Investors flock to NZ forests

Investors flock to NZ forests

More than 15% of New Zealand's forests have been sold to buyers including Harvard University and a Canadian teachers' pension fund.

Harvard's business arm has paid an undisclosed sum for 165,000 hectares of forest on North Island.

Meanwhile, a consortium including the Ontario teachers' fund paid 725m New Zealand dollars (£265m; $470m) for 106,000 hectares.

Both deals are symptomatic of trends in the forestry industry.

Big forest owners are selling up in order to concentrate on more profitable milling and distributing operations, while cash-rich pension funds are increasingly looking for stable long-term investments.

Ins and outs

Harvard bought Central North Island Forest Partnership (CNIFP) from its receivers; CNIFP collapsed three years ago under a mountain of debt and failed to meet lenders' convenants.

The partnership was managed by Fletcher Challenge Forests (FCF), the firm behind the sale to the Ontario teachers.

Both deals are part of FCF's strategy to get out of low-yielding forest-management operations, and invest in the more immediately profitable downstream part of the business.

Investors take a more long-term view, however: Prudential Timber, an investment firm which is partnering the Ontario fund, said it saw forestry as "a promising source of attractive returns".

New Zealand's high-quality timber is currently in an export slump, but many analysts expect demand to rise steadily in coming decades, in particular in the fast-growing Chinese market.

Story from BBC NEWS:

http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/3333183.stm

Published: 2003/12/19 07:55:21 GMT