Canadians grab Great Southern

Chanticleer
Great Southern probe on slow boil
AFR (subscription) : 28 Jan 2011

In what is said to be the largest property conveyancing transaction in Australian history, Great Southern’s receiver, McGrath Nicol, has sold the land to Canadian pension fund Alberta Investment Management Corp for $415 million.

http://afr.com/p/great_southern_probe_on_slow_boil_0by2S71XpWbx6ec5wP3o8M

And,

Canadian pension fund leads group in buying Great Southern’s assets for $415m

Andrew Main
The Australian
29 January 2011

GREAT Southern receiver McGrath Nicol has raised $415 million for the failed timber group’s banking syndicate by selling 252,000ha of plantations to a syndicate dominated by a Canadian pension fund, Alberta Investment Management Corporation (AIMCo).

The buyer was a fund managed by the New Forests management operation, in Sydney.

It made the purchase through its recently raised $500m Australia New Zealand Forest fund, plus a majority contribution from AIMCo.

The banks were originally owed $700m but have been repaid some of that from asset sales and may yet recoup between 95c and 100c in the dollar of their loans, since liquidator Ferrier Hodgson controls some other assets that are yet to be sold.

New Forests managing director David Brand said the deal was the second biggest rural real estate transaction in Australia, after the Packer family’s $425m sale of 16 cattle stations in the Consolidated Pastoral Company in early 2009 to the Britain-based Terra Firma group. Great Southern collapsed in May 2009 when the managed investment scheme sector imploded, leaving more than 250,000ha of freehold plantation land in Australia looking for a new owner.

Unlike some other recent deals, Mr Brand said, this was a transfer of the freehold on the land in perpetuity.

The biggest line is 88,200ha in the Green Triangle straddling Victoria and South Australia, followed by almost 76,000ha close to Albany in Western Australia, with other holdings in Tasmania, Kangaroo Island, Bunbury, NSW and Queensland.

He said the buyer was not getting the trees on the land, which under a complicated MIS structure were still owned by the 35,000 grower-investors who put about $1 billion into Great Southern.

“We have two options,” Mr Brand said.

“We can let the trees grow to maturity, harvest them and pay investors and then replant our own trees, or we can buy them all out in bulk.”

He said many of the trees were six, seven or eight years away from harvesting but the land, valued in the Great Southern books two years ago at about $1bn, had cost less than half that sum.

Mr Brand’s organisation will manage the newly acquired holding, although the actual plantations will mostly be managed by Tasmanian timber company Gunns, which was recently installed by grower-investors as the responsible entity managing their timber assets.

AIMCo chief executive Leo de Bever said in Calgary that “the reason that this is such an attractive deal is that obviously, when you buy something out of receivership and you pay cash, that means you can buy at a steep discount. We figure (it is) somewhere around 40 per cent”.

He added that the deal had received all the necessary approvals from Australian regulators.

ADDITIONAL REPORTING: DOW JONES NEWSWIRES

http://www.theaustralian.com.au/business/failed-timber-groups-assets-sell-for-415m/story-e6frg8zx-1225996377794

And,

UPDATE 1-AimCo, New Forests scoop up Australia timber lands

Thu 27 Jan 2011 2:17pm EST

* At A$415 million, one of largest such deals

* 2,500 sq kms of land in six states

* Assets acquired out of receivership

By Jeffrey Jones

CALGARY, Alberta, Jan 27 (Reuters) – A Canadian public-sector pension fund has joined a forestry management firm in a C$415 million (A$415 million) acquisition of Australian timber lands, capitalizing on a failed government investment scheme, the companies said on Thursday.

Alberta Investment Management Corp and a fund run by Australia’s New Forests Pty Ltd are buying the timberland assets of Great Southern Plantations, which include more than 2,500 square km (965 square
miles) of land in forestry and agricultural regions in six states.

The pair are buying the assets out of receivership. They will be managed by New Forests, an investment firm specializing in timber lands and environmental markets such as carbon, biodiversity and water.

The lands offer long-term opportunities to make money in numerous ways, Leo de Bever, AimCo’s chief executive, said in an interview.

They have been unaffected by the country’s severe flooding, he said.

“There is a lot of optionality to this transaction. Some of this land may eventually revert to agriculture and some of it we may turn into a different kind of forest, for biomass for instance,” de Bever said.

The deal, one of the largest in Australia’s forestry estate business, fits into the fund manager’s stated investment criteria, which include looking for distressed assets in the fields of food, energy and raw materials. De Bever has about 10 years of experience investing in the Australian forestry sector.

“It is a very tricky transaction. It’s got a lot of moving pieces, and very few people could come up with the cash, which is what we did,” said de Bever, whose organization manages about C$70 billion in public pensions and other government funds for the Western Canadian province of Alberta.

“A lot of other people wanted to buy pieces but couldn’t get the financing and so on. We finally got tired of it and said, ‘OK, here’s a price for the whole thing.'”

AimCo has been an active dealmaker, making major investments in recent years in Precision Drilling Corp (PD.TO), Viterra Inc (VT.TO) and most recently, a six-lane toll road in Chile last month.

Great Southern Plantations was a managed investment company through which retail investors could help fund government efforts to reduce Australia’s shortage of wood products while gaining a tax break. It went into receivership in 2009, a victim of the economic meltdown.

“These are 650 individual pieces that were run by different organizations at one point, so the receiver ends up with all these things and we came along and made a bid for the whole kit and caboodle,” de Bever said.

“This transaction is indicative of the trend to move towards institutional ownership of Australia’s plantation forestry estate, which will allow the industry to consolidate and become internationally competitive,” David Brand, managing director of New Forests, said in a statement.

($1 Canadian=$1.00 Australian)

http://www.reuters.com/article/2011/01/27/aimco-newforests-idUSN2619153820110127