UK company launches ground breaking new truffle investment programme
Edinburgh based Truffle Farms Europe Ltd (TFE), has launched a new truffle farm investment programme that, according to the company’s founder Martin Waddell; “will deliver higher returns, more quickly and at lower risk to potential investors than other forestry offerings.”
TFE are currently cultivating 26,500 young oak trees at the world class propagation nursery at the Institute Research and Technologia for Agronomia (IRTA) near Barcelona, 5000 of which are now available for purchase by private investors. The remaining trees will be held as part of the company’s own investment portfolio.
The trees will be planted and carefully managed on the investor’s behalf at a site in the Languedoc-Roussillon region in the south of France in February 2017, with the first truffle harvest forecast for February the following year. TFE will harvest and sell the truffle crops to global wholesale markets delivering investors a forecasted average annual rate of return (IRR) of between 15% and 21% over a 15-year tax-free period, depending on the level of investment made.
TFE are producing the highly lucrative French Black Périgord Truffle, or Black Winter Truffle. With a retail value of up to 2,400 euros per kilogram, the Black Winter Truffle is currently the highest valued, cultivatable truffle on the market and is of real interest to potential investors.
Prior to launching the new investment programme, TFE have been working closely with global tree inoculation expert Dr Marcos Morcillo and world leading truffle science experts Micologia Forestal & Aplicada of Barcelona (MF&A) at IRTA. They combine cutting edge truffle propagation science with a rigorous, research lead approach to tree management to produce record yields of up to 378kg truffles p/hectare by year 12. In a recent symposium held at the IRTA, it was discovered that the mycorrhiza levels (truffle spores) on the roots of TFE trees were on average 300% greater than on the trees of competing suppliers in attendance. This is likely to lead to consistently good truffle yields for TFE’s crop of trees, reducing risk and delivering high returns for investors.
TFE say that achieving high yields, produced earlier and more reliably across the tree’s life cycle, is down to the unique way MF&A precisely manage every aspect of the tree propagation process, from acorn selection and germination, through to root development and precise inoculation with DNA proofed, in-house prepared truffle inoculum. They have in essence taken control of the entire truffle ‘production cycle.’ Their work is also helping to minimise the crop failure rate so endemic in the history of truffle production.
Mr Waddell says; “I began to look seriously at truffles as an investment proposition when I moved the family to Perpignan in France in 2007. However, at that time, it was clear there was little evidence of the science being robust enough to support a viable truffle investment programme. When I discovered that leading truffle scientist Dr Marcos Morcillo was based 90 minutes across the border from me, I picked up the phone and was invited down to their facilities near Barcelona. Historically, first yields on black winter truffle would take an average of 15 years, but by 2014, Marcos and the team have reduced that to just four years. Now, by year 5 some knee high trees can produce over 80g of truffles at the experimental plantation in Catalonia. By taking control of every step of the inoculation, propagation, planting and tree management process, we are leaving nothing to chance and our rigorous approach has already captured the interest of many investors worldwide.”
Investors, who can buy trees in batches of 25 up to 500, will receive 80% of the truffle crop during the life of their licence and 50% of the tree sale price. The maximum purchase, a hectare equating to 500 trees, will cost £95,745 on a single payment and is forecast to return over £805,840 based on a maximum yield of 128kg p/hectare and a wholesale average p/kg price of €500. At the other end of the scale, an investment of 25 trees (eighth of an acre) will cost just £7,836 and is forecast to generate a return of £35,466, a Return on Investment of up to 353% and 15% IRR over the 15 years. TFE also offer a ‘Pay as You Grow’ option. Instead of paying one lump sum, investors pay a monthly fee to build up their tree holding affordably. The system is in essence a long-term, high yielding ecological savings plan.
Locating the plantation in France also comes with considerable tax benefits for investors, as truffles are free from income tax in the first 15 years from planting there. Also, commercial forestry investments made by a UK tax payer, where the trees are planted in the European Economic Area (EEA) are free of Income Tax, Capital Gains Tax, Corporation Tax and Inheritance Tax.
MF&A hold one of the largest data-sets of historical truffle production and this makes TFE confident their timing to market is right, with truffles achieving record prices and demand continuing to outstrip supply. 95% of truffle production has been lost since 1903, largely as a result of changing environmental conditions affecting wild truffle production. All three major truffle countries (France, Spain & Italy) continue to suffer from a series of dry summers which, has sent global truffle prices on an upward curve. Similarly, demand for truffles has reached unprecedented levels, particularly from China where the desire for luxury goods gains momentum. The US truffle market alone grew from $4m to $20m between 2004 and 2012, the ‘new rich’ from BRIC and MINT countries are following suit.