A large holding of mature forestry has come on the market through agent DTZ Sherry FitzGerald for €1.85 million.

The substantial plantation – extending to approximately 344 ha (850 acres) of forestry lands, of which 325 hectares (803 acres) are planted – is located at Glenagh, north Mayo.

It is dominated by the main commercial species, Sitka spruce, planted in 1992. The remainder is a mix of lodgepole pine, birch and larch.

Ireland’s climate and soil types give it an advantage in producing some of the fastest-growing and highest yielding forestry in the world. Timber demand outstrips supply in Ireland despite a rise in planting levels over the past 20 years.

Forestry contributed some 1.3 per cent of Ireland’s GDP in 2010.

Demand for timber from Irish forests is growing and by the end of this decade it is estimated that demand will outstrip supply by 1.6 million cubic metres.

“Much of this demand will come from the energy and small wood sectors and this portfolio is ideally positioned to take advantage of this burgeoning market,” says Shane O’Flynn of DTZ Sherry FitzGerald.

“This north Mayo holding represents a unique opportunity to acquire a significant mature plantation in one single lot. We expect to achieve a high level of interest from both Irish and overseas purchasers for the plantation.”

FORESTRY FACTS

The total estimated economic output (direct and indirect) of the forest industry to the Irish economy was €2.3 billion in 2012. Total employment generated by the forest and wood products sector stands at around 12,000.

In 2012, exports of forest products from Ireland were valued at €303 million while forestry imports were €513 million.

Almost 10.5 per cent of Ireland’s land area is under forestry – amounting to 731,652 hectares – and this area is increasing. The total area of new forestry planting for which afforestation grants were paid in the years 2004 to 2013 inclusive was 75,145 hectares.

Since 1994, forestry has delivered an average return of 5.65 per cent per annum.

Approximately 89 per cent of the output from Ireland’s panel products sector is exported along with almost 60 per cent of our sawn timber production.

Ireland is the largest exporter of MDF to the UK, through the Coillte-owned Medite Europe, and its share of the market grew from 33 per cent in 2007 to 44 per cent in 2010.

Some 47 per cent of Ireland's forests is privately owned with the remainder in public ownership, mainly vested in Coillte. Most private forests were planted over the past 20 years, consequently many are approaching thinning stage and the output from these woodlands is set to increase significantly in the coming years. This roundwood volume (timber in trees) to come to market is forecast to increase from 2.68 million cubic metres in 2011 to 6.95 million in 2028.

Forestry rotations are typically 30 to 40 years. Forests provide the largest outdoor area for recreational use in the country. Annual visitor numbers to Irish forests are in excess of 18 million. After wind energy, wood fuels are the largest contributor to renewable energy generation in Ireland.

With its climate and suitable soils Ireland can grow many tree species considerably faster than its European neighbours giving Ireland a strong comparative advantage in the growing of wood fibre.

TAXATION

Profits or gains from woodlands in the State managed on a commercial basis are exempt from income tax and corporation tax, (but not from the USC or PRSI). Distributions paid out of such exempt profits or gains are not regarded as income for the purposes of the taxes acts but the exemption granted to such profits, gains and dividends is, however, subject to the high earners restriction.

For chargeable periods starting on or after January 1st, 2004 details of all such profits, gains and losses must be included in the annual return of income to the Revenue Commissioners.

The normal rules relating to the keeping of records and the making available of those records for inspection by the Revenue also apply. Capital gains arising to an individual on the sale of woodlands are also exempt from CGT insofar as they relate to standing timber.

Any gain attributable to the underlying land is subject to CGT. Companies and other bodies of persons are liable to CGT on gains arising from the sale of woodlands and standing timber.

WHY INVEST IN FORESTRY?

Low entry and exit costs; low risk and safe investment if managed professionally; land-based investment; trees are a biological growth product which adds value by increasing in volume each year; possibility of other site development like wind farms enhancing returns.

RISKS WITH FORESTRY?

A potential lack of liquidity (this can be reduced in a large portfolio with a diversified maturity profile of forests); risks that can be insured against (fire, flooding and wind), and those that cannot, such as disease; demand for forestry could fall, but managers could reduce harvest levels in times of lower demand; industry standard public liability insurance should be taken out and maintained by the investor on their properties to mitigate against the cost of public liability claims.

GRANTS AND PREMIUMS

Government grants are designed to cover 100 per cent of the costs of planting the land with trees.

Forestry premiums are paid for 15 years to farmers and non-farmers. Premiums vary on the species. For example, premiums on Sitka spruce range from €154 per acre (where the holding is less than 20 acres) and €162 per acre on holdings above 20 acres. The corresponding figures for oak are €219 and €227.

Commercial forests are generally designed so that, when the premiums run out, the forest is ready for thinning in order to maintain an income stream.

First thinning takes place between 14 and 20 years.