We came across a bullish thesis on Rayonier Inc. (RYN) on Substack by Waterboy Investing. In this article, we will summarize the bulls’ thesis on RYN. Rayonier Inc. (RYN)’s share was trading at $25.06 as of April 16th. RYN’s trailing and forward P/E were 10.49 and 44.05 respectively according to Yahoo Finance.
Aerial view of Timberland Real Estate Investment Trust’s woodlands in the U.S. South and Pacific Northwest.
Rayonier (RYN), a timberland-focused REIT, presents a compelling investment opportunity with significant upside driven by a deep discount to its underlying asset value, a clear strategic direction, and multiple long-term catalysts. The company owns 1.75 million acres in the U.S. South and 308,000 acres in the Pacific Northwest. In a recent move aligned with its strategy to unlock value, Rayonier sold its 77% stake in a New Zealand joint venture for $710 million, implying a $922 million total valuation or $3,212.54 per acre. The sale marked a key step toward the company’s broader $1 billion asset sale goal and brings total cumulative disposition proceeds to $1.45 billion. Following this transaction, Rayonier’s net debt was reduced to $132.7 million.
A back-of-the-envelope NAV calculation assigns $2,475 per acre to the U.S. South assets and $3,500 per acre to the Pacific Northwest holdings, resulting in an estimated $5.27 billion NAV versus a current market cap of $3.80 billion. This implies a NAV per share of $33.77 versus a share price of $24.38, reflecting a 27.8% discount—or 38.5% potential upside. Management appears confident in this valuation gap, having authorized a $300 million stock buyback program, equivalent to 7.9% of the market cap.
While Rayonier generated approximately $230 million in timber-related cash flow last year (including from New Zealand), it is evolving beyond a pure-play timber business. It’s transforming into a land resources company with growing exposure to higher-and-better use (HBU) opportunities such as solar development, carbon capture and storage (CCS), and real estate. According to CEO Mark McHugh, converting just 1% of the company’s land into these higher-value uses with a 10–15x value uplift could translate into a 10–15% increase in overall company value—rising exponentially with greater land conversion.
Rural HBU land values have surged, with average sale prices rising from $2,763 (2015–17) to $4,468 (2021–24), and premiums over timberland values increasing from 55% to 117%. Rayonier ended 2024 with 39,000 acres under solar option agreements, up from 27,000 a year prior. CCS leases expanded to 154,000 acres in 2024, up from 26,000 in 2023, including a 59,000-acre lease with ExxonMobil. Additionally, the Wildlight and Heartwood development projects surpassed $100 million each in cumulative revenue, with 26,700 entitled acres supporting 37,000 housing units and 44 million square feet of commercial development.
