Commercial forestland investments : a comparative analysis of ownership objectives

Abstract: Since the early 1990s interest rates have been decreasing, which has led to lowered yield on traditional secure financial assets as bonds. It has resulted in a flow of capital in the financial market towards alternative investments in the search for yield beyond the stock market. The forest asset has traditionally been desirable in a portfolio for the diversification aspect associated with the unique characteristic of the biological growth being uncorrelated to the financial markets. However, the interest in forestland investments has become more diverse through the monetization of non-timber values. In Sweden, the price of forestland available for purchase by juridical persons has increased rapidly since the abolishment of the price regulation in the early 1990s. This study aims to identify forest owner categories of commercial forest investors within the Swedish forestland property market. The thesis used a multiple case study design conducted through a mixed-method data collection combining quantitative and qualitative data. The quantitative part consisted of a total survey from secondary data of the last 20 years' transactions of forestland from juridical persons. It was followed by a landowner classification which constructed owner categories present on the Swedish property market of forestland. The quantitative analysis was followed by a qualitative part, using semi-structured interviews to understand the owner categories objectives and perception of risk and opportunities with forestland ownership. The data analysis method used was theoretical interpretation and the applied theories were the net present value (NPV), Capital Asset Pricing Model (CAPM), Vertical Integration (VI), taxes, and types of risks in forestry. The results from the quantitative part derived nine owner categories from the secondary data, where six of the categories were related to forestry land use. The qualitative analysis indicated that the different owner categories have various objectives of acquiring forestland. Forestland was primarily seen as a financial asset and as a strategic resource for the industries. Taxes were not found to be a significant reason to invest in forestland for any owner category. The owner categories have in common that they are positive towards increasing their holdings. The main perceived risk among the owner categories was associated with the legislature, reputational and physical risks. The legislature and reputational risks are mainly connected to the uncertainty of prerequisites of the silviculture related to policy interventions. The contribution of this thesis consisted of constructing a classification of forestland acquirers in the Swedish property market of forestland. Furthermore, it identified different owner categories objectives associated with forestland ownership and the category's perceived risk and opportunities.