Such  a surge in supply, coupled with  a small amount of managers in  the market, naturally creates  opportunities for investors.  “Outside the US it’s a less  developed opportunity. Fairly  inefficient markets exist in pockets  of South America, but the most  prudent opportunity set persists  in New Zealand and Australia,”  Snyman says.  “If one was to extrapolate, this  opportunity is where the US was a  decade ago.”  But there are signs that this  flood of supply has swamped the  number of interested investors,  with only two bids made for the  $500 million Forestry Plantations  Queensland, it was reported last  month.  Snyman says the next five  years will be crucial for the new  growing timberland markets. While  there is a “relatively small number”  of Australian and New Zealand  managers capable of extracting  great value from the incoming  opportunities, many managers,  local and global, will be deploying  funds, and “it’s crucial that they get  prices right,” Snyman says.  The prices they pay must  accurately reflect the quality of  the timberland and plantation  management, but also the type of  wood on offer and its commercial  appeal.

To ascertain this, they need  local know-how. So despite their  experience, “global timberland  managers that only have a presence  in the US, and fly-in, fly-out of  Australia will be at a disadvantage,”  Snyman says.  He has seen offshore managers  fly in to Australia and out-bid local  players to get deals. “But timberland  requires patience,” he says. “The  supply coming on in the next five  years will be significant, and we’ll  be watching assets trade at higher  prices. So we think managers with  a presence on the ground will have  an advantage over global managers  who don’t.  “They will be looking at some  assets coming to market – and not  only on the quality of timberland  and management, but also access to  market.”  Currently, there is a “handful”  of timberland managers in Australia  and New Zealand with adequate  experience and resources on the  ground. Some global managers,  with regional staff plugging them  into timberland markets such as the  US, Latin America, Australia and  New Zealand, will also know the  correct values of the coming deals.

In Australia, the market exits  for timberland assets are mainly the  domestic housing, pulp, furniture  and biomass industries. Most  of New Zealand’s commercial  timberland, concentrated in the  North Island, has been harvested to  feed Chinese demand for housing  supplies ever since Russia bumped  up its tariffs on wood exports.  Managers can also use  timberlands to “eke out” other  sources of revenue, such as livestock  grazing and wind turbines, Snyman  says. “But the core remains the  forests themselves and managing  these assets.”  In pursuing these returns,  managers must also mitigate  risks, such as fire and disease,  and determine the best times to  harvest. Later on, the need to  ensure timberlands are reforested  so they meet their full commercial  potential.