INVL holds €32m first close on ag and forestry fund – exclusive

The firm secured a 27.4% IRR when it exited its €15m timberland fund in December 2019 and is now targeting a €100m vehicle with a €200m hard-cap.

INVL Asset Management has held a €32 million first close on its evergreen Sustainable Timberland and Farmland Fund II, taking commitments from a host of individual European private investors.

The Lithuanian firm’s vehicle has a €100 million target and is in talks to take commitments from institutional investors, confirmed partner Martynas Samulionis, but was unable to bring them on board for the first capital raise as it was conducted at short notice.

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 two and a half years we achieved a portfolio size of around 4.3 thousand hectares and this portfolio was very attractive in the market. By selling this whole portfolio as one, we managed to generate this return,” he explained.

INVL elected to incorporate agriculture into the second iteration of the vehicle due to their low correlation with wider market asset and ability to complement one another, Samulionis said.

“They have different return profiles so it means even though we might feel some volatility, for example in a timberland sector, the farmland sector can smooth out the returns for the investors, and vice versa.

“In farmland there are rent returns creating the cashflow from the investments and in Timberland, harvesting management of the properties brings cashflows. So, they are a bit different but they are basically fulfilling each other,” Samulionis said.

The fund has a €200 million hard-cap and 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, Samulionis explained. The fund will target 8 percent-plus net IRR, he confirmed.

“The aim of the strategy was to have an evergreen structure so that we are able to invest in a good quality portfolio and sustainably manage it, while at the same time giving comfort to the investors that if they would like to sell their fund units, they are able to do it,” he said.

STAFF II will initially focus on timberland and agriculture assets in Lithuania and other Baltic states and will also explore opportunities in Eastern and Central Europe. It has not deployed any capital to date but has identified a pipeline of assets worth roughly €45 million.