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Foreign investment in Aotearoa/New Zealand

Overseas Investment Office - June 2011 Decisions

OIO staff must be back from their break as we have quite a few approvals this month.

Helicopters NZ Flies Off To Canada

Firstly Canadian Helicopters Limited Canada Public (60.2%), Fonds de Solidarite, Canada (20.2%), Goodman & Company Investment Counsel Limited, Canada (15.6%), United States Public (2%), Various overseas persons (1.3%), Luxembourg Public (0.5%), Germany Public (0.1%), and United Kingdom Public (0.1%) received approval for an overseas investment in sensitive land, being the Applicant's acquisition of a leasehold interest in 1.4 hectares of land at Nelson Airport, Nelson. Approval was also received for an overseas investment in significant business assets, being the Applicant's acquisition of property in New Zealand used in carrying on business in New Zealand for consideration exceeding $100m, that property being acquisition of the assets and business of Helicopters (NZ) Limited, including sensitive land. Consideration was stated as $160,000,000. The vendor was Helicopters (NZ) Limited South Canterbury Finance Limited (In Receivership), New Zealand (100%).

The OIO states: "The Applicant is the one of the largest helicopter transport services companies in the world based on the size of its fleet. It currently operates in the USA, Canada and Afghanistan. Helicopters New Zealand Limited (HNZ) operates in the same industry as the Applicant in the southern hemisphere, specifically in New Zealand, Australia and Asia. By acquiring HNZ, the Applicant will be able to grow its business in New Zealand, Australia and Asia and will enable the Applicant and HNZ to become more competitive. The acquisition of the business in the southern hemisphere will provide counter-seasonal revenue and render the Applicant's business much more competitive in the global market".

This is part of the Government's attempt to recover something from its ill-conceived 2010 bailout of South Canterbury Finance Limited (SCF). As we all know, SCF was one the larger finance company failures in recent years. So large in fact, that the Government decided to bailout investors when in collapsed to the tune of $1.6 billion, thanks to a poorly thought through Retail Deposit Guarantee Scheme reeking of moral hazard. This bailout would have been music to the ears of South Canterbury investors, who couldn't lose their investments in the company, which effectively had a Government guarantee despite its well publicised underperforming loan book. For the rest of us however, it sounded more like a giant flushing toilet of taxpayer dollars.

South Canterbury's founder Alan Hubbard, who was facing Serious Fraud Office charges relating to SCF's collapse, was tragically killed in a car accident in September 2011. This transaction represents the sale of the prize jewel in the SCF portfolio. Helicopters NZ had only been in that portfolio since April 2010, after it (and other industrial companies) was swapped (sacrificed) for SCF shares in a desperate attempt by Hubbard to keep SCF afloat. The sad demise of SCF and how badly the Government handled it has been documented by many other commentators. The Government initially assured us that the final cost to NZ taxpayers of the bailout will be $600m. I think it will be at least twice that!

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Previous Roger Award Finalist Buys Another 13,000 Hectares

For the third time this year, Timbergrow Limited Tiong Family, Malaysia (100%) has received OIO approval to acquire significant forestry tracks in Aotearoa. Approval this time is for:

• a freehold interest in 5,224.3 hectares of land at Waiau Forest, 708 Waiau Rd, near Tokomaru Bay, Gisborne; and
• a freehold interest in 1,796.2 hectares of land at West Ho Forest, West Ho and Arakihi Rds, Takapau, Gisborne; and
• a freehold interest in 4,000 hectares of land at Moonlight Forest, Waitangi Rd, Gisborne; and
• a freehold interest in 717.3 hectares of land at Merriwa Forest, 2796-2798 Puketitiri Rd, Rissington, Hawkes Bay; and
• a freehold interest in 1,143.4 hectares of land at Tolaga Forest, Tauwhareparae Rd Marunga, Gisborne.

The vendors were The Trust Company Limited Australia (100%); consideration was $95,000,000. The OIO states: "The Applicant is acquiring the property for strategic forestry purposes and intends to carry on the forestry activity previously carried on by the Vendor". See our commentaries for November and December 1994, September and October 1995, June, August and September 1996, February 2000, September 2004, May 2006, March 2007, February and March 2011 for details of other significant purchases here. By my calculations they now own around 120,000 hectares.

As reported previously in Watchdog, the Tiong family is one of Malaysia's most powerful and wealthy families. They own controversial rainforest logger, Rimbunan Hijau, newspapers and magazines. They are better known here for other significant forestry investments via Ernslaw One Limited. Details of their transgressions resulting in their most recent appearance as a Roger Award finalist can be seen here. (Ernslaw One came third in the 2004 Roger Award).

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Soho Gets Coronet Peak Station

Not satisfied with already having over 33,000 hectares of leasehold South Island high country, Soho Property Limited United Kingdom (100%) has now received approval to acquire a crown pastoral lease in 22,211.2 hectares of land at 1127 Skippers Rd, Queenstown. The vendors were Coronet Peak Station Queenstown Limited New Zealand (100%); consideration was stated as confidential, but the Queenstown Lakes District Council rating database shows the property as having changed its valuation from $5,200,000 to $3,750,000 on 1 July 2011. However we can calculate that the consideration provided to the OIO was $3,870,000.

The OIO states: "The Applicant is the lessee under three Crown Pastoral leases - Glencoe Station, Mt Soho Station and Motatapu Station - which have a combined area of approximately 33,196 hectares. The Applicant proposes to acquire an interest in the Crown Pastoral Lease known as Coronet Peak Station. The Applicant is not acquiring those parts of Coronet Peak Station that are freehold.

"Coronet Peak Station covers approximately 22,000 hectares and is located 16 kilometres from Queenstown and eight kilometres from Arrowtown. It is the western neighbour of Glencoe, Mt Soho and Motatapu Stations and has as its western boundary the Shotover River, and also adjoins the Coronet Peak skifield. Coronet Peak Station is steep and mountainous and, despite its large size, has little low country with even moderate pastoral value. It is also seriously degraded, has a serious feral goat problem, and has significant problems in relation to wilding trees and other unwanted plant species.

"The Applicant intends to continue to use Coronet Peak Station primarily for general farming. Merino sheep will be farmed on areas identified as having sustainable farming value and those areas will be developed in line with the Applicant's practices on its existing farming operations. The Applicant expects to be able to carry 4,000 sheep on Coronet Peak Station. The Applicant proposes to extend its pest and noxious plant eradication programme to Coronet Peak Station. Acquiring Coronet Peak Station presents a unique opportunity to minimise the risk of reinfestation by plant and animal pests through the acquisition of the significant natural boundary offered by the Shotover River. The Applicant also wishes to capitalise on eco and adventure tourism opportunities which go hand in hand with the extensive conservation work already undertaken by the Applicant on its existing farming operations at Glencoe, Mt Soho and Motatapu Stations".

Soho used to be linked to Canadian singer Shania Twain, who as the OIO mentions above has received previous approval to acquire 33,000 ha of pastoral leases for Motatapu, Glencoe and Mt Soho Stations (see our commentaries for September 2004 and December 2009). I say used to be because Shania and her husband at the time, Robert "Mutt" Lange, have split, and he now is in control of Soho. This new approval increases Soho's massive high country holding between Arrowtown and Wanaka to over 55,000 hectares!

Anne Gibson in the NZ Herald (30/7/11), reported on the above approval. "Country superstar Shania Twain's ex-husband has bought Queenstown's Coronet Peak Station, adding a fourth property to give him a vast 55,406ha South Island high country holding. Music producer Robert 'Mutt' Lange's Soho Property already controls 33,195ha of Crown pastoral leases at Glencoe Station, Mt Soho Station and Motatapu Station. But now the Overseas Investment Office has given approval for him to take the Crown pastoral lease purchase on the 22,211ha Coronet Peak Station.

"Lange is a Zambian-born British record producer and songwriter. He and Twain split in 2008 and she later wrote a book telling how she put her 'heart, soul and dreams' into her New Zealand home - while her husband of 14 years was having an affair with his secretary Marie-Anne Thiebaud. Twain ended up marrying Thiebaud's former husband Frederic. Twain and Lange made international headlines when they bought Motatapu and Mt Soho high country stations, between Arrowtown and Wanaka, in 2004 for $21.4 million. Two years ago, Lange bought Glencoe Station for a secret amount. The Coronet Peak Station lease was sold by Malta-based Irishman Eamon Cleary, who also owns several Queenstown and Arrowtown commercial buildings, but the amount paid to him is being kept a secret".

For more analysis of the concerns associated with these deals with Soho, see a couple of excellent articles my colleague Murray Horton has written. Firstly Watchdog 123, May 2010; "Shania Twain Buys Another High Country Station: Where Is The 'Substantial & Identifiable Benefit To New Zealand'"? Also "Shania Twain Buys Up Big In Otago. A New Ingredient In Land Sales: The Celebrity Factor", in Watchdog 107, December 2004.

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Italian "Suits" Take Full Control Of Rugged Ridges & Otamatapaio Stations

Reda Holding SpA The Botto Poala Family, Italy (100%) received approval to acquire rights or interests in a further 33.33% of the shares of Rugged Ridges Limited which owns or controls a leasehold interest in 9,935.7 hectares of land at 2102 Otematata-Kurrow Road, Oamaru. Approval was also received for an overseas investment in sensitive land, being the Applicant's acquisition of rights or interests in a further 33.33% of the shares of Otamatapaio Station Limited which owns or controls a freehold interest in 6,731.7 hectares of land at 3761 and 4580 Omarama-Otematata Road, Omarama, South Island. Consideration was $4,800,000. The vendors were Lempriere (NZ) Limited Lempriere Family, Australia (100%).

The OIO states: "The Applicant owns and operates a woollen mill situated in Valle Mosso, Italy. Merino fleece from Otamatapaio Station and Rugged Ridges is manufactured into pure wool worsted fabrics, with production exported to high end garment manufacturers, which include Armani, Hugo Boss, and Ermenegildo Zegna.

"The Applicant, which currently owns 66.7% of the shares in Otamatapaio Station Limited and Rugged Ridges Limited, is seeking to purchase Lempriere (NZ) Limited's 33.3% shareholding in Otamatapaio Station Limited and Rugged Ridges Limited, which owns the land at Otamatapaio Station and Rugged Ridges, respectively. Both properties are primarily operated as merino sheep farms. The acquisition will enable the Applicant to continue to control the chain of production (from farming the wool to creating fabric from the wool clip). The ability to control quality through all stages of production and product traceability is fundamental to the Applicant's business strategy". The Botto family originally bought an interest in 9,110 hectare Otamatapaio Station in September 1993. In April 1999 they acquired a share of the 12,684 hectare Rugged Ridges Station. Also see our August 2006 commentary for details of their controversial and retrospective freehold of 5,500 hectares of Otamatapaio Station from the Crown for just $1!

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Other June Decisions

Natural Development NZ Limited Christian Baha, Austria (100%) received approval to acquire a freehold interest in 42.2 hectares of land at 79-89-Anderson Rd, Matakana. The vendor was Michael Ronald Jepson, Marianne Nancy Jepson and Peter Kemps as trustees of the Sokala Trust Jepson Family, New Zealand (100%); consideration was $4,000,000. Baha intends to continue cattle farming on the property as well as develop a small boutique vineyard.

Fieldhouse Limited TM Gott, Australia (100%) received approval to acquire a freehold interest in 56 hectares of land at 126 Mangawhero Road, Matamata. The vendor was The New Zealand Guardian Trust Company Limited Promina Group Limited, Australia (100%), consideration $4,300,000. Mr Gott intends to expand the existing calf rearing operation being undertaken on the adjoining associated land owned by Secure Resources Limited (which is owned by the Gott family). See our commentaries for August 1999 and February 2009 for details of other land purchases here by Mr Gott.

Craggy Range Vineyards Limited Terrence Elmore Peabody, Australia (99%) and Stephen Mark Smith, New Zealand (1%) received approval to acquire a freehold interest in 2.5 hectares of land at 283 Waimarama Rd, Havelock North. The vendor was Denis Terence Thorner and Pamela Anne Brockie New Zealand (100%); consideration was $1,893,000. The OIO states:" The Applicant owns and manages an existing winery, restaurant, cellar door and boutique accommodation at 253 Waimarama Road. The Applicant is acquiring the land in order to expand the neighbouring Waimarama Road property with a view to increasing the hospitality, tourism and production capacity of its existing business. The Applicant proposes to develop the land by building additional four to six boutique accommodation cottages in line with the properties on the Applicant's existing estate and to use the land to increase its current winemaking facilities for its prestige wines". See our commentaries for October 2000, June 2004, August 2006, July 2009, and July 2010 for details of land purchases here by Mr Peabody.

ABC Developmental Learning Centres (NZ) Limited ZYX Learning Centres Limited (in receivership and administration), (in liquidation), Australia (100%) received approval to acquire a leasehold interest in 0.5 hectares of land at 112-114 Sawyers Arm Rd, Christchurch. The vendor was Doncaster Holdings Limited John Edward Cox, New Zealand (100%); consideration was $2,462,575. ABC operates the New Zealand College of Early Childhood Education which was forced to relocate to the above property as a result of the Christchurch earthquake. Presumably this was part of the Australian-based ABC Learning Centres empire that collapsed in 2008.

Goodman Nominee (NZ) Limited as nominee of the Goodman Property Trust Australian Public (51.9%), New Zealand Public (32.3%), Various overseas persons (6.4%), Goodman Family, New Zealand (5.2%), and Macquarie Bank Limited, Australia (4.2%) received approval to acquire leasehold interest in 0.8 hectares of land at 60 Westney Road, Manukau, Auckland. The vendor was Workstore Developments Limited Balcombe-Langridge (Richard, Glenda Eveleen and Andrew) as trustees of the Chiswick Trust, New Zealand (50%), Scott (Terrence John) as trustee of the Terrence John Scott Trust, New Zealand (25%), and Verissimo (Christopher) as trustee of the Christopher Verissimo Trust, New Zealand (25%); consideration was to be advised. The land is for a planned ancillary warehousing and distribution facility to complement neighbouring premises for DHL.

Peter Owen Von Zahn Switzerland (100%) received approval to acquire a freehold interest in 1.1 hectares of land at 76 Bronte Road East, Mapua, Nelson. The vendor was Peter William Jones and Clare Ann Jones Peter William Jones, New Zealand (50%) and Clare Ann Jones, New Zealand (50%); consideration was $2,200,000. Von Zahn has recently been granted a Returning Resident's Visa, and intends to permanently settle here with his wife.

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$1.3 Billion Mystery

And finally for June, a completely confidential approval. The investment, applicant, vendor, consideration, and background were not disclosed. The OIO only disclosed that the overseas investment transaction has satisfied the criteria in sections 16 and 18 of the Overseas Investment Act 2005. The "benefit to New Zealand" criterion was satisfied by particular reference to the following factors:

Overseas Investment Act 2005

17(2)(a)(i) - Creation/Retention of jobs
17(2)(b) - Indigenous Vegetation/Fauna
17(2)(e) - Walking Access

Overseas Investment Regulations 2005

28(a) - Consequential Benefits
28(f) - Advance significant government policy or strategy
28(j) - Mitigating Factor

My predecessor, the indomitable Bill Rosenberg has calculated that the deal is worth $1,300,130,000 - just over $1.3 billion! He also calculates that it includes 3,586 hectares of freehold land and 24 hectares of leasehold land, and involves the transfer of a half share to overseas owners (for example going from fully New Zealand owned to half overseas owned, or from half overseas owned to fully overseas owned). Hopefully we will have more details on this decision in future.

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