LONDON: Foresight Sustainable Forestry Company Plc, an investment company that invests in UK forestry and afforestation assets, announced five acquisitions and provides a trading update.
Acquisitions
Over the last two months FSF deployed £7.9 million (inclusive of tax and transaction costs) into four afforestation properties and one forestry property, all of which are in Scotland. The acquisitions increase the portfolio by approximately 700 hectares and FSF’s total portfolio now covers 9,751 hectares.
Each afforestation acquisition is well suited for the establishment of a woodland creation scheme and has design allocations to native broadleaves alongside commercially productive forestry and open ground. The Company is also exploring natural capital potential, including peatland and wetland restoration, for the properties. Once planted, the properties are anticipated to be awarded approximately 77,000 voluntary carbon units for the additional CO2 sequestered over the project lifetime.
The single forestry property provides the Company with a good opportunity to harvest, re-design and re-stock the site in the medium term. Once the harvesting programme has occurred, a new tree species composition will be incorporated to fully capture the property’s upside potential. Well located in relation to other portfolio assets, sawmills and timber processors, the property further expands FSF’s Scottish portfolio.
In light of the current volatility, the Investment Manager and the Company will ensure a carefully prioritised allocation of capital until the shifting macro-economic market conditions are fully understood.
The Company has not utilised its Revolving Credit Facility (“RCF”) and therefore has no direct exposure to rising debt base rates (Sterling Over Night Index Average, SONIA). A prudent approach to the utilisation of the RCF will be taken during these uncertain times given the rapidly increasing cost of debt.
During times of financial market turbulence, UK forestry asset prices have historically proved resilient. UK forestry is commonly acquired and owned without the use of debt which, in the view of the Company, provides an element of insulation against base rate increases relative to other asset classes where leverage is more frequently used.
Richard Kelly and Robert Guest, Co-Heads of Foresight Sustainable Forestry Company, commented: “We are delighted to have added these five high quality assets to the portfolio. Afforestation properties are a great opportunity for capital appreciation and unlocking additional value as the woodland creation schemes reach development milestones. They also make a significant contribution to the removal of carbon from the atmosphere.
Recent market volatility has created increased uncertainty within equity and debt markets. Whilst we believe that UK forestry is relatively resilient to market turbulence, it is of course important that we consider all potential impacts in our strategic decisions and as we carefully grow our UK portfolio. We will be closely monitoring market developments and remaining dynamic in our approach to the management of the Company.”
Foresight Sustainable Forestry Company Plc (“the Company”) is an externally managed investment company investing in a diversified portfolio of UK forestry and afforestation assets. Targeting a net total return of more than CPI +5%, the Company provides investors with the opportunity for real returns and capital appreciation driven by the prevailing global imbalance between supply and demand for timber; the inflation-protection qualities of UK land freeholds; and biological tree growth of 3% to 4% not correlated to financial markets.
It also offers outstanding sustainability and ESG attributes and access to carbon units related to carbon sequestration from new afforestation planting. The Company targets value creation as the afforestation projects successfully achieve development milestones in the process of converting open ground into established commercial forest and woodland areas.
The Company is seeking to make a direct contribution in the fight against climate change through forestry and afforestation carbon sequestration initiatives and to preserve and proactively enhance natural capital and biodiversity across its portfolio. It is managed by Foresight Group LLP.