Teak investment Belem Sky in Brazil with Emerald Knight Consultants and Global Forestry Investments (GFI)

 

 

 

 

 

 

 

 

Brazil is a popular country for alternative investments. It has a politically stable environment and a fairly strong and growing economy. It is one of the top ten largest economies in the world, and one of the famous BRIC-countries with a relatively high GDP-growth.

This investment (which I made in year 2012) is in a teak plantation in Brazil. The investment broker I used was Emerald Knight Consultants, a British company specializing in providing sustainable and ethical investments with high returns. The company is only marketing investment products and the contract is signed directly with the product provider. In this case, the product provider is Global Forestry Investments (GFI), a timberland investment company focusing on sustainable forestry investments. GFI also has a long term goal to help the local community in Brazil by working together with the local government and plans to build a school for the locals. GFI has offices in Brazil, UK and Dubai.

The teak plantation is located in Belem, in the region Para north east of Brazil, and the investment project is named Belem Sky plantation. I have purchased 0.1 hectares where around 100 trees are grown, managed by GFI with partners during the investment period. The trees are already eight years old and the plan is to do the final harvest in 15-18 years. There is an option to resell the trees after three years to GFI with a capital uplift of five percent. During the investment period there will be thinning of trees (selective removing trees to improve growth rate of remaining trees) around four times, which will provide extra dividends the year after the thinning since the removed trees can be sold. The expected average return is 10% per year over the investment period.
 

 

The figure above shows the Belem area by Google maps, marked with an “A”

A few years ago I invested in another teak project, in Panama. So why do another one? Well, there are two main reasons. Firstly, if I invested in this teak project through Emerald Knights, I would get access to another more lucrative investment (more about this investment in a later blog posting). Secondly, timber has historically been a very safe investment class with good returns. The teak price has increased steadily over the past 20 years and has a broad usage within both industry and private consumer industry. Also, teak is resistant against fungus, insects, fire and challenging weather conditions, making it a sturdy timber class.

 

The photo above illustrates how timber has shown attractive returns over the years in comparison to other investment classes (figure from Emerald Knight Belem Sky investment prospect)

It all sounds pretty good but how has this investment performed this far?

I was initially excited about this investment - pretty good returns and investing in something that brings something good to the locals in Brazil. The returns from the thinning process 2012 (around 10% of initial investment) were going to be paid out in January this year. Unfortunately this didn't happen and there was no communication about it from GFI until March when I emailed them and asked for the returns... The reason was apparently that it had been severe weather in the Belem region with heavy rainfalls that had delayed the thinning process. It seemed to be a fair explanation and I would have been ok with this little hiccup in the investment process but the payment delay continued. And continued... I still haven't received the promised payment and now it is eight month delayed! GFI has come up with more reasons for the delay but all is perceived as quite unprofessional to me. Emerald Knight has recently established a specific email-address for questions related to this issue so there seems to be quite a few investors experiencing the same problem... Maybe it is the first time GFI has this kind of project and I and the others investors waiting for money are “guinea pigs”? I hope not, but it sure seems that way. GFI has promised a compensation for the delay but I will believe it the day I see the money. My wife is quite pissed at me since I invested our common money and she is nagging me about it every other day – so I really hope I will see that money soon, especially since she doesn’t want to discuss new investments until I retrieve the funds!

 

Investment summary

 

I will update if and when I receive my funds, so stay tuned and subscribe to my blog (at the top right on my blog) - don’t miss out on more interesting stories!

My alternative investment in teak plantation, Panama

“Timber is one of the safest and steadiest growth investments available, protecting an investor in times of inflation, and providing returns that have beaten almost every other investment sector over the past 40 years. Teak in particular offers one of the best values and highest yields in the timber sector. It is a small niche segment of the timber industry and is managed by smaller, privately owned companies rather than by big institutional operators…” (read more about teak investments on http://www.nuwireinvestor.com/howtos/evaluating-teak-and-timber-investment-opportunities-53585.aspx)

Investing in a teak plantation year 2007 was my very first alternative investment. It was exciting from the very beginning, starting with convincing my girlfriend about the great advantages this investment had to offer, since I didn’t want to take on the risk alone... The investment time is very long (20 years), so my girlfriend and I made a huge commitment back then to each other (even though a 2^nd hand market for the investment exist, but will most likely not generate as good ROI as sticking to the original investment plan). Apparently she is happy both with the investment and me, since we are now married and have a wonderful baby!

This investment company (Teak Invest, http://www.forwood.com/en/) started actually quite early with teak investments, around year 1999/2000. Already back then I was keen on investing with this company, but since a capital growth rate of about “only” 10% was predicted I chose to continue with stock investments, where I had a significant higher capital growth rate thanks to my successful investments on the stock market.

One of the reasons why I later on chose to invest in this alternative investment is that it has a steady growth pace and is less volatile than the stock market. I used to do quite well for an amateur investor on the stock market, thanks to being well informed about stock market opportunities as well as the micro- and macro conditions affecting the stock market. However, I had some changes in my life that distracted me from the stock market information flow, which made me rethink my investment strategy. In order to be on top - and stay on top - when investing in stocks you need to be continuously well informed about what is happening with your investments. Bad news on the stock market can quickly affect the value of your investment negatively. I needed an investment type with slower pace, both information flow- and volatility wise. Therefore I found the teak investment as a great opportunity: stable growth and I did not have to be on top of the information flow (as there is not much information to consider and act upon).

So far I am very happy with my investment. I get regular updates about the plantation and apparently the plantation I invested in is the most prosperous among Teak Invest’s plantations this far. Hopefully it continues like that! In terms of return I am also content. If we assume that the investment grows with 10% per year this would give us, now 5 years after the investment, a return of 61%. However, I actually bought the investment during a promotion where I got 10% off the regular investment price. Considering this fact I have made a 79% increase of my investment this far, assuming that the real value of the investment still was the original price without promotion. Not bad at all!

One perk I really appreciate about this investment is the opportunity to visit the plantation. The investment company has regular trips to the plantation and I plan to make a trip to see my investment in a few years together with my family, combining it with vacation. I think the teak plantation visit would be a terrific way to teach my children about getting interested in the private economy and understand different ways to saving and investing their money.

Tectona Capital (http://www.tectona.se/) is another investment company offering teak plantation investments in Panama (for as little as 5 500 kr, i.e. about 600 EUR). I have followed this company for a while and it seems to be doing well and has expanded its business, which always is a good sign for successful companies. Tectona Capital also offers a property fund investment, focusing on the Panama property market. I will write more about property investments later in my blog, so stay tuned and subscribe to my blog, don’t miss out these interesting stories!