Super Fund in bid to boost stake in Kaingaroa forest

3 May 2012

The New Zealand Superannuation Fund has teamed up with a global investment firm to bid for full ownership of the cutting rights to the country’s largest commercial forestry estate.

The Super Fund and Boston-based investment firm GMO Renewable Resources want to buy out Harvard Management Company’s (HMC) majority stake in Kaingaroa forest in the central North Island.

If successful, the deal would return more of the prime timber-generating asset back to New Zealand hands.

In 1996 the state-owned Forestry Corporation, of which Kaingaroa was a part, was sold for $2.2 billion to Fletcher Challenge and its partners.

The state-owned Super Fund confirmed yesterday the parties were discussing a possible deal, but declined to comment further.

The parties hold the harvesting rights to the Central North Island plantation forest that covers 170,000 hectares. A number of different iwi own the land, which is leased to the forest’s management company Timberlands.

HMC manages Harvard University’s US$32 billion ($39.2 billion) endowment fund and holds a 60 per cent stake in Kaingaroa.

GMO represented Harvard in the purchase of the Kaingaroa cutting rights from receiver Michael Stiassney in 2003.

The price of the trees and unrelated assets of the forest was undisclosed but at the time Stiassney said the forestry estate was valued at up to $650 million. The Super Fund owns the remaining 40 per cent stake, which it bought in 2006 for $300 million.

The New Zealand Superannuation Fund has teamed up with a global investment firm to bid for full ownership of the cutting rights to the country’s largest commercial forestry estate.

The Super Fund and Boston-based investment firm GMO Renewable Resources want to buy out Harvard Management Company’s (HMC) majority stake in Kaingaroa forest in the central North Island.

If successful, the deal would return more of the prime timber-generating asset back to New Zealand hands.

In 1996 the state-owned Forestry Corporation, of which Kaingaroa was a part, was sold for $2.2 billion to Fletcher Challenge and its partners.

The state-owned Super Fund confirmed yesterday the parties were discussing a possible deal, but declined to comment further.

The parties hold the harvesting rights to the Central North Island plantation forest that covers 170,000 hectares. A number of different iwi own the land, which is leased to the forest’s management company Timberlands.

HMC manages Harvard University’s US$32 billion ($39.2 billion) endowment fund and holds a 60 per cent stake in Kaingaroa.

GMO represented Harvard in the purchase of the Kaingaroa cutting rights from receiver Michael Stiassney in 2003.

The price of the trees and unrelated assets of the forest was undisclosed but at the time Stiassney said the forestry estate was valued at up to $650 million. The Super Fund owns the remaining 40 per cent stake, which it bought in 2006 for $300 million.

Kaingaroa was the Super Fund’s biggest single investment and best-performing investment in the 2011 financial year, off the back of strong demand for logs from China.

The pension fund has a total timber investment portfolio of $1.26 billion, which makes up about 6.5 per cent of its $19.5 billion funds under management as at the end of March.

Timberlands said Kaingaroa was recognised internationally as an intensively tended forest that produced high-quality logs of radiata pine, with smaller volumes of Douglas fir and other pines. It is a major supplier to the central North Island wood processing industry, as well as supplying logs for export to markets in Japan, China, Korea, India and other Pacific Rim countries.

The Super Fund, formed in 2003 to fund the country’s long-term pension costs, acquired its minority interest in Kaingaroa in 2006.

Boston-based GMO Renewable Resources has offices in Rotorua, Massachusetts and Uruguay. It has investments in more than 900,000 acres of timberland in New Zealand, Chile, Australia, Uruguay, Panama, Costa Rica, and Brazil, and more than one million acres of forestry in the US.