HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS

12 Months Ended

Dec. 31, 2020

HIGHER AND BETTER USE TIMBERLANDS AND REAL ESTATE DEVELOPMENT INVESTMENTS

We continuously assess potential alternative uses of our timberlands, as some properties may become more valuable for development, residential, recreation or other purposes. We periodically transfer, via a sale or contribution from the real estate investment trust (“REIT”) entities to taxable REIT subsidiaries (“TRS”), higher and better use (“HBU”) timberlands to enable land-use entitlement, development or marketing activities. We also periodically acquire HBU properties in connection with timberland acquisitions. These properties are managed as timberlands until sold or developed. While the majority of HBU sales involve rural and recreational land, we also selectively pursue various land-use entitlements on certain properties for residential, commercial and industrial development in order to enhance the long-term value of such properties. For selected development properties, we also invest in targeted infrastructure improvements, such as roadways and utilities, to accelerate the marketability and improve the value of such properties.

In the merger with Pope Resources, we acquired HBU properties with an estimated fair value of $26.5 million. This includes development properties in the town of Port Gamble, Washington, development projects in Gig Harbor, Kingston, and Bremerton, Washington and various other assets.

An analysis of higher and better use timberlands and real estate development investments from December 31, 2019 to December 31, 2020 is shown below:


	Higher and Better Use Timberlands and Real Estate Development Investments
	Land and Timber	Development Investments	Total
Non-current portion at December 31, 2019	$58,091	$23,700	$81,791
Plus: Current portion (a)	274	12,389	12,663
Total Balance at December 31, 2019	58,365	36,089	94,454
Non-cash cost of land and improved development	(1,834)	(7,390)	(9,224)
Timber depletion from harvesting activities and basis of timber sold in real estate sales	(725)	—	(725)
Capitalized real estate development investments (b)	—	6,462	6,462
HBU properties acquired in merger with Pope Resources (c)	26,510	—	26,510
Capital expenditures (silviculture)	427	—	427

Intersegment transfers	(2,630)	—	(2,630)

Total Balance at December 31, 2020	80,113	35,161	115,274
Less: Current portion (a)	(212)	(6,544)	(6,756)
Non-current portion at December 31, 2020	$79,901	$28,617	$108,518

(a)The current portion of Higher and Better Use Timberlands and Real Estate Development Investments is recorded in Inventory. See Note 22 — Inventory for additional information.

(b)Capitalized real estate development investments includes $0.4 million of capitalized interest.

(c)Based on preliminary estimates of fair value as of December 31, 2020. See Note 2 - Merger with Pope Resources for additional information.