The Flat Rock Forests Trust March 93 prospectus said that Parapine[1] and ITT Rayonier had a cutting right agreement to clear fell in 95 this 107.7 ha forest on land variously described within the same document as 183, 184.9, and 185 ha of land.[2]   The forest was valued at $973,427 and the land at $140,000.  The land was said to cost $125,000 but the forest cost was impossible to determine because, for an unexplained reason, included in its $571,970 price was the cutting right for the Lawrence Forest.

The 31 March 93 annual return put the forest area at 100.6 ha and said the harvest would be 93 and 95.  It said the land had cost $84,905 and the forest had cost $589,020 — again including the Lawrence Forest cutting right.  (No figure that I could find was ever given for either forest separately, as if they came in a set.  Francis Creek, however, is located in Upper Hutt while Lawrence is in Wanganui.  They weren’t even purchased on the same day.)  Cutting rights for three unspecified parcels of the Arbor forest were sold in 93 for $105,000. [3]  We were told Arbor was paid $90,000 1 April 93 and $271,000 was due 31 July 93.

The 31 March 94 annual return said 41 ha of Francis Creek was harvested, with 55.9 ha remaining to be harvested under a cutting right with ITT Rayonier.  It reported that 21 ha had been replanted and replanting was continuing.  The forest was, however, still described as being 107.7 ha.

The 31 March 95 annual return said 8 ha had been harvested and informed the unitholder that title to $350,000 was in dispute.  On another page, the disputed amount was said to be $370,000.  “Revenue in excess of $150,000 from harvesting to date is in an independent trust account pending resolution.”  Forme had not included the disputed amount in their subsequent valuations.  A further 38 ha had been replanted.  (This indicated that more was being replanted than was being harvested.)

The 31 March 96 annual return said “…some harvesting took place…” and commented that the dispute over title to certain trees had been resolved in the Trust’s favour, though, curiously, the Manager had accepted “…only 75% of the proceeds.”

The PriceWaterhouse summary report said that the Trust had “entered into a cutting agreement on the remaining 20 ha of mature trees in conjunction with its marketing agent, Logrite New Zealand.”  (Marketing agent?)  From June 97 to November 97, approximately $300,000 was received.  The 97 sales brochure said Francis Creek Forest was 43.3 ha freehold established 93-95 (though 59 ha had supposedly been replanted) and a further 40 ha were available for planting.  This leaves approximately 100 ha of land unaccounted for.  (Whether any of that land was forested is unknown.)

The full PW review said the cost of bush for Francis Creek was $242,000.  Forme had valued the forest March 97 at $574,000, projecting an estimated profit of $332,000.  This is impossible to reconcile with the figures provided over the years and, upon reflection, appears absurd.  The land was valued at $156,000.  That means 43.3 ha of 3-5 year old trees were worth $418,000 not including land?

What do the public records show?  In the Clearwood Holdings file, I found a mortgage dated 22 April 94 secured by an advance for the land comprised in CT 41D/673.  There was also a mortgage secured by an advance on a forestry right in gross (number B210808.1) over the land comprised in CT 41D/672.  B210808.1 had been created by a company named Huaranga Estates in December 91.  I looked at parcel 41D/672 on Terranet (and also looked up a couple of documents at LINZ) [4] and found it comprised of 118.8200 ha.  An agreement of some sort was filed by Huaranga October 92 on 32.555 of those ha.  (Perhaps this explains the “disputed” amount?)  On 23 June 94, the forestry right was transferred to Clearwood for $15,000.  (This was executed 14 January 94 and filed 15 June 94.)  On the same day, this forestry right was mortgaged to Countrywide.

Next, a caveat was filed by New Zealand Forests Management Limited — a name NZFL had for less than two months (see Changing Names).  I could find no other documents in the NZFL file at the Companies Office with this name on it.  A mortgage posted on 1 August 95 for which no information is shown.  On 9 August 95 a mortgage to Countrywide secured by an advance posted.

Document 21 in the Clearwood file was dated 1 July 97 and discharged the Countrywide mortgage.  However, it specified CT 48D/720, not title 41D/672 on which the mortgage was placed.  Document 22 released a debenture on 48D/720, though one was not in the file.

A look at 48D/720 revealed it to be a 4.5482 ha parcel that, indeed, had two partial discharges of mortgage from Countrywide.  Clearwood apparently transferred ownership of this parcel for $67,500.

In the Waimea Holdings file was information on another Francis Creek parcel — a mortgage dated 22 April 94 secured by an advance on forestry rights said to be for CT 41D/623.  That, however, proved to be a warehouse in Palmerston North.  The page following showed it should actually have been 41D/673.  Document 26 in the Waimea file released a debenture on the forestry right for 48D/720, though one was not in the file.  The unnumbered document following document 26 released a mortgage on the same.  It referred to document 9, which was actually for 41D/673.

A look at the archived Huaranga Estates file revealed that parcels 41D/672 and 41D/673 were once a single parcel, 27D/485, owned by Huaranga.  J D Mallon, corporate services officer at AMP Perpetual Trust, signed a letter in the file enclosing a PDS (Particulars of Directors and Secretary).  One of Huaranga’s directors, J P Feely, had (along with Mallon) originally owned a share in Clearwood.  Another Huaranga director, John Roger Donaghy, was FRFT’s first forestry manager.  (He was an employee of Arbor.)  Much of the detail surrounding Francis Creek remains to be discovered.

Lawrence

The FRFT March 93 prospectus said Lawrence was a 22.8 ha forestry right which was to be harvested in 93 and 2001.  Its value was given as $58,755.

The 31 March 94 annual return said the scheduled harvest for Lawrence had been deferred.  No reason was given.  At this point, the forest was still 22.8 ha.

Lawrence was not mentioned again until the (unaudited) 31 March 96 annual return, when it was revealed that logging would move into the 97 year.  Again, no reason was given.

The 97 sales brochure describes Lawrence as only 19.5 ha, established 1977.

In the full PW review’s discussion of yield records, it says Shannon (stand 771) had a value per ha of $10,418 according to D A Neilson and Associates (DANA).  Forme had valued it at $21,486/ha (a significant difference).  DANA on the other hand valued Lawrence (stand 772) at $21,664/ha whereas Forme had valued it at $10,089.  Of course, the size given elsewhere for Shannon was 86.3 ha.  Lawrence was less than one quarter that size, so the errors didn’t quite cancel each other (though this was not pointed out).

Forme valued Lawrence in March 97 at $119,000.  This was about $75,000 less than what would be expected from the per ha value cited by PW.  It was more than $300,000 less than the value expected if one used the DANA figure cited by PW.  The actual value of this forest is unknown to me.

According to the Clearwood file, on 22 April 94, a mortgage to Countrywide secured by advances against a forestry right in gross (number 993087.2) and the property described in clause 23 of the mortgage was filed.  This was revealed by LINZ to be from the Arbor Trust to AMP for $87,541 and covers 27.297 ha of the Pukenui Forest.  A mortgage was on file dated December 89, from John Stanley Lawrence to himself.  A transfer of this mortgage was made to Clearwood January 94 for $60,000.  The Countrywide mortgage was filed May 94.

[1] Owned by the same person who provided the trust with Bideford, Gary Wells.

[2]     In the NZFL file was a deed of assignment by way of security for an agreement for sale and purchase of standing timber dated 15 January 93 for $220,000 presented by Bell Gully.  No other details are given, but it must be for this.  It does not appear at LINZ as a title transaction.

[3]      Curiously, it was reported that .06 ha was planted in 1961 that was expected to be harvested in 2001.  (One 40-year-old tree?)

[4]      B374098.1 was a grant of forestry right on parcel 41D/673, sections 386. 389, and 390 which totaled 184.9490 ha.  It was subject to an unregistered forestry right to ITT Rayonier dated 7 December 92 good until 31 March 96 and an unregistered forestry right dated 12 October 92 to Parapine for 18 months beginning 30 November 92.  It was dated 22 April 94, filed 7 July 94 (as B369487) and re-filed 2 August 94.  Clearwood granted Waimea a forestry right number B365926.1 on freehold land that was subject to B365926.1 (hand written in).  Someone also hand-wrote 48D/720 on the back under 41D/673.  These were also dated 22 April 94.  B374098.2 was a mortgage for a forestry right between Waimea and Countrywide executed 22 April 94, filed 2 August 94.  So, on 22 April 94, Clearwood mortgaged the land, transferred the forestry right to Waimea, then Waimea mortgaged it.

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