MyFarm chief executive Andrew Watters is one of four directors of Afforestation Partners Management, the partner in the venture.
MyFarm has opened the second half of a fundraising for planting medium to hard hill country in Pinus radiata, after $7.5 million was committed by wholesale investors in the first stage.
The CQuest Carbon and Forestation Fund is targeting $15.2m in total to buy land and plant 1500ha over three years.
With additional bank debt of 31%, the fund is projected to have $22m to invest.
The first stage involves planting next winter 356ha of seedlings on Puketawa station, near Tiraumea in Wairarapa hill country, followed by about 300ha of a second property in Central Hawke’s Bay.
The purchase and subdividing of these farms, including on-selling buildings and good flatter land for continued farming, is under way.
The minimum investment amount for CQuest is $50,000, with $10,000 increments thereafter.
The projected dual income streams are the sale of carbon credits from sequestration between years five and 17 and the wood harvest about 10 years later.
Using a carbon sales price between $50 and $60/tonne of carbon dioxide equivalent, modelling says the fund will generate a lifetime internal rate of return (IRR) between 6% and 9% annually.
Every rise of $10 in the carbon price would produce a 2% rise in the IRR.
It is forecast to generate 10-13% free cash flow annually during the carbon sales years.
The sequestration rate is modelled on 480t/ha at a cost of $20-$25/tonne.
The $1 units in the fund will be tradable on the Syndex platform.
MyFarm head of sales Grant Payton says Afforestation Partners was bringing the forestry expertise and management, secured seedling orders for two years and the registration process for the Emissions Trading Scheme (ETS).
It had planted 1500ha in the lower North Island over the past three years and was managing 3000ha for investors.
“MyFarm is looking for further properties to apply the funds from CQuest, but the real estate market is tightening up with demand from overseas,” Payton said.
“Stage 2 is open until December 10 and it will depend on what size properties we find if there is a stage 3.”
Conscious of the anti-forestry sentiment among sheep and beef farmers, MyFarm wanted to emphasise that harder hill country only was being planted and the better quality subdivided to remain in livestock production.
The CQuest information memorandum says the fees and expenses will be: an establishment fee of 4% of land purchase and development costs; annual administration and supervision fee of 0.3% of assets under management; a one-off underwriter’s fee of $96,000 for securing the Puketawa property; one-off third-party establishment costs of $75,000 for Puketawa; and performance fees as profit shares of 3.5% of any carbon revenue and 5% of any capital distributions after sales of properties and forests or cutting rights.
MyFarm’s partner in this venture is Afforestation Partners Management, two of four directors and part-owners being MyFarm chief executive Andrew Watters, Feilding, and David Marshall, an accountant and farmer of Tutu Totara, Marton.
MyFarm also has a 12.5% stake in Afforestation Partners.