Investment in forestry is not a new trend.
However, in the last 10-15 years the role of timberland in enhancing an investment portfolio has been increasingly recognised. Forest investment has a number of general characteristics.
- Strong returns: Low risk to return ratio;
- Generally a negative correlation to stock market indices;
- Biological growth is not impacted by economic factors;
- Traditional risks can be avoided through professional forest management;
- A source of value creation.
There are a number of sources of returns from timberland investment:
- Biological growth – the seasonal growth increments add greater timber inventories each year and are unaffected by external factors.
- Biological growth will account for about 60% of value adding, if an appropriate acquisition discipline and management regime is followed.
- Ingrowth – as trees mature they add greater girth and product upgrade adds value.
- Small trees produce low value pulp, larger trees produce more valuable sawlog – typically sawlog trades at 3-5 times the price of pulpwood per unit volume.
- Timber price inflation – over the last 60 years general timber prices have risen at 1.5% above inflation.
- Land price appreciation – the principal method of forest valuation is discounted cash flow (DCF). Therefore, as timber prices rise ahead of input costs, the net DCF, and the land value, increases.
- Professional Management and Marketing – professional forest management can increase the value adding potential of each of the above factors. Initial site selection, species/provenence/seed selection, selection of silvicultural regime, thinning intensity and timing, genetic enhancement, fertilisation, timing of clearfell, certification under Forest Stewardship Council procedures are all part of a comprehensive forest management package that is essential to maximise returns.
"With over 30 years forest management experience and with over 300,000 acres under active management, Green Belt Ltd. is Ireland's largest private Forest management company"
For more information on Green Belt’s attractive Timberland Investment opportunities, contact Green Belt here - or by telephone at 049 - 854 8000