RELATED PARTIES

This note provides details about and our transactions with related parties. Our related parties consist of:


•	joint ventures accounted for using the equity method,


•	our Twin Creeks Venture and


•	special-purpose entities (SPEs).

JOINT VENTURES ACCOUNTED FOR USING THE EQUITY METHOD

We have investments in unconsolidated joint ventures over which we have significant influence that we account for using the equity method. We record our share of net earnings within "Equity earnings from joint ventures" in our Consolidated Statement of Operations in the period in which earnings are recorded by the affiliates. Through our merger with Plum Creek on February 19, 2016, we acquired equity interests in the Real Estate Development Ventures and the Timberland Venture.

Real Estate Development Ventures

WestRock-Charleston Land Partners, LLC (WR-CLP) is a limited liability company which holds residential and commercial real estate development properties, currently under development (Class A Properties) and higher-value timber and development lands (Class B Properties) (referred to collectively as the Real Estate Development Ventures). We have a 3 percent interest in Class A Properties and a 50 percent interest in Class B Properties. WestRock Company is the other member of WR-CLP and owns 97 percent of the Class A Properties and 50 percent of the Class B Properties. The company uses the equity method for both its Class A and Class B interests. Our share of the equity earnings are included in the net contribution to earnings of our Real Estate & ENR segment.

WR-CLP is a variable interest entity and is financed by regular capital calls from the manager of WR-CLP in proportion to a member’s ownership interest. If a member does not make a capital contribution, the member’s ownership interest is diluted. We are not committed to make any material capital contributions during the remaining term of the venture, which expires in 2020. We do not intend to provide any additional sources of financing for WR-CLP.

We are not the primary beneficiary of WR-CLP. We consider the activities that most significantly impact the economic performance of WR-CLP to be the day-to-day operating decisions along with the oversight responsibilities for the real estate development projects and properties. WestRock Company (the other equity member) has the power to direct the activities of WR-CLP that most significantly impact its economic performance through its ability to manage the day-to-day operations of WR-CLP. WestRock Company also has the ability to control all management decisions associated with all Class A and Class B Properties through its majority representation on the board of directors for the Class A Properties and due to its equal representation on the board of directors for the Class B Properties.

Our maximum exposure to loss is $56 million, the carrying amount of our investment in WR-CLP at December 31, 2016, plus any required future capital contributions.

Timberland Venture

Beginning on the date of our merger with Plum Creek until August 31, 2016, we held preferred and common interests in Southern Diversified Timber, LLC, a timberland joint venture (Timberland Venture), which included 100 percent of the preferred interests and 9 percent of the common interests. The Timberland Venture’s other member, an affiliate of Campbell Global LLC (TCG Member), held 91 percent of the Timberland Venture’s common interests.

The activities of the Timberland Venture consisted primarily of:


•	owning, growing, managing and sustaining its timberlands;


•	entering into cutting contracts with an affiliate of Campbell Global LLC for the sale and harvest of timber; and


•	owning a promissory note payable to the Timberland Venture (Note Payable to Timberland Venture) and collecting interest thereon.

Our investment in and share of the equity earnings of the Timberland Venture was not attributed to one of our business segments, and was reported in Unallocated Items.

On August 31, 2016, the Timberland Venture redeemed TCG Member’s interest. Upon the redemption, the Timberland Venture distributed all of the timberlands, a portion of the cash balance, and other net assets to TCG Member equal in total to the fair value of TCG Member's adjusted capital account. Following the redemption and distribution of assets to TCG Member, the Timberland Venture's remaining assets consisted of cash and a note receivable from Weyerhaeuser.

As we now hold all of the equity interests in the Timberland Venture, we have consolidated it as a wholly-owned subsidiary and eliminated our equity method investment in the Timberland Venture. As a result, the note payable to Timberland Venture is now eliminated for financial reporting purposes in consolidation as it is now intercompany indebtedness and therefore no longer appears on our Consolidated Balance Sheet.

In conjunction with the redemption of TCG Member, we remeasured our previously held equity interest to fair value at August 31, 2016, resulting in recognition of a gain of $6 million in "Interest income and other" on our Consolidated Statement of Operations during third quarter 2016.

Other Joint Ventures

During 2016, we sold our interest in North Pacific Paper Corporation (NORPAC). See Note 3: Discontinued Operations for additional information.

During 2014, Catchlight Energy was dissolved. We received no proceeds from the dissolution.

OUR TWIN CREEKS VENTURE

Through the merger with Plum Creek, Weyerhaeuser assumed the benefits and obligations associated with the formation of Twin Creeks Timber, LLC, a timberland venture (Twin Creeks Venture).

On April 1, 2016, we contributed approximately 260,000 acres of our southern timberlands with an agreed-upon value of approximately $560 million to Twin Creeks Timber, LLC (Twin Creeks Venture), in exchange for cash of approximately $440 million and a 21 percent ownership interest. The other members contributed cash of approximately $440 million for a combined 79 percent ownership interest.

The Twin Creeks Venture is expected to raise total committed capital of up to $950 million from its investors over the next several years. We expect to maintain a 21 percent ownership interest and to contribute additional capital of up to $85 million during the next several years. Unless extended by unanimous vote of all the investors, the term of the Twin Creeks Venture is 15 years.

In conjunction with contributing to the venture, we entered into a separate agreement to manage the timberlands owned by the Twin Creeks Venture, including harvesting activities, marketing and log sales activities, and replanting and silviculture activities. This management agreement guarantees the Twin Creeks Venture an annual return equal to three percent of the contributed value of the managed timberlands in the form of minimum quarterly payments from Weyerhaeuser. We are also required to annually distribute 75 percent of any profits earned by us in excess of the minimum quarterly payments. The management agreement is cancellable at any time by Twin Creeks Timber, LLC, and otherwise will expire on April 1, 2019.

The guaranteed return that the management agreement requires Weyerhaeuser to provide to the Twin Creeks Venture constitutes continuing involvement in the timberlands we contributed to the venture. This continuing involvement prohibits recognition of the contribution as a sale and requires application of the deposit method to account for the cash payment received. By applying the deposit method to the contribution of timberlands to the venture:


•	Our receipt of $440 million proceeds from the contribution of timberlands to the venture was recorded as a noncurrent liability - "Deposit from contribution of timberlands to related party" - on our Consolidated Balance Sheet.


•	The contributed timberlands will continue to be reported within the "Timber and timberlands at cost, less depletion charged to disposals" on our Consolidated Balance Sheet with no change in value.


•	No gain or loss was recognized in our Consolidated Statement of Operations.


•	Our balance sheet does not reflect our 21 percent ownership interest in the Twin Creeks Venture.

The receipt of $440 million was classified as a cash flow from investing activities in our Consolidated Statement of Cash Flows. The cash proceeds from our contribution of timberlands were used to fund our share repurchases.

Changes in our deposit from contribution of timberlands to related party balance during 2016 were as follows:



DOLLAR AMOUNTS IN MILLIONS

Balance at December 31, 2015	$	—
Initial cash receipt upon contribution of timberlands to Twin Creeks Venture	440
Lease payments to Twin Creeks Venture	(17		)
Distributions from Twin Creeks Venture	3
Balance at December 31, 2016	$	426

SPECIAL-PURPOSE ENTITIES

From 2002 through 2004, we sold certain nonstrategic timberlands in five separate transactions. We are the primary beneficiary and consolidate the assets and liabilities of certain monetization and buyer-sponsored SPEs involved in these transactions. We have an equity interest in the monetization SPEs, but no ownership interest in the buyer-sponsored SPEs. The following disclosures refer to assets of buyer-sponsored SPEs and liabilities of monetization SPEs. However, because these SPEs are distinct legal entities:


•	Assets of the SPEs are not available to satisfy our liabilities or obligations.


•	Liabilities of the SPEs are not our liabilities or obligations.

Our Consolidated Statement of Operations includes:


•	Interest expense on SPE notes of:

– $29 million in 2016,

– $29 million in 2015 and

– $29 million in 2014.


•	Interest income on SPE investments of:

– $34 million in 2016,

– $34 million in 2015 and

– $34 million in 2014.

Sales proceeds paid to buyer-sponsored SPEs were invested in restricted financial investments with a balance of $615 million as of both December 31, 2016, and December 31, 2015. The weighted average interest rate was 5.5 percent during 2016 and 2015. Maturities of the financial investments at the end of 2016 were:


•	$253 million in 2019 and


•	$362 million in 2020.

The long-term notes of our monetization SPEs were $511 million as of both December 31, 2016, and December 31, 2015. The weighted average interest rate was 5.6 percent during 2016 and 2015. Maturities of the notes at the end of 2016 were:


•	$209 million in 2019 and


•	$302 million in 2020.

Financial investments consist of bank guarantees backed by bank notes for three of the SPE transactions. Interest earned from each financial investment is used to pay interest accrued on the corresponding SPE’s note. Any shortfall between interest earned and interest accrued reduces our equity in the monetization SPEs.

Upon dissolution of the SPEs and payment of all obligations of the entities, we would receive any net equity remaining in the monetization SPEs and would be required to report deferred tax gains on our income tax return. In the event that proceeds from the financial investments are insufficient to settle all of the liabilities of the SPEs, we are not obligated to contribute any funds to any of the SPEs. As of December 31, 2016, our net equity in the three SPEs was approximately $105 million and the deferred tax liability was estimated to be approximately $180 million.