Foreign investment in Aotearoa/New Zealand

Overseas Investment Office – April 2018 Decisions

Two Mystery Consents Granted

This month two of the consents granted were totally confidential, with all information withheld. Case 201810066 and Case 201810035 were granted under s.12(a) (sensitive land) and s.13(1)(a) (significant business interests) of the Overseas Investment Act 2005, with all information withheld under the usual s.9(2)(b)(ii) of the Official information Act 1982 (would unreasonably prejudice commercial position of the applicant).

All that the OIO summary shows is that the applicants’ lawyer was Bell Gully, Auckland (and no, it’s not the controversial spring water consent: that’s Creswell, granted in May). You can read the OIO’s general explanation of confidentiality rules here. .

Craigmore Kiwifruit Conversion Declined

Craigmore Permanent Crop Limited Partnership (Hong Kong [SAR] 29.7%; Germany 29.2%; UK 28.5%; Finland 6.9%; USA 3%; NZ 2.3%; Ireland 0.5%) has consent to acquire 11.4420 hectares at 315 and 326 Hereford Park Road, Te Puke, through its subsidiary CPCP Kiwifruit Ltd from AAJ’s Kiwifruit Ltd Partnership (NZ 100%). Price withheld under s.9(2)(b)(ii) of the Official Information Act.

The OIO states that Craigmore Permanent Crop is a limited partnership established in 2016 as a horticulture investment vehicle and is part of the wider Craigmore Farming Group which has numerous investments in New Zealand. It is 97.72% owned overseas but effectively controlled by non-overseas persons. Craigmore Permanent Crop has partnered with a New Zealand-owned and controlled pack house and cool store operator for the purposes of this acquisition.

The consent allows Craigmore to acquire an operational green Hayward kiwifruit (5.96 ha) and avocado (2.04ha) orchard in Te Puke. Its plan is to convert all kiwifruit on the Land to organic production for supply to Zespri, including replacing some Haywards with the gold variety (G3). Organic kiwifruit attracts a premium and Zespri is seeking to increase its organic supply to meet demands overseas.

The likely benefits resulting primarily from conversion to organic production and replacing some avocado trees (0.5 ha) with Haywards are: jobs (around one fulltime equivalent [FTE]); some additional export receipts from the organic fruit; additional development investment for upgrades related to organic conversion; minor increase to New Zealand’s reliability as a supplier of organic G3 kiwifruit; and oversight and participation of New Zealanders (11.3% ownership by New Zealanders of Craigmore and a high level of New Zealand control).

For consent to be granted, states the OIO Decision, Ministers need to be satisfied that the acquisition would benefit New Zealand and that the benefit would be substantial and identifiable. The overall assessment, having regard to the new rural land directive, was that the overseas investment was likely to benefit New Zealand but that the benefit was not substantial and identifiable within the context of the investment.

So, overseas interests buying up sensitive land or assets just to do business as it would usually be done may no longer be good enough. This Decision contrasts with the consent for Craigmore’s kiwifruit orchard purchase in 2017 (Chris Hutching Stuff, 14/11/17, ). For more on the Craigmore Farming Group, including its foreign funding, see commentaries of May, August and December 2017, June, July and September 2015, March, April, May, June, July, August and November 2014, February, March, November and December 2013, and June 2012.

Waste Management (China) To Consolidate Auckland Operations In Tamaki

Waste Management NZ Ltd (Chinese government 50.5%; China Public 49.5%) has consent to acquire a leasehold interest in 5.2452 hectares at 11 Springs Road, East Tamaki, Auckland, from Stride Property Ltd (formerly DNZ Property Fund Ltd) (NZ Public 70.2%; various overseas 29.8%). The price will total $362,767,007 over the term of the lease.

The OIO states that Waste Management is one of NZs leading recycling and waste service companies, servicing industrial, Government, and commercial customers. It seeks to consolidate its operations in Auckland to one location to enable it to develop its business. Prior to the lease commencing and in order to secure the tenancy, Stride Property will undertake a multi-million-dollar investment in demolition, design, and construction work over two years to ready the land for Waste Management. The acquisition is said to benefit New Zealand in regard to the following stages:

Stride Property will spend several million dollars on redeveloping the property for the tenancy.
Waste Management’s new facilities and operating site will allow it to achieve greater efficiency and enhance its delivery of domestic services. Current Auckland operations are spread across several leased sites, which causes logistical and transit issues, and restricts Waste Management’s ability to grow the business.
The new site will allow Waste Management to better coordinate and schedule waste collection and processing services, to maintain and convert its fleet of trucks from diesel to electric vehicles and bins, and to separate employee/customer traffic flow from fleet and business traffic flow

The OIO states that Waste Management has made previous investments in New Zealand over a number of years that have injected substantial new capital, created jobs, and provided other benefits such as enhanced recycling capacity and electricity generation for the national grid. See Stride’s NZX announcement on 21/11/17 about development of this site . There was a major fire at Waste Management’s Neales Rd, East Tamaki site on 2 August 2017.

Waste Management and Envirowaste together dominate rubbish collection, recycling and landfills across New Zealand, sometimes operating in partnership. Originally owned by the notorious US company, Waste Management (WMX) (see April 1999 commentary), Waste Management NZ was listed on the NZ Stock Exchange, then taken over by Transpacific Industries (June 2006), expanded to Australia, bought into by the private equity firm Warburg Pincus (March 2008), then bought up by Chinese interests (June 2014, October 2014).

Its current 55.5% owner, the Chinese government, has now decided not to import other people’s rubbish, so waste disposal and waste reduction is about to become a major issue for NZ. For background articles, see Watchdogs 92, December 1999, 93, April 2000, and 123, May 2010.

Japanese Daiken Buys A Second NZ MDF Manufacturer

Daiken New Zealand Ltd (Japanese Public 63.9%; ITOCHU Corp, Japan 25.4%; Sumitomo Mitsui Banking Corp, Japan 3.9%; North American Public 2.5%; UK Investors 2%; Norway Public 1.3%; various overseas 1%) has consent to acquire 100% of the shares of Dongwha New Zealand Ltd (including its wholly owned subsidiary Patinna Ltd ) which owns approximately 124.4 hectares of sensitive land at Mataura, Southland.

The vendor is Dongwha International Co Ltd (Seung Myung Ho, South Korea 80%; Ji Hwan Seung, South Korea 5%; Ji Soo Seung, South Korea 5%; Jung Ah Kim, South Korea 5%; Ji Yong Seung, South Korea 5%; Laminex Group (NZ) Ltd, Australian Public 34.3%; NZ Public 31.5%; North American Public 18.29%; various overseas 15.9%). Price withheld under s.9(2)(b)(ii) of the Official Information Act.

The OIO states that Daiken NZ Ltd is a wood processing entity specialising in production of medium density fibreboard (MDF) on the land. Daiken NZ Ltd has an existing MDF production facility in Rangiora, Christchurch. Daiken intends to increase the production capacity of the facility, which is likely to increase export receipts and increase processing of primary products through the requirement for additional pulp logs. Daiken NZ will introduce additional capital into New Zealand for development purposes and bring knowledge of the industry from their previous investments.

See OIO Decisions of December 2015, March 2012 and January 2009 in regard to Daiken’s purchase of Canterbury timber processing plant with, then from, Itochu (Japan). An OIO Decision in October 2007 allowed Fletcher Challenge’s Laminex Group to buy into Dongwha, making it the second largest MDF manufacturer for the NZ market at that time.

Nikkei Asian Review estimated this deal as worth $US89.7 million and states that Dongwha’s sales were $91.59 million for its last fiscal year. Daiken has a production centre in Malaysia as well as NZ and plans to expand in Oceania and North America. Plywood is more common in Japan, but Daiken is promoting MDF as more durable (20/9/17). The Energy Efficiency and Conservation Authority gives Daiken’s Rangiora plant as an example of energy audits that helped reduce electricity use by 13% and diesel by around 80% in 2014.

Metlifecare Buys Land In Hobsonville

Metlifecare Ltd (NZ 68.2%; Australia 19.1%; US Public 5.8%; UK Public 3.8%; Norway Public 1.3%; United Arab Emirates Public 0.6%; various 0.53%; Germany Public 0.35%; Switzerland Public 0.23%) has consent to acquire approximately 5.5972 hectares at Clark Road, Scott Point, Hobsonville from Joseph Oliver Midgley, Huia Marie Midgley, and Desiree Morgan (NZ 100%), and Warren Edmond Midgley (NZ 100%). Price withheld under s.9(2)(b)(ii) of the Official Information Act.

The OIO states that Metlifecare develops, owns, and operates retirement villages and aged care hospitals in New Zealand, and intends to use the land to develop a retirement village and aged care hospital in Hobsonville. The benefits to New Zealand include:

creating a large number of additional independent living units and care beds, specifically designed for elderly residents;.
creating a significant number of employment opportunities both during the construction of the retirement village and aged care hospital and its subsequent operation; and
a high level of New Zealand oversight and participation.

For earlier consents related to Metlifecare ownership and expansion, see October and December 2005, June 2008 February and August 2009, August, June and July 2012. See Watchdogs 136, September 2014, 130, August 2013 and 130, December 2010, for background articles on the aged care industry.

Heritage Lifecare (Adamantem) Buys Ashburton Retirement Village

Heritage Lifecare Ltdd (Australia 49.8%; USA 20.9%; NZ 16%; Cayman Islands 9.5%; Germany 2.4%; UK1.4%) has consent to acquire approximately 0.5912 hectares of land at 45 and 47 Burnett Street, Ashburton, from Coldstream Retirement Village Ltd (The Greenvale Group Ltd, NZ 100%). Price withheld under s.9(2)(b)(ii) of the Official Information Act.

The OIO states that Heritage Lifecare has applied for consent to acquire Coldstream Retirement Village located at Burnett Street, Ashburton, including approximately 0.5912 hectares of sensitive land. Heritage Lifecare owns a large portfolio of existing aged care facilities located throughout regional New Zealand. This investment is likely to result in benefit to New Zealand as a result of the introduction of capital into New Zealand for development purposes through upgrading the Coldstream facility. New Zealanders will also participate in the investment from an ownership and control perspective given their 16% ownership stake.

See OIO consents of July 2017 and March 2018 allowing Heritage Lifecare to become fully owned by Australian-based Adamantem Capital Management Pty Ltd, as part of plans for expansion in the NZ retirement village sector. Presumably legislative amendments to prohibit the purchase of existing housing by non-residents will include aged care facilities that are being bought up by Australian chains.

Swiss Buy HSBC Tower, Lambton Quay

Lambton Quay Real Estate Netherlands BV (Swiss Public 99%; various 1%) has consent to acquire freehold land (size unstated) at 195 Lambton Quay, Wellington, from Lambton Quay Properties Nominee Ltd (NZ 100%) for $102,515,000. The OIO states that Lambton Quay Real Estate Netherlands is ultimately a wholly owned subsidiary of Credit Suisse AG, part of the Credit Suisse group of companies.

The freehold land being acquired is the site of a commercial building, the HSBC Tower, which will continue to be operated for commercial purposes. The applicant has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character. The Applicant has also demonstrated financial commitment to the investment. Completed in August 2002, the 25-storey HSBC Tower comprises 12 floors of office space, ten floors of car parking plus retail on the ground floor.

Lambton Quay Real Estate Netherlands BV was incorporated in NZ on 21 November 2017 as an Overseas Non-ASIC* Company, with one Dutch and one Swiss director, by Lambton Quay Real Estate Netherlands BV, a financial holding company set up in October 2017, owned by Credit Suisse Real Estate Fund International Holding AG, and located at an Amsterdam address with an unlikely number of other companies. So, it’s one of those tax dodge, equity fund things described in the excellent documentary “The Tax Free Tour”. *ASIC – Australian Securities and Investments Commission. Ed.

Hong Kong Buys “Path Of Exile” Gaming Company

Tencent Mobility Ltd (Hong Kong Investors 66.8%; British Virgin Islands 33.2%; various overseas 0.01%) has consent to acquire 100% of the shares in Grinding Gear Games Limited and property in New Zealand from the shareholders of Grinding Gear Games Ltd (NZ Public 65.8%; US Public 34.2%). Price withheld under s.9(2)(b)(ii) of the Official Information Act.

The shareholders of Grinding Gear Games wish to realise the value of their investment and to allow the company to grow, by utilising the international connections of Tencent Mobility. Tencent Mobility has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character. Tencent Mobility has demonstrated financial commitment to the acquisition.

Founded in November 1998, Tencent is a leading provider of internet value added services in China, which went public on the Hong Kong Stock Exchange in 2004. Its online products include platforms for social networking, payments, games, music, comics, reading, education, etc. “Path of Exile” is an online action role-playing game (RPG) set in the dark fantasy world of Wraeclast.

Grinding Gear Games’ Website states it was founded in November 2006 in Auckland, with founding members from various countries and diverse skill backgrounds. It states that “Path of Exile” is a competitive online action RPG, designed around a strong online item economy, deep character customisation, competitive person vs person and ladder races; the game is completely free and will never be “pay to win”.

Campaign Against Foreign Control of Aotearoa,
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