RELATED PARTIES

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


•	joint ventures accounted for using equity method;


•	our Twin Creeks Venture; and


•	special-purpose entities (SPEs).

JOINT VENTURES ACCOUNTED FOR USING THE EQUITY METHOD

We have investments in an unconsolidated joint venture 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.

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 is 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.

The carrying amount of our investment in WR-CLP is $31 million and $56 million at December 31, 2017, and December 31, 2016, respectively. The change in our investment in WR-CLP during 2017 is due to a $25 million cash return of investment received during 2017. Additionally, we had $1 million of equity earnings from the joint ventures during 2017. We record our share of net earnings within "Equity earnings from joint ventures" in our Consolidated Statement of Operations in the period which earnings are recorded by the affiliates.

Other Joint Ventures

Timberland Venture

Since August 31, 2016, we hold all of the equity interests in the Timberland Venture and consolidate it as a wholly-owned subsidiary and eliminated our equity method investment in the 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. 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. 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.

North Pacific Paper Company (NORPAC)

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

TWIN CREEKS VENTURE

Ownership Redemption, Agreement Termination and Sale Recognition

During October 2017, we redeemed our 21 percent ownership interest in the Twin Creeks Venture for $108 million in cash. We did not recognize a material gain or loss on the redemption of our ownership interest. The cash received was classified as a cash flow from investing activities in our Consolidated Statement of Cash Flows.

Effective December 31, 2017, we terminated the agreements under which we had managed the Twin Creeks timberlands. Following termination of these agreements, Weyerhaeuser has no further responsibilities or obligations related to the Twin Creeks Venture and our continuing involvement in the contributed timberlands ceased. Due to the events during the quarter, we have recognized the sale of the original contribution of timberlands that occurred April 2016.

Changes in our deposit from contribution of timberlands to related party balance during 2016 and 2017 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
Lease payments to Twin Creeks Venture	(8		)
Distributions from Twin Creeks Venture	2
Recognition of contributed timberlands	(420		)
Balance at December 31, 2017	$	—

Formation and Operations

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.

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 guaranteed the Twin Creeks Venture an annual return equal to 3 percent of the contributed value of the managed timberlands in the form of minimum quarterly payments from Weyerhaeuser. This agreement also required us to annually distribute 75 percent of any profits earned by us in excess of the minimum quarterly payments. The management agreement was cancellable at any time by Twin Creeks Timber, LLC, and otherwise would expire on April 1, 2019.

The guaranteed return that the management agreement required Weyerhaeuser to provide to the Twin Creeks Venture constituted continuing involvement in the timberlands that we contributed to the venture. This continuing involvement prohibited the recognition of the contribution as a sale and required 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 continued to be reported within the "Timber and timberlands at cost, less depletion charged to disposals" on our Consolidated Balance Sheet.


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


•	Our balance sheet did 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 for share repurchases.

Sale of Additional Timberlands to Twin Creeks

In conjunction with the redemption and termination discussed above, we also entered an agreement to sell 100,000 acres of Southern Timberlands to Twin Creeks for $203 million. The sale, which included 80,000 acres of timberlands in Mississippi and 20,000 acres in Georgia, closed December 29, 2017. The sale resulted in a $99 million gain recognized during fourth quarter 2017.

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 2017,

– $29 million in 2016 and

– $29 million in 2015.


•	Interest income on SPE investments of:

– $34 million in 2017,

– $34 million in 2016 and

– $34 million in 2015.

Sales proceeds paid to buyer-sponsored SPEs were invested in restricted financial investments with a balance of $615 million as of both December 31, 2017, and December 31, 2016. The weighted average interest rate was 5.5 percent during 2017 and 2016. Maturities of the financial investments at the end of 2017 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, 2017, and December 31, 2016. The weighted average interest rate was 5.6 percent during 2017 and 2016. Maturities of the notes at the end of 2017 were:


•	$209 million in 2018 and


•	$302 million in 2019.

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 taxable 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, 2017, our net equity in the three SPEs was approximately $105 million and the deferred tax liability was estimated to be approximately $116 million.