FTI Investments to put €50 million into acquiring forestry harvesting rights

A new forestry investment platform named Family Tree Impact Investments (FTI) has launched plans to deploy €50 million over the next three years.

The FTI platform, operated by sustainable forestry manager firm NewGen Forestry, will acquire forestry harvesting rights from existing plantation owners, both farmers or private forest owners.

FTI and NewGen Forestry have secured backing from institutional investors and private offices, targeting the acquisition of harvesting rights of 2,000ha of land in its first year of operations, with plans to build a minimum portfolio of €50 million of assets by 2023.

NewGen Forestry is led by former Green Belt Forestry CEO John O’Reilly, and seed investors in FTI and NewGen include the O’Kane Family – the founders of Mercury Engineering – and David Hourihane, who previously led the establishment and deployment of the €78 million Irish Government backed Ireland Energy Efficiency Investments plc.

FTI claims to offer a “new and innovative income stream to forest owners”, while also “taking a long-term view compared to the traditional forestry model, with greater focus on the environmental benefits that the forests can deliver for communities and investors”.

In return for the acquisition of harvesting rights from the landowner or farmer, FTI says it offers up to 30% of the forest value upfront, with the balance being paid over 20 years in an annuity-like, inflation-linked, income stream.

NewGen will focus initially on forests that have come to, or are close to, the end of the government’s Forest Service Premium scheme – plantations that are 15 years old, or more.

The platform claims that, unlike a traditional forest sale, the owner does not have to sell the underlying land: Instead NewGen will simply take over management of the existing forestry removing all future operational costs including insurance and managing licensing and environmental approvals and reporting.

Under the terms of the deal, NewGen will also provide a reforestation payment to replant the forest along with offering the landowner the option of an innovative payment mechanism to secure the second rotation.

FTI says it provides institutions interested in a sustainable asset class with stable long-term cashflows. The fund is targeting annual yields for investors of 5-6%, which in the current low interest rate environment provides an attractive long-term risk adjusted return.

Whilst the bulk of forestry in Ireland is based on conifer plantations, once the existing trees are harvested New Gen’s plan is to plant a more balanced mix of traditional commercial species and native hardwood trees, it is claimed.

The plans are consistent with the aspirations of the Programme for Government to implement an ambitious afforestation programme to help tackle carbon emissions and to promote biodiversity.

The fund will also help drive the consolidation of management of privately own forestry in Ireland, which will make it easier to deal with the increasing regulatory, environmental and compliance demands, NewGen concludes.