Rural land investors New Zealand Rural Land Co (NZL) are branching out to the North Island for the first time by acquiring a forestry estate located in Mangamahu, near Whanganui.
The estate is made up of five individual properties with a total area of approximately 2383 hectares.
NZL have entered an agreement to purchase the land.
It will be then leased to New Zealand Forestry Leasing (NZFL) for 20 years.
The cost to acquire 100 per cent of the estate is about $63.7 million.
NZL director Richard Milsom said it was the company’s first acquisition of a forestry reserve and its first acquisition of land in the North Island, as previously it had only acquired pastoral farmland in the South Island.
He said the company was looking to branch out into the Whanganui region as it was a high-quality area with high-quality trees on it.
It would also help diversify the company’s portfolio.
“NZL, at its core, is building a diversified portfolio of agricultural assets in New Zealand, and this is part of that strategy,” he said.
The land is currently owned by a group of Taiwanese investors, according to Milsom.
Post-acquisition, NZL would own 14,093ha of rural land.
The company has completed the institutional entitlement offer component of the acquisition, with a 100 per cent participation rate from eight shareholders and a total of $10.486m raised under the offer.
“These institutional shareholders have also applied for over $4.5m of any potential shortfall,” Milsom said.
He said there could be potential for the company to purchase further land in the region, but they had to assess each piece of land individually.
“We’d have to assess each transaction and tenancy on its merits, [but] it’s certainly not off the cards.”
A period for retail investors to purchase shares in the acquisition opened on March 6 and will close on March 15, where any shortfall will also be advised on.
A settlement date for the lease is set for April 15.
At Wharf Gate (AWG) prices for export logs increased $7-$8 per JASm3 in both January and February. Log demand in China has not increased as much as expected after the Lunar New Year, but there will be significantly reduced log supply from New Zealand due to several severe weather events across the top half of the North Island. This will likely increase price pressure for logs in China. The domestic demand for logs is weakening as building projects are cancelled or delayed.
The PF Olsen Log Price Index increased $4 in both January and February to $127. The index is now $4 above the two-year and $3 above the five-year average.
Domestic Log Market
There was very little change in log prices around the country for Quarter 1. Pruned logs remained unchanged while in some regions structural logs reduced by about $1 per tonne.
While there have been plenty of building consents, these are not translating into projects starting. This is due to a combination of poor weather, high interest rates and business uncertainty.
There is an oversupply of structural sawn timber and many mills are actively reducing production. There is price pressure as sellers look to maintain or increase their market share.
Many sawmill managers say this is the worst decking season they can remember. Clearwood is used to manufacture premium decking. Exports prices for clear sawntimber into Europe specifically are still strong.
Sale prices for sawn timber into Asian countries continue to fall. Some grades have fallen as much as 40% over the last six months.
Export Log Market
China
China softwood log inventory is just over 4m m3 and port offtake is still stubbornly sitting at about 60k per day. There are very recent indications port offtake may be increasing but nothing sustained yet.
The CFR price for A grade radiata logs in China is in the range 135-140 USD per JASm3 . South American logs are again heading to China with January and February loaded vessels selling for 110-120 USD per JASm3, but March offers are in the high 120’s. European spruce is offered at 160 EUR (168 USD) per JASm3.
The China Caixin manufacturing PMI edged up slightly from 49.0 to 49.2. The Purchasing Managers Index published by the National Bureau of Statistics in China rose 3.1 points to be at 50.1 for January. For both indices, a reading above 50 indicates an expansion of the manufacturing sector.
Warehouse prices in China had dropped 5% in the first half of February, but this slight decline has halted as the market becomes aware of reduced supply from New Zealand.
There will be a significant reduction in log supply from New Zealand. The worst affected areas on the east coast of the North Island contains Gisborne and Napier ports. These two ports account for about 25% of New Zealand’s log exports. These ports have effectively been closed for two weeks. Log production in this area is very unlikely to be above 50% for the short term. Some operations are also slow in Tauranga due to wet weather and have stopped in Northland due to damage of the public roading infrastructure.
India
Prices for green sawn timber in Gandhidham have risen by about 8% since the start of the year. South American green pine are 541 INR per CFT while Australian radiata green pine sells for 601 INR per CFT. The price for European kiln dried sawntimber has increased about 15-20% and is now 700-750 INR per CFT.
About seven or eight vessels are expected to arrive at Kandla from South America and Australia during March. Demand is not increasing despite weather turning warmer, as exports are slow and real estate markets are down.
Kandla customers also understand one unsold Handymax vessel enroute from South America was diverted to China. After seven months of oversupply, Kandla might see shortages in Quarter Two as China log buyers chase Uruguayan supply.
Tuticorin receives logs in containers from South Africa and the USA. The local green sawn timber price is 700 to 750 INR per CFT. The bulk vessel possibility from South America is still a mirage for Tuticorin buyers, who are unable to compete with Kandla. Gandhidham lumber is flooding traditional Tuticorin markets like Chennai, Bengaluru, Hyderabad, along with cheap European kiln dried lumber.
Many of New Zealand’s iconic farming properties have been split up and or auctioned off because farm owners have failed to plan for the future. Succession planning is something you know you need to think about but often put off. This is understandable as getting the right advice can be expensive and the decision about what is the best way forward is often confusing.
Beyond the financial aspects there are often emotional and family considerations to work through.
Should we sell the farm?
Are we able to sell a stake in the property rather than all of it?
It’s hard to get ahead at the moment. How can we reduce our debt to improve our cashflow?
If we keep a part ownership of the farm business how do we ensure performance for the future?
One of our children would like to run the farm but our other children don’t.
How do we provide a legacy and ensure that all of our children are treated fairly
What will we do with our time and money?
When it comes to selling their farms, owners have a lot to think through. We work alongside farm owners to help develop a way forward that provides for your family’s needs now and into the future.
We partner with leading independent professional experts including your own financial advisor who can offer you the right advice and we are able to tailor solutions for you in response to that advice that includes full or partial exit, single or multiple family member ownership structures, debt reduction and forward management plans.
We view succession planning and ownership transition as an exciting time, an opportunity for farm owners and their families to map out a new direction and provide a legacy for the future.
Twin Peaks
This larger scale forest of 1375 ha of mixed age will be harvested from 2022 onwards and represents an opportunity to co invest with a group of owners in a proven forest, which is now second rotation.
Amakiwi
The forest will be of interest to forestry enthusiasts looking for diverse species with intrinsically higher values and longer rotations than radiata, but with a solid base of approximately 60 hectares of older well tended radiata for early cash flow.
For further information and forest details please contact us
We have an active approach to farm investment and look to invest in farm businesses where we can leverage our operating experience and core competencies to improve production while preserving gross margin.
We seek to invest in farm businesses where performance has suffered due to capital and or operational constraints which we are able to remedy as part of our acquisition and forward management planning.
Our added value approach also enables us to contemplate development opportunities such as conversions, irrigation and further land development to increase the effective area farmed and therefore production.
We carefully consider the costs of inputs required to generate top line growth and establish a forward management plan that provides for optimum performance.
We understand the unique challenges of farm management in a pasture based dairying system and our management team are adept at developing and maintaining top performing pasture based farms.
Past performance is not necessarily indicative of future performance. Returns may vary and are not guaranteed. No money is currently being sought. No financial products can currently be applied for or acquired. Any offer will be made in accordance with the Financial Markets Conduct Act 2013. No indication of interest will involve an obligation or commitment to acquire a financial product. Prospective investors are recommended to seek professional advice from a Financial Adviser which takes into account their personal circumstances before making an investment decision. Kauri Rural Funds is not providing personalised advice. This website is not a Product Disclosure Statement and does not constitute an offer of financial products.
Successful agri-businesses never stay static. To meet the demands of our fast paced world, agri-business owners and managers need to be continually innovating to meet customer demand, develop new markets, produce new product and keep up with the latest research, all the while ensuring that the businesses fundamentals are sound.
Without new equity based investment it is often difficult to achieve your company’s strategic objectives Kauri looks to invest for the long term in successful agri-businesses in order to fund growth. We will partner with you as both shareholders and directors to help unlock the potential of your business.
We bring a team of people with the experience to help you drive the business forward, from breaking into new markets, launching new or improved products, to making vertical or horizontal acquisitions we have a management team that has a clear view of the value chain from producer to customer.
With Kauri as your strategic and financial partner you will have a team behind you 24/7 that are as committed and passionate about growing the business as you are.
