The O'Kane family, who sold contractors Mercury Engineering for almost €150 million, are among the backers of a new forestry venture seeking to buy harvesting rights from private plantation owners.
Family Tree Impact Investments intends to spend €50 million over three years buying harvesting rights from farmers and other private landowners who have planted commercial forests on their properties.
Initial backers of the firm include the O’Kane family, who sold well-known contracting business Mercury Engineering in 2018 for a reported €147 million.
David Hourihane, who previously established Ireland Energy Efficiency Investments, a €78 million government-backed fund that supported in green energy projects around the Republic, is another investor.
A number of institutional backers have also come on board, according to John O’Reilly, chief executive of Newgen Forestry, Family Tree Impact Investment’s manager.
However, he says that the fund is focusing mainly on recruiting family offices – businesses that invest on behalf of families – to back the project.
According to Mr O’Reilly, about a million acres – or 600,000 hectares – of forest in the Republic are privately owned.
Farmers and other landowners planted most of it with the aid of the Government’s Forest Service Premium Scheme, which paid them an income for the first 20 years of their plantations’ lives.
Fell and sell
Family Tree Impact Investments will pay 30 per cent of the forest’s value up front and the balance over 20 years, to landowners either no longer receiving cash from the scheme or who are close to the end of doing so.
In return it will get the right to fell and sell their trees once they mature. “That will allow them to convert the future value of their crop into cash,” Mr O’Reilly said.
The fund hopes this will generate returns of 6-8 per cent a year. That will come from three sources: the increase in the forest’s value as it grows, cash from harvesting and selling the trees and income from selling trees as the maturing forest is thinned regularly.
Family Tree Impact Investment is interested mainly in plantations of coniferous trees of four hectares or more within 100km of sawmills.
Ronan O’Kane said his family saw forestry as an attractive asset that combined commercial and environmental returns.
“We believe our seed investment, alongside our investment partners, will be a catalyst to attract further institutional and family office investors into this exciting sector,” he added.
The fund, formally launched on Thursday, hopes to spend €8 million-€10 million buying harvesting rights to 2,000 hectares of forest this year. It intends to invest a minimum of €50 million by the end of 2023.