Articles
Brinkman seeks funding for Costa Rica teak plantation
Company looking at alternatives outside B.C.’s limited silviculture industry
Business in Vancouver – June 30, 1998
By David Jordan (djordan@biv.com)
Faced with limited prospects in B.C., one of the province’s largest silviculture contractors has come up with a unique growth idea: a teak plantation in Costa Rica.
Brinkman and Associates has been conducting pilot projects in Costa Rica for the past three years. The company is now seeking investors for a 200-hectare plantation, which is expected to begin producing marketable timber in seven to eight years, with trees reaching full maturity in 20 years.
The private company is offering shares in a limited partnership. The shares cannot be traded, but the investment vehicle offers investors a payoff in the form of tax credits for 10 years, then a share of profits from teak harvests until the end of the plantation’s life in 20 years.
"We chose the structure of a limited partnership with maximized tax benefits because in the first years all we do is spend your money and the best thing we can do for you is create a tax benefit," said president Dirk Brinkman.
Brinkman is currently looking for an investment brokerage to market the offering. He said it’s a tough sell because of the black eye limited partnerships have suffered recently in the wake of media scrutiny of investments such as those promoted by the Magellan Group.
In addition to the public’s scepticism about limited partnerships, Brinkman has to contend with bad publicity resulting from investment scandals in Europe.
Brinkman is careful to distance his project from those get-rich-quick schemes. He said his plantation’s projected annual yield of 26.7 cubic meters per hectare is a conservative estimate, based on results from neighbouring teak plantations. European investment schemes were promising as much as 50-80 cubic meters a year.
It was the decline of forestry in B.C. that led Brinkman to expand internationally. "I don’t see our industry as having plateaued yet, but we have been saying for the last decade that we have to being working internationally," he said. "Certainly in the immediate future I see a downturn for silviculture in B.C. I don’t see a downturn in the long term, even though with the NDP’s very social silviculture agenda, it’s hard for us to see a bright business future." (See Out of the Woods, page 8)
Brinkman searched the globe for regions where the most valuable trees could be grown in the least time. He found four climatically viable areas; within those, Costa Rica was the only country with a stable government.
A pilot project for a concept that Brinkman anticipates bringing back to B.C. "We have some draft concepts on the boards for B.C. that we anticipate proceeding with in the next two or three years, but we see first establishing the investor concept where it’s easiest to demonstrate returns, and that’s with high-value tropical hardwoods," he said.
Spruce or fir plantations in B.C., which will produce logs that sell for $100-$200 a cubic meter after 80-100 years, won’t be as lucrative as tropical hardwoods, which sell for $2,000 a cubic meter and reach maturity in 20 years. However, "There’s a future in B.C. for this kind of investment," said Brinkman. "The returns won’t be as high, but it’s at home and it’ll be easy to understand."
