Agri and timber secondaries deal volume rises

Timber funds priced at 85% of NAV, down slightly from 2014, according to the Setter Capital report's author.

Agriculture and timber saw the largest growth in transaction volume on the secondaries market out of any asset class in 2015, with a 57 percent rise on 2014, according to this year’s Setter Capital Volume report.

Setter looked at transactions worth $49.6 billion traded in the secondaries market in agriculture and/or timber strategies, private equity, real estate, hedge funds and infrastructure.

The $313 million exchanged in timber or agriculture last year accounted for just 0.8 percent of total secondaries fund sales.

Out of the 1,300 buyers tracked in the survey, there were 79 investors which bought a single position in a timber or agriculture fund as opposed to buying multiple stakes in multiple funds, according to the report’s author and Setter managing director Peter McGrath. Setter did not track investors that bought multiple stakes.

The vast majority of timber and agriculture buyers were not dedicated to buying secondaries in the asset class, with exceptions including Stafford Capital Partners and the International Woodland Company, McGrath told Agri Investor.

He added that the bulk of transactions were in the timberland space as opposed to agriculture.

“I think timber is the main part,” he said. “Single agri funds do come up: one that we completed fairly recently was a fund-wide tender to the LPs,” he added, quoting a rare example.

Explaining the growth in timber secondaries, New Forests chief executive officer and secondaries specialist David Brand told Agri Investor: “Timberland is increasingly owned by institutional investors. It is just the natural evolution of any asset class that becomes more and more concentrated in institutional ownership that it grows in the secondaries market.”

“The dealflow by nature has to come from institutionally owned assets, whether that be direct deals, co-invest stakes or secondaries and funds.” He added investors “are seeking to deploy capital and increasingly recognise that you have funds available to you and separate accounts.”

Brand said that he believed the volume of trade in timber or agriculture secondaries recorded in the survey seemed accurate, but “if you are talking about secondaries slices of individual deals, or secondaries turnover in the market, it would be an order of magnitude larger than that.”

He estimated that total timber secondaries market was turning over $4 billion to $5 billion last year in timber assets worldwide, including secondaries sales of underlying assets.

New Forests is an asset manager for institutional investors targeting timberland in the Asia-Pacific region and the US with more than A$2.75 billion ($1.96 billion; €1.73 billion) in assets under management.

“[Timber and agriculture] is quite a small part [of the secondaries market], but there is definitely a lot of buyer demand in that area and maybe only a limited amount of supply at any given time,” McGrath said.

“A lot of the deals are single fund deals of someone selling one or two funds out of their portfolio. There were no huge headline deals …this is a collection of one off opportunistic sales.”

Average pricing for timber funds was 85 percent of net asset value (NAV) in 2015 which was down 1 percentage point compared to 2014, McGrath told Agri Investor.

The survey expects agriculture and timber trade volumes to stay on track and reach around $300 million by the end of 2016.