Forestry company New Forests has put 2600 hectares of Otway Plantation Portfolio in southwestern Victoria on sale for what market sources say is a $20 million-plus price tag. Source: Australian Financial Review
New Forests Asset Management is offering the plantation, comprising 24 properties, for sale in one line or as individual properties.
The preference of Australia’s largest forestry company was to sell the properties with leases of up to eight years, to allow it to harvest the timber on it, but it would consider selling the timber as well, said CBRE Agribusiness agent Peter Ryan, who is managing the sale.
The sale is not material for New Forests, which manages more than $3 billion in assets and whose institutional investors include Mitsui Group and Australia’s Future Fund.
But the transaction by business industry veteran David brand founded in 2005 by purchasing collapsed management investment scheme forestry assets, is a further unwinding of distortions created in the business during that time, as the schemes pushed up land prices to unrealistic levels and failed to make the most productive use of it before collapsing, taking a collective $4 billion worth of investors’ money with them.
The Otway portfolio, on some of Victoria’s most productive land and receiving over 1000mm of rainfall annually, was previously owned by failed MIS company Great Southern. Despite being in the heart of Victorian dairy company, it has low-grade timber for wood pulp growing on it.
“If we think about the recent Managed Investment Scheme debacle in Australia, those businesses struggled to acquire and plant 100,000 hectares per annum, even with effectively unlimited resources,” Dr Brand said in a speech earlier this month.
“Furthermore, many of those plantations represented a wasted effort because they were in areas with insufficient economic return to justify retaining them in a second rotation. There are also important lessons learnt from the market distortions of the MIS system, such as the intensive land acquisitions that drove up land prices by as much as 100 per cent over five or six years.”
The Otway land would suit forestry companies, investors or farmers, Mr Ryan said.
“It’s a 50-50, either rotated back through wood, but there’s a high sense it’ll be reverted to dairy or some other high-value agricultural use,” he said.
The weaker dollar is making Australian forestry assets more attractive to foreign investors and is pushing values higher. Last year managers of the 8900 hectar Linkletters estate in Western Australia put plans to remediate the site in the middle of the Esperance wheatbelt on hold and to instead exploit the bluegum plantations following a 15% increase in the value of the timber.
The expressions of interest campaign for the Otway Plantation Portfolio closes on August 5.