Timberland Investment

Huge swathes of the Highlands are being put up for sale in what is said to be evidence of a massive boom in multi-million-pound timber industry.

Forestry director Patrick Porteous revealed sellers were attempting to cash in on a buoyant market, while buyers were keen to reap the rewards of a growing industry – worth about £1 billion in the last year to the Scottish economy and employing more than 25,000 people.

 

He revealed developers were also desperately hunting precious available land to start up new plantations and take advantage of rising timber prices.

 

Mr Porteous said a number of landowners who have had woodlands for some time had decided to sell up while the market was at an all-time high.

 

He added: “Mills across the north are working to capacity to cope with demand, and we have just seen Norbord near Inverness undergo a major expansion.

 

“Timber prices have gone up substantially in the last year, and it is a very buoyant market. It is a good time to be harvesting and selling and buying.”

Investors frustrated by the dearth of primary timberland transactions in the US will soon have reasons to cheer, according to specialist manager New Forests.

 

In its biennial update on the forestry market, the Australia-based firm observes that assets acquired “in the heyday” of 2003-2008 are now starting to be sold back into the secondary market. Rising interest rates may also put pressure to improve cash yields, creating volatility for returns and prompting investors to delist assets. Taken together, these trends will help bring annual timberland transaction turnover in the US from about $1 billion over the past seven or eight years – net of big consolidation deals – to $2 billion over the next half-decade, New Forests said.

 

Not every investor, however, will be inclined to part ways with assets held in the vehicles they back. “It is likely that most funds will sell down their holdings, but there may be some instances where a follow-on vehicle will be used to roll over the assets,” David Brand, chief executive of New Forests, told Agri Investor. “We understand there are some LPs looking to hold on to underlying assets – particularly for large, quality assets – even amidst fund exits.”