North Island forestry portfolio for sale

5:00 AM Wednesday November 16, 2016 Paul Charman

One of New Zealand’s largest forestry land holdings is on the market, with a 60-year tenancy agreement in place.

One of New Zealand’s biggest privately-owned forestry land portfolios is for sale, comprising five separate plantations in the Lower North Island.

The portfolio encompasses more than 3061ha of trees, spread across Manawatu and Wairarapa districts.

The portfolio is being marketed through a tender process by Bayleys Southland salesman Hayden McCallum, and Rob Deal from Bayleys Wairarapa. Tenders will close on December 1.

McCullum says the extensive land portfolio is owned by a Southland-based company — Forest Growth Holdings — however, only the land and not the plantings is to be sold.

There is a 60-year forestry right leased to Wairarapa Estate, an Australian-based forestry investment company, he points out. “This is a high quality tenant — a real estate investment firm specialising in sustainable forestry, land management, timber processing, and conservation businesses.”

Combined the land holdings now generate an annual rental income of $216,869 for the landowner.

McCallum says the blocks — which can be sold either individually or as one parcel — produce revenue as follows:

  •          Craigie Lea Forest — 1670ha generates annual rental of $125,000pa
  •          Erindale Forest — 878ha generates annual rental of $53.500pa
  •          Tinui Forest — 190ha generates annual rental of $14,938pa
  •          Beehive Creek Forest — 168ha generates annual rental of $13,131pa, and
  •          Flat Point Forest — 154ha generates annual rental of $10,300pa.

All five blocks are freehold titles, with rental reviewed annually and any potential increases linked to the Consumer Price Index. They can be purchased in any configuration ranging from one to five lots.

“From an investment perspective, the 60-year lease term attached to all the blocks would be one of the longest terms for a commercial occupancy anywhere in New Zealand,” McCullum said.

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Brokers claim that, in terms of construction suitability, New Zealand pine exceeds the quality of pine grown overseas.

“Obviously this is dictated by the long growing and harvesting period of the pine plantations, but nonetheless, offers an it extremely long-term investment opportunity.

“The quality of New Zealand’s pine over the likes of (that produced by) its competitors from Australia ensures the wood’s suitability for the construction and housing sectors.”

McCullum says carbon credits produced by the forests would remain with the forestry right holder. As lessee, the company was responsible for watering and tending the pine trees throughout their life cycle, as well as maintaining the access roads networking the plantations.

“The company, which will be the occupier of the land, has a long-term view of economic and market trends for its products, simultaneously supported by operating under environmentally-friendly and sustainable practices,” he says.

“For venture capitalists abiding by ‘ethical investment’ principles when identifying investment opportunities, forestry blocks certainly meet all the criteria. Pine forests are environmentally-positive, they are carbon-positive, they generate foreign income for domestic owners, and the end product they deliver is socially beneficial.”

McCallum says it is rare to have such a large portfolio of land with guaranteed returns. “This is a great long term investment opportunity.”