Expert interview: Sustainable return potential, even for the small purse
For their expansion, Jäderberg & Cie now invites co-investors to benefit from this extraordinary, monopoly-like constellation. In addition to their private placements and institutional solutions, Jäderberg & Cie. issued two new regulated equity offerings to retail investors. In an interview, founder and CEO Peter Jäderberg explains the opportunities and risks.
Mr. Jäderberg, your house deals with an unusual raw material ...
Jäderberg: For us Europeans, it is relatively unknown, but billions of people, especially in Asia, have been using it for millennia: sandalwood, one of the world's most precious tropical woods. The tree contains an essential oil, which is sought after and known for its healing, medicinal effects as well as its fragrance. The worldwide desire for a variety of uses has led to overexploitation, and now the tree is threatened with extinction. The traditional wild game supply has plummeted by more than 96 percent and is under state protection.
So where do you get your sandalwood from?
Jäderberg: Our partner was the only one who managed to cultivate this tree extensively as reforested mixed forests. To expand these areas in the tropical north of Australia, they have invited a handful of international investors to own plantations directly and independently. These include the State Fund of Abu Dhabi, the Endowment Fund of Harvard University and the Church of England. We were the first international plantation investors in 2010 and now own five plantations totaling 700 hectares, making it one of the largest sandalwood companies in the world. All of these plantations are sustainably managed, processed and centrally marketed by our Australian partner. This makes us part of a world-wide dominant recycling community. This is the source of our sandalwood.
And how is the sandalwood used, what are the sales markets?
Jäderberg: Traditionally, it is used in Ayurvedic and Chinese medicine as a natural remedy and aroma. Furthermore, for example, as fragrance, soap and in various customs, rituals, in everyday life of Hinduism, Buddhism and other cultures. We see our markets in natural cosmetics, aromatherapy up to modern medicine - with a lot of price potential. In other words, the unusually attractive market constellation is, to say the least, that we are part of a commodity monopoly, for which demand is greater than supply in the long term, and because of the large number of sales markets, we have great freedom and control in pricing. The vertically integrated value chain increases the margin and thus the return on investment. In addition, nature will prevent potential imitators from catching up on the growth of our plantations or harvest time if they started to grow sandalwood today. Unusually advantageous.
Mr. Jäderberg, your house has launched two new assets. How are investors involved in this constellation?
Jäderberg: With these two offers, our public investors are shareholders in our plantations and co-operators through a German KG. Therefore, after the harvest, they receive proceeds from the exploitation of the sandalwood and the precious essential oil, for which the wholesaling already pays up to 5,000 US dollars per KG.
For whom are the new participation offers suitable?
Jäderberg: We have launched two different public assets to meet different investor needs. The minimum investment amount for the JC Sandalwood Invest 10 is 10,000 euros. Here investors can expect a return of 9.2 percent IRR after tax. This equates to 13.4 percent IRR before taxes. Overall, investors are to return 300.2 percent after taxes. The plant runs until 2033, first payments are already planned from 2028. In addition, there are possibilities of individual advance payments of up to 6 percent pa, but then at the expense of the harvest distributions.
And the second investment?
Jäderberg: We are very pleased that with an investor-friendly savings plan we are making our unique investment accessible to a broader public as a meaningful admixture. With the JC Sandalwood Invest 11 investors invest in the same plantations and thus have the same harvest times as the one-time investment. Because this is a savings plan, the fund is also suitable for investors on a smaller budget. By default, the investor starts with a first deposit, followed by 96 additional saving rates from 100 Euro upwards. According to the prospectus, investors are expected to receive 179% payouts and 6.4% IRR returns. This equates to 9.0 percent IRR before taxes.
Why do you think that the concept arrives at the customer?
Jäderberg: The entrepreneurial return is certainly attractive. However, I see the greatest value in the admixture effect, as sandalwood is unusually independent of capital markets, currencies and economic cycles. It stabilizes every asset portfolio. I would like to emphasize that the fair distribution of costs means that the first deposit is not disproportionately burdened with commissions, but the investor is immediately invested with his investment ratio. And in the case of blows of fate, there is a hardship rule, so that investors can suspend savings rates, without being burdened with further costs. As with the one-time investment, the savings plan investor has flexible options for making special payments or increases.
They advertise that an investment is an "impact investment". Why?
Jäderberg: The sustainable cultivation on plantations counteracts the depletion of the Indian sandalwood population in its original homeland and protects the species from extinction, because for many years Indian sandalwood has been on the Red List for Endangered Plant Species of the World Conservation Union. Quintis has received several awards for her approach to water and nature. The project exemplarily supports ethics, ecology and social, corporate responsibility and is a prime example of impact-based investing. On our website and in our information documents, we show the more detailed.
There was economic trouble for your partner Quintis last year. Is that still a risk for investors?
Jäderberg: No, the Quintis Group, after all world market leader in the management and marketing of sandalwood, successfully completed the restructuring process in October 2018. The company is optimally positioned economically. Quintis has been given fresh capital thanks to large, financially strong partners, such as BlackRock, who have recognized the enormous potential. This also successfully protected the investment of more than 3,600 Australian private investors and international institutional investors, including the Jäderberg & Cie. Group. With the Restructuring is secured funding for the coming years. The newly established Quintis will focus fully on the management and marketing of sandalwood. We benefit from this and our co-investors.