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UK timberland fund aimed at global pension funds

UK timberland fund aimed at global pension funds | Timberland Investment | Scoop.it

FIM Services, the UK-based forestry and renewable energy investment manager, has launched its first institutional fund, the FIM UK Timberland Fund, with an initial target of £100m (€125m) to be raised from a number of cornerstone investors, including pension funds worldwide.


The fund is intended to give institutions the chance to invest in high-quality, well-located commercial plantations, taking advantage of current opportunities FIM has in the pipeline.


Anthony Crosbie Dawson, forestry portfolio manager at FIM, said timberland was an attractive asset for pension funds to consider because it had no correlation with equities, and served as a hedge against inflation.
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Crosbie Dawson said the fund would select high-yield assets well located for timber markets, with good infrastructure and unconstrained access.

Assets will also be selected on their potential for ‘higher and better use’ (HBU), particularly in relation to wind farms.
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FIM will acquire commercial plantations within the UK, which consist primarily of Sitka spruce – the fastest-growing conifer in the UK – and with the largest number of end-uses. Plantations will be located mainly in Scotland and Wales, the wettest parts of the UK, where the trees grow the quickest.
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FIM, which has more than £500m under management, also runs two funds for retail investors – FIM Forest Fund I and FIM Sustainable Timber and Energy – with £63m and £99m, respectively, under management.

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PPF appoints new farmland and timberland managers

PPF appoints new farmland and timberland managers | Timberland Investment | Scoop.it

The Pension Protection Fund (PPF) has appointed seven fund managers as part of its development of its alternative investment portfolio.


The managers will invest in farmland and timberland. The PPF has made this decision so that it can benefit from greater diversification and reduce its overall risk.


The seven appointed fund managers are: Brookfield Investment Management, Dasos Capital Oy, GMO Renewable Resources, Hancock Timber Resource Group, Macquarie, New Forests Pty and Stafford Timberland Group.

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Pensions guardian favours alts over equities, branches into timber

Pensions guardian favours alts over equities, branches into timber | Timberland Investment | Scoop.it

Overstretched finances are an all too familiar issue for Alan Goodman, fund management principal at the Pension Protection Fund (PPF), which absorbs the assets of insolvent company pension funds and covers their liabilities to members.


It’s therefore no surprise that Goodman says the PPF adopts a low-risk strategy but that doesn’t mean it’s averse to taking some well-balanced risks. The fund’s current exposure to alternatives stands at 20%, double that of its allocation to equities at only 10%.

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Since the PPF was established in 2004 its assets have grown significantly, says Goodman, which in turn has widened its focus towards alternative investment.


‘We started with real estate, then added private equity, infrastructure, global tactical asset allocation and alternative credit strategies. Alternative credit funds were added a couple of years ago, such as distressed debt, mezzanine and senior loans.


‘The most recent strategy we’ve tapped into is farming and timber.’

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The search this specialised investment started in 2012 and the group has recently backed its first timber fund manager.


‘The market provides a number of characteristics in terms of stability,’ he says. ‘The logged timber prices can be volatile but the overall growth rate can really come through, especially if you get geographical diversity via the different rainfall patterns around the world.


‘Demand is high for timber products. Australia and New Zealand have strong export markets to the growing middle classes of Asia where less timber is traditionally grown.’


Goodman and his team have focused their first timber investment on this market through a fund which is able to invest in a variety of regions.

At present they have shortlisted seven managers to target timber and farmland investments, which include groups such as Brookfield Asset Management, GMO Renewable Resources and Hancock Timber Resource Group.

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However, one risk which Goodman highlights is linked to the sector’s nascent status.


‘One of the outstanding issues is how you exit this type of investment? Who is the next natural buyer? It will be interesting see how this pans out over the next 10-15 yeas,’ he says.

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Investment In Forestry Continues to Provide Outstanding Returns

Investment In Forestry Continues to Provide Outstanding Returns | Timberland Investment | Scoop.it

The latest UPM Tilhill Timber Bulletin highlights and provides a unique insight into key factors relating to UK standing coniferous timber sales such as market share, performance of the market with a view to investment and, additionally, the impact of the growth in renewable energy.

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Investment in forestry continues to provide outstanding returns compared to practically any other investment. In 2012 the return on investment was 18.3 per cent and over the last 10 years the annualised return was 16.3 per cent.

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Angels branch out into £10m timber fund

Angels branch out into £10m timber fund | Timberland Investment | Scoop.it

Business angels are spreading their wings into the 
forestry sector, with Edinburgh-based syndicate Par Equity preparing to launch a £10 million timber fund.


The firm, founded by Paul Atkinson in 2008, believes that at least 50 investors 
will pile into the fund, which will probably feature a mix of individuals and institutions.


Par Equity has already tested the waters with a trading partnership over the past two years, which brought together 18 investors to buy around £2m-worth of forestry.


Atkinson told Scotland on Sunday that Par Forestry Partnership had bought 
three forests in Scotland – at Armadale in West Lothian, in Ayrshire and along the M74 motorway – and that his firm expects to close a deal in Wales in the coming week.


“This is a long-term form of investment, because it can take 35 years for trees to grow to the right size to be harvested,” Atkinson explained.

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U.K. charities turn to unconventional investments

U.K. charities turn to unconventional investments | Timberland Investment | Scoop.it

Investment officials at the Church of England — one of the U.K.'s largest non-profit organizations by investment assets — are adamant about their contrarian stance.


In restructuring the £5.2 billion ($8.2 billion) portfolio during the past 18 months, the Church Commissioners have been searching for outperformance in uncrowded territory, raising allocations to illiquid assets such as timberland.


[Editor: "uncrowded territory"???]

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Perspective on investing in UK forests

Perspective on investing in UK forests | Timberland Investment | Scoop.it

"The IPD UK Forestry Index shows a return of 20% for the year to December 2010 and the Forestry Commission indices show the coniferous standing timber sales price up by over 70% in the five years to September 2011. The current levels of growth have taken place in spite of an ailing construction sector."

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Savills and UPM Tilhill release 2013 UK market report

Sam Radcliffe's insight:

From the announcement: Fifty per cent more forestry property was traded in the last year compared to 2012, to the value of £97.3 million, 8.5 times the value traded in 2000. This made 2013 a record year, both in the total value of the market and its unit price.


As in the past, most of the sales were in Scotland (68.9% by value) but there was a significant increase in Wales this year with 16% of sales taking place there compared to just 4% in 2012.


Also at record levels is the average value per stocked hectare which is now at £7,057. This has given an annualised average growth since 2002 of 15.4%. The average value of a property is up 29% on 2012 values to £1,231,000.

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UK Forest Fund now one of the largest forest owners in the UK

UK Forest Fund now one of the largest forest owners in the UK | Timberland Investment | Scoop.it

FIM Forest Fund I LP – Haregrain Forest ... raised a further £19.1 million, increasing the value of the portfolio to over £60 million. It now owns 9,851 hectares of highly productive commercial forestry and is harvesting some 220,000 tonnes of timber per annum.


The LP is structured to allow smaller scale investors to enjoy the benefits of a forestry investment, which are normally only available to those investing in excess of £1 million in a directly owned property. The LP is tax transparent, so the favourable tax treatment applying to commercial forestry applies to each individual member.


Forestry income is exempt from income tax and capital gains tax. In addition, it qualifies for 100% relief of inheritance tax once an investment has been held for two years.
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These benefits were available subject to a minimum investment of £30,000, making forestry readily accessible to a wide range of investors.

Forestry has been an excellent investment in recent years. The IPD UK Forestry Index has outperformed equities, gilts and commercial property over the past 10 years. The LP has provided strong returns to date. The blended IRR of all members has been 11.9% post-tax.

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Hertfordshire County Council hires alternatives manager to explore timber

Hertfordshire County Council hires alternatives manager to explore timber | Timberland Investment | Scoop.it

Just in time to be listed as a mandate for 2012, Hertfordshire County Council announced it has hired a new alternatives manager.


The contract, worth between £200m-£300m, has been awarded to Swiss fund management company LGT Capital Partners. The manager will oversee the scheme's portfolio of alternative investments in a fiduciary-style mandate.


The £2.5bn scheme is said to move away from private equity and explore other investments such as infrastructure and timberland.

Sam Radcliffe's insight:

At today's exchange rate, the contract is worth US$128-192 million.

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Irish Timber Council: Sale of forestry rights puts 2,500 jobs at risk

Irish Timber Council: Sale of forestry rights puts 2,500 jobs at risk | Timberland Investment | Scoop.it

The proposed sale of Coillte’s harvesting rights could lead to the closure of all ten of Ireland’s sawmills with the loss of 2,500 jobs, according to the Irish Timber Council (ITC).

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Pat Glennon, Chairman of the Irish Timber Council said: "Ireland’s sawmill operators are already paying a premium for Coillte sawlogs which account for 80% of the available supply in Ireland. Any purchaser of the harvesting rights is naturally going to take advantage of this and increase prices further in order to secure a quick return on their investment

"There is no room for sawmill operators to absorb any level of price increase and the consequence is that sawmills could close with important employment being lost in rural areas."

According to the report, any benefit to the Exchequer from the sale will be "small and disproportionate" to the negative impacts on the sawmill sector.

Sam Radcliffe's insight:

For background on the government proposal, see: Washington Post story.

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No sell-off of forests, promises Caroline Spelman

No sell-off of forests, promises Caroline Spelman | Timberland Investment | Scoop.it

England's publicly owned forests and woodlands will not be sold off, the environment secretary, Caroline Spelman, said on Wednesday, after the independent panel she appointed recommended it remain in public ownership.


The panel said the sell-off had "greatly undervalued" the benefits that woodlands provide for people, nature and the economy and that investment would repay itself many times over in terms of public benefit. It called for the forests to be held in trust for the nation and for public investment to manage and expand the woods.

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UK Parliamentary biomass group ignores timber interests

UK Parliamentary biomass group ignores timber interests | Timberland Investment | Scoop.it

The inaugural meeting of the All-Party Parliamentary Group on biomass rode roughshod over the concerns of the timber sector on mass burning of wood for energy, according to industry representatives attending.

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Following the meeting, the TTF, Wood Panel Industries Federation and Confor issued a joint statement. It said that government forecasts put the demand for wood fuel of biomass plants currently in planning at 80-100 million tonnes by 2030. This is eight times the UK's 2010 harvest.

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