Forest in Latvia – a profitable investment

Through his consultancy assignments in the forest industry, Per Johansson became aware of the possibility to invest in forest land. In autumn 2023, Per took the first step by buying a forest holding in Latvia through his company Stora Sandön. Just one year later, the company owns no fewer than nine forest properties, with a clear objective to expand.

“I’ve worked a lot in eastern Europe and Russia, and when I started to look around for the best investment opportunities in forest, my interest quickly homed in on the Baltic market,” he explains.

Stora Sandön is an investment and management consulting company, set up by Per Johansson in 2012. Today, around twenty people are involved in the business, whose main focus is consulting services within strategic development, digitalisation, and supply chains. Sustainable investments of the company’s capital are also a key part of the business operation, and investments in forest are a way to manage and create value, while contributing to the global goals in the 2030 Agenda.

“Together with Skogssällskapet, we’ve drawn up an investment strategy. We’ve also had really valuable help with assessing the properties that have come up for sale. Latvia has very favourable prices for forest properties, and has a strong wood market.”

Goal: Six percent return on the forest

The war in Ukraine has affected the wood market in Latvia, as trade with Russia has been cut off. Wood prices are high, and there is great interest from Nordic wood buyers. Based on the strong growth in Latvian forests, Stora Sandön set a minimum target of six percent return from their forest investments, a figure reached already in the first year.

“You can compare that figure to Sweden, where the return can be as low as two to three percent (excluding the value change of land)”, says Per Johansson.

Average size of forest properties in Latvia is considerably smaller than in Sweden, which makes the possibilities for consolidation particularly important for anyone planning to buy and own forest. One criterion for Stora Sandön was that the forest properties they invest in should lie close to one another, to ensure cost-effective forestry measures. Another important factor was proximity to the wood market, to ensure good prices.

The company’s current ambition is to invest in at least 1000 hectares of forest within five years, with an annual purchasing rate of 7-10 properties.

Important to do thorough research before the purchase

Per Johansson explains that the ownership structure in Latvia is often more complex than in Sweden, with co-ownerships involving families at many levels. The ownership structure and the poor maintenance of many forest properties make it important to conduct detailed investigations before buying.

“We’ve benefited a lot from our collaboration with Skogssällskapet, both in learning about the local market and for understanding what our expectations could be for the properties we buy. We have a management agreement with Skogssällskapet, so we could get forestry under way directly, and both felling and planting could be carried out cost-effectively and smoothly,” concludes Per Johansson.