Year 2020 is very surreal for some of us. I have a cousin who almost lost her life this February due to a virus infection. She is my age and is now left with damaged kidney that may require a transplant. Then came COVID19. Suddenly the whole city came to a standstill. We are quarantined in our own home for months. People lost their jobs. One of them is my best friend. Some have to endure pay cuts. Others continue their essential services. There is not much that I can do. So I finally have some time to look after my garden.
I told my family and friends that I would start by planting some vegetables. If the quarantine persist, I will switch to planting durian. Durian is a tropical fruit that takes years to mature. I meant it as a joke. Until I saw this company Plantation International
They are supposedly a multinational plantation and farm management company. Managed forestry as an asset class? I thought this is interesting. So let's dig in. I am looking at their subsidiary company Durian Harvests. Their plantation on offer is based in Malaysia Johor Kulai, which is a stone throw away from Singapore. To be clear they are not selling the plantation land with Durian trees. Instead as I understand they are offering contracts to sub lease their durian trees to investors in parcel for a period of 20 years. After which they provide the plantation management services to help grow, harvest and sell the fruits when they mature. So I guess legally you own the harvest with the sub lease contract and are entitled to the sales proceed.
Let's look at some figures stated in their prospectus that is linked below:
It is a projection example based on a <10 durian trees plantation ownership package>,
Trees per Plantation 10 Trees
Purchase Price USD 32,800
Harvest Cycle 20 Years (Annually)
Total Harvest Net Returns USD 130,252
AVG. Annual Harvest Proceeds USD 6,513
AVG. Annual Net Returns 19.86%
Before we get too excited about the 19.86% returns, I need to remind you that this the average annual net returns for 20 years. For the first year, expected annual return is NIL. For the 2nd to 4th year, 0.40%. For the 5th and 6th year, 7.0+%. Given the counter party risk involved, the long holding period does not appeal to me at all. I wonder if there is any shortcut.
How about buying an existing durian plantation complete with a perpetual agriculture land title?
I am checking out some offers once the quarantine is lifted.
Updates on 5/6/2020:
I am able to find a seller on businessforsale Asking price is around USD2m for 12.39 acres of durian plantation with annual harvest income of around USD200k. ROI is 10% annually
Another seller is contacted through my family members. Asking price is around USD560k for 8.0 acres of durian plantation with annual harvest income of around USD28k. ROI is 5% annually. They managed to visit the land and took some pictures:
Updates on 12/6/2020:
One more offer spotted on Facebook. Durian plantation in Ayer Hitam for sale. 28 numbers MSW old trees and 110 numbers MSW young tree in 6 acres of land. Comes with a 4 storey building with swiftlets bird nest. Harvesting approximately 1kg of bird nest per month.
Sale price listed at RM4xx,000 per acre.
Meantime, my Vegepod continues to flourish. It's a jungle now :)
Further readings
Fraud alert for Agarwood Tree Investment: https://www.straitstimes.com/business/invest/another-agarwood-investment-scheme-under-scrutiny
Trending alternative investment: https://www.scmp.com/business/article/2181206/time-branch-out-trees-offer-alternative-investment-property-market-wobbles
Cashflow study for a hectare of durian plantation done in 2010: https://animagro.blogspot.com/2010/11/cashflow-of-durian.html
A blog by a Malaysian durian farm owner