Secondly, the market for existing plantations seems intransparent and illiquid. For the seller, it therefore made trouble and needed time to find a suitable buyer. This is well aware of the buyer and he will put the seller under pressure to increase a liquidity discount to get, so its own IRR. Buying an existing teak wood Plantation: the perspective of buyers purchasing an existing teak wood plantation avoids certain risks for the purchaser. Firstly, the results of the project are clearly visible and the risk of soil quality and suitability of the site can be better appreciated. Rather has the difficulty to do due diligence and careful clarification.
Due to lack of data, a buyer does not seem needed some time to find out whether or not the called plantation has potential. For the discerning buyer, such opportunities are much more interesting, especially since he is better able to give an opinion on the expected volume of wood and the harvest due to the existing tree diameter. So, you can reduce the risk of buying into an existing plantation for the buyer. The second aspect is that the “lock-in” period 20 to 25 years may take in a greenfield project as is buying into an existing brownfield plantation investment depending on significantly may reduce the investment period for investors from the age of the plantation -. A shorter holding period means less risk for the investor. Also for cash flow estimates, various assumptions must be taken (inflation forecast, expected sale price, and wood volume). In the case of miscalculation, an estimate is by definition not the same as the actual result is the difference between the reality of less serious for a brownfield project as a greenfield project.
A greenfield project original assumptions are further extrapolated into the future and thus cause larger deviations from reality, as when a brownfield project. Conclusion under the point of view of the incoming Risk it might be wiser to invest in a legacy plantation. More clarity over several previously unknown variables (soil quality, effectiveness of the planting strategy), so that the risks can be reduced and the investment period is shortened. However, this approach requires more care, due diligence and attention to the price to be paid.