Angels branch out into £10m timber fund
BUSINESS angels are spreading their wings into the forestry sector, with Edinburgh-based syndicate Par Equity preparing to launch a £10 million timber fund.
The firm, founded by Paul Atkinson in 2008, believes that at least 50 investors will pile into the fund, which will probably feature a mix of individuals and institutions.
Par Equity has already tested the waters with a trading partnership over the past two years, which brought together 18 investors to buy around £2m-worth of forestry.
Atkinson told Scotland on Sunday that Par Forestry Partnership had bought three forests in Scotland – at Armadale in West Lothian, in Ayrshire and along the M74 motorway – and that his firm expects to close a deal in Wales in the coming week.
“This is a long-term form of investment, because it can take 35 years for trees to grow to the right size to be harvested,” Atkinson explained.
“That works as a nice contrast to some of the higher-risk but shorter-term investments that we make in technology companies.”
Par Equity’s recent deals have included pumping £400,000 into Edinburgh-based Global Surface Intelligence, which aims to grab a slice of the £20 billion global carbon-reporting market, and selling its stake in Glasgow-based music streaming specialist Simple Audio as part of its sale to California-based computer hardware firm Corsair.
Par Forestry Partnership has also benefited from grants supplied by Forestry Commission Scotland to plant 160,000 Sitka spruce trees on 350 acres in Ayrshire.
“The forestry trading partnership and the fund are all about economies of scale,” added Atkinson. “Small investments in forestry – around £50,000 or £100,000 – just aren’t economic.
“There’s an increasing demand for forestry to supply timber for the construction industry, wood pulp for boarding and for biomass to be burned.
“The fund will look to raise a minimum of £5m, but I think a more realistic target is £10m.
“There are still tax breaks, but not the kind we were seeing in the 1980s, when celebrities and politicians were buying up large tracts of land and planting forests.”
Par Equity is setting up its first unit trust as a feeder to the forestry fund, allowing savers with self-invested pension plans (Sipps) to take stakes in the fund.
Andrew Castell, one of the firm’s executive partners, added: “This isn’t a unit trust for the sake of having a unit trust, it’s a vehicle to let people invest in the fund.
“We’re still working out the final details of the structure of the fund, such as what kind of mechanism there could be for investors to exit if need be.”
A report published by property firm Savills and timber specialist UPM Tilhill in November showed that the price of woodland rose by 49 per cent per hectare during the preceding 12 months, with sale prices exceeding asking prices by 32 per cent.
UPM Tilhill managing director George McRobbie said: “An increase of nearly 50 per cent up to £6,920 per hectare is staggering.
“The increase in values is being driven by strong investor confidence.”