A PRIVATE investor has bought a million-dollar portfolio of four blue gum plantations in Western Victoria, as more smaller investors zero in on the sector.
Located in the Western Districts and the Eastern Grampian regions, the four properties covering 373 hectares – 233 planted to blue gums – are likely to be reverted to grazing or cropping once current leases to woodchipper WA Plantation resources expire.
The properties changed hands for $2600 per hectare and mark the entrance of smaller investors onto the market.
The majority of forestry transactions since the fall of the managed investment schemes have been major portfolio transactions between global participants, with local farmers and private buyers locked out of the market.
In May, 20,657 hectares of former Timbercorp plantations in Victoria, South Australia and Western Australia were absorbed by institutional fund manager New Forests. But the mix is slowly changing, according to Colliers International agents Jesse Manuel and Tim Altschwager, who marketed the most recent deals, in addition to the Timbercorp plantations.
The agents report a high level of interest from local farmers looking to purchase small-scale forestry blocks for future reversion to grazing or cropping land, as well as private investors seeking a low-entry-level investment showing a high yield.
Once the trees have been harvested at the blue-gum plantation and the leases come to an end, the tenant does not intend to renew the lease, Mr Manuel said. Therefore, the new owner will use the land for their own forestry and farming pursuits.
Around 4000 hectares of blue gum plantations in the Western District are on the market. It costs $300 to $2000 per hectare to convert the land back to grazing.
Investors have been putting leased blue gum plantations up for sale in the Western Districts region of Victoria three or four years out from harvest, preserving the asset's value by allowing new owners to collect an income stream before reverting the land to more traditional farming practices.
Prices achieved have been indicative of around a 9 per cent yield in some instances. Yields will be tighter for properties where the tenant has committed to a second rotation.
"Some owners are now looking to consolidate operations within close proximity to ports or where they have a critical mass of high-performing assets, and properties located outside of the 100 kilometre to 150 kilometre distance from a port or situated in less desirable growing country are now being snapped up by private investors and local graziers," Mr Manuel said.
A further 900 hectares of blue gum property remains available for purchase, including the largest holding, Ennis, covering 466 hectares.
