Why invest in forestry

Not only is the total investment sum affordable, but you don’t pay it all at once. A forest investment is contributory, meaning that after an initial lump-sum payment, you pay in annual instalments called Calls, usually paid once or twice per year. Calls are also set at an affordable level so investors can meet ongoing family and financial commitments during the life of their forest investment. However, with Carbon Lease arrangements in place for most of our Limited Partnership investments, there are no Calls required which also helps improve profitability.

Should an investor’s circumstances change, we are able to facilitate the sale of shares so that the investment can be liquidated prior to harvest.

Go to our Investment structure page to learn more about tax and our Limited Partnership investments.

Importance of Tax Paid Real Returns
With any medium to longer term investment, it is the projected return after maintaining the purchasing power of your money and paying any tax due that is most important. This is the tax-paid real return.

The difference between the gross return and the tax paid real return is the impact of inflation over the period on the purchasing power of the New Zealand dollar plus taxation.

Inflation at just 2.0% halves the purchasing power of the dollar in about the same time as it takes a Radiata seedling to grow into a mature tree.

Historically, forestry investment has demonstrated an ability to maintain value with inflation and to reward investors with substantial real (after inflation) returns. Other investments with a similar potential are property and equities.

Global market conditions favour wood and New Zealand’s competitive advantage puts forestry into the top three export earning sectors in the country. We are close to the Asian markets and we have excellent growth rates meaning we can supply quality radiata pine in shorter time frames. Our forestry exports are worth $5 billion to the New Zealand economy and this will grow. The industry is a big contributor to regional economies and its role is recognised in the government’s regional economic development action plans.

Global demand for wood alternatives is declining while demand for wood products is increasing. Population growth continues to increase demand for wood, and wood consumption increases further with a country’s increase in economic and social development. We see this in the ‘rising middle classes’ of China, India and Korea, our major export markets. With the global movement to preserve dwindling native forest resources, by either not logging at all or by logging on a sustainable basis, the trend is towards a log supply reduction and increased demand for plantation forest products.

The substitute products for solid wood like steel, aluminium, plastic and cement all have very high energy inputs and high carbon outputs. As the cost of energy increases and as carbon taxes are progressively introduced to limit climate change, inevitably the price for these substitutes will also increase.

Our size results in significant economies of scale which we pass on to investors. We have a reputation as a forest manager of quality, able to derive maximum value from the forest for our investors, from forest establishment to harvest. We have excellent contractor relationships and employ highly skilled forestry professionals. Plus, our forests are located in some of new New Zealand’s best sites for plantation radiata pine.

Our role is also to help you manage risk. Our skill as the manager comes into play in the careful management of the crop (and insuring for specific risks where possible), and of the market such as harvesting so that returns can be maximised (in the meantime the trees keep growing in size and in value).

Learn more about our investments here.