Forestry and agriculture ABS with Sandbox Funding
We invite our investors to invest in Sandbox Funding new ABS program that includes 5 loans to forest and agricultural land company “Ozolu Meži” LTD. Loans to borrower company are issued to support business operations expansion and growth – to acquire, process, and develop a larger amount of forest properties.
About ABS program:
- Total amount – EUR 150 000 EUR
- Skin in the game – 10%
- Available for investments – 135 000 EUR
- Term – 9 months
- Interest rate – 11.75 % p.a.
- Penalty fee (in case of late repayment) – 15 % p.a.
- Type – SME / forestry and agriculture
- LTV – 70%
- Trust score – B+
- Location – Latvia
- Collateral – Full commercial pledge on company shares
About Borrower company:
Name – “Ozolu meži” LTD
Reg number – 44103097153
Reg date – 05.12.2014
Legal address – Beātes 5, Valmiera, Valmieras county., Latvia
Board member – Edgars Vecozoliņš
Crefo Score – 166
What is CrefoScore
Efficient early-stage credit risk indicator, providing immediate assessment of credit applicant’s solvency. CrefoScore corresponds to an estimate of the expected probability of default over a time horizon of 12 months. The higher the CrefoScore, the higher the probability of default.
“Ozolu Meži” shows stable and positive CrefoScore with a positive tendency shown in the last 2 years. Company’s score is significantly above the industry average.
Read more about CrefoScore here
Borrower company and field of operations
“Ozolu Meži” LTD is a forest and agricultural land company with main operations to acquire, process, and develop a larger amount of forest and agricultural land properties. “Ozolu Meži” brings together individual landowners and large local and international forest investment and management companies.
Business success factors
- Perfected evaluation and sales process
Almost 10-year experience plus a team of 10 industry experts (contractors) enabled the company to perfect acquisition process of forest and agricultural land properties. Track record confirms that the current sales process is one of the best on the market.
- Speed and know-how
Active sales process, quick decision-making, and know-how of local legislation enable to maximize value of each property. Properties mostly require a pre-sale process, including optimizing tree stock and legal procedures (compared to architect navigating through construction regulations to optimize the design and obtain construction permission).
- Competitive edge over foreign capital buyers
Knowledge of local market and legislation combined with competence in structuring complex deals ensures strong partnerships with large local and international forest investment and management companies.
Clients in Latvia and Europe are well-known forest and agricultural land development and management funds. Among our clients are – SIA SG Capital Meža Fonds, SIA Ingka Investments Latvia, SIA SCA Latvijas meži, SIA Latvijas Finieris Mežs, Skogsutveckling Syd AB Latvijas filiāle, SIA HD Forest, SIA NFF III LATVIA, SIA SKOGSSALLSKAPET.
Financial and business performance indicators
Business performance indications, “Ozolu Meži” LTD*
Borrowers’ business performance indicators for the last 5 years highlight the company’s stable position in the market. In the last 5 years, the net profit to annual turnover ratio has been 37% (30% in 2022).
The Borrower company has a proven track record of solid business model. Currently, the sales team has generated sales leads that need more working capital than own company`s capital. Excellent sales network and state-of-the-art valuation of leads and closing process enable the company to further grow. It allowed the company to triple turnover in 2021 and foresees at least 20% top-line growth and keeping up with historical profit margin.
The company’s equity has continued to increase reaching 1 396 354 EUR due to operations being profitable and shareholder determination to not use profit to distribute dividends but instead reinvest all the amount in further fueling growth.
Total land (in hectares) acquired in 2022 – 200 ha. In 2023 already acquired 170 he with a total value of 609 000 EUR.
Average “time to deal” (from property acquisition to agreement with large property management funds) – 3-6 months.
Market situation
Global economic processes directly affect agricultural and forest land and timber market prices in Europe and Latvia. The price of land has remained stable (no decreasing tendency), but because of shifts in the global economy, round wood prices have significantly decreased. Raising the ECB’s EURIBOR rate with the aim of reducing inflation. As a result, the construction volume has significantly decreased and the demand for wood raw materials has naturally decreased.
Since October 2022, the price of round wood continues to fall. The situation will stabilize, and the demand and prices will increase accordingly. The increase in demand is forecasted due to EU green directives, which determine an increasingly active transition to alternative fuels (for example, wood chip boiler plants). The other factor is that markets will also have to compensate for the volumes of materials that were recently imported in large quantities from Russia and Belarus.
As a result, large international land and forest development funds have slowed down their property acquisition capacity. These funds look at the markets (and adjust their performance and acquisition strategy) globally, while we understand the market – locally. Many market conditions indicate that this is a good time to purchase properties, and develop and “clean” all legal rights to structure effective deals with large land and forest development funds in the near future when the prices will go up.
We expect that in 2024, the market will become more active as the average property price increases.