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Weyerhaeuser Co. (NYSE:WY)

Merger of TRI Pointe Homes, Inc. Conference Call

November 4, 2013 8:30 AM ET

Executives

Brad Cohen – Investor Relations

Doyle R. Simons – President and Chief Executive Officer

Barry S. Sternlicht – Chairman, TRI Pointe Board of Directors

Douglas F. Bauer – Chief Executive Officer of TRI Pointe

Analysts

Will Randow – Citigroup

Nishu Sood – Deutsche Bank

Ivy Zelman – Zelman & Associates

Mark Weintraub – Buckingham Research

Operator

Greetings and welcome to the TRI Pointe Homes Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Cohen with ICR. Thank you, Mr. Cohen, you may begin.

Brad Cohen

Thank you, operator good morning. Welcome to the TRI Pointe Homes call to discuss the pending combination with Weyerhaeuser Real Estate Company, the wholly owned homebuilding and real estate subsidiary of Weyerhaeuser Company, to discuss the recent announcement. I would like to direct everyone’s attention to the Investor Relations section of Weyerhaeuser’s and TRI Pointe’s website where you will find copies of the respective companies’ press release in the investor presentation that management will walk through on this call today.

In addition a filing on Form 8-K described in the transaction has been made with the Securities and Exchange Commission. Before we start off the call, I would like to say that we will be discussing certain matters that inherently involve forward-looking statements and proposed transactions that ultimately may or may not be consummated. As a result, I would caution our audience to refer to the risk factors included in the Company’s SEC reports, as well as the cautionary language that appears at the beginning of the slides and other written materials where you will find a more detailed discussion of those inherent risks and uncertainties.

Also in connection with the proposed transactions, we will be discussing today we plan to file certain documents with the SEC in the future which, again we would encourage all investors to read because they will contain important information.

Those documents can be found when filed on the SEC’s website. With that let me turn the call over to Mr. Simons, President and Chief Executive Officer of Weyerhaeuser.

Doyle R. Simons

Good morning, everyone and thank you for joining us to discuss this exciting announcement regarding the combination of Weyerhaeuser Real Estate Company or WRECO as it’s known, and TRI Pointe Homes. I’m joined by Doug Bauer, Chief Executive Officer of TRI Pointe. We are here in Southern California where TRI Pointe is headquartered and where WRECO’s largest homebuilding subsidiary Pardee Homes also has its headquarters. We’re also joined on the call today by TRI Pointe’s Chairman, Barry Sternlicht, who is in New York.

As highlighted on Slide 4, TRI Pointe and Weyerhaeuser have entered into an agreement whereby WRECO and TRI Pointe will combine in a Reverse Morris Trust Transaction expected to be tax-free valued at approximately $2.7 billion. This transaction will establish TRI Pointe as one of the 10 largest homebuilders in the United States with an estimated equity market capitalization of approximately $2.5 billion and provide Weyerhaeuser shareholders with the opportunity to own shares in one of the largest homebuilders in the country.

In addition the combined company will own or control approximately 30,000 lots in some of the nations most attractive housing markets including approximately 19,000 lots in California. We have great respect for TRI Pointe’s and WRECO’s management teams a combination of TRI Pointe’s senior management team with WRECO’s strong local market franchises and management team will ensure the combined company maximizes its long term growth potential.

Slide 5 provides an overview of the transaction, the $2.7 billion RMT transaction consist of 130 million shares of TRI Pointe stock and a cash payment of approximately $700 million to Weyerhaeuser. At closing Weyerhaeuser will distribute ownership of WRECO to Weyerhaeuser shareholders and neither expand all or a split off. Weyerhaeuser shareholders will ultimately own approximately 80.5% of TRI Pointe shares; in the pre transaction TRI Pointe share owners will own approximately 19.5% of the shares.

The Board will expand from 7 to 9 directors with TRI Pointe naming five and Weyerhaeuser naming four Directors. Barry Sternlicht will be the Chairman and Doug Bauer will be the CEO and a Director. The headquarters will continue to be in Irvine, California. The transaction is expect to close in the second quarter 2014 subject to customary closing conditions and TRI Pointe shareholder approval.

Importantly Starwood and TRI Pointe management have agreed to vote 40% of the outstanding TRI Pointe shares in favor of the transaction. As highlighted on Slide 6 the goal of the Weyerhaeuser Board strategic evaluation process for WRECO was to position WRECO to realize its full potential and to maximize value for Weyerhaeuser shareholders.

Part of this review the Board ran a thorough and robust process evaluated all available options and concluded this combination with TRI Pointe, met the stated goals. This combination creates the strong, well capitalized, standalone homebuilder with significant long term growth potential and a vehicle for Weyerhaeuser shareholders to own a pure-play homebuilder.

This transaction will also result in a more focused Weyerhaeuser company going forward. As a result of this transaction Weyerhaeuser will be a forest products company with reduced earnings volatility and a capital allocation policy focused on returning cash to shareholders through a growing and sustainable dividend and share repurchases when appropriate investing in our businesses through high return capital projects, pursuing growth opportunities and maintaining an appropriate capital structure. Importantly the RMT transaction is expected to be tax free to Weyerhaeuser and its shareholders.

Before I hand it over to Barry let me just say how impressed I am by the senior management team at TRI Pointe and how pleased we are with the confidence that Barry has placed in this group.

Now I will turn it over to Barry Sternlicht, the Chairman of TRI Pointe to talk about the benefits of this transaction.

Barry S. Sternlicht

Thank you, good morning everyone and based in Connecticut not in New York and still few I have point out. We’re very happy to be here today and as you know we’ve been active investors in the homebuilding and all segments of real estate and when we chose to get in the Homebuilding market several years ago, we knew that’s the most important thing in this industry is to find the best management team and as many of you know if you were around for IPO just about 11 months ago, we’re now moving with the team of Doug Bauer and Tom Mitchell and Mike Grubbs and I’m glad to see that Weyerhaeuser chose them also as the best horse to ride and building great shareholder value going forward.

I think they are among the tightest, most disciplined executives that I run into in my career. So we’re quite pleased that Weyerhaeuser has been trusting us with their great homebuilding company and creating even better company in merged scale. We knew from the start that we had significant experience running a larger company.

As you know our management team at TRI Pointe spend most of their youth in the William Lyons Company and they have had extensive experience across many new markets on the West Coast for more than 20 through many cycles. So we’re extremely proud of the opportunity today to expand into other markets that we targeted like the Arizona, Texas, Seattle, Vegas and other Western markets, as well some East Coast markets.

The management teams know these markets well and it will be just a matter of time before we expanded there. So now to get to go there all in one fell swoop. That’s a very time efficient use of management’s time growing. And we grow the Company to 30,000 lots, which creates a long-term pipeline, which is very important to us as we study this transaction, particularly the holdings in Pardee in Southern California, in the San Diego market and other county markets, which are completely synergistic with our existing holding in those markets.

As you know with almost 20,000 or two-thirds of lots in California market, we expect that we will enjoy the benefits of this merger for several years and I also point out in many transactions that I’ve been involved in certainly of this scale; often they are dilutive in the first year. We expect this to be accretive in year one and every year after that.

So we’re also here to build a long-term value and we think these are great assets with great management teams. This isn’t a broken company. WRECO is a very strong Company and Weyerhaeuser’s decision to exit the business was really a matter of focusing their shareholder on their larger business, which is their forest products business and not the homebuilding sector. So it’s a perfect move, I think for WRECO, for Weyerhaeuser and great opportunity for TRI Pointe, which we were able to capitalize.

When we concluded our due diligence, in fact we enforced our earlier view that the management team and the subsidiary companies of WRECO were terrific. They had strong local reputations and very strong local brand. And our job will really be to work with them to provide capital to them, grow their subsidiaries and do it in an efficient manner to maximize shareholder value and return on equity.

And all of this, I think at the end of day including the WRECO directors, we have a view of maximizing the long-term value of the Company. And then providing scale in this industry at this point was very important. You may think that housing market will mumble or stumble a little bit in a short period of rates rise, but there is no question, the homebuilding market is in for multiple years of expansion, given the demographics and the household formation in the United States.

So we think we’re building in a one fell swoop, the ninth largest homebuilder by market cap, and it will eliminate we hope, a discount we have with the small floats that we had prior in this merger. I’ll mention again that WRECO’s key positions in these terrific California markets that hard to enter, many in cases matured community where we can underwrite, certainly the near-term growth with a low standard deviation if you will.

And again WRECO’s deep local experience teams in these markets are ready for expanding in the long ride. So we have a similar culture being customer focused, which is really what Doug has built and lead, building excellent quality homes quality homes for their customers and operating with integrity, all with an eye at growing profitability in the future.

We have also targeted some markets where we wanted to get long land, particularly in California. These are the markets we wanted to pursue and so we did aggressively when this opportunity came up. And so in less than nine months of being public, we’ve now found the perfect merger partner to accelerate our growth for both companies and for the TRI Pointe team going forward.

One of our conditions to the merger was that our team stay in place. And in fact, Weyerhaeuser knows our team also as by reputation and some in personally, and I think they know that how good a group they are and I think that was what drove their selection of us as the preferred bidder in this, really merger as opposed to – two great companies as opposed to one completely buying the other.

And with the transaction, it lets us strengthen our balance sheet. So I will say again I’m delighted that the transaction is expected to be accretive in every year going forward and we real fortunate then merging this Company, this will be great. The combination of a great Company for a years to come. So I will be staying on as Chairman of TRI Pointe Board and look forward to working with Doug and his team and the Weyerhaeuser Directors going forward.

With that, I’ll turn the call back to Doug.

Doyle R. Simons

Thank you, Barry. My remarks will be organized around two topics. First, I’d like to brief the callers on the histories of TRI Pointe and WRECO, and lastly, talk specifically about the powerful combination. But allow me to first say, how excited we are at TRI Pointe?

To take TRI Pointe to next level in a manner that truly compliments the business we started only a few short years ago and took public less than ten months ago. This is a powerful combination that provides us with the land and team necessary to merge as one of the preeminent homebuilders, in the country with a focus on high growth, lot constrained markets.

Let me now jump in on Page 10 and provide a brief history of TRI Pointe. We are a leading regional merchant homebuilder focused on attracted California and Colorado markets. Both are states where we have extensive local knowledge and key land developer relationships. This approach is a critical reason behind our success thus far.

We build across a variety of price point and home sizes, which has provided us flexibility to pursue a wide array of land acquisition opportunities. We have been successfully executing our business plan resulting in a strong growth across key metrics for the last 12 months.

Moving on to the attributes of WRECO on Slide 12; let me provide some further color on the strength and quality of WRECO’s operations, which is really quite evident. WRECO has been one of the largest and most respected home builders in the nation for years. Most recently ranked 17 by closing volume, 13 by revenue as of 2012. These rankings are statements to the quality of WRECO’s management, product and mix as they show a focus on not just building for deliveries for building for profitability and customer satisfaction.

WRECO’s also leads in the all important area of local trusted brand in attractive markets with economic and democratic growth and stability. These markets are comprised of seven states with 10 submarkets and respected brands helping capture a diversity of buyers.

WRECO brings to the table a formable land position and strategy as evidenced by their over 27,000 lots in land constrained markets. Of equal importance is WRECO’s focused on keeping their land strategy on the local level, giving local operators with the most granular knowledge in this strongest relationships that flexibility to source and develop the best locations.

In the end, you’re only as good as your team; the quality of your product and most importantly, your reputation and customer service. WRECO’s highly experienced operating teams with an average tenor of 20 year and their 95% willingness to refer rating make them one of the best group of operators in this business.

Now moving on to Slide 13, WRECO’s markets are located in states with high forecasted growth in a history of consistent economic and demographic strength. In the West California, Arizona, Las Vegas are expected to continue to strong growth in pricing and demand, while the Puget Sound here are continues to benefit for growth in multiple industries.

Houston is characterized by economic and population expansion and continues to be one of leading permit markets in the nation. The Greater Washington DC area has historically seen relatively steady economic growth over time. This relative stability provides us with confidence in the long-term attractiveness of this market.

Let’s now go to Slide 14. This combination is powerful and a natural fit, creating a leading national homebuilder with a regional focus. In this case, the sum is greater than the parts. TRI Pointe’s industry leading management team will be a force multiplier to WRECO’s market leading franchises and the resources of their exceptional on-the-ground management teams.

The combined operations of both companies will give the new TRI Pointe over 29,000 lots, a stronger and deeper California market position, a relatively high average selling price product line, land positions and brand recognition in the nations most attractive housing markets, along with the benefits of a strong and experienced leadership team.

From a financial standpoint, this combination result in a business with some of the best margins in the Industry, a strong balance sheet allowing for continued growth and earnings accretion for all of the TRI Pointe shareholders.

Moving on to Slide 15; Slide 15 illustrates the excellent geographic match this combination creates. Out of the 27,000 lots, TRI Pointe gains more than 16,000 are located in California, effectively strengthening our operations and competitive position in the state, which happens to be one of the country’s largest and strongest new home markets in a market that we know intimately.

The combination also provides TRI Pointe with an entry into other high-growth markets that exhibit favorable long-term economic and demographic fundamentals, including Houston, Phoenix, Washington DC, Las Vegas and Seattle. Importantly, the experienced management teams in these markets have proven operational experience expertise.

Each market is different and the ability to take a tailored approach to product development, marketing and sales is a distinct competitive advantage. The beauty of this combination is that we hit the ground running at all six operating companies once we close.

As I noted before local brands and knowledgeable management are crucial in homebuilding. Every market is different and one size does not fit all. TRI Pointe will have an unrivaled suite of locally recognized and trusted brands with the talent pool to manage a growth.

Now please turn to Slide 16; the addition of the WRECO markets and their local management team is crucial. In our business, we have proven that there are material benefits to being a local market leader, especially if you are in the top 10. WRECO brings a top five market position in six of their eight markets and top 10 and seven of those eight. Five of those markets are currently operating less than 25% of Peak Housing Permit levels, as shown on the chart at the bottom of the page and are demonstrating some of the highest growth in the nation, resulting in exceptional growth opportunities for TRI Pointe as we move forward.

Moving to Slide 17; the pro forma land position of TRI Pointe will be strengthened in some of the nation’s best home markets and in the sweet spot of our peer group with an estimated nine years of supply of land and lots. This approach will enable us to meet growing demand and increase our deliveries while maintaining a responsible level of land exposure in these key markets. With over 29,000 lots in eight markets, we will have ample land to meet all of our short-term business plan needs and also provides optionality.

Let’s now move to Slide 18; this next slide highlights the profound change of the combination we’ll make relative to our public homebuilder market peer group. Upon closing, based on estimated combined equity market value, TRI Pointe will be one of the 10 largest homebuilders in the United States. There is additional potential for us to refine our combined operations and add to our ancillary business opportunities over time.

Turning to Slide 19; we provide a quick look at TRI Pointe on a pro forma basis. TRI Pointe will be a financially strong and flexible enterprise to meet future market conditions. We will have ample liquidity and dry powder to take advantage of opportunities in our markets, while our debt position will be conservative and in line with our peer group. Coinciding with the closing of the transaction, we will complete a debt issuance of senior unsecured notes. Importantly, financing for this transaction has been obtained from Deutsche Bank Securities and Citigroup for this transaction.

In summary, as noted on Slide 20, this is a transformational and powerful combination of management experience and leadership that will be operating one of the largest and best position homebuilders in the country. It overlays WRECO’s leading brands regional management talent, strong land position with the TRI Pointe Management Public Company experience and a vision for growth and strong industry relationships.

The ability to hit the ground running with minimal integration at the operating level provides for a clear path of execution. Additionally, the combination provides for increased market capitalization and shares outstanding, providing for greater access to the capital markets and an expanded shareholder base.

Thank you for letting us to share this exciting news with you today. We look forward to leading this national homebuilder with a regional and local focus and taking TRI Pointe to the next level.

Before we open up the line for a few questions, let me remind you that we are not at liberty to discuss any additional details beyond the presentation and press release today, and have not reported our third quarter results. We will be filing a proxy with additional details and once it is filed, we will be able to provide additional information.

With that operator, open up the lines for a few questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question is coming from Will Randow from Citi. Please proceed with your question.

Will Randow – Citigroup

Hey, good morning guys and thanks for taking my question.

Douglas F. Bauer

Hi, Will.

Will Randow – Citigroup

Hi, Doug, I guess on a historical basis, because you might not want to dive into details, but when you looked at these regions or some of the new markets, most of which you’ve managed over at your predecessor employer. Can you talk about where you want to get heavier or lighter historically in regards to these markets?

Douglas F. Bauer

Well, Will with over 29,000 lots, we’re well positioned in all the marketplaces and having that operational team in place allows us to really maximize our growth opportunities in each one of those marketplaces. I haven’t placed a heavy emphasis on either one, obviously California has the predominance of the lots and we view that, number one, as its right in our sweet spot. It’s in our wheelhouse. We know California, as you know very well.

And number two, it provides great optionality. WRECO’s Pardee operations, having lots in the Inland Empire and San Diego, and Los Angeles where we’re not as heavily located, provides an excellent footprint for growth in California and establishing a strong brand both on the Pardee and TRI Pointe level.

Will Randow – Citigroup

Thanks for that. And then as a follow-up, maybe Doug and Mike, if you can speak to number one, how you think about there is opportunity to increase asset turns? And what the pro forma cash structure may look like including net debt to cap leverage?

Douglas F. Bauer

Well, as we noted in our earlier comments and I believe it’s on Slide 19. We look at the debt book capitalization on a combined basis of roughly 43%. So we feel that is a prudent level our combined company has a very strong pro forma liquidity and as I mentioned earlier, ample dry power to grow the business and grow the operations of WRECO and TRI Pointe.

Will Randow – Citigroup

Okay, thanks again guys. And look forward to speaking with you.

Douglas F. Bauer

Thanks Will.

Operator

Thank you. Our next question today is coming from Nishu Sood from Deutsche Bank. Please proceed with your question.

Nishu Sood – Deutsche Bank

Thanks. Good morning, everyone. Congratulations on the announcement. I wanted to ask, Doug, about differences in land strategy. So when TRI Pointe was founded, it was founded on the principle of managing land risk, keeping land supply kind of contained to perhaps three or four years, and some of WRECO’s assets are much longer-term, obviously, especially in California.

So I was just wondering in a combined entity, how would you think about reconciling those going forward? It could imply a change in strategy or to managing those assets or shedding some of those assets. How are you thinking about that going forward?

Douglas F. Bauer

Hi, Nishu thanks. It’s the great question. If you breakdown the four operating companies that WRECO currently has in Seattle, Arizona, Houston and Washington D.C. They actually fit the TRI Pointe model perfectly. Each one of those companies operates with turning their inventory and maintaining inventory of approximately three to four years.

California, especially as you’ve pointed out the Pardee operation, does expand our landholdings. But as I mentioned earlier, California is right in our wheelhouse. We know those markets intimately and it provides us for an immediate platform for growth and building our housing divisions in Los Angeles, Inland Empire, San Diego and obviously Orange County.

Some of the longer land assets will provide us optionality frankly, whether it’s increased land sales, different sorts of land ventures or cos or what have you. It provides all kinds of optionality and that’s one of the more attractive opportunities that this merger provides TRI Pointe.

Nishu Sood – Deutsche Bank

Got it, great; that’s very helpful color. So when you looked at the Pardee Southern California assets, you saw sufficient breadth that would allow you to accelerate community kind of openings. And obviously I’d imagine there is some depth there as well; some physicians that are just very long time wise.

Douglas F. Bauer

Yeah, the assets in California are, we think very accretive, especially you pick on San Diego for example, which is a vary lot in land constrained market, very entitlement constrained and party offer some of the best assets frankly in San Diego in a very under supplied market.

So we feel that has a significant opportunities for increased earnings potential just when you look at San Diego, and the same is true for the Inland Empire and Los Angeles each one of those submarkets as we always focus on our submarkets are very, very strong positions. And one thing to point out is the assets from WRECO actually come over at their book value in this transaction. So that makes for a very nice operation.

Nishu Sood – Deutsche Bank

Great. And one other one if I could. When we talked in the past about the blueprint for TRI Pointe becoming a regional builder, it’s almost a perfect fit in what you are getting from WRECO with the exception of the DC operation. So in thinking long-term here, this kind of changes the regional into a national, so how are you thinking about that going forward as well?

Douglas F. Bauer

Nishu, I knew you would ask me that question. But I’ve got my son playing lacrosse over there, so I needed a reason to go to Washington DC.

Nishu Sood – Deutsche Bank

Got it.

Douglas F. Bauer

We again with our focus on building a regional platform focus on really long-term attractive markets that have the key fundamental, drivers of employment growth, household formation. We viewed actually Washington DC and the Richmond area as a perfect complement.

It’s going to add a few more miles to my travel schedule. But you couldn’t have asked for a better opportunity and the team there in DC is unbelievable. They’ve got very deep local relationships and they build incredible product that is just along the same cultural lines that TRI Pointe is formed.

Nishu Sood – Deutsche Bank

Okay, great. Thanks a lot.

Barry Sternlicht

Yeah, Doug, it’s Barry. I just want to add one thing on this change in the strategy to the land bank. I mean I think the key to this Company is big enough that it creates incredible optionality for Doug and his team to buy sell joint venture or lay off some of their land exposure if they want to, but borrowing property and owning in such pre-holdings Pardee, particularly in Southern California.

We were going to get long land that was in one place we wanted to get long land because they are making any more of it, entitlements are very tricky and these guys know everything, there it to know about land in Southern California. So we thought that was going to be core strength of this transaction. It drives a lot of the growth of the Company in long-term and we were very comfortable in taking on that exposure in that particular sub market end-market.

Nishu Sood – Deutsche Bank

Thanks. It makes sense.

Operator

(Operator Instructions) Our next question is coming from Ivy Zelman from Zelman & Associates. Please proceed with your question.

Ivy Zelman – Zelman & Associates

Good morning guys. Thank you for taking my question, Recognizing you’re mentioning Barry, I think Doug you mentioned the word cultural, when you think about the independent companies that have been part of the WRECO this Company many of the CEOs have been operating autonomously and from a cultural perspective, just curious how you plan strategically to bring these companies together and how to retain these management of each of these entities that have driven the success of this individual companies and what compensation are you providing them to keep them and retain them longer term.

Barry Sternlicht

Well, Ivy just a great question I mean obviously the human capital element of homebuilding as you and I’ve talked about, real estate is one but the human capital is 1A, 1B however, you want to rank it, but we rank it right at the top and one of the more strategic and one of the huge benefits of this transaction is the fact these companies operate on a very entrepreneurial local basis.

They’ve got strong key leadership that is a retained as part of this transaction and they know their local markets, when we in our previous experience over 20 years building up a line that is always been our focus and we think actually the key to unlocking the value in this transaction is to keep those operating teams, operating in their format to let them operate and build value in their local marketplaces.

So that’s a key fundamental driver to Tom, Mike and I as we operate these businesses to continue to have them grow and expand locally. This is a very local business and that was actually one of the key drivers in our mining and creating value.

Ivy Zelman – Zelman & Associates

So the CEOs of those individual companies be compensated with stock and is there any long-term contracts that have been provided to them?

Barry Sternlicht

They are all being retained and currently have their compensation programs in place and they will be in place once we close this transaction to secure the operations in each one of the areas.

Doyle R. Simons

Doug, go ahead.

Douglas F. Bauer

As we discussed go ahead…

Ivy Zelman – Zelman & Associates

I just going to ask given that you are acquiring, there is obviously several companies in aggregate, are you anticipating from an accretive impact synergies and if so how do you derive those synergies in what form?

Douglas F. Bauer

Well, the synergies at from the combination primarily will happen as we move our operations over the next 12 months to Ervine, but the operating companies from an operating standpoint are not changing. Everybody at WRECO is staying in place and that’s one of the huge benefits of this transaction.

We hit the ground running the additional operating synergies actually comes from moving our ancillary businesses such as a mortgage company, expand some of our national purchasing programs and so forth. So the benefit of this transaction is really building value in the combined operation and less about limiting costs efficiencies at the overhead level.

Ivy Zelman – Zelman & Associates

And then just lastly Doug and you maybe able to give us some perspective on it but when you were underwriting this transaction or the merger what’s your anticipated IRR on this that you felt that was achievable without expecting synergies from any SG&A savings et cetera?

Douglas F. Bauer

Well Ivy we spend considerable amount of time in our due diligence working with our advisors taking a look at the financial performance of these companies, and we feel very comfortable and confident in our underwriting this value as you compared to our peer group. But as we file our necessary financial documents under this R&D structure, we will provide for that information once we close.

Ivy Zelman – Zelman & Associates

Got it. Well, thank you very much Doug. I appreciate it.

Douglas F. Bauer

Thanks Ivy.

Operator

Thank you. Our final question today will come from Mark Weintraub from Buckingham Research. Please proceed with your question.

Mark Weintraub – Buckingham Research

Thank you. A couple of questions; first, I was hoping if possible can we get a little more color on where the landholdings in California? What percentages in the San Diego area? How much is in the Inland Empire, et cetera? Is that something you can share with us at this point?

Douglas F. Bauer

Is that Mark? Hi, Mark this is Doug to be honest I don’t have the percentages broken off right in front of me right now. But I can tell you that between San Diego, the Inland Empire and in Los Angeles, which are the three market areas that Pardee kind of dominates. It provides an excellent footprint for homebuilding operation in land sales, but we can follow up with that information later.

Mark Weintraub – Buckingham Research

Okay. Great, and when you think about the rate of growth in these markets, particularly in the California markets, do you anticipate they will be largely growing with market growth or do you have the capability to essentially speed up the process with your lot position and grow meaningfully faster than what the submarkets would be growing?

Douglas F. Bauer

Well, when you take a look at combining the TRI Pointe operation, which represents as of June a little over 2,600 lots along with the Pardee Operation. It provides an excellent foundation to set up operations of housing operations in the Los Angeles, Inland Empire, San Diego and I call the Orange County marketplaces, I break it down that way because they are really sub markets, each one is very unique in its own right and what Pardee offers is a base to establish those housing opportunities both in housing and land sales. But they it also provides as a team those teams in place in those market areas to continue to expand our merchant and land development opportunities. So we think it’s an unbelievable opportunity.

Mark Weintraub – Buckingham Research

Okay, great, a question for Doyle, if I could, the $700 million that will come from WRECO to Weyerhaeuser. What’s going to be the use of those moneys?

Doyle R. Simons

Good morning, Mark. As I mentioned our financial priorities as we’ve highlighted before Mark, start with returning cash to shareholders to enrolling unsustainable dividend and also share repurchase when appropriate we’ll also look to invest in our business through higher return capital pursue growth opportunities and of course we will always maintain an appropriate capital structure. So as we look at the proceeds from this transaction going forward that’s the way we will prioritize the proceeds.

Mark Weintraub – Buckingham Research

Okay, thank you very much.

Doyle R. Simons

Thank you.

Operator

Thank you. We’ve reached the end of our question-and-answer session. I’d like to turn the floor back over to Mr. Bauer for closing remarks.

Douglas F. Bauer

Well, I thank everyone for joining us this morning. We are very, very excited. This is a powerful combination, Tom, Mike and I want to thank everybody at the Weyerhaeuser team and Doyle and his team for putting this opportunity together and working in tandem as it really a form of a partnership. We look forward to reporting our own third quarter earnings on November 13.

So thank you everybody and have a great day.

Operator

Thank you. That does conclude today’s teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

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