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Hardwood Forests Investment Is A Growth Industry

April 8, 2009Article by Ray Withers

Putting cash in to sustainable hardwood forests is a growth industry – and a chance for the eco-conscious to offset their carbon footprint with an ethical investment.

The strategy is a simple cycle of life – the money literally grows on the trees not necessarily in the land.
* You buy a plot of land on a commercial sustainable plantation as a forestry investment
* Trees are planted, managed, thinned and harvested hen they are fully grown
* The timber is sold as sustainable hardwood
* The cycle starts again

Hardwood tress reach maturity between six and 15 years after planting, depending on the type of timber.
Agar wood is the quickest grower and teak the slowest. Putting money in to a stand of hardwood is in line with the medium to long-term return expected from any other investment.

Improving your green credentials

Investors also improve their green credentials by offsetting their carbon footprint. Generally, an average UK family of four produces 18 cubic tonnes of carbon emissions a year, this could be offset by making a tropical hardwood investment in 300 teak trees plus maintenance costs.

Click here (http://actonco2.direct.gov.uk/index.html) to calculate your carbon footprint.

Investing in sustainable hardwood

A typical investment is Sustainable Timber Hardwood, Anuradhapura, Sri Lanka , offered by UK consultants Property Frontiers, of Oxford. This investment package offers flexibility on harvesting trees. Harvests are recommended to take place at six years growth to utilise the maintenance and management programmes in place. Crops are continually monitored for signs of pest and disease and crop thinning ensures that the best plants are selected for development.

Figures have shown that even investing in only 300 trees can produce a staggering profit of at least £40,000 at when harvested. Projections are based upon a conservative estimate of yield from research carried out by the University of Minnesota regarding agar wood growth rates, in conjunction with the price of agar wood chips based on current and historical market values. 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. The cycle starts again by rolling over some of the income in to further tree investment and contributing towards maintenance giving further profits further down the line.

Author

Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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