Forests: An attractive asset for investors
#Vineyards — 24.06.2020

Forests: An attractive asset for investors

Forêt I Agrifrance I BNP Paribas Wealth Management

Real Estate is a coveted investment for investors. Families and entrepreneurs consistently allocate a significant portion of their wealth to the asset class that offers long-term perspective and the characteristic of real non-replicable assets.

Within the asset class, forests have always offered a differentiated exposure mixing personal pleasure, tool of portfolio diversification and safe haven value. In several countries, like France, they also benefit from fiscal advantages drawing investors.

Nevertheless, not all forests are made equal. Investors are mostly looking for large forests offering the possibility of a financial yield through either timber exploitation and/or hunting licenses.

"Real Estate is a coveted investment for investors. Families and entrepreneurs consistently allocate a significant portion of their wealth to the asset class that offers long-term perspective and the characteristic of real non-replicable assets.

Within the asset class, forests have always offered a differentiated exposure mixing personal pleasure, tool of portfolio diversification and safe haven value. In several countries, like France, they also benefit from fiscal advantages drawing investors.

Nevertheless, not all forests are made equal. Investors are mostly looking for large forests offering the possibility of a financial yield through either timber exploitation and/or hunting licenses."

Benoit Lechenault, Head of Agrifrance at BNP Paribas Wealth Management

However, the value of forests also comes from the increasing attractiveness of the asset itself. The underlying average valuation of forests in France for example has increased by 3.5% per year over the past 20 years (source: Société Forestière CDC).

Some may question the evolution of the market price of forests considering the noticeable decrease of the French timber market in 2019, compared with 2018 . Matthieu Carbillet, Deputy Head of Agrifrance at BNP Paribas Wealth Management highlighted that “At this stage, we don’t know if the market price drop will impact the value of the underlying forest asset. In the past, we have seen that it requires several years of market price drop or stagnation to impact valuation levels.”

Overall, the market sees a shortage of offer compared to the sustained demand for this type of assets. Like many real assets, forests offer the key characteristic of being unique and by nature limited in availability. This characteristic is one of the drivers of the underlying valuation increase over time.

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About Agrifrance

Agrifrance is the specialist rural property division of BNP Paribas Wealth Management, Wine making properties, beautiful prestige homes, agricultural fields, forest areas. With more than 40 years of experience in this area, Agrifrance supports its clients in their heritage approach. With its network of recognised professionals, Agrifrance is also able to provide complementary services such as expertise in and management of rural properties.
For almost 20 years, Agrifrance has been producing an annual report that provides insight into rural land investment. This year, the study focuses on the rural land market in Britain.

Agrifrance is one of the asset diversification services proposed by BNP Paribas Wealth Management alongside Private Equity, Real Estate and Art Advisory