Two New Forests funds to be fully deployed this year – exclusive

The Tropical Asia Forest Fund and Australia New Zealand Forest Fund II are now half and two-thirds invested respectively.

New Forests expects to complete investing its Australia New Zealand Forest Fund II (ANZFF II) and Tropical Asia Forest Fund (TAFF) by the end of the year, the firm’s founder and chief executive officer David Brand has told Agri Investor.

He added the A$707 million ($531.18 million; €478.54 million) ANZFF II is two-thirds deployed and likely to be fully invested this year. The firm is currently investing commitments from its second and final close. Brand’s only caveat was “with a competitive market [in Australia and New Zealand] we have to remain disciplined on our asset pricing”.

New Forests has invested more than A$1.5 billion in the Australian and New Zealand forest sectors since 2010 through ANZFF, ANZFF II, and co-investments, according to Brand. He said any future forestry funds in the region would probably remain similar in size to ANZFF II, as investor demand remains the same. ANZFF closed on A$490 million in October 2010.

“There’s strong interest from current investors and others to ensure we have a continuous investment program in the Australia and New Zealand region, which has proved to be an extremely active market for institutional timberland investors over the past several years,” said Brand. Although he did not confirm the fund life for ANZFF II, he said New Forests is “exploring the interests of our investors to seek longer-term funds”.

New Forests held a final close on its Asian regional fund, TAFF, on $171 million in 2013. Brand said that any second fund have to be larger, would not confirm if the firm would raise a second Asian fund in 2017.

New Forests has bought assets in Indonesia and Malaysia including 100,150 hectares of forest in West Kalimantan, as well as 25,000 hectare plantations in Sabah through TAFF. The fund has a 10 year lifespan from its launch in 2012, but has the option of being extended.

Brand told Agri Investor that a bigger fund would be “open to a variety of opportunities, such as greenfield projects, existing timber plantations, investment in related processing and infrastructure, and expanding to include other tree crops like rubber”.

He added that the value of forestry projects combining both production and conservation for timberlands benefit from scale and investments in traceable value chains.

Environmental risk is becoming an increasingly important issue for investors. For example, Norway’s sovereign wealth fund divesting from companies that damage tropical rainforest.

Brand said that investor interest in Asian forestry projects that emphasised conservation and responsible forestry was widespread, “ranging from pure impact investors to mainstream, blue-chip pensions who are now looking for ways to combine holding real assets with net positive social and environmental outcomes, like climate mitigation”.