint, obviously, with the Pulp acquisition and I think mostly exiting Oregon. How do you think you’re positioned there with the remaining footprint?
Dave Nunes: We’ve always liked our footprint in Washington. And certainly, the Pope transaction greatly strengthened that in a number of ways. The move that we did into Southwest Oregon in 2016, when we acquired these assets was really designed to create a beachhead. It was not considered kind of the sufficient scale that we like to see. But it was a nice beachhead and it had some nice age class complementing ages relative to our then legacy holdings. And as we discussed in the prepared remarks, a, there has been less deal flow in that region. And b, it’s just been at pretty strong pricing. And so we’ve been unsuccessful in growing in that region. And so that is why this translated into a good candidate. We still have a small holding in Northwest Oregon that’s tributary to Longview that we really like that market.
And we think that our Washington Holdings certainly have a nice scale and now an improved Doug-fir mix and lower operating costs with more ground-based logging. And so we think it will be fine in terms of how that Northwest portfolio performs.
Anthony Pettinari: Great. Great. And with the strategic initiatives, can you talk about kind of the long-term positioning of the dividend and the dividend coverage? And the strategic initiatives seem very logical in terms of taking advantage of the arbitrage between public and private markets. But I guess just devil’s advocate, looking back at some other timber owners, Plum Creek would sell land and buy back stock, and there was sort of perception that they were selling land to support the dividend. I’m just wondering if you could kind of talk about the dividend and stress testing it into ’24?
Mark McHugh: I mean, just to start, just to be absolutely clear, we do not intend to include proceeds received from this disposition program as part of our cash available for distribution. We obviously characterize asset portfolio moves like this as large dispositions, which we specifically exclude from adjusted EBITDA and our calculation of cash available for distribution. So this is not a strategy of churning land to generate otherwise unsustainable cash flow. As it relates to the dividend funding, we’ve been very consistent in our message as well as our actions over the years. Even during the pandemic when visibility was very limited, we maintained our distribution. We previously indicated that we expect our dividend this year to be modestly underfunded.
However, with the actions that we’ve taken, coupled with our updated outlook for EBITDA towards the higher end of the range, we’ve largely closed that funding gap on a pro forma basis. As we said in the past, our approach to the dividend is one that focuses on a payout ratio over time and not in a given quarter or even a given year. We’re really focused on setting the dividend at a level that we believe can be sustained over the long term, recognizing that we’re going to go through different business cycles and economic cycles from time-to-time. We also want to have the ability to grow the dividend over time as the cash flow from our portfolio improves, and we certainly see those opportunities over the longer term with growth in our land-based solutions business, in particular.
The plan that we announced yesterday is very consistent with the goal of improving our cash flow profile over time. We expect to complete this plan in a way that is going to be accretive to cash available for distribution. And to that end, as we noted in our prepared remarks and illustrated in the presentation on the website, the Oregon disposition and the application of those proceeds is expected to generate CAD per share accretion of approximately 6%. And we expect that these additional dispositions will generate further CAD accretion, which will ultimately accrue to improving dividend funding capacity over time.
Anthony Pettinari: Okay, that’s very helpful. I’ll turn it over.
Operator: The next question will come from Paul Quinn of RBC Capital Markets. Your line is open.
Paul Quinn: Yes. Thanks so much. Good morning, guys. And congratulations, Dave, on the retirement and Mark on the promotion. Maybe just taking a look at following this Oregon transaction, you’ll have no floating debt and it sounds — and your debt cost is down at 2.8%. Maybe you can just remind us of what you’ve got over the next couple of years in terms of refinancing.
Mark McHugh: Yes. Sure, Paul. I’ll take that. We posted a detailed presentation to our website in conjunction with the announcement of the asset disposition and capital structure realignment plan. that lays out our debt maturity profile as well as our swap maturity profile over the next several years. And so just to be clear, we have $150 million debt that is currently floating that we intend to repay with the proceeds from the Oregon disposition. We have another $150 million of debt that’s actually due 2028, but it becomes floating through a swap maturity next year. So August of 2024. And that’s the only floating rate debt exposure that we have through 2025. So our next debt maturity is not until 2026. And so we really feel very well positioned in terms of our ability to manage this targeted leverage reduction and really maintain a very low cost of debt along the way.
