After over a year of bidding and negotiations, the Harvard Management Company (HMC) has finally closed a deal with New Zealand’s Central North Island Forestry Partnership, purchasing the 468,000-acre Kaingaroa forestry estate on Dec. 12.
Although HMC President Jack E. Meyer declined comment on the final purchase price, the New Zealand Herald stated that the estate has an estimated value of 820 million New Zealand Dollars—approximately $540 million.
The purchase will be HMC’s second investment in New Zealand timber, following a smaller transaction earlier last year.
Under the terms of the arrangement, HMC does not own the land on which the timber is located. Instead, the land is retained by the New Zealand Government.
Following the close of the deal, timber accounted for approximately 10 percent of Harvard’s $19.3 billion endowment, Meyer said. HMC also has positions in timber throughout the U.S. and Brazil and is considering purchasing other timber assets around world.
According to Meyer, Harvard owns a greater number of timber assets than its Ivy League counterparts. He cited Harvard’s timber assets as a partial contributor to the success of the endowment and said he hopes for “greater growth [in timber assets] in the future.”
“We think that timber as an asset class may be mis-priced. We believe we can get an 8-9 percent real rate of return from this investment,” Meyer said.
The most recent deal was brokered by Boston-based GMO Renewable Resources, an international Timber Investment Management Organization.
According to Meyer, HMC chose to work with GMO Renewable Resources because of their familiarity with the New Zealand timber industry.
The negotiations lasted over a year due to a number of technical difficulties, according to Meyer. The estate, previously owned by the joint venture of Fletcher Challenge Forests Ltd. and China International Trust and Investment Corp., had gone into receivership. It was placed on the market at 1 billion New Zealand Dollars, an amount owed to a syndicate of 12 banks.
HMC also had to compete with several other bidders for the assets.
Denis M. Schweder ’04, a New Zealand native, said he had read about the deal in the press and offered his two cents on Harvard’s purchase.
“ I think that the investment is a strong one for the HMC. Trees in New Zealand grow relatively fast so the time-frame for returns will be favourable,” Schweder wrote in an e-mail.
—Staff writer Adam P. Schneider can be reached at email@example.com.