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Every Christmas, we invite them into our homes and what happens? We spend the whole time pouring them drinks, finding them headache pills and catering for their fussy tastes in food. It takes days to clean up after them. And it still feels like they’re under our feet weeks later. No, not the in-laws. I refer, of course, to Christmas trees.
According to experts (or at least the people who were contacted by a Daily Mail reporter for a December space-filler two years ago), the average Christmas tree will drink a third of a pint of water a day, but also require regular top-ups of vodka and lemonade, to kill off bacteria and provide glucose for its cell structure, as well as salicylic acid from aspirin tablets to prevent fungal infection; and the ongoing absence of bananas or other fruit that emit ethylene gas, as this can cause premature needle drop.
But even if you went to all these lengths, the chances are your central heating will reduce even the juiciest spruce to twigs by the Feast of Stephen — leaving you to pick needles out of the shagpile well past Twelfth Night.
At £200 or $200 for a six-foot fir, it is a lot of expense for something that, when discarded alongside your neighbours’ in that first week of January, will form one of the most depressing of all suburban tableaux. If only families realised a tree could be for life, not just for Christmas.
Thankfully, there is now a chance of this message getting through, following two rather larger coniferous transactions. Never mind the 6m small British Christmas trees that will enter landfill sites next month, think instead of the 30,000 hectares of forest that asset manager Gresham House can let you buy into, having acquired Aitchesse, a forestry manager, last month for £7.7m. Tony Dalwood, chief executive of Gresham House, shares the view of Digby Guy, chairman of Aitchesse, that the risk/return characteristics of forestry are “such a good fit for institutions and families”.
Similarly, try to see the wood for the 35m Christmas trees in the US — in particular the 5.3m hectares of wood that timber group Weyerhaeuser will own after agreeing to acquire Plum Creek three weeks ago for $8.4bn.
Rick Holley, chief executive of Plum Creek, believes the $100m of cost synergies will enable investors to “capitalise fully on the improving housing market”.
Timber itself, however, appears a market on which wealthy families could scarcely improve. In the US, the National Council of Real Estate Investment Fiduciaries index shows the annual return on timberland over the past 28 years has averaged 13 per cent.
In the UK, IPD Annual Forestry Index puts the average annual return over 22 years at 8.9 per cent, which, as Gresham House notes, beats UK equities and bonds. Dalwood attributes this outperformance to the “illiquidity premium”: the extra return investors expect for not having the ability to sell at short notice. “Returns have been good,” he says. “In timber, we are in the early stages of people getting used to this. The illiquidity premium should reduce over time, as appreciation for the asset class increases.”
Anthony Crosbie Dawson, portfolio manager at rival forestry adviser FIM, argues that getting used to the long-term nature of the asset class is what gives timber investors an advantage over those in other real assets. “Forestry has big advantages over farmland,” he says. “You don’t have to harvest annually.” He cites the example of 2008-09, when housebuilding “fell off a cliff” and timber prices plummeted. FIM kept its trees in the ground and let them add more volume — and deferred value.
Timber price volatility remains a risk — FIM may not pay its target 3 per cent tax-free income distribution to investors if low prices mean it has to harvest too many trees to fund it. But, instead, FIM might look to pay a larger distribution once prices have recovered.
Sunaina Sinha, managing partner of Cebile Capital, even sees evidence of a secondary market developing, enabling her to advise clients on half a dozen forestry asset sales.
Add in sustainable policies and tax breaks for long-term investors and it is possible to see why trees have been a purchase of choice in recent festive seasons. In December last year, Aitchesse advised the Church of England on a deal to buy 15 forests for £49m. No need to worry where this year’s vicarage Christmas trees will come from. But the vodka, on the other hand
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