Finnish asset manager United Bankers has reached an agreement to sell 33,000 hectares of forests in Finland to MEAG, the asset manager of Munich Re Group. Acting on behalf of one of its clients, MEAG’s acquisition of a total forest area larger than the city of Munich marks one of the largest forestry transactions in Finland.
Upon completion of the deal, the buyer will pay approximately €166 million for the 33,000 hectares of forest properties and partnership interests of UB Nordic Forest Fund II LP. Launched in 2015, this fund represents United Bankers’ second private equity vehicle investing in physical forest properties. The agreed price, which reflects the value of the forest properties and future rental income from wind power leases on properties, translates to an internal rate of return (IRR) of 13.3 percent per annum for investors in the fund. After the sale, United Bankers remains the fourth largest private forest owner in Finland through its forest funds, with a total forest area of approximately 133,000 hectares.
“Due to the great success of the forest investment program for Munich Re Group, MEAG has decided to offer its market access also to other institutional investors,” says Wendelin von Gravenreuth, Head of Illiquid Assets Forestry at MEAG. “These investments are ideal for long-term investors who are looking for inflation-protected returns, attractive cash flows and a low correlation with other asset classes,” he continues. “We are pleased that by investing in Finland, we are further enriching our diverse portfolio in one of the most developed forestry markets.”
“Due to the great success of the forest investment program for Munich Re Group, MEAG has decided to offer its market access also to other institutional investors.”Wendelin von Gravenreuth, Head of Illiquid Assets Forestry at MEAG
“Finnish forest land offers an excellent way to diversify investments into an asset class that provides stable returns independent from financial market developments. The transaction was driven by MEAG’s strategy to expand the forestry exposure of its clients into Finland, where the buyer has no previous forest holdings,” Jyri Hietala, CEO of UB Nordic Forest Management Ltd, explains the background to the transaction. “UB Nordic Forest Fund II LP offers the buyer a large and well-managed portfolio of forest properties, which together with a long-term cooperation agreement with UPM-Kymmene Plc, will secure professional management of the forest assets also in the future.”
“The transaction also demonstrates the effectiveness of our Buy and Build strategy.”Patrick Anderson, CEO of United Bankers Plc
“The current transaction shows that the valuation levels of our forest funds are moderate when compared to the return requirements of large investors for forest investments,” adds Patrick Anderson, CEO of United Bankers Plc. The forestry team at United Bankers employs the strategy of buying individual properties or small pools of properties to drive asset value growth through the ‘buy and build’ premium created when acquiring nearby properties to achieve operational synergies. “The transaction also demonstrates the effectiveness of our Buy and Build strategy,” confirms Anderson. “Interest in the forest as an investment will remain high thanks to both the environmental values of well-managed forests and the increasing and more diversified end-use of wood.”
