Catchmark Timber Trust Inc. (CTT) CatchMark Joint Venture Acquisition Conference Call May 15, 2018 10:00 AM ET
Executives
Brian Davis - CFO
Jerry Barag - President and CEO
John Rasor - COO
Todd Reitz - SVP, Forest Resource
Analysts
Collin Mings - Raymond James
Dave Rodgers - Baird
Jordan Sherman - Ranger Global
Operator
Good morning and welcome to the CatchMark Joint Venture Acquisition Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded.
I would now like to turn the conference over to Brian Davis, Chief Financial Officer. Please go ahead.
Brian Davis
Thank you, Brian. Good morning, and thank you for joining us for a review of CatchMark Timber Trust announcement concerning our agreement to acquire 1.1 Million Acres of East Texas Timberlands and a joint venture with the group of leading institutional investors. I am Brian Davis, the Chief Financial Officer of CatchMark. Joining me today on the call are President and CEO, Jerry Barag; Chief Operating Officer, John Rasor; and our Senior Vice President of Forest Resource, Todd Reitz.
During this call, CatchMark management will make forward-looking statements. These forward-looking statements are based on management’s current beliefs and the information currently available. CatchMark’s actual results will be affected by certain risks and uncertainties that are beyond its control or ability to predict and could cause our actual results to differ materially from expectations. For more information about the factors that could cause such differences, we refer you to our 2017 annual report, Form 10-K and other reports that we filed with the SEC.
Now, I turn over the call to Jerry Barag.
Jerry Barag
Good morning, everybody, and thank you for joining us this morning. This is milestone day for CatchMark in the wake of last night announcements of our joint venture partnership known as Triple T Timberland's to acquire nearly 1.1 Million Acres of Prime Timberlands in East Texas with the group of leading institutional investors. It's a truly transformational transaction for the Company, tripling the acreage in which we hold significantly expanding our future fee-based investment management business. It's also one of the largest U.S. Timberland transactions since the sale same asset by Timberland for the current owner Campbell Global in 2007 for $2.4 billion and the sale of TimberStar properties in 2008 for $1.9 billion a transaction that John Rasor and I participated in personally.
This morning, I will provide an overview with the Triple T purchase and it's significant to CatchMark and our shareholders. John Rasor, who will be responsible for managing Triple T Timberland, as President of the Joint Venture and will discuss the property and highlights it attributes. Then Brian Davis will cover the finance and accounting implications. So here with the key takeaways about the transaction, CatchMark is leading at 1.4 billion acquisition in joint venture with the group of sophisticated institutional investors to acquire premier Timberland asset, 1.1 million acres in East Texas from seller Campbell Global.
At $1,264 per acre, the pricing is extremely attractive and compares favorably to regional industry benchmark, positioning the joint venture to generate potential premium returns on its investment. CatchMark's ability to secure the transaction demonstrates our ability to execute on transactions with size and complexity. The joint venture is a major step to expand CatchMark and build shareholder value by partnering with the group of highly sophisticated institutional investors. This institutional investors are blue-chip consortium including BTG Pactual Timberland Investment Group, Highland Capital Management, Medley Management Inc. and a major Canadian institutional investor.
CatchMark will triple the acres which we manage by making an investment of up to $227.5 million in the Triple T joint venture. CatchMark will manage the joint venture with ability to recapitalize the asset in the future, retaining long-term ownership control. This Timberland fits CatchMark profiles for high-quality, well located assets with excellent productivity leading to sustainable inventory levels that can provide durable earnings and growth for our stockholders. CatchMark has identified opportunities to unlock future value which include inventory optimization and the flawless execution of terms for the existing supply agreements, which provide demand certainty to the owner.
CatchMark significantly expands its investment management business providing additional future income to supplement its dividend and growth strategies. This latest joint venture builds on the success of last year's already very successful Dawsonville Bluffs joint venture with the Missouri Department of Transportation Retirement System. Dawsonville Bluffs as we detailed in our first quarter earnings announcement is outperforming plan. The transaction is immediately 2% to 3% CAD accretive. CatchMark gains annuity based asset management fee income and the opportunity to earn outside returns within a credit based remote structure, supplementing harvest revenues from long-term supply agreements.
Most importantly, this innovative transaction accomplished with our strategic goal of participating in large prime timberland acquisitions and gaining long-term control over high quality assets with the opportunity to create superior returns in today's recovering market environment. The institutional validation by our partners ultimately enhances CatchMark's ability to pursue other opportunities like this. We've set the Triple T timberland transaction to close within 45 to 60 days subject to a customary closing condition.
Before I turn the presentation over to John Rasor, I want to highlight that John and I are very familiar with these properties, having operated in and near the same East Texas markets when we ran TimberStar a decade ago. Additionally, CatchMark currently owns and operative assets nearby. Because it's such a large and important strategic initiative for CatchMark, we decided that John should transition from his CatchMark COO role to become President of the Triple T Timberlands and run the joint venture. As you may know, John has more than 45 years of industry experience before CatchMark and TimberStar John led George Pacific's Timberland and work procurement operation including operations in East Texas.
Throughout his accomplished career, John has demonstrated the ability to extract value from timberland properties and position them for optimal performance. He's done that for CatchMark properties over the last 4.5 years since our formation. There is no one who knows these properties better or is more capable of delivering our strategic objectives for this asset than John.
With that introduction, John will take you through the property profile and the harvest potential for these timberlands.
John Rasor
Thank you, Jerry, and taking a closer look at the timberlands we are acquiring. This asset is unique and is compelling. Its size and scale are exceptional. In spite of challenging conditions over the past decade, these timberlands had a history of institutional ownership and have been well managed. They are positioned to ensure sustainable future harvest volumes which are secured by long-term wood supply agreements with industry leading counterparties which provides demand certainty.
Nearby mill markets feature well capitalized customers, new capacity additions and strong long-term housing demand generators. In fact just last week, there was an announcement of a new greenfield southern hill pine sawmill to be located close to the epicenter of this property and add to that RoyOMartin close by is in the ramp up phases of a new world class OSB mill. These timberlands are located within 100 miles of three of the top five U.S. home-building markets Austin, Dallas and Houston which offers logistical cost advantages to the closest mills in timberlands that supply them.
These markets will provide strong, growing and compelling demand fundamentals. The timberlands have highly productive soils with an attractive site index. Importantly, the asset features a rapidly improving inventory profile, growing from the current 2.8 million tons of annual harvest volume to more than 5 million tons by 2028. Improving inventory will result in the opportunity to restructure operations to optimize the future cash flows and value. We’re assuming existing long-term saw timber and pulpwood supply agreements with exceptionally strong counterparties, Georgia-Pacific and International Paper, which run through 2029 and 2027, respectively.
International Paper has an option to extend its agreement until 2032. We believe there’ll be opportunities to restructure aspects of the saw timber supply agreement to achieve win-wins for the joint venture and our customers. This assessment is based on our experience in TimberStar where we are able to navigate supply agreements and create value by optimizing operations under the terms of the agreements. In addition, there is a significant potential for HBU sales in the market as they result in pent up demand. Relatively few acres have been sold from this property in East Texas over the past decade, and there will be opportunities going forward for high value dispositions. In summary Jerry, there really is a lot to be excited about. We like the region, we like the price and the timing in the cycle and it’s a great asset growing in value.
Jerry, I’ll turn it back over to you.
Jerry Barag
Okay, thanks John. With John taking the lead, our intention is to integrate the Triple T properties expeditiously into our operations taking advantage of CatchMark's existing presence in East Texas and maximizing value to incorporating our management standards and best practices. Forest Resource Consultants and American Forest Management will execute land management and accounting functions on the Tripe T timberlands respectively. Just as they do in order CatchMark owned properties, we expect that many of the on the ground forestry team working with the properties today under Campbell Global will transition over to Triple T.
As part of the transition, CatchMark Senior Vice President for Forest Resources, Todd Reitz, will take on additional responsibilities and going forward will oversee all management operations for CatchMark’s existing properties which today encompass ownership interest in approximately 514,000 acres of timberlands located in eight states. Todd joined CatchMark more than a year ago, and he is an outstanding industry veteran in his own right, having worked both Plum Creek and Weyerhaeuser. His experience, expertise and industry relationships make him exceptionally well suited to expand his role for us and he's been working closely with John in preparation for this transition of responsibilities on the existing portfolio.
Now, I would like to turn the call over to Chief Financial Officer, Brian Davis, to discuss the accounting and financial implications for the transaction.
Brian Davis
Thank you, Jerry. CatchMark will fund our investment up to 227.5 million and the joint venture to a multi-draw credit facility catch on hand. Post-closing, we plan to maintain a similar interest rate hedging profile of 75% fixed rate and 25% floating. As a joint venture CoBank will act as an agent for our lenders syndicate and provide a $350 million financing facility of which up to 650 million will be funded at closing. Over the past six months, we've been preparing to invest in major transaction like Triple T for outstanding and improving the flexibility of our credit facilities. Their joint venture structure allows CatchMark to pursue its growth imperatives creatively while maintaining prudent leverage profiles.
We believe there will be an opportunity to recapitalize debenture overtime with lower cost longer term equity as the asset level improvements occur. Our confidence in that outcome is based on the knowledge that the property has historically attracted significant institutional capital. On accounting basis, CatchMark will account for its investments under the equity method. In CatchMark share of the joint venture earnings will be reported as income from unconsolidated joint ventures below the operating line. It should be noted that due to transaction cost and distribution preferences, CatchMark anticipates recording large non-cash losses on a GAAP basis during the first 12 to 18 months of ownership. These non-cash losses will equal CatchMark's initial investment and the joint venture.
From our modeling perspective, we would expect to record a majority of non-cash losses up to 68% in the first quarter of ownership followed by amount of up to 20% in subsequent quarters. Such non-cash losses will be adjusted for our non-GAAP measures as those measures are hypothetical and are based on book-value rather than share market value. Also they are not indicative of CatchMark's operating results or the joint ventures operating results. We are prepared accordingly for these occurrences and they should not impact the cash operations of the Company. Jerry?
Jerry Barag
Okay, so let’s sum up here. So in summary, we believe the strategy behind the Triple T joint venture is extremely important for CatchMark's stockholders and our future growth. It highlights CatchMark's ability to nimbly tackle large and highly complex transactions, which supports us the opportunity to invest in premier properties at premium returns. It enables CatchMark shareholders to owned interest in more diverse pool of assets. The profile of the property is conducive to futures significant NAV growth as inventory and harvest ramp up overtime. The joint venture structure can both help and enhance returns and modulate risk. An opportunity exists to enhance returns further through asset management and capital level improvements.
We've accelerated our investment management business providing additional sources of income to support our dividend and growth. Significantly, the transaction is immediately cash flow accretive to CatchMark. And we have confidence about delivering results based on the quality of the properties to support of our savvy partners and because CatchMark management has a successful track record of delivering results on a similar property and proximate markets while at TimberStar.
Lastly, I want to emphasize the CatchMark's intent to be involved with the asset for years to come as an owner and manager. At CatchMark, our goals remains to assemble the highest quality Timberland's portfolio in the industry which enables storable returns and long-term growth within shareholder value and supports our dividend. This transaction furthers our attainment of those goals in every respect. We're extremely pleased about what this means for CatchMark and our stockholders.
Thank you again for being on the call today. And now Brian, John and I will take the questions about Triple T.
Question-and-Answer Session
Operator
We will now begin the question-and-answer session. [Operator Instructions] Our first question today comes from Collin Mings with Raymond James. Please go ahead.
Collin Mings
To start, can you maybe just talk a little bit more about the supply agreement in place with Georgia Pacific and International Paper? Maybe specifically, can you touch on the pricing terms as well as what the minimum volume commitments represent as a percentage of that 2.8 million ton current harvest volume that you guys referenced?
Jerry Barag
John, would you like to start on that?
John Rasor
Sure, I'd be happy too. Let's start that, well, I guess it’s good afternoon over there, Collin. The IP agreement is a pine pulpwood agreement and the volumes represent a significant portion of the pine pulpwood that we harvest. Pricing is based on the market pricing experience of IP in the area and then it indexes quarterly to two of the TimberMart's south regions in the area so that if you can get some price movement up or down as the larger area represents. It’s the same, essentially the same kind of agreement we work with IP on TimberStar and it has worked very well.
The pine saw timber agreement with Georgia Pacific is more challenging. We're looking forward to taking it on. We know that there's the potential of some improvements in that agreement, but we've got to get our feet on the ground from where we are to get started. It is requiring all of the pine -- virtually all of the pine saw timber harvest that the property is capable of generating in their early years will be tied up on that supply agreement. And the pricing index is based on volumes that Georgia Pacific purchases at the gate of their mills in the area.
Collin Mings
Okay. So all the pricing mechanisms are kind of market-based to some degree, is that fair?
John Rasor
To some degree -- IP certainly is, Georgia Pacific is a relatively small sampling of their total requirements therefore quite frankly the price is challenging.
Jerry Barag
So, Collin I'll just add to that because there's been a lot of industry speculation and chatter about some of these subjects. So, first I will confirm that we've had no less than three independent consultants verifying the harvest of this property going forward and it's in a relationship with those supply agreements back to GP and IP, and all three of them have confirmed the fundamental ability of the property to continue to supply both IP and GP at the inventory levels and the harvest levels that we have projected on this property. I should also add that through difficult positions or difficult situations we think that Campbell has done a really good job.
Campbell and the managers on the ground at the property have done a real good job of positioning this property to be able to do that immediately and going forward into the future, and we would continue to operate and expand on the work that they've done in that regard. With respect to the pricing mechanisms and even the most of the specifics to that are confidential information that we don't have the ability to disclose, but what I will tell you is the International Paper agreement is and has always been functioning in a very productive way, and it’s a good agreement. The Georgia-Pacific agreement also operates very well and it is a complicated pricing mechanism that we intend to work for the best we can.
Collin Mings
And then just as far as the minimum volume commitments. Again, prepared remarks, Jerry, you made some indications on kind of longer term, some more flexibility as the harvest volumes themselves improve. But are there some changes in the minimum volume commitments that will give you more flexibility as you look out past the next few years?
Jerry Barag
Yes, actually the volume commitments starts to go down in the near future and so combination of better inventory and harvest combines with lower volume commitments to make it a pretty comfortable experience in terms of delivering the volumes that are expected.
Collin Mings
Switching to structure, can you maybe just talk about the variability implied by the up to $227.5 million commitment from CatchMark as well as just the overall structure from the equity participation from the partners? Just one of your partners in their press release referred to a preferred equity investment. Maybe just talk a little bit more about that structure, the variability in the potential equity equipment as well as the other role of the other partners?
Jerry Barag
So, our expectation is that ultimately CatchMark will invest right around $200 million in the property. The commitments have been put forth by the partnership group that we have today. And quite frankly, we’ve had more interest in other investors coming into the transaction. And so, we may reduce the amount of the equity that we put in by a slight amount. Some of the other partner's may reduce their commitments with the admission of some new equity investors that come in post announcement but probably pre-closing. And so, there’s some non-variability that goes into that number and where it ends up I don’t know but it’s not significantly different. If I was you I would key in on a $220 million investment number.
With respect to the structure itself again, some of the concerns of that are somewhat confidential, but it’s a highly structured transaction that affords CatchMark the benefit of additional enhanced returns on the backend of the structure. And in some cases a much more than the majority of the proceeds that we would get based on our expected performance will come to CatchMark in the form of incentive bonus participation and the profits and so there are other considerations that are in there that allocate returns over the duration of this joint venture between CatchMark and its partners based on our baseline underwriting we accept that we are going to achieve very significant props participations on backend.
Collin Mings
All right. One more for me and then I'll turn it over and jump back in the queue. But just how do you think about managing the potential conflicts of interest just given you already own some timberland in Texas and Louisiana? Potentially, you could acquire more on a wholly-owned basis. You made reference to additional JVs. Maybe just talk a little bit more about that -- the potential conflicts and how that's going to be managed.
Jerry Barag
Sure. So we owned today of around 60,000 acres of Timberlands that's on the southern end of this property both in Texas and Louisiana. For the most part the customer that we sell the timber on that property too and the customers that are selling timber on the Triple T are different.
The most notable difference here is the fact that virtually a 100% of the harvest from the Triple T Timberland is going to be sold through those supply agreements that are adjusting in a place, and those are realistically the only two customers -- the only two people in the customer base for those properties going forward. So, it doesn’t really present a conflict at least for the forcible future.
With respect to additional properties that we may buy or that we may look at, we don’t have any legal restrictions with respect to limiting our activities. We do have a duty and -- a duty to notify that joint venture partners that they're coming in for this transaction and just that buy course of business, we would absolutely do that in a way that would be fair to all the parties if that opportunity presented itself.
Operator
Our next question comes from the line of Dave Rodgers with Baird.
Dave Rodgers
Just wanted to talk a little bit more maybe about the structure and the choice of being kind of around 15% owner, and then how did you kind of arrive at that number going into it? And you did say that maybe there is a chance to recap at later? Does that involve CatchMark putting more equity into the deal as harvest volume can grow here?
Jerry Barag
So, let me take that and Brian feel free to jump in a bit, if you have anything to add. The decision on the sizing the capital base was really driven by liquidity at CatchMark. We like this transaction. We think it represents a premium from a return standpoint to virtually everything that we've been able to do recently and that just had up a level of attraction to us. We also think it's complimentary in a lot of different ways to the existing portfolio and the investment activities that we do with CatchMark. And so we saw it is based on our capital availability and it comes out to about 22% to 23% of the joint venture at the end of the day and I know that map is hard. but you can believe me that that's the right number. So with -- I'm sorry, the second part of the question was?
Dave Rodgers
It was in regard to recapitalization, Jerry?
Jerry Barag
So, Dave, you've alluded to that as an improving harvest profile. There's an opportunity to recapitalize it. It would also be from not only from a debt perspective but also from an equity perspective based upon the profile through the improvement of the underlying assets not only through harvest profile but also from an inventory profile. We believe that this will be what attracts a significant amount of institutional capital, so provide us an opportunity to recapitalize the asset, right
Brian Davis
So CatchMark's intention is to have our capital invested that we start with in this property for a long time. We may perform some recapitalization of the joint venture partners and restructuring of some of the other joint ventures of the joint venture partner interest. But at the end of the day, CatchMark will maintain control of the assets and continue on within investment. There are opportunities going forward in the future if we would like to but we're not required to, to increase CatchMark's investment in this property but that's a future opportunity that we'll just have to decide on when that presents itself.
Dave Rodgers
And then maybe just one follow-up on the liquidity comment, Jerry, and maybe it’s for Brian too. I think on the earnings call, you mentioned 200 upwards of 300 million of capacity given where your ownership is in this and the cash you'd like to bring it on, what's the updated capacity post close?
Brian Davis
Dave, I'll take this, this is Brian. So, on the last earnings call we talked about nameplate capacity of $300 million given where our multi-dollar term loan availability was $265 million and our revolver was $35 million. Clearly, this enterprise will require $220 million under our multi-draw term loan that still gives us good capacity post closing $80 million which we feel comfortable with. It should be noted our capacity on our balance sheet actually exceeds our actual availability under our co-bank credit facilities and that affords us opportunity to exercise incremental accordion feature under our facility or increase our liquidity. But as we stated today Dave it has to be a pretty special opportunity for us to continue to leverage out but those opportunities are out there and we will view them accordingly.
Dave Rodgers
That's helpful, maybe two on the fee side. Can you talk about what the recurring fees are for this type of venture or what yield the earnings from this? And then on promote specifically I think in the slide deck that you put out there. It says 80% promote structure and you have one and two. You kind of addressed why years one and two, I'd want to hear a little bit more on that, just the promote carry beyond that in the future and is that just kind of how to think about monetizing land, just a little more color on that please?
Brian Davis
Sure, this is Brian, I'll handle the fees then I'll turn it over to Jerry for the promote. Dave, we try to provide a roadmap for you regarding fees from a CAD accretion standpoint, we talk about 2 to 3% cat accretive. We've told you that we're going to fully fund our investment under a multi-draw term loan. You can make an assumption associated with the interest expense, associated with the multi-draw term loan. The amount of G&A is pretty de minimis as relates back to the management of this asset as we'll leverage our existing enterprise.
So, those have been your two variables can lead you back into the recurring fees element of this. I can tell you the fees are paid on an asset value as a percentage of overall ownership, so that’d be the application if you wanted to back solve into what’s the rate on that asset. But specifically I can’t provide that detail but we believe we provided the roadmap for you. Jerry, maybe as it relates to promote you can hopefully answer Dave's question.
Jerry Barag
So, the promotes are significant in any eventuality regardless of what the timing was, in the structuring of this there was basically an extra incentive that was granted to us, that was offered to us in the event that we could recapitalize on restructuring of capitalized the joint venture earlier rather than later. And we didn’t decline it. I mean we thought it was a great option to be able to have and to take it. It will go down from the 80% level but still the -- a majority of the excess profits on the joint venture, will go beyond the two-year period and so we’re not necessarily daunted by the reduction in that.
Dave Rodgers
And one clarification on what you said, Brian, the 2% to 3% CAD accretion does not include in your share of any HBU land sales then, based on your comments?
Brian Davis
The HBU land sale is property level cash flows that would be distributed back to us as their cash distributions would be occurring, but from our standpoint we’re anticipating any cash distributions from the joint venture in the near term. So from a CAD accretion standpoint, it’s really been driven by the fees earned off the asset management agreement.
Operator
Next question comes from Jordan Sherman with Ranger Global. Please go ahead.
Jordan Sherman
I just wanted to follow-up on a couple small points but also ask first the -- the increase in the harvest from 2.8 million tons to 5 million tons by 2028. Can you just talk about how that ramps up, what's -- what it takes to ramp that up, is additional capital needed and then how -- what are operating margins today and how does that look as we ramp up the harvest?
Jerry Barag
John, would you like to start on that one?
John Rasor
Sure. It’s a steady incremental climb, in terms of the harvest increasing and the inventory is increasing at the same time, and that’s a function of just how productive the soils are, how well it’s been managed, the kind of technology that Campbell has put into the ground, and it’s one of the best profiles of both inventory and the harvest available that I’ve ever seen.
Jordan Sherman
Are you describing really just an aging of the timber?
John Rasor
Yes. And as cash to capital requirements, they’re related to how much you’re harvesting each year and so those and capital requirements will incrementally increase as you increase some of your harvest but they’re fairly steady state.
Jordan Sherman
And from an operating perspective?
Jerry Barag
Yes, I would say Jordan, so from a operational standpoint the biggest challenge that we’ll have is as the harvest starts to flex upwards, we’ll have to find contractors and harvest them and pulling contractors, and increase the number of crews that we’re running at the property, that is really the biggest operational challenge that we will have that we think we will have plenty of time to prepare for in and will have that well in hand by the time it gets there.
Jordan Sherman
And then from an operating margin standpoint, is it similar to with company margins today and there is a change as you harvest growth?
Jerry Barag
Because of the nature of the supply agreements shorten in the pricing, it really is the same as the harvest grows it's the same as what we're experiencing today.
Operator
[Operator Instructions] Our next question is a follow-up from Collin Mings with Raymond James. Please go ahead.
Collin Mings
Just a few more follow-ups for me. Just -- Brian, just in response to Dave's question, can you talk a little bit more about what, if any, additional G&A you'd expect just in context here of adding another JV and then, obviously, overseeing triple the acreage? So just maybe talk about scalability of the existing platform and what you expect as a result of this JV going forward.
Brian Davis
Sure. What we're looking at from adding on a staffing level basis is not at the senior management basis it's really at a property accounting level basis maybe some junior managers associated with that so from a staffing standpoint we really be leveraging off our senior management team here at CatchMark, and so we anticipate that to be pretty de minimis in regarding the overall expense but we want to make sure reflective.
Collin Mings
Okay. And then Brian, while I have you, just from a -- I apologize if I missed this in the prepared remarks, but just going back to the financing of the joint venture. Maybe just talk a little bit more about fixed, floating, potential rate on kind of that side of the structure.
Brian Davis
Sure. It's an overall to 750 million credit facility of which 650 million that will be funded at closing providing 100 million of liquidity at the joint venture. The term will be up to 7 years and from the standpoint the type of covenants would be very similar to that covenant structure that CatchMark currently exhibits today which is really an LTB and a liquidity covenant.
Collin Mings
Okay. And then as we think about that $100 million, is that just essentially some working capital from -- for the JV that all the way up.
Brian Davis
That is correct.
Collin Mings
Okay. And then just stepping back, bigger picture, Jerry, I mean you've acquired timberland with higher going in kind of cash yields. Clearly, in response to Dave's question, you highlighted that a lot of the near-term CAD accretion is as a result to kind of the management fees. This sounds like more of a intermediate to longer term NAV and, ultimately, some more cash flow play. But just as you think about -- again, on a lot of the conference call, you highlighted there was more than one timberland deal under LOI. If you think about pursuing additional deals or as we think about additional deals that might already be in your pipeline? How do you think about the right balance of kind of that near-term cash flow kind of going in cash yield as opposed to maybe more opportunistic NAV plays? How do you think about that going forward? And how do you think about that in terms of what else you might have in your pipeline right now?
Jerry Barag
So I think the easiest way to answer that question is opportunistic deals part of their nature or deals like this come around when they come around and it’s hard to plan for them, but it's something that you definitely want to be able to take advantage of the opportunity or capture the opportunity when it is available. I can’t tell you when the next one's going to come and I can't tell you how big it’s going to be, but I'm optimistic that those kind of transactions will be out there. This, the nature of this property and this transaction were a little bit different and we had to change our approach to wrestle it to the ground to figure out how to participate in this because of the lack of near term cash flow that exists on this property and having said that it's a great property and I think you all understand by what's going on with the inventory and long term what's going on with this property is that it has the potential to be a great long term investment for CatchMark but we have to overcome the clear impediment on the front end which was the lack of near term cash flow.
And we're able to do that by supplanting property level cash flow with asset management fees that we're going to earn for managing the partnership or the investment that the rest of the partnership are going to present here, and it was a very serendipitous mix of being able to substitute one for the other, it wasn't a situation where this property is going to be deficient at the cash flow for long periods of time and we had to figure out a way to do something on a structural basis that will overcome that to be invested in this asset, it really is a bridge from today till about four years from now where the property will be able to stand on its own. The second part of the question is with respect to other opportunities we had talked about on the call before they are more in line with the traditional acquisitions and transactions that we've been doing for the last several years.
Collin Mings
Got you, okay, so to the point of once you get more joint venture opportunity it please near term pipeline we should think of kind of more traditional bread and butter wholly owned type transactions.
Jerry Barag
Yeah, I think that's fair and again I think thoughtfully building this company and thoughtfully building the assets of this company we should be and want to be doing a little bit of both or a lot of both.
Operator
At this time, this will conclude the question-and-answer-session for today. I’d like to turn the conference back over to Jerry Barag for any closing remarks.
Jerry Barag
Okay, well, I appreciate everybody joining us today. This is very exciting and as we noted in the comments, we believe this is transformational so CatchMark on a lot of different levels, and we look forward to closing this in the next several weeks and being able to report back on future earnings calls about our progress.
So with that, I will leave you and wish you a good day. Thanks.
Operator
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
- Read more current PCH analysis and news
- View all earnings call transcripts