CatchMark Timber Trust Inc (NYSE: CTT)
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Q4 2018 Earnings Conference Call
Feb. 15, 2019, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
See all our earnings call transcripts.
Prepared Remarks:
Operator
Good morning, everyone and welcome to the CatchMark Timber Trust Fourth quarter 2018 Earnings Call and Webcast. All participants today will be on listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note that today's event is being recorded.
And with that, I'd like to turn the conference over to Brian Davis. Please go ahead.
Brian Davis -- Chief Financial Officer
Thank you, Brian. Good morning and thank you for joining us for a review of CatchMark Timber Trust results for full year 2018 and the three month period ended December 31, 2018. I'm Brian Davis, the Chief Financial Officer of CatchMark. Joining me today on the call are President and CEO, Jerry Barag; Senior Vice President of Forest Resources, Todd Reitz; President of our Triple T joint venture John Rasor.
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 on Form 10-K and subsequent reports that we file with SEC.
Today's presentation includes certain non-GAAP financial measures. Reconciliations of these measurements are included in our earnings release, which is posted on our website. Todd, John and I will join Jerry to answer any of your questions after this presentation.
Now I turn over the call to Jerry Barag to cover full year 2018 results, fourth quarter results and company guidance for the year ahead.
Jerry Barag -- President, Chief Executive Officer, and Director
Thanks, Brian. Good morning, everybody and thank you for joining us. As we all know, the past six months have been somewhat volatile for the timber and wood products industry and especially difficult for lumber manufacturers with prices down 50% to 60% in certain lumber categories. This led to a challenging fourth quarter, particularly impacting owners of timberland in the Pacific Northwest.
At CatchMark, by design, we have been able to navigate through this rough patch effectively unscathed, our pure-play model circumventing lumber price volatility. The U.S. South micro markets where we are concentrated are steady and improving driven by recent under way and announced mill expansions, which should result in future strengthening of unit prices.
Furthermore, southern yellow pine lumber prices have been less affected compared to other species and today stand at close to long-term trend prices. Quite frankly, our operations have remained unchanged during this period and so does our outlook for CatchMark-owned properties.
Since CatchMark's inception as a public company, we have steadily expanded assembling the industry's consistently highest quality timberland portfolio and consistently meeting our operating targets. We've reduced exposure to volatility through our pure-play nature.
We're a timberland investor not a lumber company. Our acquisitions have proved out by picking the right locations with proximity to the best mill markets. Our delivered wood sales strategy and fiber supply agreements continue to help baseload and optimize our timber sales revenue through relationships with creditworthy counterparties.
Our diversified cash flow streams have enabled to defer harvest to optimize future upside. We've managed our capital effectively to maximize growth, including entering into strategic joint ventures with institutional investors. And our new investment management business delivers asset management fees, helps protect against downside volatility and provides opportunities to capture very attractive incentive fees.
As a result of our business strategy, CatchMark is extremely well positioned to generate and grow durable cash flows, always seeking to deliver a reliable dividend over time.
In 2018 specifically, we took bold and significant steps to execute our long-standing strategic initiatives to increase cash flow, expand our prime timberland portfolio in top mill markets, maximize results from harvest operations, and reinforce our capital position.
In addition, we significantly advanced our investment management business, diversifying and solidifying our revenue streams. And again we met our company guidance for the year.
In 2018, we increased timberlands managed by 200% to more than 1.5 million acres. That included investing $200 million in the Triple T joint venture, which has secured significant stable ongoing asset management fees, offers potential superior investment returns and attractive long-term sustainable growth from extremely high quality Texas timberlands, and provides the opportunity for capturing performance based incentive management fees.
We further diversified assets and expanded sawtimber holdings by entering into the leading Pacific Northwest mill markets through the purchase of 18,000 acres of Prime Oregon Timberlands in the $89.7 million Bandon transaction.
After the Triple T investment upgraded our regional portfolio, we rebalanced our holdings in Texas and Louisiana and recycled capital to facilitate the Bandon purchase. That was accomplished with the sale of 56,000 acres of timberlands for $79.3 million in the Southwest disposition.
We completed other HBU land sales of approximately 8,500 acres for $17.5 million, meeting our target for the year within the range of 1% to 2% of the acreage disposed. We raised $72.5 million of capital in an equity offering to pursue opportunities in a robust acquisition pipeline.
We improved liquidity by increasing total borrowing capacity by $75 million to $644 million at year-end and secured a new seven-year, $140 million term loan to replace existing debt. And we executed $200 million of interest rate swaps to mitigate exposure to rising interest rates.
Looking specifically at full year 2018 result highlights, we increased total revenues by 7% year-over-year. We increased adjusted EBITDA by 19%. We increased asset management fees to $5.6 million, which were primarily generated by Triple T during the second half of 2018. We also produced $2.6 million in income and received $8.5 million in distributions from the Dawsonville Bluffs joint venture. And during the year we paid fully covered dividends totaling $26 million or $0.54 per share.
CatchMark also incurred a net loss of $122 million for full year 2018. These results were overwhelmingly due to losses allocated from the Triple T joint venture in accordance with GAAP rules. In meeting our guidance for 2018, we again effectively demonstrated how our disciplined strategy for assembling the consistently highest quality timberlands portfolio and the ongoing operations excellence together to maximize cash flow and support our dividend to all phases of the business cycle. And yesterday we declared a first quarter 2019 cash dividend of $0.135 per share for stockholders payable on March 15. Our dividend yield is the highest among timber REITs and continues to offer superior risk-adjusted coverage.
In 2018, we completed an industry-leading investment, the Triple T joint venture and took the first step in entering the Pacific Northwest through the Bandon acquisition. Triple T especially represents a significant expansion of our holdings and both investments are designed to register durable cash flow growth and support our dividend well into the future.
They further enhance the quality of our prime timberlands in leading markets, reinforced by delivered wood sales strategy and fiber supply agreements which meet our investment profile. Their premium stocking and productivity characteristics are in keeping with our stringent investment criteria which are proved out in helping deliver superior results and enabling operation advantages throughout our portfolio.
And these operating advantages continue to pay-off in consistent and predictable cash flow. We operate in superior micro markets with proximity to leading mills and customers. We continue to benefit from executing on our delivered wood sale strategies in those mill markets and we gain from our extensive long-term fiber supply agreements with creditworthy counterparties.
By strategic design, the mill markets where we operate in the U.S. South continue to outperform southwide averages. CatchMark's average pine sawtimber stumpage price has maintained a premium over southwide averages ranging up to 9% since the first quarter 2017.
The premium has been even higher in the chip-n-saw category ranging from 20% to 40%. Delivered wood sales had been at the foundation of our management philosophy and we increased delivered wood sales as a percentage of total harvest from 74% in 2017 to 80% in 2018. Through our delivered wood sales strategy, we can keep better control of our supply chain and produce more stable and predictable cash flows.
We also made a tactical decision early in the year to defer some harvest in anticipation of stronger future pricing. Our gross timber sales declined 3% year-over-year as harvest volume declined 8% year-over-year, as a result of these discretionary deferrals.
But our per term pulpwood pricing increased about 6% to help offset the decline in harvest volume and our fourth quarter pine sawtimber stumpage price registered a $25 per ton compared to southwide averages which have tracked below $24 for the past eight quarters according to TimberMart-South.
In addition the significant new asset management fees from Triple T and execution of planned HBU Timberland sales to dispose of less productive holdings, buttressed overall company performance during the year. The new asset management fees are notable in diversifying our revenue streams and provide a predictable and significant source of ongoing cash flow.
In addition, we have the opportunity to earn attractive performance based incentive fees going forward. Both our joint ventures in Triple T and Dawsonville Bluffs are operating to plan. And integration of Triple T operations has been efficient and well-managed meeting our performance objectives to date.
With regard to Dawsonville Bluffs we recognized $2.6 million of income during the year generated primarily from the planned sale of HBU Timberland and mitigation bank credits. In addition we received $8.5 million in distributions as we move to fully monetize this finite life $10 million investment ahead of schedule. In terms of adjusted EBITDA, Dawsonville contributed $6.8 million.
Now turning specifically to CatchMark's operating results for the 3-month period ending December 31, 2018. We increased revenues 1% year-over-year. We generated adjusted EBITDA of $9.4 million compared to $9.9 million in the fourth quarter of 2017. We produced $2.8 million in asset management fees primarily from Triple T.
We completed Timberland sales of approximately 1300 acres for $2.6 million. We incurred a net loss of $32 million, primarily due to GAAP accounting losses allocated from Triple T. And we paid a dividend of $0.135 per share to stockholders of record on December 13, 2018.
As a result of our plan to strategically defer harvest for an anticipated future stronger pricing environment, gross timber sales revenue in the fourth quarter decreased 20% from fourth quarter 2017 due to a 22% decrease in harvest volume. Timberland sales for the quarter were higher year-over-year due to selling more acres at a price per acre 26% above fourth quarter 2017. In the fourth quarter, CatchMark completed a series of coordinated transactions by closing on the sale of 56,000 acres of timberlands in Texas and Louisiana, the Southwest Region disposition.
As a part of the sale, we retained approximately 200,000 tons of merchantable inventory to be harvested over the next two years. Proceeds from the Southwest disposition were recycled to pay down debt used for last summer's Bandon acquisition. As a result of these two transactions in Triple T, we improved the overall quality of our timberlands ownership in the Southwest and reduced our regional exposure to post the Triple T investment.
We also redeployed capital to prime sawtimber holdings in the Pacific Northwest and we strengthened our overall capital position. Also in the fourth quarter under our $30 million share repurchase program announced in August 2015, CatchMark repurchased close to 99,000 shares of common stock for approximately $1 million in open market transactions. As of December 31, 2018, CatchMark may repurchase up to an additional $18.7 million worth of shares under the program.
Given the relative stability of our cash flow and recent steps taken to reduce debt including the Southwest disposition, we're very comfortable with our balance sheet. During the year, we raised $72.5 million in equity to support our investment pipeline. We refinanced existing debt, which was outstanding under our multi-draw facility, securing $140 million term loan. This refinancing improved our weighted average maturities and our first step maturities are now marked until 2024.
After increasing our borrowing capacity to a total of $644 million, we had $165 million of dry powder at year-end. And we entered into $200 million of interest rate swaps to reduce exposure to potential rising interest rates. Approximately, three quarters of our rate exposure was swaps fixed rate as of year-end 2018.
As a result going into the New Year, we have sufficient capacity and flexibility to continue our track record of growth through select acquisitions and joint venture investments at the appropriate time. Taken together, all the initiatives we completed last year will help set the stage for growth in adjusted EBITDA for 2019 as well as in the future. And we believe that we are well positioned to navigate through current economic volatility, stemming from general concern about the housing market and tariff and trade issues as well as global uncertainty.
Lumber mills in our micro markets are operating at or near full capacity. Demand is good for finished lumber supported by expected level of housing activity including robust repair and remodel business. We also see no pullback in previously announced mill expansion projects in the U.S. South and recent capital investments in mills are beginning to pay off with improved production levels. That is beginning to drive increased log demands in our micro markets across the region.
Another positive sign overall finished lumber inventories are light, which bodes well for mills to run at or near capacity levels with multiple shifts. Furthermore, Southern Yellow Pine lumber manufacturers are still able to produce lumber with comfortable margins based on current levels of finished lumber prices and timber input prices.
Our pulp markets also remained strong across all products. As a result, our fiber supply agreement partners and other pulp customers appear well-positioned for steady production throughout the year ahead. Lastly, historically, weather conditions are supporting and even increasing timber prices in our market.
Taking all factors into consideration, for full year 2019 guidance, we anticipate adjusted EBITDA in a range of $52 million to $60 million or a 4% to 21% increase compared to full year 2018. This increase will result primarily from earning a full year of Triple T asset management fees of $11.5 million as well as an increase in net timber revenue attributable to higher harvest volumes.
Harvest volumes are anticipated in the range of 2.2 million to 2.4 million tons and increases our forecast to drive from Southwest disposition timber reservations, deferred harvest from last year, and expect the new harvest from the Bandon acquisition. Beginning in the second quarter Bandon should also help increase the share of sawtimber and our mix into a range of 40% to 50%.
In the U.S. South, we also anticipate a slight increase of approximately 1% in harvest volume as a result of our delivered wood sales and fiber supply agreements in select micro markets. The timberland sales target of $16 million to $18 million remains consistent with past years within the range of 1% to 2% of the acreage.
We've also been delighted with Dawsonville Bluffs which by year end 2018 had generated adjusted EBITDA of $8.8 million. We anticipate Dawsonville generating an additional $3 million to $5 million surpassing our original investment of $10 million.
Our outlook does not include potential contributions from future acquisitions and joint ventures which we pursue as part of our ongoing growth strategy and does not include any potential capital recycling from dispositions.
So, in summary CatchMark's favorable guidance for the year ahead derives directly from the well-formulated and consistently executed programs that deliver durable cash flow for our shareholders and support our dividend.
They are; investing capital prudently in prime timberlands in selected markets near leading mill customers to provide growth opportunities which has resulted in price and demand stability; also benefiting from the disciplined management of delivered sales strategy and fiber supply agreements in those markets with creditworthy counterparties to cushion against volatility; capturing new highly predictable revenue streams from entry into the investment management business; and finally, focusing to derive upside from our investment in Triple T and further upside from Dawsonville Bluffs.
So, in conclusion, CatchMark had an extremely successful year in 2018 in meeting our strategic objectives, registering higher year-over-year revenues and higher EBITDA, and significantly expanding our investments and investment management platform. And we believe we're well-positioned to move ahead successfully in 2019.
All of us at CatchMark, our Executive Group, our Board, our astounding and dedicated employees have worked extremely hard to position the company to deliver on our promise to our shareholders, grow cash flow and support our dividend from execution of a clear and focused strategy and operations excellence. That will continue to be our focus in the year ahead.
I appreciate everybody being on the call today. And now Todd, Brian, John Rasor and I are available to take any of your questions.
Questions and Answers:
Operator
We'll now begin the question-and-answer session. (Operator Instructions) And look today's first question will be from Collin Mings with Raymond James. Please go ahead.
Collin Mings -- Raymond James -- Analyst
Thanks. Good morning, guys.
Jerry Barag -- President, Chief Executive Officer, and Director
Good morning
Brian Davis -- Chief Financial Officer
Good morning, Collin.
Collin Mings -- Raymond James -- Analyst
To start Jerry, do you have any other acquisitions or dispositions in the active pipeline right now? And just along those lines, how do you think about the potential to reduce leverage further here in 2019 with some additional capital recycling?
Jerry Barag -- President, Chief Executive Officer, and Director
Okay. So it's an easy answer to the first part of your question, no. We purposefully made a decision post the frenetic end of 2018 and closing Triple T the Southwest disposition and Bandon to make sure that we had appropriately integrated all those changes into our portfolio. And so we have effectively stopped looking at acquisitions for the time being.
And then with the dislocation that happened in our share price, we didn't think that it was a particularly opportune time to aggressively go and seek new investments.
So having said that, from a capital standpoint, we are very, very focused right now on liquidity in particular. And the use of that liquidity, which we think would be best spent on a combination of paying down debt and some tactical share repurchases, assuming our share price remains at a level that I think is unrealistically low and opportune for us to repurchase shares.
So I think that will be certainly the focus of what we're doing for the first six months of 2019. And we'll continue to reevaluate that. Brian, do you have anything you want to add?
Brian Davis -- Chief Financial Officer
No. I guess another point of emphasis here Collin is, when we take a look at our guidance for 2019, which reflects a full year impact associated with Bandon as well as Triple T, our leverage profile does naturally reduce from the levels where on a stated basis today by another turn to turn in a quarter.
So you put that on top of what Jerry is talking about an opportunity for us to review some capital recycling opportunities that would be on a CAD per share neutral basis and that would also maximize our asset realizations, you see some opportunities inside of our portfolio for additional leverage reduction.
Collin Mings -- Raymond James -- Analyst
Okay. So on balancing nothing under contract or really active right now neither of the acquisition or disposition front or just given where things stand it sounds like the buyers would be -- fear to go one way or the other, it would may be to be to sell something to on the margin bring down leverage a little bit more, is that a fair recap?
Brian Davis -- Chief Financial Officer
I think that is very accurate as the way we're thinking about things.
Collin Mings -- Raymond James -- Analyst
Okay. That's helpful. And then switching to Triple T, can you just provide us an update both operationally as well as any progress toward restructuring the sawtimber supply agreement or really any other value-creation event recognizing you guys are highly incentivized to unlock value in the first few years of that deal? So an update there again both operationally as well as any sort of value-creation activity would be very helpful.
Jerry Barag -- President, Chief Executive Officer, and Director
So, John Rasor is here joining us today and I'm going to turn over the specifics of that question to him. But he as well as everybody on the team involved with Triple T have done just a remarkable job of integrating 1.1 million acres into full operations and I'm pleased to report that we are running at a full operational run rate at this point and have been for some time.
We've met all of the minimum deliveries or the expected deliveries to the supply agreement counterparties in the Southwest and it continues to go well. There continues to improve and John will talk a little bit about that.
With respect to the future opportunities that we identified when we purchased the Triple T property we're working toward that diligently. That was not meant to be an overnight process. It's going to take a little bit of time. But we have begun the process of trying to get to agree that we think we'll have the opportunity to add significant value to that property.
John, won't you give a little bit more detail about that?
John Rasor -- President, Triple T Timberlands
Okay. I think the headline what the property of this size and the amount of volume that has to move is best described as more than 400 truckloads a day to support the supply agreements then and the additional sales we make into the market.
And with the weather that has been absolutely historically epic over there meaning it just has rained and rained and rained with the rainfall for the quarter being well over anything that anybody has seen previously I'm feeling like we met the challenge.
As Jerry said we satisfied both the big Georgia Pacific supply agreement requirements and the IP supply agreement requirements that was quite an accomplishment, but the challenges we faced with the weather alone.
I would add to that that while we hit all the numbers on the volumes, we did come up short on the hardwood volumes simply because we could not access the tracks. We will be prepared to get after that again in 2019. And you really only have about three-month window over there in the flatwoods of Texas to get into these bottom lands. And we intend to be fully prepared to take advantage of that opportunity as we look at 2019. Surely, the rain will be less by then.
On the harvest revenue side, I can tell you pricing has been a bit less than we had expected, but we're seeing some uplift now. So that we're looking at a really good start in January. And we see prices moving upward, specifically, around the prime pulpwood and the prime sawtimber products.
Also our surface use income has been significant and better than we expected with the oil and gas activity that has become quite a component of our business that's been value-added.
And we will -- we've started to implement a modest land sale program and are very encouraged by the kind of pricing and interest we're getting. So, it was a tough six months, but we got there and we're looking forward to 2019.
Jerry Barag -- President, Chief Executive Officer, and Director
Yes. So, I will remind everybody that all of these things and all of the accomplishments that have happened over there are important. But from a cash flow standpoint, from an EBITDA standpoint to CatchMark, it's really a barometer for what we expect to be able to move property value and NAV over time.
The earnings that CatchMark receives on that property are essentially from the investment management fees. So, realistically changes in prices, changes in income for 2019 really won't have any bearing on the EBITDA that CatchMark is going to get from its investment.
Collin Mings -- Raymond James -- Analyst
Okay. That's very helpful update guys. Two other quick ones for me. I'll turn it over. Just on CapEx. Brian it looks like you guys came in a little bit below budget for 2018. How should we think about 2019 on the CapEx front? I apologize if I missed this in the guidance.
Brian Davis -- Chief Financial Officer
It's about $5 million to $6 million next year. We got a carryover from the fourth quarter and first quarter this year. So, $5 million to $6 million in 2019.
Collin Mings -- Raymond James -- Analyst
Okay. And then on -- just the cost side overall, it does look like G&A forestry management fees and other operating expenses were all up notably sequentially in the fourth quarter. Again not necessarily huge dollar amounts but just collectively that was a notable variance for us at least. Just anything in particular we should be mindful of?
Brian Davis -- Chief Financial Officer
So in the Q4 in G&A it included pursue costs about $150,000. I think that's noted inside the adjusted EBITDA reconciliation line. As it stands with other operating expenses, we expense basis of timber related to lease terminations and timber deed expirations and casualty losses within the operating expense line item. In the fourth quarter, we had just under $600,000 of non-cash charges related to this activity. The corresponding entry reflecting these non-cash expenses can be found on our cash flow statement in the operating section. So those are the two notable areas, which you can -- we can provide detail on.
Collin Mings -- Raymond James -- Analyst
Okay. I'll turn it over and go back in the queue. Thanks, guys.
Brian Davis -- Chief Financial Officer
Thank you.
Operator
Next question will be from Anthony Pettinari with Citi. Please go ahead.
Randy Toth -- Citi -- Analyst
Good morning, guys. This is actually Randy Toth sitting in for Anthony. I guess, my first question is...
Brian Davis -- Chief Financial Officer
Good morning.
Randy Toth -- Citi -- Analyst
...good morning -- can you talk a little bit about your 2019 guidance and what baked in? I know you have $3 million to $5 million coming from Dawsonville and I imagine around $11 million coming from Triple T. Just any assumptions around pricing in the U.S. South?
Jerry Barag -- President, Chief Executive Officer, and Director
I'm going to let Todd answer that.
Todd Reitz -- Senior Vice President-Forest Resources
Sure. So we'll think about overall market conditions and where we're coming out of 2018. We finished fourth quarter very strong, had a nice run rate coming up to that point as Jerry mentioned in his comments, some of that being weather related. But the bigger takeaway and the stable steady part of this is that we're beginning to see build consumption improve. Some of the capital improvements that have been initiated in late 2017 and 2018 are beginning to come online. So we're seeing some of that demand pull.
That being said, we're anticipating some more stable view of pricing if you will going forward. So if we saw a 2% to 3% very modest uptick over the year that would be what we're looking at going forward. Additionally we have a little stronger mix of sawtimber in there. As Jerry mentioned with Bandon coming on and we're positioned to harvest this year going to be more in that 40% to 50% range. So some added value associated with that as well.
Jerry Barag -- President, Chief Executive Officer, and Director
Yeah. And I probably like to remind everybody that a year ago when we did this call, I think my exact words were that we would be disappointed if we didn't see some modest improvement in prices over the operating areas where CatchMark owns its properties. And in fact, we delivered that in spite of some headwinds that came from southern yellow pine, exports that were effectively derailed as a result of tariffs that were put on particularly punitive tariffs from the U.S. South.
And so, we're very proud at being able to do that. We certainly saw the conditions strengthening and being able to do that. We think we delivered it. And I think we feel relatively confident that we will see some more strengthening going into 2019.
Randy Toth -- Citi -- Analyst
Okay. That's helpful. And then just saying in the U.S. South, it's quite a bit of saw mill capacity coming online over the next 12 to 24 months especially in Alabama and Georgia. My question is, how will all of this capacity impact pricing for pulpwood, because of the saw mill residuals? Just kind of curious how that relationship -- how you think about that?
Jerry Barag -- President, Chief Executive Officer, and Director
Sure. So you look at a lot of the customers where we're operating and in general they have a baseload that is associated with raw logs that have to come in, pulpwood that has to come in. That component will be consistent. Pricing for that has been very very stable. We see that being strong going forward and customers being well positioned for that.
As far as the residuals are concerned they'll work that into their overall mix. And we think that we're going to see some positive movement on the market going forward. Additionally with our supply agreements, we have a strong position with our customers that are stable and set forth into the future, 10, 12 years depending on who we're working with, that allows us to be a little bit insulated to any of the ups and downs, if you will, in the marketplace.
Randy Toth -- Citi -- Analyst
Okay. That's helpful. Thank you. I'll turn it over.
Jerry Barag -- President, Chief Executive Officer, and Director
Thank you.
Operator
(Operator Instructions) Next question will be from Paul Quinn with RBC Capital Markets. Please go ahead.
Paul Quinn -- RBC Capital Markets -- Analyst
Yeah. Thanks very much. Good morning, guys.
Jerry Barag -- President, Chief Executive Officer, and Director
Hi, Paul.
Brian Davis -- Chief Financial Officer
Hi, Paul.
Paul Quinn -- RBC Capital Markets -- Analyst
Hey. Just a question on 2018 just what was the quantify of harvest that you deferred? And it sounds like that you're going to harvest a part of the deferral or all it. So maybe you could just help me out in 2019?
Jerry Barag -- President, Chief Executive Officer, and Director
Sure. So when you look at it as a year-over-year, call it, 150,000, 100,000-or-so tons that we pulled back going into 2018. Going into 2019, we're going to end up adding about that amount back in. So it's kind of a rebalancing of where we were compared to previous. Again, it will be a regional difference with the Northwest coming in and then having the timber reservation coming out of the Southwest as well. So all of that will pretty much be brought back online throughout 2019.
Paul Quinn -- RBC Capital Markets -- Analyst
So the original reason for the deferral was to take advantage of higher timber prices down the round is the stuff that you're coming in. But I guess the increased harvest in 2019 as a result of the deferral in 2018. On the regional mix is that going to result in a higher price in the sort of 2% to 3% that you're kind of expecting?
Jerry Barag -- President, Chief Executive Officer, and Director
We would anticipate that going -- the modest increase throughout the year or potential for throughout the year. That's correct.
Paul Quinn -- RBC Capital Markets -- Analyst
Okay. And just shifting now, we haven't seen a lot of timberland transactions, it seems like, I don't know, a-year-and-a-half, two years now. And we had a pretty steady increase in interest rates throughout 2018. Have you seen or you experienced yourself changing underwriting criteria around that?
Jerry Barag -- President, Chief Executive Officer, and Director
I think underwriting criteria has generally been somewhat stable, Paul. Now where the volatility has been, has been really out in the Pacific Northwest, where you've had a lot of volatility for the most part to the upside, but more recently to the downside in timber prices. And so interestingly, there -- since we closed on the Bandon transaction there were two properties that were offered out in the Pacific Northwest. One of them actually transacted. The other one didn't transact in that. That was the first time in quite some time that a property in Pacific Northwest failed to meet a clearing price.
What we're seeing going forward into 2019 are a couple of things, a couple of trends. One is quality has become much more important even -- it was important previously, it's become much more important. And so higher quality property is the best properties are trading. And they are supporting floor pricing number one.
Number two, it's going to be an interesting transaction, because there still is seemingly a lot of pressure on the TIMOs who have a decade-or-so old investments that there is pressure for them to liquidate, but they have been cycling through their portfolio selling the better properties as opposed to the weaker properties. And in the U.S. that's getting harder to do, because you had seen a lot of transactions in the Pacific Northwest and that seems to be coming off given I think people's anticipation that Pacific Northwest properties are going to at least flatten or potentially some of the valuations out there might fall.
Interestingly, what we've heard at this early point in the year is there maybe a significant number of international transactions that happen or offerings that are coming from the TIMOs this year. And so naturally, we won't be a very active participant in things like that.
Paul Quinn -- RBC Capital Markets -- Analyst
All right. Thanks very much. Best of luck guys.
Jerry Barag -- President, Chief Executive Officer, and Director
Thanks, Paul.
Brian Davis -- Chief Financial Officer
Thanks, Paul.
Operator
Next question is a follow-up from Collin Mings. Please go ahead.
Collin Mings -- Raymond James -- Analyst
Thanks. Just a couple of housekeeping things from me here. Just as far as the timing of future losses associated with Triple T, can you just maybe give us some guidepost there and remind us what that should be just given how that just from a net perspective kind of a big driver?
Brian Davis -- Chief Financial Officer
Certainly, Collin. So how we're thinking about is about $25 million per quarter for Q1 through Q3 and then the remaining $15 million in Q4 2019.
Collin Mings -- Raymond James -- Analyst
Okay. And then, I apologize if I missed this Brian. But as far as -- have you quantified a G&A number for 2019? Again, I guess, you kind of gave us some other puzzled pieces but can you be a little bit more explicit there?
Brian Davis -- Chief Financial Officer
We'll, give you the corners to your puzzle, Collin. So we anticipate G&A to increase about 1% to 2% year-over-year, which close about $2.6 million of equity compensation. One thing, I should note as we kind of fill these things in our other operating expense is expected to remain flat on a gross basis even after backing out the other operating expense that we occurred in fourth quarter this year, the real net increase is resulting from property taxes. And for -- where we added for forestry management will increase year-over-year to about $7.3 million to $7.7 million as we allocate expenses of our management of our joint ventures from G&A into this line item. And this is inclusive of approximately about $500,000 of equity compensation expense.
Collin Mings -- Raymond James -- Analyst
Okay. That's helpful detail. And then just going back to Paul's question as far as timberland transaction markets. Jerry just for our benefit, can you maybe just -- maybe clarify a little bit as far as some of the evolution in the market if you will. How much of that is being driven by some of the potential bidders not maybe emerging as much they would have a couple of years ago? Is it concerns around pricing and the trajectory of pricing specifically in the Northwest near-term or longer-term outlook for the U.S. South? Just curious -- maybe more simply that the pool of potential buyers has changed or maybe has some of their underwriting and the environment changed where it just has been as active?
Jerry Barag -- President, Chief Executive Officer, and Director
I think the answer is yes to all of the above. So the backdrop to the markets really starts with liquidity. And liquidity is I would tell you it was a transaction year last year. So there is liquidity. It is coming from different places. And it is -- it's spotty certainly compare to what it used to be a decade ago. And that trend has been around for the last couple of years, and I don't think that it is going to change.
If you look at the buyer's property over the last year or over the last couple of years, it's a rotation in names. I mean its different names than you would have likely seen a decade ago. And the philosophies around those transactions tend to be a little bit different.
So by and large the -- as I previously mentioned, higher quality properties and really high quality markets are the ones that are ultimately transacting. There have been some other transactions of lesser-quality properties. And after being marketed for multiple times, some of those had begun to actually trade now. There was actually a trade of some Alabama property at the end of last year that transacted at just under $1,200 an acre.
And interestingly, it was a pretty similar price to the Triple T transaction, although, it was much worse mill markets, much less productive property than Triple T, and a much different story. And so you may see some of that actually come to market and finally transact now in 2019.
But I believe the real focus is going to be from the sellers. They're going to looking around their portfolio for properties in pockets of strength. And I think right now they believe that those pockets of strength really are international properties, international investments that they've made. And that there's probably more liquidity especially in the TIMO market for international properties right now than domestic properties.
Collin Mings -- Raymond James -- Analyst
Along those lines are you concerned though as maybe some of these lower-quality properties clear the market? Just the impact that might have on Timberland appraisals and just from that environment recognizing again you have Triple T up there which at some point you like the optionality around that. But just curious how you think this might actually filter through from an appraisal standpoint in the marketplace?
Jerry Barag -- President, Chief Executive Officer, and Director
Yes. As you pointed out it really becomes an appraisal issue. The appraisal issue at least for us, the biggest outcome of that would be around the loan-to-value ratios the coverage ratios that go with our debt. We think we're comfortably insulated from it. And -- but at the end of the day, we do believe that the appraisers and the market in general has made the distinction between lower-quality properties and higher-quality properties.
And we are not feeling much downward pressure, if any, on the types of properties that we own. I think it's going to be a different state of properties which ultimately may have an impact on the NCREIF Timberland Index. So it should cause some interesting headlines, but operationally for us I don't expect there's problems.
Collin Mings -- Raymond James -- Analyst
I appreciate all the extra color.
Jerry Barag -- President, Chief Executive Officer, and Director
Great. Thanks Collin
Operator
At this time this will conclude today's question-and-answer session. I'd like to turn the conference back over to Jerry Barag for any closing remarks.
Jerry Barag -- President, Chief Executive Officer, and Director
Thanks again everybody for joining us for the fourth quarter. This call is always a marathon for us. And I appreciate everybody hanging in and we will talk to everybody in 90 days.
Operator
The conference has now concluded. We do want to thank everyone for attending today's presentation. At this time you may now disconnect.
Duration: 46 minutes
Call participants:
Brian Davis -- Chief Financial Officer
Jerry Barag -- President, Chief Executive Officer, and Director
Collin Mings -- Raymond James -- Analyst
John Rasor -- President, Triple T Timberlands
Randy Toth -- Citi -- Analyst
Todd Reitz -- Senior Vice President-Forest Resources
Paul Quinn -- RBC Capital Markets -- Analyst
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