APG, PPF and UniSuper team up to acquire Tasmanian forestry asset from New Forests

Australian superannuation fund UniSuper, the UK’s Pension Protection Fund and Dutch pension fund manager APG Asset Management have acquired a 170,000ha plantation forestry estate in Tasmania from a fund managed by New Forests.

The deal will also see the investors acquire Forico, the largest private forest management company in Tasmania, that manages the estate. The estate is one of Australia’s largest hardwood plantations by productive area and comprises vertically integrated assets and operations spanning approximately 90,000ha of productive plantation forest.

Forico also owns supply chain infrastructure including two wood processing mills, a seedling nursery, a fiber technology laboratory and port access via a freehold facility at Long Reach, Tasmania.

The three investors will each hold an equal one-third stake in Formica and the estate. Financial details were not disclosed but Agri Investor understands the total combined value of Formica and the estate is in excess of A$1 billion ($639 million; €603 million).

The asset is being purchased from New Forests’ Australia New Zealand Forest Fund 2, a 10-year closed-end fund that is approaching the end of its life. ANZFF2 closed on A$707 million in 2014.

The PPF was an investor in ANZFF2 as well as being a co-investor in Formica alongside the fund. It did not want to exit the asset, New Forests CEO Mark Rogers confirmed to Agri Investor, so decided to maintain its existing stake and invest additional capital to become a one-third shareholder in the asset. APG and UniSuper are new investors in the asset.

Ben Avery, APG senior portfolio manager, natural resources Asia-Pacific, told Agri Investor that APG was attracted to the deal because it represented an opportunity to secure a scale position in a “very high-quality plantation forestry resource” outside of a conventional bidding process. This was, he said, “quite unique given the competitive environment for assets in the forestry sector.”

“We’ve been a long-term investor in forestry and Australia is one of our core markets. Across all natural resource investments, both in agriculture and in forestry, [Australia] is very investment-friendly – the investment and land ownership rules are clear, and in forestry in particular, the country has high-quality sustainably-managed assets,” he said.

Avery added that APG likes the dual benefits forestry offers, for its attractive risk-adjusted returns as a portfolio diversifier as well as its potential for positive environmental impact.

“These plantation estates are mature so have very significant carbon storage capacity, and we think they have additional potential, which aligns with our approach to responsible investing and ambition to seek out opportunities that combat climate change.”

New Forests’ Rogers said the asset had been “somewhat constrained” to date by the closed-nature of ANZFF2 and that now the assets should benefit from further investment.

“We see these assets, particularly the land base, as a blank slate even today. We can do energy plays, wood fiber plays, carbon plays, conservation and biodiversity plays – there are any number of things that the land can support in Tasmania. And that will continue ad infinitum, effectively,” he said.

Both Avery and Rogers said the possibility of building renewable energy assets like a wind farm would be explored in due course, with Rogers stating: “Wind farms sit well on massive forestry estates because you don’t get the same kind of NIMBY visual impact-type [complaints] when they are deep in the forest where not many people see them. And there is good wind down there in Tasmania, so it would be really effective.”

The team will also explore opportunities to diversify into softwood, as the estate is predominantly hardwood.

“That means we would move from a short-rotation commodity in hardwood, to longer-rotation softwood, which means the trees would be in the ground for a longer period of time, and therefore will be able to sequester additional carbon over time,” Avery said.

On the attractiveness of the asset class generally, Avery added: “As the net-zero story ramps up, and as we see institutional investors chasing assets that provide significant carbon sequestration capacity, forestry as an asset class really ticks that box. The competitive environment for these types of assets from institutional investors is only on the increase.

“We have an active mandate and an appetite to continue growing our natural assets portfolio.”

APG manages approximately €540 billion in pension assets, UniSuper has around A$115 billion in assets under management and the PPF has approximately £39 billion ($47.9 billion; €45 billion) AUM.