Forestry Investment Risks
- ESTABLISHMENT AND MANAGEMENT OF PLANTATIONS SPLIT BETWEEN TWO COMPANIES
- FREEHOLD TITLE PREVENTS TOTAL LOSS OF INVESTMENT
- INTENSIVE MANAGEMENT REDUCES NATURAL RISKS
Making a purchase of this nature entails an element of risk. This page is designed to help you make a balanced judgement regarding this forestry investment. When you purchase a forestry plot, you purchase a natural product. The return on your investment is dependent on financial and natural factors and the quality of plantation management.
- Insolvency of Baum Kapital. Clients who purchased the freehold title to their forestry plot and as such they do not run any risk of loosing their plot and trees should this occur. The land they purchased is in their name and will remain that way until they sell it again. After the plantations are established, the involvement of Baum Kapital effectively ends and the management company of choice takes over management of the plot and trees.
- Insolvency of the chosen management company. In case of insolvency of the chosen management company, a new agreement with another management company would have to be signed. That company would then continue with management of the plot and trees and the harvesting later on. There are currently three management companies involved with the management of the plantations.
- Collapse of the timber market. Should the prices for timber collapse for whatever reason, harvesting of the timber can simply be delayed until the market has recovered. Meanwhile the trees will grow even bigger and thus more valuable.
- Currency risk. As the plantations are based in Germany, a currency problem with the Euro does pose a potential risk. However, as farmland and timber will always have a value in whatever currency comes next, this risk is mitigated.
- The biggest danger for young trees is excessive weed growth, as weeds have a direct and negative impact on the development of the trees during the first few years. As soon as the trees have outgrown the weeds, this risk is reduced greatly. Regular and intensive weeding by the chosen management company is needed to help the trees through the first phase.
- Forest fires and storms. Forest fires almost never occur in Germany, so the risk of a fire destroying a plantation is minimal. Storms do occur in Germany, but usually in the winter. During the winter, Acacia trees have no leaves so any damage is minimal. Most storm damage occurs in evergreen Pine forests.
- Spells of drought. In Germany it rains throughout the year. Additionally, all plots will have irrigation systems installed on them which will keep the trees irrigated.
- Wildlife. The only wildlife in Germany that can cause damage to trees are deer and wild boar. The fence that surrounds all plantations keeps out such wildlife.