News of fund launches and global plans being hatched on the timberland front has been coming in thick and fast of late.
As Agri Investor reported around the start of the pandemic in May, investor confidence in the asset class was generally unshaken, as one of its more endearing characteristics is the ability to favorably time sales and harvests by riding out crises as assets are left to grow in value.
Along with the ever-present need for GPs and LPs to work together to find ways to contribute positively to the global climate crisis, interest in tree planting, conservation and monetization continues to remain strong.
Craigmore Sustainables, a New Zealand forestry investor that fully exited its 2011-vintage fund in 2020 and delivered 6.18 percent IRR net of fees, has launched a NZ$300m ($216 million; €179 million) follow-on vehicle.
A key difference between the two funds is that the latter is evergreen, while the former was a 10-year close-ended vehicle. Chairman Nick Tapp said he was “not unhappy” with the performance of the first fund, but there was a sense that improved returns could have been secured had the GP been able to secure longer-term buy-in from, what were, early supporters of the asset class.
Another potential tailwind for the new vehicle could be New Zealand’s Emissions Trading Scheme, which facilitates carbon credits sales and partially supported the generation of cash returns on the first fund – Craigmore expects roughly one-third of returns from the new vehicle to come from this avenue.
Meanwhile in LatAm, London-based Astarte Capital Partners launched a $250 million timber fund that will invest in Paraguay, alongside local timber management company SilviPar.
Astarte co-founder Teresa Farmaki declined to disclose the 10-year close-ended fund’s return targets, but she did comment on the fact that Paraguay’s conducive climate for growing forestry is largely untapped, and the potential to store roughly 9 million tons of carbon across the planned 50,000 hectare eucalyptus plantation, has attracted a diverse range of prospective investors.
“The trees actually grow one meter a month,” Farmaki said. “We get 24-meter trees in two years, which is one of the key attributes of the region. The world needs more forests and that region is just absolutely unique for realizing that.”
The fund expects to begin rotational harvesting by year seven, which is also when Astarte expects to begin trading carbon credits generated by the forestry assets, Farmaki added.
And over in Europe, Gresham House Forestry managing partner Olly Hughes tells Agri Investor in an upcoming interview that 2020 was a year in which the UK-based firm “did very well and our investors did very well.”
Hughes cited three main drivers for the firm’s good year: a weaker pound that made domestically-grown timber more attractive, increased domestic timber demand due to more home renovations, and increasing investor appetite for sustainable assets.
The firm will launch a second UK vehicle in Q2 and will kick off “an international strategy” over the course of the year, he confirmed.
Based on this geographically diverse set of funds and anecdotes, the signs point to another favorable year for the timberland asset class.