Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – January 2011 Decisions

Americans Buy A Number Of Kiwi Hotels

After a plethora of decisions last month, January was a much quieter one at the OIO. The most significant approval given was for Host Hotels & Resorts, LP United States Public (57.9%), Vanguard Group, Inc., United States of America (9.6%), BlackRock Institutional Trust Company NA, United States of America (6.2%), Fidelity Management & Research, United States of America (5%), State Street Global Advisers (US), United States of America (4.5%), APG Asset Management US, Inc., United States of America (4.4%), Cohen & Steers Capital Management Inc., United States of America (3.9%), ING Clarion Real Estate Securities LLC, United States of America (3.1%), Morgan Stanley Investment Management Inc., United States of America (2.9%), RREEF America LLC, United States of America (2.5%) to acquire property in New Zealand used in carrying on business in New Zealand for consideration exceeding $100m, that property being assets held by Tourism Asset Holdings Limited & Accor SA. Consideration was stated at $184,130,220. The vendors were Tourism Asset Holdings Limited and Accor SA Board members and founders of Accor SA, France (19.9%), Jagen Pty Limited, Australia (17.5%), Angelese TAHL Investor Trust, Australia (17.5%), United States Public (15.5%), French Public (11.4%), Various overseas persons (9.6%), Guinness Peat Group Nominees Pty Limited, Various (5%), United Kingdom Public (3.6%).

The OIO states: “The Applicant owns and operates numerous luxury hotels in the United States and in other countries. The Applicant will acquire the assets and operations of seven New Zealand hotels, which will become part of the Applicant’s global portfolio of hotel assets. Significant refurbishments will be undertaken over the next five years”. The NZ Herald reported details of this deal (7/12/10), in an article by Anne Gibson titled “Americans snap up six NZ resort hotels”.

“Six of New Zealand’s biggest resort hotels have been sold by Australia’s largest hotel investor to an American business for $A115 million ($149 million). In the largest hotel real estate sale this year, Novotel and Ibis properties in Auckland, Wellington, Christchurch and Queenstown have changed hands. The vendor is Australia’s Tourism Asset Holdings (TAHL) which was listed in 1996 but privatised a few years later. The buyer is America’s Host Hotels and Resorts, which in 2005 bought a big hotel portfolio from Starwood Hotels & Resorts Worldwide, under brand names including Westin, Sheraton, W, St. Regis and The Luxury Collection. Host was called Host Marriott Corporation until four years ago. It has properties in the United States, Belgium, Britain, Brazil, Canada, Chile, Italy, Mexico, the Netherlands, Poland and Spain and now New Zealand.

“Matthew Eady, Tourism Asset’s Chief Executive, said his business wanted to put its energies into its home country. ‘TAHL’s strategic preference is to focus its capital and resources within Australia’, he said. This year Tourism Asset sold the Sofitel Wentworth Hotel in Sydney to LaSalle Investment Management for $A130 million. Eady said the sale was of more than 1,000 rooms at the Novotel and Ibis in Ellerslie (Auckland), the Novotel and Ibis in Wellington, the Ibis Christchurch and the Novotel Queenstown.

“‘The final result is an excellent outcome for TAHL shareholders. While we do believe the New Zealand hotel market performance will continue to improve in the medium term, TAHL’s strategic preference is to focus its capital and resources within Australia given its unique hotel market dynamics’, Eady said. The Australian business has kept the Novotel and Ibis hotels in Rotorua. Dean Humphries, National Hotel Director of Jones Lang LaSalle Hotels in Auckland, said the Host deal was a huge vote of confidence in New Zealand. ‘This is a big transaction after the sale of the Hyatt in Auckland a few weeks ago. There is investment demand for good quality hotels with high occupancy, well-maintained and well-positioned’. Eady said no hotel broker was involved in the six hotel deal. ‘The hotels were held by TAHL as a mixture of leases and management agreements with Accor, but the sale structure incorporated new management agreements between Host and Accor'”.

New Hong Kong Owners For Four New Zealand Vineyards

Regenal Investments Pty Limited Gold Rainbow Int’l Limited, Hong Kong (Special Administrative Region) (45.3%), Hong Kong Public (25.2%), Trueway International Limited, Hong Kong (Special Administrative Region) (22%), Triluck Assets Limited, Hong Kong (Special Administrative Region) (7.5%), received approval to acquire rights or interests in 73% of the Challenger Wine Trust which owns or controls:

a freehold interest in 360.8 hectares of land at 1370 Matapiro Rd, Crownthorpe, Hawkes Bay; and
a freehold interest in 44.8 hectares of land at 169 Gimblett Rd and 2145 SHW 50, Fernhill, Hawkes Bay; and
a freehold interest in 200.5 hectares of land at 1917 Redwood Pass Rd, Dashwood, Marlborough; and
a freehold interest in 142.1 hectares of land at Rarangi Vineyard, 53 Flaxmill Drive, Marshlands, Marlborough.

Consideration was stated as $42,252,673. The vendors were existing shareholders of Challenger Wine Trust other than LANV Pty Limited Australian Public (70.2%), New Zealand Public (21.9%), DIAM Co. Ltd, Japan (6.9%), Various overseas persons (1%). The OIO states: “Challenger Wine Trust (CWT) owns 16 vineyards in Australia and four in New Zealand. CWT’s vineyards have significantly diminished in value as a result of a number of factors, including the global financial crisis, an ongoing oversupply of grapes, lower prices for wine grapes and the higher value of the Australian dollar. The fall in property values has contributed to an increase in CWT’s gearing relative to borrowing covenants imposed by CWT’s institutional lenders. The Applicant will stabilise this position by the Applicant’s purchase of the 73% interest resulting in CWT being owned by two significant institutions being the applicant and LANV Pty Limited, a wholly owned subsidiary of Challenger Life Limited of Australia, rather than numerous and less financially resourced members of the public”.

And An American Takes Control Of Gibbston Valley Wines

In two related decisions, an American shareholder of Gibbston Valley Winery Ltd (GVWL) has gained a controlling interest. Firstly, Philip Dean Griffith United States of America (100%) received approval to acquire rights or interests in a further 11.1% of the shares of Gibbston Valley Wines Limited which owns or controls a freehold interest in 43 hectares of land at Gibbston Highway, Gibbston Valley, Bendigo Station, Bendigo Loop Rd, Cromwell and Kawarau Gorge SH6. The vendor was Michael Stone New Zealand (100%).

In the second approval, Philip Dean Griffith as sole trustee of the Philip D Griffith Family Trust United States of America (100%) received approval to acquire rights or interests in a further 25.7% of the shares of Gibbston Valley Wines Limited which owns the above mentioned property. The vendors were Michael Stone, Suzanne Stone & Pat & Fergus Reid. The consideration for both transactions was stated as confidential. In effect, Griffith has increased his shareholding in this winery from 23.8% to 60.6%. The OIO describes the investment as necessary to offset operational losses and complete of GVWL’s capital works programme. Griffith has been a regular buyer of land in the area. See our September 2008 commentary for details of his last significant purchase.

Contact Energy Expands Geothermal Footprint

Contact Energy Limited Various overseas persons (26.6%), Unknown Overseas Persons, various (22.4%), Australian Public (21%), New Zealand Public (14.6%), United States Public (6.6%), Asian Public (2.9387%), United Kingdom Public (2.5%), Asian Investors, Various (1.4%), European Public (0.9%), European Investors, Various (0.8%), Middle Eastern Public (0.1%) received approval to acquire a freehold interest in 211.1 hectares of land at 1450 Mapara Rd Taupo. The vendor was Robert Bruce Lilburn New Zealand (100%); consideration was stated as $3,742,000 plus GST. The OIO states: “The Applicant will purchase the land to acquire geothermal rights that will be used for its existing nearby power stations at Wairakei and Poihipi Road, and the proposed Te Mihi power station. The land will also continue to be used for farming”. For details of other land purchases by Contact Energy for the purposes of developing geothermal power, see our commentaries for July 2006, September 2007, January, July, October 2008, and July 2009.

Michael Hill Now Plans To Increase His Investment

You may recall from last month’s Decisions that Michael Hill (Jeweller) simplified his holding into a single investment vehicle. This month, the reason for that became clear. Specifically, Durante Holdings Pty Limited Michael Hill Family, New Zealand (100%) has now received approval to acquire rights or interests in the shares of Michael Hill International Limited pursuant to a partial takeover offer. Consideration is to be advised. The vendors will be existing Shareholders of Michael Hill International Limited other than Durante Holdings Pty Limited.

The OIO states: “The Applicant which is 100% owned by the Michael Hill Family currently has a 47.62% shareholding in Michael Hill International Limited (the Company). The Michael Hill Family wishes to demonstrate its support and ongoing commitment to the Company by investing further in it”. Durante then sought and bought 10.03 million shares in Michael Hill International Limited at 90c per share at the beginning of 2011, taking its ownership level to 50.2%.

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