Investment: Forestry

Money really can grow on trees

24 February 2007

So how can you get into the market? You can buy direct via one of the forestry agencies: Bidwells, FIM or UPM Tilhill. Forests in Scotland currently change hands at about £2,000 an acre and you can buy in small plots — but according to Raymond Henderson of the forestry agency Bidwells you need to spend about £200,000 to achieve the scale that makes it a good investment. Anything less and you’ll be considered to have bought ‘amenity woodland’, rather than to have invested in forestry. You also need to be very careful about what you buy and be sure to get impartial advice. Forestry agents are often no more than mediocre estate agents in wellies, and as such they are unlikely ever to bring to your attention the fact that much of southwest Scotland is covered in waterlogged spruces planted in the kind of deep acidic soil that means they are unlikely ever to reach real maturity.

If you’re not quite up for dealing with all that, you could look at a fund. FIM manages funds with a minimum £25,000 holding, investing in properties growing sitka spruce (picea sitchensis, apparently the ‘most productive’ of our conifers). Otherwise you could invest internationally via the equity market. There are plenty of publicly traded timber firms in the US and Canada but in Britain there are only a few. There is the recently listed Phaunos Timber, a Guernsey-registered investment fund which has raised $100 million to make timber-related investments globally; Highland Timber, which (while currently loss-making) has forestry projects in Britain and New Zealand; and finally Radicale Projects, which invests in all sorts of horticulture in Australia but also has forestry interests. All three are listed on Aim.

Merryn Somerset Webb edits MoneyWeek.