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Foreign investment in Aotearoa/New Zealand

Overseas Investment Office - August 2016 Decisions

Blackstone’s Immortal Life Insurance Investment

Fresh from buying five retirement villages in June, Blackstone, via Immortality Pte Ltd and Immortality ESC Ltd, United States public (65.1%), Cayman Islands public (11%) and various overseas persons (23.9%), received approval for the acquisition of rights or interests in up to 49% of the total issued shares of Partners Group Holdings Limited, to be completed in up to four transactions by 31 January 2019. Transaction value is $200,000,000

The OIO states: “The Applicant is an investment vehicle for funds managed by The Blackstone Group LP. Partners Group Holdings Limited (PGHL) is the holding company of a financial services group that specialises in providing life insurance and medical insurance in New Zealand, as well as income protection, disability insurance, trauma cover and business risk protection (the Target Group). The Investment consists of making an equity investment in PGHL by the Applicant through the subscription of up to 49% of the total issued shares in PGHL. The Investment is to be made in up to four transactions over 30 months”.

“Since its formation in August 2010, the Target Group has grown rapidly. The Investment is intended to raise equity capital to enable the continued growth of the Target Group. Blackstone is attracted to the Target Group because of its fast growing life insurance business, highly experienced management team, best-in-class products, and highly efficient and scalable business model. Blackstone is a global investment and advisory firm with a number of offices and investments in the Asia Pacific region and the Investment is aligned with Blackstone’s regional strategy and industry focus globally”.

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Jiang Sells Down Crafar And Synlait Farm Ownership To Other Chinese

Milk New Zealand (Shanghai) Co. Ltd., Zhaobai Jiang, China, People's Republic of (54.7%), China public (44.7%) and Lei Jiang, China, People's Republic of (0.6%) and Hunan Dakang International Food & Agriculture Co. Ltd. Zhaobai Jiang, China, People's Republic of (54.7%), China Public (44.7%) and Lei Jiang, China, People's Republic of (0.%), received approval for an overseas investment in sensitive land, being Milk New Zealand (Shanghai) Co. Ltd’s acquisition of rights or interests in 100% of the securities of An Yuan Dairy Limited which owns or controls approximately 7,892 hectares of land being various dairy farms known as the Crafar Farms situated in the North Island.

Approval was also received for an overseas investment in significant business assets, being Milk New Zealand (Shanghai) Co., Ltd’s acquisition of rights or interests in 100% of the securities of An Yuan Dairy Limited, the consideration of which exceeds $100m. Thirdly, Hunan Dakang International Food & Agriculture Co. Ltd’s received approval for the acquisition of fiduciary management rights in respect of New Zealand Standard Farm Limited’s shareholder rights in SFL Holdings Limited which owns or controls approximately 4,560 hectares of land being various dairy farms known as the Purata Farms (previously Synlait Farms) situated in Canterbury.

Consideration was “withheld under s(9)(2)(b)(ii) of the Official Information Act”. The vendors were existing hareholders of An Yuan Dairy Limited, Zhaobai Jiang, China, People's Republic of (99%) and Lei Jiang, China, People's Republic of (1%) and New Zealand Standard Farm Limited Zhaobai Jiang, China, People's Republic of (99%) and Lei Jiang, China, People's Republic of (1%). The OIO states: “Zhaobai Jiang will continue to be the majority owner of, and continue to have control of, Crafar Farms and Purata Farms but his interest will be diluted to approximately 55% with the remainder being widely held by the Chinese public”.

“The Applicants intend to undertake several key initiatives on Crafar Farms as a result of the investment being:

• conversion and improvement of an area of land to dairy farming units over a period of five years;
• investment into new irrigation infrastructure and upgrades of existing irrigation infrastructure; and
• installation of telemetry technology across the farm portfolio.

The Applicants estimate that the implementation of the investment plan is likely to result in an increase in its annual production of milk solids and additional job opportunities on Crafar Farms.”

Paul McBeth at www.scoop.co.nz (15/11/16) backgrounds this latest Chinese play in our dairy sector. “Chinese billionaire Jiang Zhaobai has left the Board of his New Zealand farming operation, though he isn't giving up on the nation's agribusiness sector. Jiang retired as a director of Milk New Zealand Holdings, the vehicle which owns the former Crafar family farms, on November 1, Companies Office filings show. However, he's still a director of a separate holding company that bought the former Synlait Farms group”.

“Jiang's Shanghai Pengxin ventured into New Zealand's farming in 2012 when it bought the Crafar farms out of receivership and later went on to buy the Synlait farms. However, last year (2015) its plans to buy the Lochinver farm near Taupo was rejected by the Government against an Overseas Investment Office recommendation and Pengxin later ditched plans to buy other farms in Taupo and Northland”.

“Those acquisitions were to be a precursor to Pengxin selling its interest 55%-owned subsidiary Hunan Dakang Pasture Farming Co, a Shenzhen-listed company, and grant Hunan Dakang management rights over its interest in Synlait Farms. The effect would have been to reduce Shanghai Pengxin's interest in Crafar and Lochinver to 55% from 100%, bringing on board other Chinese investors via the listed entity. Pengxin went ahead with the restructure despite the deals falling through, receiving OIO approval in August after a 22-month wait”.

"’The reason the chairman is no longer a director of the holding company is because he believed it appropriate to enable Hunan Dakang to appoint its own director’, a Milk NZ spokeswoman said in an emailed statement. ‘Jiang Zhaobai remains committed and supportive of New Zealand's agribusiness sector’. Pengxin has since turned its efforts to developing a processing factory to produce long-life yoghurt, but hasn't been able to find a local investor to buddy up with that would meet OIO requirements. That's prompted Pengxin to seek revised conditions on its investment allowing it to develop a factory on its own with limitations on the amount of milk it would take, however the company has again faced a slow response by regulators”.

See our April 2012 commentary for details of Jiang’s purchase of the Crafar farms, January commentary for the Synlait purchase and September 2015 commentary for the Lochinvar decline. Other significant purchases here by Jiang include Gulf Harbour and Kawarau Falls in August 2012 and February 2016 respectively.

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Chinese Plan 200 Unit Apartment Complex For Albany

Guojia Yu, Nanjing Dadi Construction Group Co. Limited and NZ Rose Garden Development Limited, Guojia Yu, China, People's Republic of (58%), Tina Yang, New Zealand (25%) and China Public (17%), received approval for an overseas investment in sensitive land and significant business assets by Guojia Yu, Nanjing Dadi Construction Group Co., Limited (Nanjing Dadi) and NZ Rose Garden Development Limited (NZ Rose Garden) (together, the Consent Holders), being:

• the acquisition of rights or interests by Guojia Yu and Nanjing Dadi in up to 75% of the shares of NZ Rose Garden which owns or controls a freehold interest in approximately two hectares of sensitive land (the Land) at 25 Don McKinnon Drive, Albany, Auckland (the Share Purchase); and
• the establishment of a business in New Zealand by the Consent Holders (being the development of a mixed-use complex) where the total expenditure expected to be incurred in establishing that business exceeds $100 million (the Development), (the Investment).

The vendor was Tina Yang New Zealand (100%); consideration was “withheld under s(9)(2)(b)(ii) of the Official Information Act”. The OIO states: “The Development is a multi-stage multi-use complex development taking place in Albany, Auckland. On completion, it is expected that there will be hundreds of apartment units (with approximately 200 apartment units being built in stage one of the Development), as well as supporting car parks, work/living units and retail units”.

“The Consent Holders are experienced in real estate development and sales, engineering construction, equipment installation, property management, building maintenance and contracting overseas projects. The Development will (among other benefits) result in the introduction of new investment capital into New Zealand, create a number of full time equivalent jobs over a period of at least 12 months and result in added market competition for the supply of housing in Auckland”.

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Chinese Plan Ice Cream Factory For Kerepehi

And in yet another Chinese purchase, in two separate decisions, Chinese investors have been given approval to establish and ice cream factory at Kerepehi. Firstly, Allied Faxi New Zealand Food Co., Limited, Chinese Government, China, People's Republic of (32.%), Yu Pan, China, People's Republic of (30%), PEG China Private Equity Fund LP, China, People's Republic of (23.3%), Beijing Allied Hongda Trading Co., Limited, China, People's Republic of (10.3%) and Beijing Jingguoguan II Equity Investment Management Centre LP, China, People's Republic of (4.1%), received retrospective approval for the acquisition of a freehold interest in approximately 4.5 hectares of land at 112 Kerepehi Town Road, Kerepehi (the Land) (retrospective investment). The vendor was New Nature NZ Limited, Yu Pan, China, People's Republic of (100%); consideration was $2,860,000.

In the second consent for a prospective investment, Beijing Sanyuan Foods Co. Limited, Chinese Government, China, People's Republic of (46.9%), China public (21.9%), Shanghai Pingrun Investment Management Co., Ltd, China, People's Republic of (16.7%), Skysoar Limited, British Virgin Islands (10.2%), Shanghai Fosun Chuanghong Equity Investment Fund Partnership (LP), China, People's Republic of (3.8%), Wii Pte Limited, China, Singapore (0.5%) and various overseas persons (0.1%), received approval for the acquisition of an interest in up to 90% of the issued share capital of Beijing Allied Faxi Food Co. Ltd which indirectly owns or controls a freehold interest in the Land (prospective investment).

The vendors of the second transaction were existing shareholders of Beijing Allied Faxi Food Co. Limited, Chinese Government, China, People's Republic of (46.2%), PEG China Private Equity Fund LP, China, People's Republic of (33.3%), Beijing Allied Hongda Trading Co. Limited, China, People's Republic of (14.7%), and Beijing Jingguoguan II Equity Investment Management Centre LP, China, People's Republic of (5.9%): consideration was $15,000,000

The OIO states: “Allied Faxi New Zealand Food Co. Limited acquired the Land for the purpose of establishing an ice cream factory. It has undertaken significant investment to develop the factory and has created numerous new job opportunities. The factory is expected to start exporting ice cream to China by the end of 2016. The prospective investment relates to Beijing Sanyuan Foods Co. Limited acquiring an interest in an upstream shareholder of Allied Faxi New Zealand Food Co. Limited, being Beijing Allied Faxi Food Co. Limited. Beijing Sanyuan Foods Co. Limited and Beijing Allied Faxi Food Co. Limited are associated as the Chinese Government has a significant interest in both entities. Beijing Allied Faxi Food Co. Limited’s indirect interest in the Land comprises a relatively small portion of its total assets”.

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Japanese Buy Northland Forests

Summit Forests New Zealand Limited, Japanese public (66.7%) and various overseas persons (33.3%), received approval for acquisition of a freehold interest in approximately 1,359 hectares of land in Northland, also known as Takou Bay Forest Estate and Whitehills Forest Estate. The vendor was Trevor Mark Chiltern-Hunt as Executor of estate of Percy James Chiltern Hunt, United Kingdom (100%): consideration was “withheld under s(9)(2)(b)(ii) of the Official Information Act”.

The OIO states: “The Applicant intends to maintain and develop the forests on the relevant land in conjunction with their existing Northland forestry estates, in order to produce timber for domestic processing and export markets (with the main focus being increased supply to Northland sawmills)”.

Summit Forests already owns 27,817ha in Northland, being the Aupouri Forest, producing 570,000 tonnes of logs. See our September 2014 and December 2015 commentaries for details of Sumitomo's more recent forestry purchases here.

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Swedes Grab Another Canterbury Dairy Farm

Southern Pastures Limited Partnership, Sweden (58.5%), Luxembourg (22%), New Zealand (2.5%) and various (17%), received approval for an overseas investment in sensitive land, being Southern Pastures (Kowhai Farm) Limited Partnership’s acquisition of a freehold interest in approximately 252.1 hectares of land at 479 Ardlui Road, Te Pirita. The vendor was Drenth Holdings Limited, Jan Hendrik Drenth, New Zealand (50%) and Janna Berendina Drenth, New Zealand (50%); consideration was “withheld under s(9)(2)(b)(ii) of the Official Information Act”.

The OIO states: “The Applicant is the majority equity partner in Southern Pastures (Kowhai Farm) Limited Partnership. The Applicant’s intention is for Southern Pastures (Kowhai Farm) Limited Partnership to continue to farm the land as a dairy farm. In particular, the Applicant intends that Southern Pastures (Kowhai Farm) Limited Partnership will:

• increase the milking platform on the farm through investment in effluent disposal and other infrastructure; and
• increase the herd size and the production of milk solids on the farm.

The farm will be incorporated into and operated as part of the Applicant’s South Canterbury cluster of dairy farms”.

In an opinion piece in the Christchurch Press (15/9/15), Martin Van Beynen rings a rather muffled alarm bell under the headline “Tough Call: Selling Our Farmland To Foreigners”: “The Overseas Investment Office, which approves purchases of sensitive land by foreign buyers, helpfully publishes its decisions for public perusal a month or two after the decisions are made. The information published is not generous but the bare bones are there so you get to know the identity of the sellers and the buyers and what is being bought and sold”.

“These days the amount paid is usually kept secret but this can be found out in other ways. The deals being done between locals and overseas interests in the next year or so will be carefully watched. There is a feeling the New Zealand dairy industry is ripe for a shake-up and this will provide opportunities for cash-rich NZ farmers, if there are any left, and, more controversially, those voracious foreign buyers”.

“It's easy to picture many overseas groups, who perhaps already have a substantial foothold here, hovering like hawks for the kill. And who could blame them. Business is business and opportunity is opportunity. The purchase of New Zealand farmland by foreigners is an emotive topic, particularly where the Chinese are involved and where the land is well known and important to the country. Sales of farm land stimulate debate when much bigger deals, such as the sale of shares in big NZ companies to foreign buyers, generate little argument”.

“We can also be very selective in our outrage. If an Indian firm wanted to buy Solid Energy for a good price and save some West Coast mines, you would not hear a peep of protest. Water and agricultural land are our most valuable economic resources and deserve special attention but why shouldn't foreign buyers get a slice of the action? After all these outside buyers, in theory, provide much needed long-term investment, make improvements, look after flora and fauna and create jobs”.

“Foreign buyers, it must be said, are often better stewards of the land than local farmers. If we can't or won't provide the investment needed to make the most of our assets, why shouldn't we open up the field to international capital? The only catch is the matter of control. Decisions made in overseas boardrooms can result in increased investment, breathing space for prices to improve and better marketing and access. But they can also mean decisions which favour foreign shareholders and owners rather than locals”.

“Profits might be ploughed back into the farm but foreign owners usually want a return on investment and that is money which leaves the country for spending in other markets. Foreigners with deeper pockets or stronger currencies also skew the market so locals wanting to buy farms or increase the size of current holdings find it harder. And, as a final argument, there is also something deeply disturbing about calling your country home when a lot of it has been sold to people who do not live here and do not share your nationality, interests or culture.

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“We Were Never A Nation Of Tenant Farmers”

“You can't blame the sellers. Who does not sell to the highest bidder? But that doesn't mean it should be easy for them. In July (2015) Canterbury farmers were given permission to sell off 800ha of land. Not a lot but over a year it mounts up. Outfits called Pareora Dairy Limited and Somerset Dairy Limited sold 500ha at Pareora River Road to a partnership consisting of the UK, Irish, continental European and Scandinavian public (74%)”.

“The sellers behind the dairy limited companies were Canterbury gentleman Forbes Herbert Elworthy (84%), the NZ public (8.5%) and also the public of the tax haven, the British Virgin Islands. Elworthy brings up the issue of how New Zealand is New Zealand. He grew up here but gives one of his addresses as Wardington Manor, Banbury, Ox17 1sw, United Kingdom. The buying partnership wants to add the farms to its Canterbury dairy pod and lift production”.

“The other deal is the sale of a 306ha beef and sheep farm at Rakaia Terrace Road, Hororata, owned by the Inch family trust. The buyer is Southern Pastures Limited Partnership, which is owned by interests from Sweden (58%), Luxembourg (22%), New Zealand (2.5%) and various (17.5%). The new owner intends to convert two separate adjoining blocks into an irrigated dairy farm. The new farm will be operated as part of Southern Pasture's South Canterbury cluster of dairy farms”.

“I won't lie to you. I don't know the answer. It's easy to see that letting rich foreigners buy hobby farms or high country stations as a bolthole is crass and wrong. But foreign investors who are prepared to invest in the business of farming to improve the land and to preserve or create jobs? Is that such a bad thing? All I know is, we need to keep a very close eye on it. It's not just an economic argument. There is a price on self respect too.”

If ultimately our own very sovereignty at stake! See our December 2014 commentary for details of the South Canterbury cluster they already own. Southern Pasture also owns a number of central North Island dairy farms having bought eight from Graeme Hart in December 2012 at around half the going per hectare rate for the area. See our commentary for that month as well as July 2014 and 2015 for details of these purchases.

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Chinese Public Take Greater Share Of Waste Management

Capital Environment Holdings Limited, China Public (70.7%), Chinese Government, China, People's Republic of (28.1%), United States public (1%) and United Kingdom public (0.2%), received approval for acquisition of up to 51% of the shares in BCG NZ Investment Holding Limited, which will result in an overseas investment in sensitive land as BCG NZ Investment Holding Limited indirectly owns or controls:

• a freehold interest in approximately 78.3 hectares of land at 125-127 Old Brighton Road, Fairfield, Dunedin; and
• a freehold interest in approximately 182.7 hectares of land at Redvale Landfill, Landfill Access Road, Dairy Flat, Auckland; and
• a leasehold interest in approximately 2.3 hectares of land at Redvale Landfill, Landfill Access Road, Dairy Flat, Auckland; and
• a freehold interest in approximately 1.3 hectares of land at 25 Inlet Road, Papakura, Auckland; and
• a freehold interest in approximately 1.2 hectares of land at 57-59 Port Road, Lower Hutt; and
• a leasehold interest in approximately 0.1 hectares of land at 53 Port Road, Lower Hutt; and
• a leasehold interest in approximately 1.5 hectares of land at 8 Daphne Street, Te Awamutu; and
• a freehold interest in approximately 0.6 hectares of land at 27 Seaview Road, Lower Hutt; and
• a leasehold interest in approximately 0.6 hectares of land at 108-110 Ostend Road, Waiheke Island; and
• a leasehold interest in approximately 12 hectares of land at 600 Island Road, Puketutu Island, Manukau Harbour, Auckland; and
• a freehold interest in approximately 123.2 hectares of land at Bruce Road, Bonny Glen, near Marton; and
• a freehold interest in approximately 1,461 hectares of land at Kate Valley Landfill, Mt Cass Road, Waipara, North Canterbury; and
• an other interest in approximately 55.9 hectares of land at Horseshoe Bush Road, Dairy Flat, Auckland.

Approval was also received for an overseas investment in significant business assets as the consideration exceeds $100 million. The vendor was Beijing Capital (Hong Kong) Limited, Chinese Government, China, People's Republic of (54.6%) and China Public (45.4%) and BCG ChinaStar International Investment Limited, Chinese Government, China, People's Republic of (100%); consideration was US$234.4 million.

The OIO states: “The proposed investment is part of a restructuring by the Applicant’s group of companies of its ownership interest in BCG NZ Investment Holding Limited. The Applicant and the vendor are all associated with, and directly or indirectly wholly or partially owned by, Beijing Capital Group Company Limited. BCG NZ Investment Holding Limited has an indirect interest in 100% of the shares of Waste Management NZ Limited which owns various landfill sites across New Zealand”.

“The net effect of the transaction is to increase the Chinese public ownership of Waste Management NZ Limited by approximately 20%. The proposed investment is likely to result in new job opportunities in New Zealand for graduates over the next three years. The Applicant’s parent’s previous investment in Waste Management NZ Limited has also resulted in benefits to New Zealand such as the creation of new jobs and the additional investment for development purposes”.
See our June 2014 commentary for details of the Chinese Government's original purchase of Waste Management.

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Other August Decisions

Nigel David Howard and Dawn Susan Anderson Howard, United Kingdom (100%) received approval for the acquisition of a freehold interest in approximately 8.1 hectares of land at 136 Harley Road, Tasman. The vendors were Wayne Gilbert Wooff and Nini Christina Wooff, New Zealand (100%); consideration was “Withheld under s(9)(2)(b)(ii) of the Official Information Act”. The Applicants intend to migrate to New Zealand and reside in New Zealand indefinitely.

Alan Logan Craft (as trustee of the Manawa Toru Family Trust), United States of America (100%), received approval for the acquisition of a freehold interest in approximately 29.1 hectares of land at 525 Lund Road, Katikati. The vendor was John Francis Taylor, Jill Christine Taylor, and EM Trustee No. 7 Limited as trustees of the Taylor Family Trust, New Zealand (100%); consideration was “Withheld under s(9)(2)(b)(ii) of the Official Information Act”. Alan Logan Craft intends to migrate to New Zealand and reside in New Zealand indefinitely.

Volker Udo Zahn and Heike Maria Zahn, Germany (100%), received approval for the acquisition of a freehold interest in eight hectares of land at 14 Gibbston Back Road, Gibbston Valley. The vendor was ML Holtzman, Hungary (100%); consideration was $3,600,000. Volker Udo Zahn and Heike Maria Zahn intend to migrate to New Zealand and reside in New Zealand indefinitely.

Fairytale Investments Pty Limited, Robert David Alfred Tilse, Australia (50%) and Virginia May Tilse, Australia (50%), received approval for the acquisition of a freehold interest in 35.5 hectares of land at 3163 Kawatiri Murchison Highway, Murchison. The vendor was Gregory Charles Robertson, New Zealand (100%); consideration was $305,000. The Applicants have migrated to New Zealand and plan to reside in New Zealand indefinitely.

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