Reasons to invest in Baltic forests
HD Forest offers low-risk investments with an expected return rate of 5-6 % and full investor control. Future prospects are good, as timber products will be highly valued in the biobased society.
When investing in forestry with HD Forest you can expect a secure investment with a future Internal Rate of Return (IRR) of 5-6 %. HD Forest is a part of Hedeselskabet with over 150 years of forest management experience in Denmark. We have 25 years of experience in the Baltics and ensure competent management of your forest investment.
HD Forest operates in Estonia, Latvia and Lithuania. All three countries are members of NATO and EU, and the currency is in Euro, which provides the same benefits as for the rest of Europe. The Baltics are thus ideal for safe and profitable forest investments.
High historical return rates
As illustrated on the graph, 2/3 our investors have historically had an Internal Rate of Return of more than 10 % on their forest investment:
The graph shows total returns – unleveraged and net of all costs and management fees. Most importantly, no investors have experienced a loss during our more than 20 years of operations in the Baltics.
Investing in real estate, farmland and forestland has always been acknowledged as secure investments. Baltic forest investments are no exception: Historically we have seen a stable development in timber prices and the value of forest properties.
The biological risks such as wildfire or severe insect attacks are relatively low, because the semi-natural mixed forests of the Baltics show a great resilience towards these threats. In addition, your investment will typically spread geographically over several properties, which decreases the risk further.
Promising future perspectives
Investing in Baltic forestry has promising long-term perspectives, because it delivers biobased products to the society.
All 100,000 hectares of forest managed by HD Forest are certified according to FSC and/or PEFC – and are furthermore subject to the modern forestry legislation of the Baltics. This makes the timber produced at HD Forest a resource, which will be highly valued in the biobased society; thus we expect a notable rise in demand for Baltic timber products in the future.
Low forest prices
Investing in Baltic forests comes with the additional advantage of low forest prices that are significantly lower than is the case in Northern Europe – which means you will be able to produce more responsible timber products for the same amount of investment compared to investing in forest in other European countries.
Estonia (45,230 square kilometres)
The Estonian forest area covers more than 2 million hectares, which is half of the total area of land. Private forest ownership constitutes 43 %. Forest growth constitutes approx. 16 million cubic metres/year. Annual harvest is around 11 million cubic metres.
Key facts about Estonia: EU and NATO member, EUR currency, GDP/capita (2018): 23,250 USD. Export of forest products accounts for 13 % of the total exports. The forest sector contributes 6 % of the total GDP.
Latvia (65,000 square kilometres)
Forest covers 52 % of the total land area, which accounts for 3.4 million hectares. Private forest ownership constitutes 45 %. Forest growth constitutes approx. 17 million cubic metres/year. Annual harvest is around 12 million cubic metres.
Key facts about Latvia: EU and NATO member, EUR currency, GDP/capita (2018): 17,860 USD. Export of forest products accounts for 20 % of the total exports. The forest sector contributes 5 % of the total GDP.
Lithuania (65,300 square kilometres)
Forest covers 1/3 of the total land area, which accounts for more than 2.1 million hectares. About 1/3 of the forests are privately owned. Forest growth constitutes approx. 11 million cubic metres/year. Annual harvest is around 9 million cubic metres.
Key facts about Lithuania: EU and NATO member, EUR currency, GDP/capita (2018): 19,150 USD. Export of forest products accounts for 13 % of the total exports. The forest sector contributes 3.8 % of the total GDP.
Full investor control
Your investment at HD Forest consists of tangible forest properties that you own.
Thus, as a forest owner you are in full control of your investment: You are always in a position to put your forest for sale and get out of the investment again. There is no binding period. Historically the track record for selling forest properties in the Baltics has been relatively quick due to the high demand on the market. In the future we also expect that you will be able to sell your forest investment again within a reasonable amount of time.
Flexible forest management
As part of formulating your investment strategy, we recommend the country most suitable for your investment based on a number of factors, including your short-term and long-term goals, local conditions and any preference you might have.
The daily management set-up is flexible: You can leave the entire management to HD Forest – or you can be a hands-on forest owner participating more or less in the daily management of your forest property.
For instance, you can benefit from a flexible harvesting schedule: When timber prices are low, you do not have to harvest timber in your forest, if you can spare the liquidity. You can leave the timber standing for a couple of years without compromising the quality of the wood products. On the other hand, when timber prices are high, you can take advantage and increase the volume of harvest in your forest to maximise economic yield.
Typical investment set-up
We can structure the deal according to your wishes. Normally we establish a limited company in the Baltic state where you would like to invest. The limited company will then purchase forest properties to an extent defined by you as investor.
The forests are hereafter managed by HD Forest: We will manage the forest operations but also the limited company and even the bank account – it is all up to the actual agreement we make.
- Attractive return expectations (5 %+ IRR net of fees and costs, unleveraged)
- Low risk
- Flexibility and investor control
- Long-term investment
- Historical returns; 10-12 % IRR
- Significant forest sectors nationally
- Efficient infrastructure and good market access
- Modern timber processing industries
- EU, NATO, EURO-zone
The manager: HD Forest
- Full-service provider
- Investment set-up
- Forest management
- Administration and reporting
- 20+ years’ experience
- 100,000 ha management for private forest owners
- Total value of our clients’ forests approx. 500 million EUR
Benefits beyond financial return
- Certified investment (FSC & PEFC)
- Well positioned to capture upsides:
- Climate change mitigation (e.g. afforestation)
- Future replacement of fossil raw materials with bio-materials (construction, energy, textile, bio-plastic, etc.)
Invest with HD Forest to gain solid diversity in your portfolio
As listed above, there are numerous good reasons to invest in Baltic forests:
- Stable Internal Rate of Return (IRR) of 5-6 %
- Low risk, secure investment
- Forest investment with long-term perspectives
- Full investor control and no binding period
These are your four take-home points, as to why you should invest through HD Forest. We look forward to hearing from you.
Read the rest of our FAQ here.
- Q: Which return rate can I expect, if I decide to invest in Baltic forests?
A: The expected return rate is 5-6 %, when you invest through HD Forest. The return rate is unleveraged and net of all costs.
- Q: How has the Internal Rate of Return (IRR) been in the past?
A: Our clients have experienced different return rates, but none have suffered losses during our 25-year long track record:
- More than 2/3 of our investors have had above 10 % IRR
- Around 1/5 have had 6-8 % IRR
- Under 1/10 have had 2-4 % IRR
- Q: How do you ensure a responsible forest management?
A: All our managed forests are certified according to either PEFC or FSC – two globally recognized forest certification systems.
This guarantees that all harvested timber is responsibly produced, which means that we:
- Protect exposed nature areas
- Harvest less cubic meters of timber than grown every year
- Leave deadwood for insects and fungi
- Secure new generations of trees to grow up after harvest of mature trees
- Q: Is it safe to invest in the Baltics?
A: We claim that investing in Baltic forestry is as safe as investing in forestry in any other European country.
Estonia, Latvia and Lithuania are all members of NATO and EU as well as being part of the EURO-zone. Investing in the Baltics therefore comes with the same benefits as for the rest of Europe.
All Baltic countries generally score high in international transparency ratings and are acknowledged for having open, modern economies with growth above the EU average.
Property rights are secure and well-documented with fully digitalised land cadastral systems and low transaction costs when trading properties.
Join our field trip to the Baltics!
If this has piqued your curiosity and made you want to experience Baltic forestry and the supporting woodworking industry with your own eyes, we recommend you to join one of our yearly field trips. You can also request a field trip, if you have specific wishes regarding when and where in the Baltics you specifically want to go.
Contact us now
Fill in the form for a non-binding chat, and we will contact you as soon as possible. If you have general questions or want to know more about our field trips, fill out the form below.
HD Forest advises on forest management, provides promotion and brokerage services relating to the sale of forest areas and advises on acquisition of forest areas. Annual returns may vary, and an investment in forest areas could lead to a loss of all or part of the capital invested. HD Forest is not liable for any tax consequences associated with investments in forest areas, and investors are therefore advised to seek professional advice from a lawyer and/or an accountant.
Tax differences: There are some tax and legal differences between the Baltic States. Contact us to know more.