Stafford raising timberland Fund VIII with $500m target – exclusive

Stafford Capital Partners is raising its eighth international timberland fund – Stafford International Timberland Fund VIII – with a target of $500 million, according to Stafford Timberland partner Stephen Addicott.

The firm is planning to hold a first close in October, due to a deal it has in the pipeline and soft commitments of around $190 million from investors in the firm’s previous funds.

Stafford International Timberland Fund VII held a final close last year, raising $84 million more than its $400 million target. That fund is now 96 percent deployed, said Addicott.

Stafford’s international timberland funds are typically geographically diversified with assets across the US, Australasia and Latin America. Investors include European and Australian pension schemes, as well as one US investor and some endowment funds and family offices. One LP, the Victorian Superannuation Fund, has invested a total of $271 million in Funds IV to VII, according to its chief executive Michael Dundon.

Fund VIII will have a heavy allocation to assets invested in the secondaries market, after Fund VII increased its allocation from an intended 30 percent to 51 percent due to well-priced secondaries dealflow, said Addicott.

“What we are finding is that access to well-priced and quality assets, particularly in New Zealand and the US, is coming through secondaries,” he told Agri Investor.

Stafford will now aim to make 50 percent of its investment for Fund VIII through the secondaries market.

“There was a lot of institutional investment in timberland [between 2006-2008]. We are seeing those funds nearing completion,” said Addicott, describing the situation as “unique”.

“At that time timberland prices were increasing on the back of the strong housing market in the US, and of course with the drop off … the returns from those primary funds have been affected. What we are seeing now is that some institutional investors are interested in rolling the funds over, and benefitting from the gradual uplift in US housing starts, but some are saying it’s the end of term and we are interested in selling our stake.”

Stafford’s timber group cannot raise a fund until its predecessor is 75 percent of capital has been deployed and typically puts its funds to work over a two-to-three year period, Stafford Timber partner Tom Goodrich told Agri Investor earlier this year. He added that the firm was seeing strong transaction flow.

Fund VII was the second fund for which Stafford also set up a co-investment vehicle since the firm was founded in 2004, according to Addicott.

“Of the $484 million raised in our last fund that closed in March 2015, we have now committed $464 million or 96 percent. Over the past 9 months we have completed $450 million of deals, including a $160 million investment where half of the investment went into the fund and half went into a co-investment vehicle. We considered this deal to be too large for the fund, with too much concentrated into a couple of assets, so we offered $80 million for co-investment,” said Addicott.

He added that increasing the target for Fund VIII would mean that the firm could increase its bite-size, giving the fund more purchase options and improving dealflow.