Great Southern ...

Hi everyone ... just wandering if anyone knows the process of disposing of tree plantations from Great Southern.

Understandbly that the investment of trees is not very liquid ( and I understand this ) however just wandering if anyone has invested anytime in understanding the sale process and if in fact there are any buyers that would be interested.

We slightly over-invested in funds as part of the tax minimisation strategy NI promoted last year. Now the interest repayments are affecting our affordability calculation in the eyes of the lenders when shopping around for a PPOR loan. Hence why I ask the question ...

Cheers ...

 

As a "grower" with GTP for the last almost 7 years, I thought I would enquire into the "seconds" market for the woodlots mid last year. Upon contacting GTP in Perth was told although there was a secondary market for woodlots it was in fact very hard to find anyone to buy them and only at a fraction of your invested price, e.g. if you invested $10K you would be lucky to find anyone to pay you more than $3500 in the initial years 'cause your trees are still small and presumably you did not get the tax benefit buying on the secondary market. However check it out with GTP direct and they will give you the answer, but you may have to hang on for the full term to recoup your initial investment.

 

GTP

Redover,

Have you been purchasing each year or just a one off purchase 7 years ago??


Bob

 

Redrover, any response?

 

One off 7 years ago in GTP, and several investments in TIM.

 

I guess you have not received any returns yet then?

 

No return until maturity which is early 2009. Remains to be seen whether you get your money back or not!! certainly there is virtually no secondary market in woodlots. Hopefully there may even be a profit at the end of the day.

 

so redrover, did you go into the agribusiness scheme for the tax deduction and the potential for some return from the woodlots? Or was the plan to use the tax refund to invest into something else as well.

How did you fund the initial purchase, finance/cash?

 

It was only a small investment and was for the tax deduction to offset gains made from real estate sales. Paid cash, financing was not worth it - remember any financing on these schemes carries a liability as far as your debt servicing ratios are concerned when you want to buy something else and require finance. I did not get a tax refund, but a reduction in my taxable income which was the purpose of the exercise. If you believe the investment advertising blurb at the time of purchase I should also get some capital gain on the eventual sale of the woodlots but I will have to wait 18 months to find out.

 

Thanks for sharing redrover.

In regards to the liability, this is true, but it is projected to be an annual income producing asset, well the grapes are anyway, so the banks would have to take some of this income into account. Further with the navra method, you buy units in the navra fund which also generate income, so if anything your serviceability should actually increase if things go to plan.

 

The trees certainly do not produce any return until maturity so if you are using debt to fund you have to carry it for the duration.

Grapes may have a "projected" return over a few years but also the grape crops may fail, pests, etc. or there may be a surplus as there has been in the past and create a glut and there goes your "projected" return. I think the banks need to see a couple of years "actual" return for their debt servicing criteria to be satisfied.

I guess you could say rental income is a "projected" return but it is far more certain than something that needs to be cultivated and watered!!

Who said he would never invest in anything that needs to be fed, watered or exercised!!

 

True, the grape crops may fail and not return anything, but like i have mentioned earlier, there is the Navra returns as well to take into account.

Who said this?

 

Great Southern has just released a statement regarding the resale of their units after having held them for 4 years - Trading of Forestry Managed Investment Scheme Interests for full details. I dont know what the resale value would be...