Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – July 2013 Decisions

“Confidential”, Chinese Buy 1,116 Ha On Karikari Peninsula

Another quiet month at the OIO and, firstly, a completely confidential decision. Apart from the date of the decision, 3 July 2013, all the OIO states is: “CONFIDENTIAL, the overseas investment transaction has satisfied the criteria in section 16 of the Overseas Investment Act 2005. The ‘substantial and identifiable benefit to New Zealand’ criteria were satisfied by particular reference to the following factors:

Overseas Investment Act 2005

17(2)(a)(i) – Creation of jobs
17(2)(a)(iii) – Increased export receipts
17(2)(a)(iv) – Greater productivity & efficiencies
17(2)(a)(v) – Additional investment for development purposes
17(2)(a)(vi) – Increased processing of primary products
17(2)(b) – Indigenous vegetation/fauna
17(2)(c) – Trout, salmon, wildlife and game
17(2)(e) – Walking access
17(2)(f) – Offer to gift foreshore/riverbed to the Crown

Overseas Investment Regulations 2005

28(f) – Advance significant Government policy or strategy”.

As usual, CAFCA appealed this decision and, eventually, the OIO released some details of the decision. The Applicant was Shanghai CRED Real Estate Co. Limited, Guo Jie Gui, China, People’s Republic of (36.1%), Pei Zhan, China, People’s Republic of (25%), and Others, China, People’s Republic of (38.9%); the vendor Paul Knox Kelly, Edgewater Developers Limited, Carrington Farms Limited, United States of America (100%); the land a freehold interest (both fee simple and stratum in freehold) in approximately 1,116 ha of land located on Karikari Peninsula in Northland, being the site of the Carrington Assets; the consideration, still confidential. The OIO states: “The Applicant intends to continue to operate and develop the existing businesses (including the Carrington Golf Course Resort and Karikari Winery Estate) operated on the land”.

Anne Gibson in the New Zealand Herald (9/11/13) reported on the deal, with comments from our own Murray Horton*:

China’s Shanghai CRED Real Estate says it has bought the 1,000ha Peppers Carrington golfing resort on the Karikari Peninsula in the Far North from American Paul Kelly. The Chinese business said it had big plans to expand the resort and market it overseas, particularly in China. The buyer said it would target high-income Chinese tourists, drawing on its experience in creating and marketing other mixed-use developments, including hotels, golf courses, residences and conference centres. The Chinese also plan to upgrade and expand an existing 188ha vineyard, which already exports its products to China.

Shanghai CRED General Manager Guo Gui said Peppers Carrington could provide the sort of holiday experience wealthy Chinese and other international tourists were seeking. The seclusion of the property was viewed positively by that segment of the market, as well as the opportunity to enjoy a beautiful natural environment, white-sand beach, a golf course and wines from the vineyard. He said affluent Chinese tourists tended to use Chinese tourist agencies, which preferred to recommend Chinese-owned resorts internationally.

The Campaign Against Foreign Control of Aotearoa has campaigned for years to stop big deals like this, saying it is not in New Zealand’s interests. The Campaign believes the independence of most countries is being eroded because most of the world’s economy is now owned and controlled by a relatively small number of big corporations. Campaigner Murray Horton said the Peppers Carrington sale would mean that part of Northland would become a Chinese enclave. Mr Horton said the campaign would have the same objection if it was an American, Japanese, Australian or British-owned resort.

(* Murray Horton reports: This is the full text of what I told the Herald when asked to comment: “Here is a perfect illustration of vertical integration. ‘Mr Gui says affluent Chinese tourists tend to use Chinese tourist agencies, which, in turn, prefer to recommend Chinese-owned resorts internationally’. ‘We will promote Peppers Carrington through our own resorts and our many contacts in tourism in China’. So it is, effectively, a Chinese enclave in Northland. And, let me hasten to add, the fact that it is Chinese-owned is not the point. CAFCA would have the same objection if it was an American, Japanese, Australian or British-owned resort. The profits go out of the country (and vertical integration ensures that the Chinese businesses involved clip the ticket at every step along the way) and the locals get low paying, low skill service jobs like maids, cleaners, waiters, barmen, gardeners, baristas, etc. It’s a model seen at resorts throughout the Third World. New Zealanders see it every time they take a holiday in Fiji. Well, now we will be China’s Fiji”.)

Another High Country Station Sold, This Time Ben Avon Station

Paroa Bay Winery Limited, Richard Anthony Magides, United Kingdom (100%) received approval for the acquisition of a freehold interest in 2,737.2 hectares of land at Ben Avon Station, Ahuriri Valley, Waitaki. The vendors were James Harding Crosby Morris and Mary Ann Morris New Zealand (100%) and Ben Avon Run Co. Limited New Zealand (100%); consideration was $6,500,000. The OIO states “The Applicant will continue to operate Ben Avon Station as a sheep and beef station, and will develop an exclusive eight room luxury wilderness lodge on the land which will offer guided hunting, fishing, horse riding and snow sports in the Ahuriri Valley”. Magides has previously purchased a vineyard comprising 24 hectares in Paroa Bay, Bay of Islands (see our May 2012 commentary).

Matthew Littlewood in the Timaru Herald reported on the sale (30/8/13):

A British businessman has been granted consent to purchase Ben Avon Station in the Ahuriri Valley. The Overseas Investment Office (OIO) has approved the purchase of the station, previously owned by high country identity Jim Morris and his wife Mary Ann. The property was bought by Singapore-based businessman Richard Magides, who also owns the Parora Bay Winery in Russell, Northland.

OIO documents suggest the sale price of the 2,700 hectare freehold area of the Ahuriri Valley station could be about $6.5 million. The full sale agreement has yet to be finalised. OIO Manager Annelies McClure said the applicant had about a year to report on the nature of the final sale agreement. The Essex University-educated Mr Magides has managed several hedge fund businesses, particularly ones specialising in the Asian markets. He was unavailable to comment.

Mr Morris said he was pleased with progress so far. ‘The new owner understands the importance of the environment. He wants to maintain its character. This isn’t going to be turned into a massive dairy conversion. I understand what he’s planned is very much in the spirit of all the conservation work our family have done’, he said. It is understood Ben Avon Station would continue to be a sheep and beef station, but Mr Magides would also lodge consents to develop a ‘luxury wilderness lodge’, as well as offer guided hunting, fishing, horse riding and snow sports opportunities. ‘If this goes ahead, it could be a really exciting addition for the district’, Mr Morris said. ‘It will bring a lot of visitors and jobs to the area, and complement the other recreational activities in the region’.

Ben Avon Station completed the tenure review process nearly a decade ago, with 4,800 ha transferred to the Crown to become public conservation land. The rest was placed into freehold, which Mr Morris has run as a sheep and beef farm, as well as operating a high country cottage for visitors to the area. The OIO consented to Ben Avon Station’s sale because it would create jobs, increase export receipts, and provide commercial recreational opportunities. Mr Morris will help oversee the transition of the property over the next few years, particularly as the new owners go through the consenting process and build the new accommodation. ‘We will still be living here for a while yet’.

And Brits Shuffle Ownership Of Allflex

Tagada Holdings Inc, BC European Capital IX Fund, United Kingdom (75.4%), Electra Private Equity Partners 2006 Scottish LP, United Kingdom (14.9%), and various overseas persons (9.7%), received approval for an acquisition of rights or interests in 100% of the shares of Allflex Holdings III, Inc. the consideration of which exceeds $100m.The vendors were Existing Shareholders of Allflex Holdings III, Inc United Kingdom Public (55.6%), Jersey Public (20.5%), French Public (9.4%), various overseas persons (8.5%) and United States Public (6%). Consideration was described as $US1.35 billion for the worldwide business of Allflex Group (enterprise value). The value of the New Zealand assets exceeds NZ$100m.

The OIO states: “Allflex Holdings III, Inc. operates a worldwide business of manufacturing and distributing plastic and electronic animal identification tags. Allflex NZ which is a wholly owned subsidiary of Allflex Holdings III, Inc. has been operating in the New Zealand animal identification business for over 57 years. The Investment is an acquisition of the worldwide business of the Allflex Holdings III, Inc. The Applicant plans to support the international growth of Allflex Holdings III, Inc. and will continue the on-going support of Allflex NZ”.

Blakely Pacific Expands Forest Empire In Waimana

Blakely Pacific Limited, Eddy Family, United States of America (100%), received approval for the acquisition of a freehold interest in 228.1 hectares of land at Waimana, Whakatane. The vendor was Waimana Forest Farm Limited, New Zealand Public and Various Entities, New Zealand (98.1%), and Australian Public (1.9%); consideration was confidential. The OIO states: “The Applicant intends to further develop the afforestation project on the land by investing in pruning and thinning operations which is likely to result in high quality clearwood”. Blakely has been a regular OIO applicant for land for forestry purchases for the past 16 years. See our May 1995 commentary for details of Blakely’s original purchase the 2,009 hectare Pentland Hills Station Ltd at Waimate and a further 78 hectares added in August 2010. Other purchases include the 2000 hectare Saddle Peak Station in March 2007 and 3,689 hectares in Waimate in April 2003.

Campaign Against Foreign Control of Aotearoa,
P.O. Box 2258
Christchurch.