Lithuanian private equity firm INVL Asset Management has acquired a 1,270ha asset in Latvia made up of forestry and farmland. Financial details were undisclosed.
INVL made the investments via its subsidiary businesses Zemvalde Forest and Zemvalde Agro. Forestry makes up 338ha of the asset, with the remainder being farmland.
Capital was deployed from the firm’s Sustainable Timberland and Farmland Fund II, which has a €100 million target and held a fourth close on €81.3 million in August 2022.
The evergreen fund features an initial three-year lockup period and several liquidity events such as a dividend-like quarterly unit redemption. It also has an annual liquidity window during which investors can dispose of a capped number of units per year. The fund will target 8 percent-plus net IRR.
“STAFFII has drawn 100 percent of investor commitments and already deployed most of it into the assets in Lithuania, Latvia and, just very recently, Romania,” partner Martynas Samulionis told Agri Investor. “In total, we own more than 17,000ha of forest and farmland and have a strong deal pipeline to continue expanding in the Baltics, as well as Central and Eastern European Union countries.”
Samulionis said Scandinavian countries have historically held an interest in Baltic forestry assets and now the firm has noticed an uptick in interest from Central and Western European investors in the region’s forestry and farmland.
STAFF II is the successor to the firm’s INVL Baltic Forrest Fund I, a 2017 vehicle that raised €15 million and invested exclusively in Lithuanian timberland. The fund generated a 27.4 percent internal rate of return when the majority of the portfolio was sold to Swedish investor Silvestica in December 2019.
“We were consolidating the very highest quality portfolio of timberland in Lithuania,” Samulionis told Agri Investor in 2020. “In two and a half years, we achieved a portfolio size of around 4,300ha and this portfolio was very attractive in the market. By selling this whole portfolio as one, we managed to generate this return,” he said.
The region experienced the same commodity price spike and inflation surge that has been observed across the globe, said Samulionis, but competition for deals has remained strong.
“In the Baltics, inflation went above 20 percent at the end of 2022, so during the year, we have seen a steady climb of forest and farmland values as these assets tend to work as a hedge against inflation when looking historically, and 2022 confirmed this tendency,” he said.