Combined North Island forests create mega-block investment opportunity
Combined North Island forests create mega-block investment opportunity
| 3 September 2016
At a time when investment capital in New Zealand and overseas is looking to Kiwi forests as a long-term opportunity, a significant parcel of North Island forest holdings is coming onto the market at the same time.
Totalling 4,685 planted hectares, the combined and adjoining forest holdings in and around the Lismore Hill Forest near Whanganui are marketed by Jeremy Keating and Warwick Searle, Directors of CBRE New Zealand’s Agribusiness and members of the New Zealand Institute of Forestry.
The blocks are offered for sale by Deadline Expressions Of Interest in two tranches in October. The first Deadline Expression Of Interest for the Lismore Hill Forest closes on 13 October 2016. Then, the Deadline Expression Of Interest for four blocks of land and forests owned by Whanganui District Council, which are being sold as one, closes two weeks later.
Jeremy Keating says that the owners of the Lismore Hill Forest view it as a good time to go to market at same time as the Whanganui District Council put their forest holdings up for sale.
“The owners appreciate, like us, that it is not often that forestry holdings of this size, location and scale come together for sale on the open market, so it is particularly pleasing for us that we have won this opportunity against a shortlist of five other firms.”
Keating says that forest investment is increasingly popular in New Zealand and overseas. “This is due to a combination of favourable growing conditions and because forestry as an asset class is seen as a very safe investment over the long term. And, when you combine the global recognition of New Zealand as a safe investment destination with the fact that domestic log processors are not getting enough supply, these holdings could fill a sizeable gap.”
Warwick Searle adds that because the blocks are in their second growth, they offer proven performance and have all the infrastructure of roads and skid pads in place already.
“The average planting age of 13 years across the WDC forests is good, as it shows an even spread over the forest, so not everything comes onto the timber market at once. The upside of the scale that the forests offer is that they are all within one region. Essentially, they offer secure scale in a mixed age class, and a near-constant supply of logs from one region.
“This means that the offer is essentially de-risked for the new owners, as everyone has been round the loop before. At a time when there is a considerable capital in New Zealand and overseas looking for a forestry home, corporate foresters, timber management organisations and New Zealand-based log traders in particular will appreciate the tremendous opportunity this presents for investors looking for long-term income and growth in forestry.”
22 kilometres north east from Whanganui by road along State Highway 4, Lismore Hill Forest comprises four separate blocks either side of the state highway and off No 2 Line through Fordell. The total forest area is 4,739.6 hectares.
The forest grows predominantly radiata pine, supplying domestic processors and the export market. It offers an established crop together with significant infrastructure and over 780 hectares of radiata pines aged 20 years or older. This comprises 1,328 stocked hectares of Crown Forestry Licence (CFL) plus 2,397 stocked hectares within a Forestry Right from Ngati Apa.
The Crown forestry licence and forestry right for this property (excluding the underlying land) is for sale by Deadline Expressions of Interest closing on 13 October 2016.
Jeremy Keating says that the forest has been corporately owned and managed for many years, and is now in a second rotation.
“Establishment of Lismore Hill Forest began in 1964 under the auspices of the New Zealand Forest Service. Approximately two thirds of the land underlying the forest (3,204.1877 ha) was transferred to Te Rununga o Ngāti Apa ( Ngāti Apa) as a consequence of a Treaty of Waitangi settlement with that claimant group. That transfer and the Termination Notice issued by the Crown to the Vendor in respect of that area became effective on 4 February 2011.
“This means that all the hard work has been done - all the infrastructure and roading is now in place, including 250 skid sites that are now in place. However, as the last of the first rotation harvest is now complete and successfully re-established, the owners have decided to focus on the balance of their estate.
“Furthermore, the owners have completed re-establishment activities for a second rotation on all commercially viable productive land, which now shows an average age class for Pinus Radiata of around 12.9 years old. Based on the previous regime that adopted a minimum 26 year age class for clearfell, there is expected to be ample time for the current crop to be grown to maturity and harvested.
“This presents a great opportunity for an astute purchaser to secure scale, with Lismore Hill Forest offering a mixed-age class forest. It is equally an opportunity for a purchaser to acquire an established crop and take assignment of the Crown Forestry Licence which has some 29 years to run, or 39 years in the case of the land stocked with Douglas Fir, together with assuming ownership of all of the roading and skid sites located on the land holdings.”
Whanganui District Council offers a forest estate of four forests and land for sale.
Totalling 1,359 freehold hectares, three of the landholdings adjoin the Lismore Hill Forest, with one slightly further west.
Searle says that the forest offers a crop area of 961 hectares in total, with an average planting age of 13 years old across the Te Ara To Waka, Siceleys, McNabs, Tauwhare, Waitahinga and Nukumaru forests. They are all predominantly radiata pine and located within 30 kilometres of Whanganui.
“Harvesting in Tauwhare, Te Ara To Waka and Waitahinga forests has led to an upgrade of the major arterial roads,” says Searle. “In March 2014 the access road into McNabs forest was upgraded for use by logging trucks. This forest is accessible by Right of Way over the adjacent Lawrence’s property.”
Searle says that the majority of the forest is radiata pine but there are also three stands of cypresses and a number of small plantings of eucalypts throughout the forests.
“Although the forests vary in their history of management, the first crop was treated in a variety of regimes, mostly involving pruning. The intended regime for the second crop is a one-hit prune and thin, which will occur around age 7-9 to leave a final crop stocking of 280-300 stems/ha pruned to approximately 6m. The presence of natural regeneration has forced an earlier light thinning in some parts of some forests. Pruning is almost completed in the replanted areas of Te Ara To Waka.”
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