Holdco putting City Forests up for sale

Invercargill City Forests Ltd’s forestry estate of more than 3000ha is now on the market after the Invercargill City Council's holding company was directed to rationalise its portfolio in May last year.

The estate — 14 South Island forests in Southland, Otago, and Nelson-Marlborough — has a total area of 3599ha, having 3058ha of productive land in mainly pinus radiata.

Invercargill City Holdings Ltd (Holdco) general manger Andrew Cameron said the sale by tender "in an ideal" world would be completed shortly after the first call for expressions of interest closed on March 31.

The reason Holdco was getting rid of its forestry assets was because of the type of portfolio it wanted and not due to the state of the industry, including a slump in prices, and he was confident there would be interest in the "significant sale" for the company.

"It had nothing to do with ‘forestry’ per se. It’s more to do with the fact that ... it’s effectively a commodity, and the holding company formed the view that the commodity nature of it didn’t really suit the investment portfolio that we were trying to build," he said.

"We can only go off historical sales in the last 12, 18 months and there’s plenty of interest around. And there has been plenty of interest in prior sales from other parties. So, at this stage, forestry itself appears to be a good investment — if it suits your portfolio."

Forestry expert, DANA Ltd director Dennis Neilson, of Rotorua, said although the 14 forests formed "a significant estate, especially for Southland" as a corporate forest owner, the size of the estate would be at the smaller end of the scale as New Zealand’s major players held up to 200,000ha.

For a variety of reasons, New Zealand was a favoured country for international forestry investors, he said.

"I would say that it would be most likely that there would be multiple bidders, including multiple bidders from overseas."

And the short-term issues facing investors "may impact on the bid prices", he said.

Also, "if this gets any worse for any longer" some possible sellers might consider delaying a sale.

Colliers International’s specialist forestry sales team has been appointed to market the estate by way of a two-stage expressions-of-interest process.

"The forests have a total stocked area of 2999ha, principally established with radiata pine as well as smaller sections of douglas fir and other minor species," forestry director Warwick Searle said in a statement.

"A further 59ha is awaiting replanting while the remaining freehold land has either been land-banked or is unproductive."

Mr Cameron said Invercargill City Forestry would still exist after the sale, but without any assets. Holdco had no interest at this stage to go back into forestry.

"But are we going to invest in other opportunities or look at other things? ‘Yes’ is the short answer to that as well.

"We will contemplate what we do going forward, but it’s not like we’re selling this to buy something else."

hamish.maclean@odt.co.nz