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Forest First on road for $135m – exclusive

The Colombian forestry asset manager has raised $24m in equity from a $70m equity raise target; the remainder will be raised through debt.

Forest First, a timberland asset management company, is currently on the road raising funds for a $135 million Colombian plantation.

Forest First Colombia (FFC) has already raised $24 million in common equity capital from high net worth individuals and its founders. It plans to raise an additional $46 million in equity; the remainder will be raised in debt, according to Tobey Russ, chief executive at Forest First.

At this stage the company is focusing its fundraising efforts on family offices and high net worth individuals; Russ believes they are better suited to the offering than institutions at this stage.

“Generally speaking the large institutional investors such as the pension funds, endowment funds and life insurance companies are the ultimate holders of forestry assets around the world,” he told Agri Investor. “Having said that, these same institutions are not very good at plantation forestry start-ups; they are more comfortable accepting a lower return on more mature assets. Forest First is quite happy to be working with private capital investors that are interested in higher returns as the company develops and until the IPO,” said Russ adding that an IPO is planned in three to five years’ time.

FFC is planning to raise a further $10 million before the end of the year in order to plant 7,000 hectares of trees in 2015. Forest First planted 2,000 hectares between 2010 and 2013 and will plant another 3,000 over the course of 2014. The plan is then to plant another 14,000 hectares each year thereafter.

“We have already done trials on the land in question and do not want to rush to plant too quickly so will be staggering the planting over a five year period,” said Russ.

Forest First plantation after 14  months
Forest First plantation after 14 months

The project will have an end date of around 2025 and Russ predicts that the returns on equity from the latest fundraising round will be between 26 percent and 27 percent.

The first harvest will be in 2018, representing seven years since the first planting. This is a good opportunity to take the company to IPO since it will show investors a full life cycle of the trees, said Russ. “While we can already show that FFC can grow trees very well, the harvest will also demonstrate that we can take product to the local and international markets,” he added.

FFC is planting acacia and eucalyptus, both high density hardwood trees that provide various revenue streams apart from construction and paper such as from wood pellets that are being increasingly used for heating in residential housing.

But the biggest source of revenue will come from energy companies that are starting to use wood as a source of energy production; in some European countries energy companies will be forced to replace around 20 percent of their coal-produced energy by using wood fuel, said Russ adding that many utilities are already move quickly in this direction including Drax in the UK which manages the largest coal fired utility in all of Europe.

Forest First has hired Apex Capital Introduction Services as its administrator and introducer. The founders currently hold a 30 percent stake in the company.