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CatchMark Timber Trust Inc (NYSE:CTT)
Q3 2020 Earnings Call
Oct 30, 2020, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon. Welcome to CatchMark Timber Trust's Third Quarter 2020 Earnings Conference Call and Webcast. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Ursula Godoy, Chief Financial Officer. Please go ahead.

Ursula Godoy-Arbelaez -- Senior Vice President, Chief Financial Officer and Treasurer

Good afternoon, and thank you for joining us for our review of CatchMark Timber Trust's results for third quarter 2020. I am Ursula Godoy, Chief Financial Officer of CatchMark.

Joining me today on the call are Chief Executive Officer, Brian Davis; Chief Resources Officer, Todd Wright; and John Rasor, President of Triple T Timberlands.

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 2019 annual report on Form 10-K, our quarterly report on Form 10-Q for the first quarter of 2020, and subsequent reports that we file with the SEC.

Today's presentation includes certain non-GAAP financial measures. Reconciliations of these measurements are included in our earnings release and in our Form 10-Q filed with the SEC yesterday, Thursday, October 29, 2020, both of which are posted on our website. After our presentation, Brian, Todd, John, and I will be pleased to answer any of your questions.

Now I turn over the call to Chief Executive Officer, Brian Davis.

Brian M. Davis -- President, Chief Executive Officer and Director

Thanks, Ursula, and thank you all for joining us on the call this afternoon. At the outset, all of us at CatchMark want to take this opportunity to express that we hope you, your family, friends, and associates have remained well and safe during the ongoing pandemic.

Turning to the business at hand and our review of the third quarter, the primary takeaway is that CatchMark remains on course and on plan to meet our guidance for full-year 2020 results. We continue to manage successfully through the challenges presented by COVID-19 and are optimistic about how the ongoing recovery in the housing market will be beneficial for increasing timber prices in our markets going forward.

We avoided direct damage to our timberlands from storms in the U.S. South and wildfires in the Pacific Northwest, adjusting our harvest plans where necessary. As a result, some timber sales have been moved into the fourth quarter. As a direct product of our business model, which focuses on superior management of prime timberlands in premier mill markets and working with well capitalized counterparties, we continue to secure higher-than-average market prices in the U.S. South for our harvest. Additionally, in the Pacific Northwest, we realized a 26% increase year-over-year and delivered sawtimber pricing as compared to third quarter 2019. The resilience, flexibility and adaptability of our business approach and the dedication of our entire CatchMark team have been instrumental in allowing us to take advantage of market opportunities during this volatile and uncertain time.

During the third quarter, we also have been focused on initiatives to recapitalize the Triple T joint venture and maximize returns for our stockholders and our partners in due course. Triple T harvest operations, benefiting from the renegotiated wood supply agreement with Georgia-Pacific, continue to exceed underwriting and continue to generate positive cash flow. And we realized increased asset management fees from Triple T as a result of last quarter's amended asset management agreement.

We maintained our discipline in making capital allocation decisions and are reviewing recycling opportunities to balance leverage reduction, share repurchases, and growth opportunities. In the meantime, our capital position remains strong, and we have ample liquidity to fund growth as investment opportunities arise.

During the quarter, we did not complete any acquisitions, large dispositions, or share repurchases under our share repurchase program. Notably, we once again fully covered our third quarter dividend from cash from operations. Yesterday, we also declared a fourth quarter dividend of $0.135 per share for stockholders of record on November 30, 2020, payable on December 15, 2020.

We are also thankful that our CatchMark team has remained safe, and our operations have not been impacted by health-related issues during the pandemic. Again, we hope that this is the case with you, your colleagues, and your families as well. Our headquarters group has adopted an effective hybrid work model of in-office and remote work based on business and personal needs, practicing social distancing and established health protocols. We continue to be extremely diligent, maintaining constant communications with our customers to be as responsive as possible to their supply chain needs. And our fiber supply agreements and delivered wood sales relationships continue to provide us an advantage in fulfilling customer supply chain requirements and a meeting market demand. This network of relationships has been particularly helpful in navigating through mill markets affected by wet weather conditions in the South and by wildfires out West.

As a result, we continued to deliver consistent cash flow in the third quarter and stayed on course to achieve our full-year operating objectives. Although some harvests were delayed into the fourth quarter, we continued to attain premium pricing in the U.S. South for our timber sales, significantly above industry averages, both for sawlogs and pulpwood. In the Pacific Northwest, we sold our timber at higher pricing into increased mill market demand, driven primarily by the improving housing fundamentals. In addition, we remain on course to meet our timberland sales goals for the year.

We also are particularly encouraged by the momentum in what appears to be a durable homebuilding recovery, driven by the combination of favorable demographics, low mortgage rates, and low historical housing supply. Despite the pandemic, single-family starts are back above one million units a year for the first time since 2017. September building permits for single-families surged more than 24% year-over-year, and the NAHB housing market index measuring monthly homebuilder sentiment just achieved a new record high in October. These trends hold promise for improved pricing at the stump in 2021 and beyond to meet expected rising demand for timber products.

For the third quarter, year-over-year revenues were lower, primarily because 2019 had produced larger volumes from a timing strategy to concentrate harvests in the second half of 2019, after deferrals earlier in the year. Third quarter 2020 results were also impacted by delaying harvests into the fourth quarter, due to weather and fire disruptions. Net loss was substantially reduced by a decrease in losses allocated from the Triple T joint venture. Lower adjusted EBITDA primarily resulted from decreased earnings from the successful Dawsonville Bluffs joint venture, which effectively wound down last year. Except for weather-related issues, which delayed some harvests, primarily in the Carolinas, these results had largely been anticipated and built into our harvest plan. And as noted, we expect to make up weather-related deferred harvests during the ongoing quarter.

In sum, we remain very much on full-year plan, and looking further ahead, we are optimistic about the continued strength of the pulpwood markets and the strong prospects for saw timber, driven by improvements in the housing market. Ursula will now cover third quarter results in greater detail, as well as results for the first nine months of the year.

Ursula Godoy-Arbelaez -- Senior Vice President, Chief Financial Officer and Treasurer

Thank you, Brian. For the quarter ended September 30, 2020, CatchMark generated revenues of $24.6 million, compared to $26.4 million in third quarter 2019, a decrease primarily related to reduced timber sales from anticipated lower harvest volumes, as well as weather-delayed harvests, primarily in our Mid-Atlantic region. This year's harvest volumes have been more evenly distributed compared to 2019, when harvests were weighted more heavily to the second half of the year.

For third quarter 2020, timber sales revenue totaled $18.1 million, 8% below the $19.7 million generated in third quarter 2019. Total harvest volume decreased by 8% to 581,000 tons. We improved net loss on a GAAP basis by $16.4 million year-over-year to $4.1 million, primarily due to a $23 million decrease in losses allocated from the Triple T joint venture, offset by a gain on the large disposition recognized in 2019.

We generated adjusted EBITDA of $12.4 million, compared to $16.5 million in third quarter 2019, primarily due to lower investment management EBITDA attributable to the profitable wind-down of Dawsonville Bluffs and, to a lesser extent, the net decrease in timber sales.

Breaking out adjusted EBITDA by segment, for the third quarter, year-over-year harvest EBITDA was $8.5 million, compared to $9.4 million in third quarter 2019, primarily the result of lower harvest volumes. Real estate EBITDA increased by 12% to $2.3 million year-over-year due to selling more acres, 1,200 versus 1,100 in third quarter 2019. The average per-acre sales price was $2,047.

Investment management EBITDA decreased from $7.3 million in third quarter 2019 to $3.7 million. The result reflects the wind-down of Dawsonville loss, which had provided significant incentive-based promotes in third quarter 2019. On the upside, we earned an increased asset management fee from Triple T during the third quarter as a result of the amendment to the joint venture's asset management agreement completed during the second quarter of 2020. We also paid a dividend of $0.1235 per share to stockholders of record on September 15, 2020, which was fully covered by cash from operations.

For the nine months ended September 30, 2020, CatchMark generated revenues of $73.3 million, compared to $77.6 million for the first nine months of 2019. Timber sales revenue was comparable to prior year, $52.4 million for the first nine months of 2020, compared to $52.5 million for the same period in 2019, as total harvest volumes increased by 8%, offset by lower pricing from our U.S. South region.

During the first nine months, timberland sales decreased $3.7 million, in line with expectations, and asset management fees were comparable to the 2019 period. Net loss improved by $66.9 to $14.6 million compared to $81.5 million for the first nine months of 2019. The improvement was primarily due to a $76.8 million decrease in losses allocated from the Triple T joint venture.

Adjusted EBITDA totaled $34.7 million compared to $41.7 million for the first nine months of 2019. The decrease was primarily due to lower adjusted EBITDA generated by Dawsonville Bluffs and lower timberland sales.

Breaking out adjusted EBITDA by segments, for the first nine months of 2020, harvest EBITDA increased year-over-year from $23.9 to $24.5 million due to an increase in timber sales, primarily registered in the first half of 2020. Real estate EBITDA decreased by $3.5 to $8.3 million, due primarily to lower timberland sales as the pandemic had delayed closing transactions in the second quarter. Investment management EBITDA declined by $4.10 to $9.4 million, due primarily to the Dawsonville wind-down.

During the first nine months of 2020, we sold 5,200 acres of timberlands for $8.9 million, compared to 6,000 acres for $12.6 million in the first nine months of 2019. The lower per-acre sales price resulted from lower average merchantable timber stocking levels and higher timber reservations on tracts sold in 2020.

Looking overall at the results for the third quarter and first nine months, we successfully continue to manage through the constraints of the COVID economy, and in the fourth quarter, we are poised to make up the harvest deferrals caused by recent storms and fires. Anticipated timberland sales in the fourth quarter, including delayed sales from earlier in the year, also are on track for closing. These financial results are in line with expectations and full-year results are on course to meet guidance.

Now turning to our capital position, it was an uneventful third quarter without major changes to the balance sheet after a flurry of activity earlier in the year and in 2019, when we had undertaken concerted steps to deleverage. As of the end of the third quarter, we had just over $150 million of borrowing capacity under our credit facilities, nearly $116 million from the multi-draw term facility and $35 million under the revolving credit facility. In addition, we had cash on hand at quarter end of $8 million.

During the quarter, CatchMark did not complete any transactions under its share repurchase program, and we had $13.7 million remaining in the program for future repurchases as of September 30, 2020. Overall, CatchMark continues to benefit from a strong capital position, highlighted by ample liquidity and low cost-of-debt capital, with no near-term refinancing or maturity risk. As a result, we are well positioned for future growth as direct acquisition and joint venture investment opportunities present themselves.

Now Todd will cover harvest operations.

Todd P. Reitz -- Chief Resources Officer

Thanks, Ursula. Third quarters can be eventful because of the relatively higher potential for hurricanes and wildfires, and we, again, managed successfully through this one without direct damage to our timberlands. Although some harvests have been deferred until the fourth quarter because of these events, we expect to realize any delayed revenues and keep on plan for full-year 2020.

As expected, our overall harvest volumes were down year-over-year, since third quarter 2019 reflected higher activity, boosted by harvest deferred from earlier in that year. Results again were buoyed by our business model, based on delivered wood sales and fiber supply agreements with counterparties in some of the nation's leading micro markets. Sales remained steady and consistent, helping ensure steady cash flows and offsetting delayed production in the Carolinas and Pacific Northwest, due to weather and fire-related issues. Once again, we were able to continue to achieve higher pricing than market averages in the U.S. South because of our superior mill markets. And in the Pacific Northwest, we capitalized on higher local mill demand for our timber, as inventories remained low, emerging from COVID disruptions and housing demand drivers increased. Overall, the homebuilding recovery and strong demand for pulp-related products continuing through the pandemic have supported consistent harvest volume flow in CatchMark's mill markets.

During the quarter, we harvested more than 580,000 tons, achieving price premiums in the U.S. South of 61% and 21% relative to TimberMart-South's southwide averages for pulpwood and sawtimber, respectively. In the Pacific Northwest, we realized a 26% increase in delivered sawtimber pricing year-over-year, benefiting from the factors previously discussed. The achieved third quarter pricing also was 21% above second quarter 2020 pricing.

Stumpage prices also improved over the second quarter and were higher than U.S. southwide averages. Year-over-year, our stumpage prices were 6% lower for pulpwood and 7% lower for sawtimber, compared to much larger 11% and 13% decreases in southwide averages, while timber prices in the region decreased as compared to the prior year due to a heavier mix of chip and saw and smaller diameter sawtimber as a result of shifting market demands. We are optimistic that increased homebuilding activity and resulting heightened demand should prove beneficial in further boosting log prices in the near term.

Sawmill customers realized lumber pricing at all-time highs, reaching well over $900 per 1,000-board foot during the third quarter. In the U.S. South, these increases have not fully translated into value back to landowners. That is because mill operators have remained disciplined, maintaining tight log and finished product inventories, since uncertainty prevails over possible additional impacts from COVID-19. Sawmill orders across the country are showing signs of stability, and mill utilization rates are peaking with increased hours of operation. We would not be surprised to see some mills start a third shift to capitalize on the strong demand in lumber pricing. This leads us to expect a sustainable recovery in housing will be reflected in higher timber prices in 2021.

To wrap up, Pacific Northwest harvest operations, which were temporarily interrupted late in the quarter because of nearby fire dangers and shutdowns of harvesting activities ordered by local governmental agencies, have resumed, and we are on track to meet full-year plan. That also holds true in the Carolinas, where wet weather conditions from third-quarter storms only temporarily slowed down our activities. We also expect to maintain our pricing premiums across our markets.

In addition, our delivered wood program continues to provide front-of-the-line opportunities in many of our micro markets in the form of additional quota, when available.

Brian, back to you.

Brian M. Davis -- President, Chief Executive Officer and Director

Thanks, Todd. Todd's review of harvest operations points out once again how the attributes of the CatchMark business model of prime timberlands, leading mill markets, wood supply agreements, delivered sales, and well-capitalized counterparties give us an advantage in dealing with potential market challenges, whether storm, fire or from the pandemic. The adaptability and flexibility of our business model are working for us again in the fourth quarter as we move to meet our full-year plan, support our dividend, and realize the full value of our timberland assets now and in the future.

The positive trajectory of housing markets and overall improvement in lumber prices offer clear signs supporting an outlook in our markets for increasing prices derived from our harvest, absent future economic shocks. As Ursula discussed, our capital position is strong, and liquidity is ample for making new investments and direct acquisitions and possible additional joint ventures, and we'll remain disciplined in our capital priorities.

We also continue to position ourselves for future growth, as last year's deleveraging and capital recycling helped set the stage. Specifically, the recently renegotiated amendments to the Triple T wood supply agreement with Georgia Pacific are important steps in recapitalizing Triple T. Our team is fully engaged in moving forward with various options to recapitalize Triple T and maximize its value for our stockholders and institutional partners. In the meantime, the renegotiated supply agreement has allowed triple T to realize higher pricing on timber sales, and the amendment to our asset management agreement with Triple T has increased our asset management fees. In sum, triple T is operating to our expectations and to plan. These results, taken together, reinforce our expectation of continuing to deliver an attractive dividend, fully covered by cash flow from operations, and providing long-term shareholder value.

In conclusion, third quarter results were anticipated, compared to an outsized result in the third quarter 2019 that was primarily a product of harvest timing. We expect the storm, fire disruptions only delayed revenues into the fourth quarter. We continue to maintain our pricing premiums over U.S. south market averages. Timberland sales are on track to meet targets for the year. The balance sheet is strong. We have maintained our discipline and capital allocations and our decision-making regarding additional recycling opportunities to balance leverage reduction, share repurchases, and growth opportunities. We remain on track to meet full-year 2020 plan, and we expect to meet our primary objective to stockholders, generating durable and predictable cash flows to produce an attractive dividend on an ongoing basis.

To all of you on the call, please remain healthy and safe. And now we will take your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question is from Anthony Pettinari from Citi. Go ahead.

Randy Devin Toth -- Citigroup Inc -- Analyst

Goodmorning, guys. This is actually Randy Toth sitting in for Anthony.

Brian M. Davis -- President, Chief Executive Officer and Director

Good morning, Randy.

Randy Devin Toth -- Citigroup Inc -- Analyst

My first question is -- Good morning. Can you just talk about customer log inventories generally, given the rapid moves in lumber, how sawmills are thinking about that? Thank you.

Todd P. Reitz -- Chief Resources Officer

Absolutely. You were asking about customer inventories, I think, is what I heard there. What we've seen is that customers have been very disciplined during the quarter. Coming out of the second quarter, we had the drop as they reduced their inventories. During the third quarter, they've begun to build that back up, but disciplined from a standpoint of really only maintaining, we call it three days of inventory during the quarter, either of inbound logs and outbound finished product. We have seen that improve to, call it, three to five days, as we move through the quarter and, coming into the fourth quarter, if you will, here. So again, being very disciplined on their inventory levels so as not to be caught short, should there be an additional turn-back in the economy or something else come up with COVID.

Randy Devin Toth -- Citigroup Inc -- Analyst

Got it. Got it. Understood. And then maybe can you just give us a little bit more color on your U.S. health micro markets and any differences regionally there?

Brian M. Davis -- President, Chief Executive Officer and Director

Yes, Randy, I'll start off first, and then I'll turn it back over to Todd. Specifically, where a lot of people end up going with, is really on the sawlog prices and correlation to lumber prices that we've seen throughout the summer. But what's interesting, we've been very consistent regarding the macro movements and then ultimately, how we deploy our capital into the micro markets in which we have had a lot of success in. We've really had -- we identified five macro events that we had expected to occur that would ultimately drive southern sawlog prices for the long term. Three of those have happened. One was the Mountain pine beetle, leading to the destruction of nearly 12 million acres in British Columbia, which has led to the British Columbia mill closures, which ultimately led to the reallocation of capital to the U.S. South. Those are the three key elements as part of our investment thesis associated with CatchMark. Where we are now is really an early stage of sustained housing recovery, which ultimately will result in a drain or use in the markets which we operate in. Obviously, the consumer products have been very stable. And the fifth one will ultimately be increased timber and timberland applications, such as in mass timber construction and carbon. What we're most excited about is timberland in the most robust manufacturing regions, such as Georgia and Texas, where we own or manage 90% of our assets, we'll see the greatest amount of pricing tension first, and we're encouraged by signs in those subsectors. That being said, Todd, if you wouldn't mind, talk a little bit more about those subsectors.

Todd P. Reitz -- Chief Resources Officer

Absolutely. So, you think about our Georgia market there, kind of right around the Alabama, Georgia line and then over on the coast. There in our south-central market is where we have our fiber supply agreement, our largest one with WestRock. That has produced really consistent volume flow, cash flows for us, so it's really a base load for us. And then the other fiber supply agreements we have are in the coastal Georgia area with IP. And then, moving up the coast into the Carolinas, we also have one there with IP at their Eastover facility, really provides us an opportunity to baseload the business there. And then, outside of that, you have a variety of customers in a well-balanced position, if you will, between pulp and sawmill customers. And the majority of what we do there, as you know, is handled through a delivered wood program. We're able to then flex and move with markets as they change. And this year really highlighted that with the ability to be nimble as markets have changed, product mix change requests from customers, one thing or another. And what we've seen come in more so this year than others is this demand for additional chip-and-saw volume. You look at where lumber has moved throughout the course of the year, there's been a heavier focus on the two-by-four, and so we've seen our customers move toward that. And with our delivered model and the positioning in these markets, we've been able to react to that.

Randy Devin Toth -- Citigroup Inc -- Analyst

Okay. Thank you. That's very helpful.

Brian M. Davis -- President, Chief Executive Officer and Director

Thanks, Randy.

Operator

Our next question is from Paul Quinn from RBC. Go ahead.

Paul C. Quinn -- RBC Capital Markets -- Analyst

Yes. Thank you very much. Good morning guys or good afternoon, I guess.

Todd P. Reitz -- Chief Resources Officer

Good morning, Paul.

Paul C. Quinn -- RBC Capital Markets -- Analyst

Yes. Timber sales deferrals that you're going to do into Q4, how much is that -- what is that volume?

Todd P. Reitz -- Chief Resources Officer

Hi, Paul, so you're looking at -- and it's really volume coming into the -- really, as we said in the notes, the Northwest, Carolinas. Between the two, you're probably looking at around 50,000 tons or so that will move -- that didn't move in the third quarter, that will move into the fourth quarter. But recognize that also, where we had really strong production in our south-central coastal areas, they're not going to be ramped up by any means. They were a little ahead of schedule, so in the end, we end up balancing things out.

Paul C. Quinn -- RBC Capital Markets -- Analyst

Okay. And then just on inventories at area sawmills. I mean, I think, Todd, you said they were three days in another up to three to five days. That really doesn't move around a lot, right, in the U.S. South? It's nothing like Canada.

Todd P. Reitz -- Chief Resources Officer

No, you're exactly right. And they've been a lot of kind of on-time deliveries, if you will, is what we're seeing. And we're beginning to and looking at -- so one, you have your conversations. The others are actually out in the field. You're going around, you're looking at the various mills and what they actually have on site. So you're beginning to see a little bit of inventory building under some in the log yards under cranes, and you're beginning to see a little more volume in their set-out yards under their bins and all for storage of lumber, so that's beginning to improve a little bit. But they don't get much beyond, like I was saying, kind of maybe, say, five days right now in the markets where we're operating, and it's just to not be caught short at this point in time. Let's get past the election, get on into 2021, see how things are moving with housing and everything else, and I think there's the potential to see that build. But at this point in time, they've been pretty consistent in that.

Paul C. Quinn -- RBC Capital Markets -- Analyst

Okay. And then, just thinking about the lumber mills, especially in the U.S. South, I mean, they've just come off a record quarter. They get to keep some money because the sawlog price remains very low. Have you been approached by anybody in terms of potential greenfields out there looking for long-term timber supply?

Brian M. Davis -- President, Chief Executive Officer and Director

We have not in our current markets, Paul. From our standpoint, we are in some of the best and most robust mill markets. Where I would expect you to see that as more of the middle Gulf states where those opportunities would be regarding the very plentiful supply side as it relates to logs. And so, I'm not surprised we have not been approached regarding any greenfield operations. What we've actually seen in our markets -- yes, actually, what we've seen in our markets, Paul, is really expansion, really the wave of capital that came from Canada, a lot of M&A activity, efficiency gains first, now capital expansion plan second.

Paul C. Quinn -- RBC Capital Markets -- Analyst

Okay. So, where you would expect to see the greenfield, basically, I guess, up in Mississippi and kind of upper Alabama as well, right?

Brian M. Davis -- President, Chief Executive Officer and Director

Yes, that's right, western Alabama, upper Mississippi, eastern Louisiana to a certain extent.

Paul C. Quinn -- RBC Capital Markets -- Analyst

Nice quarter. That's all I had. Best of luck.

Brian M. Davis -- President, Chief Executive Officer and Director

Great. Thanks, Paul.

Operator

Our next question is from Nick [Selman] from Baird. Go ahead.

Nick -- Baird -- Analyst

Hey, guys. It's Nick on for Dave. I just have one quick question. You guys have made some steps in reducing leverage, and the dividend is still pretty well covered. But have you guys thought about cutting the dividend to reduce leverage even further? You're not getting rewarded at a 6% yield, which is higher than the yield on timber, so just kind of your thoughts there.

Brian M. Davis -- President, Chief Executive Officer and Director

Nick, thanks for the question. Appreciate it. It's interesting. So, we take a look at really what's our business model? Business model is about predictability and stability associated with the cash flows, up cycles, down cycles, when you talk about leverage and you talk about the components associated with that. We have very low capital expenditure needs. We have a very low cost of debt at 2.4%. And from a shareholder return standpoint, it's an important consideration for what they receive. It is well covered and understands the framework-associated considerations of reducing leverage. How we think about leverage reduction is really going to come from a couple of opportunities: one, through capital recycling, which we've demonstrated the better part of the last 18 months. And the second component of that would be through the successful recapitalization of Triple T. And so, from that standpoint, we do really view deleveraging from capital events. Obviously, at a current share price at somewhere between $8 and $9, issuance of equity in exchange for your low-cost debt doesn't make really a lot of sense for us. In the meantime, we're going to continue as they've had associated with our business model. It remains a well-covered dividend, and we believe that's an important return consideration for our shareholders.

Nick -- Baird -- Analyst

Great. That's my one question. Thanks, guys.

Brian M. Davis -- President, Chief Executive Officer and Director

Thanks, Nick. Appreciate it.

Operator

[Operator Instructions] Our next question is from Buck Horne from Raymond James. Go ahead.

Buck Horne -- Raymond James -- Analyst

Hey, good morning, guys. I think you got into some of my question with the response there, but I guess, maybe if you could just help us understand your thought process around the timing of the Triple T recap. What avenues or options are you most optimistic about? Is an outright sale of the entire portfolio the most likely outcome, or what are the options? And then, of course, what would be the most -- if you had the capital to redeploy, I guess the second part of my question is, what -- where does share repurchases rank in terms of where you would recycle capital into?

Brian M. Davis -- President, Chief Executive Officer and Director

Buck, this is Brian. That's a lot in there, man. So I will start off, first and foremost, one, the Triple T investment has performed very well. GP and IP have been great partners since we've operated under this venture. It's really one of the strengths associated part of the acquisition, the joint venture partnership, which we have in that marketplace. Operationally, John Rasor and his team have done a fantastic job of really making that thing hum. So, from the standpoint of timing, we've been very consistent in our approach. I believe we announced, after our second quarter, after the renegotiation of the GP supply agreement, we really put ourselves on a 2-year clock in order to get that completed. A lot of that is driven by capital market activity. Fund flows continue to be very robust into this asset, especially given that you're looking at 10-year treasuries that are in 70 to 80 basis points and you're looking at historical total returns in this space, 6% to 8%. And you think about it on a risk-adjusted basis, that's a pretty healthy risk premium associated with this asset in of itself. And so, from the standpoint of timeline, we're consistent; two years from the time of the renegotiation associated with Triple T amendment with Georgia Pacific. Your second question is a little bit more -- I got to demonstrate a little bit more dexterity around it because there are a number of variable options associated with that. It can be everything from an outright sale of the underlying assets to a new joint venture that takes on part of the assets through also as well as an apportionment. And so, those are the ranges of outcomes. I wish I could be a little bit more specific with you on that. But I can tell you, the focus of the management team has been very much so on the Triple T recapitalization. Obviously, we have not taken our eye off the ball as it relates to operating the business, because we have really three main factors for our business: one, operate the business the way that we know how on a sustainable basis; 2, focus on the recapitalization of Triple T; and then, 3, really looking at capital recycling opportunities, but maintain the discipline that we don't need to be a seller at any price. Which segues into, I believe, your last part of your question, which is an allocation of capital. How do we think about it? Where are we putting it first? So first and foremost, it's really about the dividend, then the liquidity. Then the third component, and we really -- and we've demonstrated this with our last capital recycling opportunity -- it's a component of debt reduction, share repurchases, and acquisitions, with the majority focused on debt reduction, then followed by share repurchases, and lastly by acquisitions, especially given where our current share price is today. Hopefully, that answers your question, Buck.

Buck Horne -- Raymond James -- Analyst

That was extremely well done for a very multipart question. I got three into one there, so I'm out. Appreciate it.

Brian M. Davis -- President, Chief Executive Officer and Director

Great.

Buck Horne -- Raymond James -- Analyst

Well done.

Brian M. Davis -- President, Chief Executive Officer and Director

Thanks, Buck. Appreciate it.

Operator

This concludes our question-and-answer session. I would now like to turn the conference back over to Brian Davis for closing remarks.

Brian M. Davis -- President, Chief Executive Officer and Director

Thank you for joining us today. Stay safe. Have a great holiday season, and we look forward to talking to you in 2021.

Operator

[Operator Closing Remarks]

Duration: 37 minutes

Call participants:

Ursula Godoy-Arbelaez -- Senior Vice President, Chief Financial Officer and Treasurer

Brian M. Davis -- President, Chief Executive Officer and Director

Todd P. Reitz -- Chief Resources Officer

Randy Devin Toth -- Citigroup Inc -- Analyst

Paul C. Quinn -- RBC Capital Markets -- Analyst

Nick -- Baird -- Analyst

Buck Horne -- Raymond James -- Analyst

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