SLM Partners secures first close on €250m ag and forestry fund

The vehicle will pursue timberland investments in Ireland and the Baltics as well as permanent crop opportunities in Spain and Portugal.

SLM Partners has secured a first close of an undisclosed size on its €250 million Silva Europe Fund, which will invest in timberland and permanent crops.

The 2021-vintage builds on the firm’s €30 million Ireland Silva Fund from 2018, which employs a continuous cover forestry approach that promotes regeneration and involves multiple tree species. This is in contrast to the single species clear fell and replant management approach widely used across Europe, according to SLM co-founder and managing partner Paul McMahon.

The vehicle will make greenfield and brownfield timberland investments in Ireland, the Baltic states and other European countries which McMahon did not specify.

SLM has also identified permanent crop opportunities in Spain and Portugal where “exciting work” around regenerative agricultural systems for permanent crops is taking place, said McMahon, which will contribute to SLM’s goal of establishing a “climate positive” portfolio where carbon sequestration in trees and soil exceeds greenhouse gas emissions from operations.

“We’re going to be using cover crops, biological fertility, integrated pest management, integrating livestock where possible, and so really improving soil health, storing more carbon and adding really positive biodiversity benefits as well,” he told Agri Investor.

“The final step and that is going fully organic. We see potential to make Europe and the Mediterranean countries like Spain and Portugal the real leaders in organic permanent crop production in the world.

“We think there are real pockets of opportunity and that’s partly because there’s historically been less investment and less competition in Europe, so asset prices have not been bid up quite as high as maybe in California or Australia.”

McMahon added that the opportunity the firm has identified involves making smaller transactions and aggregating the portfolio, which is the same strategy the firm used for its 2018 Irish fund.

The Irish vehicle is now 80 percent deployed and is beating its return target, added the managing partner, which has an IRR target in the “mid-to-high single digits but is actually delivering a low double-digit IRR.”

Key products from the Europe Silva Fund will include high-value timber for construction, biomass for energy production, organic olives, nuts such as almonds, walnut sand pistachios, and cork.

SLM secured a $75 million separately managed account with a single institutional investor to pursue an organic conversion strategy in the US.

The buy-and-lease strategy will be deployed in the eastern Corn Belt and became the firm’s main US agricultural strategy. SLM was established in 2009 and has total assets under management of $210 million in farmland and timberland.

The firm also became a member of the Natural Capital Investment Alliance, which is a group of asset managers investing in a range of themes including sustainable forestry and regenerative agriculture, through to investments in businesses that are supporting the shift to circular economy.

The Natural Capital Investment Alliance aims to mobilize $10 billion by the end of 2022.