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Ethical Investors Twig Sustainable Forests
June 30, 2009Article by Ray Withers
Ethical investors are barking up the right tree by investing in sustainable hardwood forest management
Illegal logging is depleting the world’s rainforest at the rate of clearing land the size of a football pitch every second.Now, truly green investors can balance the damage by putting cash in to planting new trees – and watch their money grow at the same time.
UK property consultants Property Frontiers have teamed with a specialist company dedicated to ecological reforestation projects.Some of the advantages, says Property Frontiers sourcing manager Ben Jefferis to this type of investment are:
* Initial investments from just £10,000
* Forecast returns of up to £256,540 from a £15,000 investment
* Several potential tax advantages for UK taxpayers include CGT rollover relief and an investment that can go in to a self administered personal pension (SIPP)
* Environmentally conscious investment which may be applicable for Carbon Credits in the future
* Various harvest date options allowing “waterfall returns” at 6 years, 9 years and 15 years
* Long term, unleveraged investment, a fantastic alternative to recent real estate market volatilityAdd to this the supply shortages, with around 40million acres of tropical forest being destroyed each year, and this makes for an outstanding investment opportunity.
Additionally, considering tree volumes increase at exponential rates, the longer left before harvesting the more handsome the returns.Investors also have the added advantage of choosing when to harvest according to the price and peaks in the market demand.
Two similar investments are offered –
* Puttalam, Sri Lanka
* Sabah, Malaysia
Both investments offer the same terms.Figures have shown that even investing in only 300 trees can produce a staggering profit of at least £40,000 at when harvested.For a minimum investment of £10,000, the investor buys 300 agar wood or teak trees and contributes £5,000-£6,000 towards maintenance costs.
* Agar wood trees are harvested after six years, producing a gross harvest value of £60,000, deduct the timber company’s profit share and the investor’s net profit is £41,000.
* Teak trees are harvested after nine or 15 years, when the gross harvest value is £246,450, leaving the investor with an anticipated net profit of £271,540.
A shorter-term option is available for teak These projections are based on a lumber price of £0.72 per board foot for the first thinning, increasing at an annual rate of 6% for the subsequent thinning and final harvest. The 5% profit share is retained as a harvest fee.The timber company has allowed a generous 10% for harvest and processing costs, which covers the milling the trees.