The market for shares in jointly owned forests is in many respects less efficient than the market for forest properties. This can offer attractive opportunities for buyers, but at the same time it can result in an unfair transaction price for sellers of the shares. This is particularly due to modest distributions of surplus and insufficient forest resource data in sales materials. It is difficult to assess the value of a share without sufficient information on the total volume of growing stock and how it is expected to develop.
Suomen Sijoitusmetsät Oy aims to promote fair pricing in the market for shares in jointly owned forests by developing the Joint Forest Share Marketplace and compiling the most comprehensive information possible to support buying and selling decisions, particularly on large and expanding jointly owned forests. Haapaveden yhteismetsä, selected as Joint Forest of the Year, has invested in transparent communication, making it easier to assess the value of its shares. Among expanding jointly owned forests, Metsänhaltija Joint Forest follows a similar approach. At the same time, Yhteismetsät ry is preparing guidelines on the information jointly owned forests should publish. The guidelines also take into account that the same practices are not suitable for jointly owned forests of all sizes.
The undervaluation of shares can also be corrected when a jointly owned forest sells some of its land. This occurred, for example, in the Rumo and Kiskonjoki jointly owned forests, where the value of the shares more than doubled following land sales. The marketability of shares can also improve if a jointly owned forest merges with another jointly owned forest whose shares are traded more actively.
Currently, on Omalla Maalla LKV’s Joint Forest Share Marketplace, shares in Sallan yhteismetsä are offered at a price equivalent to €1,110 per hectare and €15 per cubic metre of growing stock. By comparison, shares in Itä-Suomen yhteismetsä have been valued at €30 per cubic metre. “When these prices are compared with average figures in the forest property market, the undervaluation becomes clearly apparent,” says Joni Tervo, real estate agent at Omalla Maalla LKV. He continues: “Fundamentally, trees grow in the same way whether the forest belongs to a jointly owned forest or to a private owner.” Low valuations can easily result in tax-exempt distributions of surplus exceeding five per cent.
“A more efficient market for shares in jointly owned forests would also make valuation easier, for example in estate inventory and collateral valuation situations,” says Mika Venho, founder of Suomen Sijoitusmetsät Oy. If shares in jointly owned forests are valued in estate inventories on the basis of average per-hectare prices for forest land, the result may be an unreasonably high tax burden. On the other hand, without a functioning market for the shares, banks also find it difficult to determine an appropriate collateral value when there is no clear market price available.
If a forest owner has no heirs who wish to continue owning the forest, the alternatives are often either selling the property or contributing it to a jointly owned forest. From the perspective of forestry, the continued fragmentation of forest properties from one generation to the next is problematic, as it can weaken the long-term profitability of forestry. Joining a jointly owned forest offers a solution in which forest properties remain intact and in active forestry use, while owners retain the opportunity to maintain a connection with their forest assets through their shares in the jointly owned forest. Further growth in the popularity of jointly owned forests requires a credible and transparent market for their shares.
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