North Island mega-block forests sale

5:03 AM Saturday September 3, 2016 Colin Taylor

The Lismore Hill Forest is 22 km northeast from Whanganui by road

Combined and adjoining forest holdings near Whanganui totalling 4685 planted hectares are being marketed for sale as long-term investment opportunities for New Zealand and overseas investors.

“This offering comes at a time when there is a considerable capital in New Zealand and overseas looking for a forestry home,” says Jeremy Keating of CBRE who, with colleague Warwick Searle, is marketing the forestry blocks for sale by deadline expressions of interest in two tranches.  

The first deadline for expressions of interest for the Lismore Hill Forest closes on October 13. The second deadline for expressions of interest for four blocks of land and forests owned by Whanganui District Council (WDC) which are being sold as one, closes two weeks later.

Keating and Searle, who are directors with CBRE’s Agribusiness team and members of the New Zealand Institute of Forestry, say the sale is expected to particularly interest corporate foresters, timber management organisations and New Zealand-based log traders who will appreciate the opportunity presented for investors looking for long-term income and growth in forestry.

“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 is putting its forest holdings up for sale,” Keating says.

“The owners appreciate 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 marketing agencies.”

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. Combined with the global recognition of New Zealand as a safe investment destination and a shortage in supply for domestic log processors, these Whanganui holdings could fill a sizeable market gap.”

Searle says the blocks are in their second growth stage so they offer proven performance and have all the infrastructure of roads and skid pads already in place.  

“The average planting age of 13 years across the WDC forests is a good feature because it shows an even spread over the forests. That means not all the trees will come onto the timber market at once.

“The upside of the forests is that they are all within one region. Essentially, they offer a secure scale in a mixed age class, and a near-constant supply of logs from one region. And this means that the offer is essentially de-risked for new owners.”

2.	The Lismore Hill Forest is 22 km northeast from Whanganui by road

An aerial view encompassing both the Lismore Hill and Whanganui District Council forests.

The Lismore Hill Forest is 22 km northeast from Whanganui by road along State Highway 4 and comprises four separate blocks either side of the state highway. The total Lismore Hill Forest area is 4739.6ha including unproductive areas.

The forest predominantly consists of radiata pine trees and supplies domestic processors and the export market. It comprises an established crop with 798ha of radiata pines aged 20 years or older – along with significant infrastructure.

Lismore Hill Forest encompasses 1328 stocked hectares of Crown Forestry Licence (CFL) plus 2397 stocked hectares within a forestry right from Ngati Apa. It is the CFL and forestry right (excluding the underlying land) that is for sale by deadline expressions of interest closing on October 13.

Keating says 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. About two thirds of the land underlying the forest, or 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 February 4, 2011.

“This means that all the hard work has been done - all the infrastructure and roading is now in place, including 250 skid sites. 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 shows an average age class for pinus radiata of around 12 years old. Based on the previous regime that adopted a minimum 26 year age class for clear-fell, there is expected to be ample time for the current crop to be grown to maturity and harvested.

“This presents a great chance for an astute purchaser to secure scale, with Lismore Hill Forest offering a mixed-age class forest,” Keating says. “It is equally an opportunity for a purchaser to acquire an established crop and take assignment of the CFL which has some 29 years to run - or 39 years in the case of land stocked with douglas fir. The buyer would also assume ownership of all of the roading and skid sites located on the land holdings.”

Searle says the Whanganui District Council sale comprises an estate of four forests with the freehold land included in the sale.

Totalling 1359ha, three of the landholdings adjoin the Lismore Hill Forest, with one slightly further west.

The forest offers a crop area of 961ha 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 30km 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.

“While the majority of the forest is radiata pine, there are also three stands of cypress 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 the seven to nine year age mark, leaving a final crop stocking of 280-300 stems per hectare to be pruned to approximately six metres.”

Searle says the presence of natural regeneration has forced an earlier light thinning in some parts of some forests but pruning is almost completed in the replanted areas.

Jeremy, Warwick.jpg

Jeremy Keating (left)  and Warwick Searle (right), of CBRE