# buying forestry as an individual or in partnership?



## Brendan Burgess (7 Oct 2010)

It has been suggested to me that 15 year old forestry is very good value at the moment because a lot of farmers want to sell it so that they can buy non afforested land. 

I know a few others who are also interested in making similar investments.

I assume it's not worth our while pooling our resources and buying as a partnership? 

I assume that all the buyers would be cash buyers of around €100,000 each so there would be no problems with joint and several liability for the borrowings.

*Advantages 
*We could buy one big forest rather than 5 smaller ones which would cut down on the costs of managing it. I assume that a large forest is cheaper to maintain than 5 small ones. 
There might well be pooled expertise. (This would be a big advantage to me as I know nothing about it) 
If one partner wanted to sell out their interest, they may well find it easier to sell to one of the other partners

*Disadvantages 
*It's messy owning anything jointly as it's rare that the financial objectives of the individuals would tally. One person might need to sell their share and could find it very difficult to sell a share in a partnership. 
If the partners had to pay costs such as insurance, then it's a source of hassle when one doesn't pay their share on time.
The partners might disagree on the management or strategy for the investment. 
A share in a forest would not be a good security for a loan, whereas a forest owned outright might well be acceptable.



*Conclusion 
*Not a good idea to buy it jointly if one can afford to buy a small forest on one's own. 

I suppose if a large forest became available, the individuals could buy it and split it up so that each would own and control separate parts of it. 

*Buying as a limited company*
I think that this is tax inefficient, or can it be structured so that the gains in the company and in the share price would be tax-free? 

Buying units in a forestry fund makes sense if you don't want any role  in managing it and you can't afford a small forest on your own.

Brendan


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## mercman (7 Oct 2010)

Brendan Burgess said:


> I suppose if a large forest became available, the individuals could buy it and split it up so that each would own and control separate parts of it. Brendan



Forestry is the In thing this year as Timber prices are very very high. Whilst it might sound like a great idea to own the forestry jointly, what happens if one party refuses to make his annaul payment for Insurance, refertilising, replanting, maintenance  etc. Also at the end of the forestry and the site is clearfelled, there is a legal obligation to replant the land and presently there are no grants available for replanting land that has been clearfelled or in fact destroyed by fire.


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## PMU (9 Oct 2010)

I’m all for investing in forestry as part of a portfolio of diversified asset classes (I hold some US forestry REITs) but you just can’t buy a forest and sit on your rear end watching the trees grow for 15 -30 years and then expect to cash in.  You need to buy in a good location, carry out thinning, provide nutrition, fencing, buy insurance, etc. You really are farming trees and will have ongoing expenditure.    It’s not something for a bunch of amateurs so you would need to factor in the cost of a management company to manage your forest.  

One problem I’ve noticed is a lack of an index of timber prices in Ireland. In the  UK there’s the  IPD forestry index and the Forestry Commission publishes two timber sales indices
  http://www.forestry.gov.uk/pdf/tpi200903.pdf/$FILE/tpi200903.pdf .  I think you would need this type of information to gauge trends, estimate profitability, etc.  Otherwise you are just buying in the dark and may end up selling to a monopoly purchaser (SmartPly and Medite are both owned by Coillte).  

Buying a forest is an illiquid  investment so before worrying about partnerships (which in itself carries a liquidity issue identified in your post)  it would be prudent to determine if direct forestry investment in Ireland  by an amateur is likely to provide both a reasonable return on one’s investment and  also provide a sufficient premium to compensate for illiquidity.


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## Woodsman (28 Oct 2010)

Forestry is a good investment but probably is only for people who either know the business or have someone competent that they know to advise them and whom they trust. There have been a number of schemes in the past offering returns which are simply not there and therefore should be looked on with suspicion. Timber prices are down app 30/40% compared with a few months ago but still well up on last year. They may have a bit further to go and the presence of Coillte complicates the market. Prices rise and fall like any commodity and up to date market reports are available from either the Irish Timber Growers Association or Teagasc. When I asked my accountants if I should consider becoming a "Name" in Lloyds some years ago they asked me what did I know about insurance. I replied "Nothing". They then said "you have answered your own question". I would suggest the same applies to forestry. If you dont know the business or have a trusted friend that does, avoid it.


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## Brendan Burgess (28 Oct 2010)

Hi Woodsman

I understand that the first version of the Irish Forestry Fund has matured and the returns have been quite good. Not as good as they had projected, but, ahem, a lot better than shares. 

Brendan


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## Woodsman (1 Nov 2010)

Hi Brendan
The returns from the Irish Forestry Fund have indeed been good relative to shares and/or property but then returns in general from forestry over the past decade have been exceptional with timber prices reaching an all time high a few months ago. One must remember however that the returns from some privately owned woodlands over the past 10/15 years have been quite spectacular. I would wonder what percentage of the funds profits goes towards management and what are the actual management fees. Anyone with say €100,000 plus to invest would surely be better purchasing their own woodland, either here in Ireland or Scotland. There is also good value to be had in afforested land in Eastern Europe but like owning apartments anywhere abroad, management can be a problem.


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## Daithi7 (25 Jan 2022)

Anyone know how forestry has done in Ireland since 2010 say?

Seems a very opaque asset class,  which is hard to get a handle on returns.


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## Peanuts20 (26 Jan 2022)

I can't see many farmers wanting to sell at this stage to buy unforested land. Any farmers I know who got involved in forestry primarily used bad land such as glens so you should be asking, why are they really selling now.?

2nd problem is cost of harvesting

3rd problem you have is what do you do after you have harvested?. The land is, in effect, destroyed and can't be returned to agricultural land, or other use, or at least without spending a fortune clearing it and then getting it legally reclassified as non-forestry. My understanding is that  you are legally obliged to reforest it under the 2014 Forestry Act and you are unlikely to see a return on that investment.

I'd seriously suggest having a chat with Teagasc before doing anything


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## Jazz1945 (14 Feb 2022)

My reearch tells me that they're selling their forested lands, after 15 years, because their grants/sources of immediate income has run out.

BTW, why do you say that, on re-forestation, you'd be unlikely to see a return on that investment?


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## PMU (14 Feb 2022)

Daithi7 said:


> Anyone know how forestry has done in Ireland since 2010 say?
> 
> Seems a very opaque asset class,  which is hard to get a handle on returns.


Teagasc produces a  timber prices report [broken link removed].  You could also try the Irish Timber Growers Association.


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## Baby boomer (14 Feb 2022)

Is it possible to get a fairly hands-off forestry investment?  For example, buy a piece of land, and contract out planting, management and harvesting.  You would then have an agricultural asset which presumably attracts 90% CAT relief for the next generation.


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## Peanuts20 (15 Feb 2022)

Jazz1945 said:


> My reearch tells me that they're selling their forested lands, after 15 years, because their grants/sources of immediate income has run out.
> 
> BTW, why do you say that, on re-forestation, you'd be unlikely to see a return on that investment?



Unless you are going to sell again to someone else then it is likely to be 2040 before you would be harvesting again. Thats a long time to wait for a return and is why farmers only give their bad land over to forestry


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## Daithi7 (Yesterday at 11:35 AM)

Surely there's scope for an Irish forestry REIT?

It seems the obvious way for non farmers to invest in this asset class in Ireland.

Here's an article on a few of the overseas forest & timberland REIT options 

Investing in Timberland REITs









						3 Timberland REITs to Consider in 2023 | The Motley Fool
					

Timberland REITs offer a lower-cost option for investing in the harvesting and selling of wood products. Learn about the industry and your options for investing.




					www.fool.com
				









						Timber REITs: Renewable Dividends | Seeking Alpha
					

Timber REITs have come roaring back to life over the last twelve months. Read more on the four REITs we track that account for ~$40 billion in market value.




					seekingalpha.com


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## publicservice1 (Yesterday at 11:56 AM)

Interesting thread.
Myself and a couple of family members pooled resources and embarked on this route over15 years ago, and have added to it over time. I administer and manage it all. Happy to answer any specific queries if it helps.

As I've gotten older, the later planting has become more of a legacy project- in native- specifically Oak, as we probably wont see clear fell in 2100 or thereabouts


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