New Forests to acquire 46,000 hectare softwood plantation estate in Tasmania

THE AUSTRALIA New Zealand Forest Fund, a forestry investment fund managed by Sydney-based New Forests Pty Limited, has agreed to acquire a 46,000 hectare (114,000 acre) softwood plantation forestry estate located in the north of Tasmania. The forestry estate will be acquired from a joint venture between Forestry Tasmania and a global timber investment manager for a total purchase price of $156 million. New Forests has lodged an application with the Foreign Investment Review Board, and the transaction is scheduled to complete in January 2012.
New Forests’ Managing Director, David Brand, commented: “New Forests is pleased to acquire this attractive forestry estate, which is an important component of the sustainable plantation timber industry in Tasmania. These plantations are on generally flat to rolling terrain, with good rainfall and a history of good management. The estate makes for a high-quality, long-term investment opportunity.” New Forests currently manages over 275,000 hectares of timberland properties across Australia on behalf of its institutional investment clients.
The transaction is based on acquiring the plantations via a Forestry Right on Crown Land, which provides for ongoing operations through 2069. The forest currently produces over 550,000 cubic metres of softwood timber per annum, largely under contract to local processing facilities. With a diversified age class structure across the estate there will be a steady and growing cash yield over time.
The forestry estate is certified to the Australian Forestry Standard, and ongoing operational activities will continue to provide local employment opportunities to local businesses. New Forests will manage the forestry estate in accordance with the company’s social and environmental management system, ensuring long-term sustainability with replanting programs and environmental restoration using native plantings in sensitive areas, such as riparian zones. Brand remarked: “With institutional investors seeking long-term, stable assets to counter the current volatile economic conditions, these softwood plantations make a strong addition to our investment portfolio.”
Tasmanian Deputy Premier Bryan Green said the sale of rights of Forestry Tasmania’s joint venture softwood plantations would assist the business manage its way through restructuring of the State’s timber industry. The Taswood Growers joint venture has sold the rights for $156 million with the State maintaining ownership of the land.
Green said Forestry Tasmania and its joint venture partner GMO Renewable Resources agreed to the sale to Sydney-based firm New Forests.
“New Forests will have the right to establish, maintain and harvest the 46,000 hectare plantation estate until the forestry rights expire in 2069,” Green said. “While the trees will change hands, the land remains owned by Forestry Tasmania, and the new owners will continue to supply the state of the art sawmill at Bell Bay, Norske Skog’s pulp mill at Boyer, as well as several smaller timber processors.”
Green said he welcomed Forestry Tasmania’s decision to use its share of the proceeds primarily to retire debt to help manage its business through the restructuring of the industry.
“This is a very good outcome for Forestry Tasmania and the wider forest industry.
“I would emphasise that while the Government has been kept fully informed, the decision to sell the 50% share in the joint venture was made entirely by the Forestry Tasmania board.
“The sale is a sign of confidence in the future of the Tasmanian timber industry, by New Forests, which already holds significant forest assets around Australia,” Green said.
Forestry Tasmania’s Managing Director Bob Gordon said Taswood Growers appointed investment bank Morgan Stanley to advise on a competitive sale process. “The price achieved was within the fair value range appraised by independent expert, James W. Sewall Company in June this year.”
Gordon said the sale was a logical extension of FT’s decision in 1999 to enter into the joint venture arrangement with GMO Renewable Resources. “We have also been mindful of the recommendations of the Auditor General. Through this strategic sale, FT intends to reduce debt, improve cash flow and address the lack of working capital,” Gordon said.