Foreign investment in Aotearoa/New Zealand
Overseas Investment Office – September 2010 Decisions
Japanese Purchaser Declined (Again)
A busy month at the OIO and we start with a rare refusal. Kiwi Queen NZ Trust Nobuyoshi Seki, Kazuma Seki and Shinsaku Seki and the children of Shinsaku Seki, Japan (100%) were declined approval for the acquisition of a freehold interest in 9.9 hectares of land at 49 Sunnyside Road, Coatesville. The consideration was stated as $3,950,000. The vendor was Daniels Family Trust Daniels family, New Zealand (100%) The OIO states: “The Applicant intended to acquire the property so that one of its beneficiaries could use the property from time to time as a residence when he visited New Zealand. The Applicant proposed to demolish the existing residence and build a new residence on the property to be used to host visitors from Japan, two or three times a year. The overseas investment transaction has not satisfied the criteria in section 16 of the Overseas Investment Act 2005”.
Section 16 refers to the criteria for consent of overseas investment in sensitive land. Specifically paragraph (e) (i) refers to the applicant “being ordinarily resident in NZ or intending to reside in NZ”, and this presumably is the test that this applicant failed to satisfy. This is not the first time Nobuyoshi Seki has been declined by the OIO. In October 2002, he tried to buy a $3 million property in Castor Bay, Auckland for the purpose of converting into an upmarket guest/boarding house for Japanese business people. In declining this application, the Overseas Investment Commission (OIC, as it was then) stated “the application for consent has been refused as it was not considered to be in the national interest”.
Sky City Increases Shareholding In ChCh Casino To 50%
Sky City Investments Christchurch Limited New Zealand Public and various Entities, New Zealand (32.7%) various overseas persons (29.2%) Australian Investors, Australia (21.5%) Investors Mutual Limited, Australia (6.2%) United States Public (5.9%) United Kingdom Public (4.5%), received approval for the acquisition of rights or interests in a further 4.46% of the shares of Christchurch Casinos Limited (CCL), the value of the assets of CCL and its 25% or more subsidiaries being greater than $100m. The asset value was stated as $220,000,000; the vendor was Southern Equities Limited Louis Mervyn Crimp, New Zealand (100%).
The OIO states: “The Applicant is a wholly owned subsidiary of Sky City Entertainment Group Limited (Sky City), which operates a number of casinos in New Zealand and Australia. Sky City has a 45.54% interest in CCL, which in turn has a 33% interest in Dunedin Casinos Limited. Through a share buyback, the Vendor will cease to own any of CCL and SKYCITY’s ultimate ownership of CCL will increase to 50%. The Investment will simplify the ownership structure of CCL so that a minority shareholder is removed and there will effectively be two major shareholders with equal shareholdings in CCL”. The other shareholder in CCL is Skyline Enterprises, a consortium of wealthy, largely South Island investors.
Not happy with 50% of CCL, a couple of months later, Sky City then attempted to buy for cash, the remaining 50% held by Skyline. However this was rejected by Skyline, which perhaps they now regret given the post earthquake disruptions to the Christchurch Casino. See our commentary in May 2004 for details of Sky City’s original purchase of a 40.5% stake in the Christchurch Casino, and our July 2004 and 2005 commentaries for details of Sky City’s takeover of Riverside Casino, Hamilton. And finally, while we are on the subject of Sky City, its attempt to bribe the Government into allowing it to increase the number of gaming tables and poker machines it has, by building a new convention centre in downtown Auckland, shows just how little social responsibility the casino operator has.
Lion Breweries Buys Back Newmarket Site
New Zealand Breweries Limited Japanese Public (78.5%) United States Public (9.4%), various overseas persons (5.9%) United Kingdom Public (5.2%) Australian Public (1%) received approval for the acquisition of rights or interests in 100% of the shares of Great Northern Developments Limited, the value of the assets of Great Northern Developments Limited and its 25% or more subsidiaries being greater than $100m. The vendor was Existing shareholders of Great Northern Developments Limited Abu Dhabi Investment Authority (50%) New Zealand Public (36.5%) Australian Public (13.5%) The asset value was stated as confidential.
The OIO states: “In 2007, the Applicant agreed to sell, and APEREF II Limited (AMP Private Equity Real Estate Fund II Limited) agreed to purchase the Lion Nathan Brewery site located on Khyber Pass Road, Newmarket, Auckland. APEREF II nominated Great Northern Developments Limited (GND) to complete the acquisition. The Applicant has entered into an agreement which will result in the Applicant acquiring the shares in GND. It is proposed that GND (under the Applicant’s ownership) will continue with the proposal to redevelop the property”.
As I reported in Watchdog 126, May 2011, under July 2010 OIO decisions, this site has proved to be a disastrous investment for the AMP Property Trust which bought it from NZ Breweries in 2007 for $162 million. Most commentators believe that AMP has lost half that investment and that NZ Breweries is now back to where it was in 2007, owning the 5.2ha site but with another $80 million in its back pocket! See our commentary for September 2007 and February 2008 for further details of AMP’s acquisition of the Lion Breweries property and our July 2010 commentary on the AMP Property Trust restructuring involving the site and media commentary on the loss for AMP.
Chinese Grab Controlling Stake In Synlait Milk
In the most significant OIO decision of the month, Bright Dairy and Food Co., Ltd Chinese Government, People’s Republic of China (63.9%), China Public (32.3%) China Pacific Life Insurance Co. Ltd, People’s Republic of China, (1.7%), Bank of Communications Sea Fortis Securities Investment Fund, People’s Republic of China, (1.4%), Bank of China Sea Fortis Securities Revenue Growth Investment Fund, People’s Republic of China, (0.7%) has received approval for the acquisition of rights or interests in 51% of the shares of Synlait Milk Limited which owns or controls a leasehold interest in 49.2 hectares of land at 1028 Heslerton Rd, Bankside-Dunsandel. Approval was also received for an overseas investment in significant business assets, being the Applicant’s acquisition of rights or interests in 51% of the shares of Synlait Milk Limited, the value of the assets of Synlait Milk Limited and its 25% or more subsidiaries being greater than $100m. The consideration was stated as confidential.
The OIO states: “The Applicant is one of the largest dairy product manufacturing and distribution enterprises in the People’s Republic of China. The Applicant distributes its products in the Chinese domestic market, with Shanghai being its major market. The Applicant will subscribe for new ordinary shares in Synlait Milk Limited which will result in it holding 51% of the issued share capital of Synlait Milk Limited. Synlait Milk Limited owns and operates a high specification milk processing facility, producing milk powder products and high value functional milk products for export. The funds raised through the Investment will be used to strengthen Synlait Milk Limited’s financial position and fund a new milk processing plant”.
Details of this deal were reported by the New Zealand Herald on 19/7/10. “Bright Dairy & Food, China’s third biggest dairy company by volume, has agreed to buy a majority stake in Canterbury milk processor Synlait Milk for $82 million. Synlait, which abandoned a planned $150 million share sale last year due to a tepid response, will be a joint owner of its processing company with Bright Dairy, though it will keep and operate its farms through a separate company. Work on a new milk powder processing plant is underway, and is expected to double the company’s capacity by the 2011/12 season.
“The Synlait deal is Bright Dairy’s first investment in processing facilities outside China. ‘This accelerates our value-added strategy and is aligned with Bright Dairy’s strategy of introducing a range of premium infant formula and milk powder products through its leading brands and retail distribution channels in the burgeoning eastern seaboard domestic markets of China’, said John Penno, Synlait Milk Chief Executive in a statement. “Synlait Milk will help Bright Dairy establish a market leading position in the infant formula and milk powder category with a planned co-branded range”.
“The Bright Dairy deal is the second Chinese bid to capitalise on New Zealand’s dairy production, with Hong Kong-listed Natural Dairy looking to inject $1.5 billion in a buy-up of land and facilities, including the 16 Crafar family farms. Federated Farmers issued a press release this afternoon saying that ‘the weakness of New Zealand’s capital markets has been exposed’ by the Bright Dairy investment. ‘After last year’s abandonment of an Initial Public Offering, it’s a damming indictment on our capital markets that Synlait couldn’t rely on New Zealand to provide the investment capital necessary to fund its expansion’, says Lachlan McKenzie, Federated Farmers Dairy Chairperson.
“‘With a majority of Synlait Limited’s processing arm being bought by Bright Dairy & Food Co Limited, I think New Zealanders should be thankful Fonterra Cooperative Group, Westland Dairy Cooperative and Tatua Cooperative Dairy Company are Kiwi owned by Kiwi farmers’, said McKenzie. He said Federated Farmers hoped Synlait Milk would look to work with local cooperatives to develop the quality end of the Chinese market. ‘New Zealand can only meet a small part of China’s total needs so developing the value end of the market is in our interests’, said McKenzie. He said Bright Dairy had a huge advantage with its Chinese distribution channels and he’d ‘like to extend that same message to Natural Dairy’ – the company bidding for the Crafar farms.
“The Natural Dairy bid has sparked controversy from all quarters, with Federated Farmers joining calls from the Green Party to block Chinese interests purchasing New Zealand land. Bright Dairy is listed on the Shanghai Stock Exchange with a market capitalisation of $1.7 billion, and is a subsidiary of Bright Food Group, the biggest food company in Shanghai. Earlier this month Bright Food unsuccessfully tried to buy CSR’s Australian sugar unit. Synlait, which aims to expand its milk powder capacity, is seeking funds to build a second dryer at its main site. It currently processes 70 million litres of milk a year, according to its Website. Present shareholders include Japan’s Mitsui, which acquired a 14% stake in 2007 for $13.5 million, implying a capitalisation of $96 million. Mitsui also made a further $16.5 million loan available to Synlait at that time”. See our November 2009 commentary for details of Synlait’s attempt to increase its capital base via a public share offering. Also see Dennis Small’s excellent article “Corporate Agriculture/Free Trade Contradictions Bite Home” in Watchdog 124, August 2010 for more details on the corporate/overseas takeover of our agricultural base.
Harvard University Snaps Up Big Sky Dairy Farm
In another significant overseas grab of our dairy assets, Dairy Farms Partnership President and Fellows of Harvard College, United States of America (100%) received approval for the acquisition of: a freehold interest in 88.5 hectares of land at Patearoa, RD4, Ranfurly, Central Otago; and a freehold interest in 766 hectares of land at Patearoa, RD4, Ranfurly, Central Otago; and a freehold interest in 905.3 hectares of land at Patearoa, RD4, Ranfurly, Central Otago. Consideration was stated as $34,152,494.
The vendors were Consultant Management Services Limited (in receivership) Rodney John Humphries and Trustee Management Limited, New Zealand (100%) Cascade Capital Limited (in receivership and in liquidation) Rodney John Humphries, Bruce Raymond Sheppard and Lynette Margaret Nicholson, New Zealand (33.4%) Brookside Farm No 2 Limited and Practise Management Trustee Limited, New Zealand (33.3%) Rodney John Humphries and Trustee Management Limited, New Zealand (33.3%) Main Farm Limited (in receivership) Rodney John Humphries, Bruce Raymond Sheppard and Lynette Margaret Nicholson, New Zealand (41.7%) Brookside Farm No 2 Limited and Practise Management Trustee Limited, New Zealand (33.3%) Rodney John Humphries and Trustee Management Limited, New Zealand (25%). The OIO states: “The Applicant’s particular interest in the New Zealand dairy industry stems from New Zealand’s position as a leader in the global dairy industry. The Applicant intends to integrate management of the land with its nearby Helenslea dairy farming operation. The Applicant intends to improve the current dairy farming activities on the land through a development programme (involving improved irrigation and improved pasture management)”.
Kent Atkinson of NZ Press Association (NZPA) reported details of this sale on Voxy.co.nz 5/10/10. “Overseas Investment Office staff recently given new guidelines on the sale of ‘sensitive land’ have approved the sale of a big Otago dairy farm to offshore owners. Big Sky Dairy Farms in the Maniototo district in northern Otago — set up as a high profile dairy farm conversion in 2001 — has been sold to Harvard University for $34,152,494 and renamed Dairy Farms Partnership.
“Finance Minister Bill English announced on September 27 Cabinet Ministers would be given more power to address economic impact issues when assessing overseas investment applications for ‘sensitive land’ and issue a new Ministerial directive letter to the Overseas Investment Office (OIO). The 1,760ha property grazing 3,300 cows is one of the nation’s largest, producing over one million kg of milksolids: milkflows worth $6.7 million at the rate Fonterra paid for the 2010 season.
“Big Sky’s original syndicate formed in 2001 and included co-developers Ewan Carr and Rodney Humphries and a Dunedin businessman, the late Howard Paterson. They announced controversial plans to build up the nation’s biggest dairy herd of 6,000 cows on the property near Patearoa in the Maniototo. The project raised concerns about water rights, environmental impacts, effluent, herd health and irrigation and at one stage Big Sky was criticised for planting a four ha brassica field in protected upper Taieri wetlands.
“It remained one of the most ambitious dairy conversion projects in the Southern Hemisphere until the company defaulted paying Nissan Finance NZ Ltd and the High Court at Dunedin ordered its liquidation, in April 2007. The Otago Daily Times reported at the time that an estimated four companies associated with Big Sky owed creditors more than $30m.The property comprises several houses, three rotary dairy sheds, calf sheds, workshops, and implement sheds, with 1,200ha of milking platforms, and an additional 560ha of land. When it was originally offered for sale in 2008, the package included more than one million fully paid shares in Fonterra.
“Harvard University is the world’s wealthiest university and already has investments in New Zealand’s primary sector, including the nearby Helenslea dairy farm, and land management of the two properties will be integrated, according to Harvard. The University told the OIO that its particular interest in the dairy industry stemmed from New Zealand’s position as a global leader in the sector, and that it intended to boost the operation by improving irrigation and pasture management. Harvard is also the majority investor in Kaingaroa Timberlands, which has about 170,000 hectares of cutting rights to plantation forests in the central North Island. The Harvard University investment will be overseen by an Auckland-based firm, Franklin Rural Management…” For details of other Harvard University purchases here, see our commentaries for October 2003 (Kaingaroa), March 2004, October 2004 and October 2008 (Helenslea).
Grey Lynn Countdown Property Sold To Singapore Investors
Goodland Limited Jeffrey Yih Peir Hing, Singapore (50%) Bei Keen Wong, Singapore (50%) received approval to acquire a freehold interest in 1.1 hectares of land at 271 Richmond Road, Grey Lynn, Auckland. The vendor was Defensive Investments Limited Michael Steele Judd, New Zealand (17%) Bell Family and Yates Allison Trust Partnership, New Zealand (16.6%) Colin Steele Judd, New Zealand (16.5%) Richard Daniel Judd, New Zealand (16.5%) Yates Allison Family Trust No. 2, New Zealand (16%) Bell Family Investment Trust, New Zealand (16%) Phillip Graeme Bell, New Zealand (0.7%) Greig Anthony Allison, New Zealand (0.7%). Consideration was $18,350,000. The OIO states: “The owners of the Applicant are commercial property investors and own other commercial properties in Auckland. The acquisition of the land is consistent with the Applicant’s investment strategy in commercial property. The land has a supermarket built on it, which the Applicant will continue to lease to General Distributors Limited, the operators of Countdown supermarkets”
A New Sawmill For Milburn?
In what could be seen as one of the few examples of positive foreign investment, Southern Cross Forest Products Limited Hagen Family, United States of America (89.5%) Colin Gordon Thomas Whitefield, New Zealand (10%) Mark de Latour, New Zealand (0.5%) received approval for the acquisition of a freehold interest in 37.75 hectares of land at 447 Waihola Highway, Milburn. The vendors were Calder Stewart Industries Limited New Zealand (100%). Consideration was $1,462,500.
The OIO states: “The Applicant owns sawmills and timber processing plants situated in Mosgiel, Milton, Balclutha and Thames. The Applicant proposes to establish a new sawmilling and wood manufacturing facility on the land. The proposed sawmilling and wood manufacturing facility will supplement the Applicant’s existing facilities in New Zealand and produce additional lumber which will enable the Applicant to increase its sales in South East Asia, the United States of America and Australia”. See our commentary of September 2006 for details of the Hagen family’s purchase of Thames Timber Ltd.
Dumgoyne Station Added To Swiss Portfolio
Middle Mount Limited Heinrich Martin Henni, Switzerland (100%) received approval for the acquisition of a freehold interest in 439.5 hectares of land at Bushy Knoll Road, Hangaroa, Gisborne. The vendors were Judith Anne Moore and the Candy Family Trust Ward Geoffrey Candy, Judith Anne Moore and Allan Colquhoun de Latour as trustees of the Candy Family Trust, New Zealand (50%) Judith Anne Moore, New Zealand (50%). Consideration was $2,418,750.
The OIO states; “The Applicant proposes to acquire the land known as Dumgoyne Station, which is adjacent to the Avondale and Awapapa Station property acquired by the Applicant in 2009. The proposed acquisition will expand the Applicant’s sheep and beef farming operation in the Gisborne region and enhance the viability of the farming operations of Avondale and Awapapa Station”. See our commentaries for April 2006, December 2006 and September 2009 for details of other land purchases here.
Other September Decisions
RHL NZ Limited Recreation Holdings Limited United States of America (100%) received approval to acquire a freehold interest in 225.8 hectares of land at Wairoa Gorge, Nelson. The vendor was George Alan Reese New Zealand (100%); the purchase price was $595,000. According to the OIO: “The Applicant has recently acquired adjoining land to develop into a mountain bike park with trails and a lodge for accommodation purposes. This land will increase the area of the mountain bike park so that more trails can be added. A New Zealand company, NZ Trail Solutions Limited, has been engaged by the Applicant to assist in managing the land, the entire trail building process, development, maintenance (including pest control) and other matters relating to the proposed accommodation lodge”. See our May 2010 commentary for further Wairoa Valley purchases by RHL
621 Rosebank Road Property Limited Blum Foundation, Austria (48%), Herbert Blum, Austria (26%), Gerhard Blum, Austria (26.0%) received approval to acquire a freehold interest in 1.47 hectares of land at 621 Rosebank Road, Auckland. Consideration was $5,175,000. The vendor was Smith & Nephew Limited Smith & Nephew plc, United Kingdom (except Isle of Man and the Channel Islands) (100%). The OIO states: “The Applicant is part of the Blum Group of companies based in Austria, which is a leading global supplier of hinge, lift and pull-out systems for furniture producers, especially for kitchen furniture. The Applicant intends to acquire the land to secure and develop suitable premises for Blum’s Auckland operations”.
Peter Michael North & Alison Joan North Alison Joan North, South Africa (50%) Peter Michael North, South Africa (50%) received approval to acquire a freehold interest in 15.5 hectares of land at 1024 Leigh Road, Matakana, Warkworth. Consideration was $1,293,750; the vendor was Bryan Rissman New Zealand (100%). The Norths are applying for NZ residency under the skilled migrant scheme and plan to build a house on the property which is currently bare.
Heritage Hotel Management Limited Singapore Public (100%) received approval to acquire a leasehold interest in 0.86 hectares of land at 96 Fernhill Rd, Queenstown. Consideration was $650,000; the vendor was Little Rock Management Company Limited Paul Wayne Burton and family, New Zealand (50%), Roderick William Guthrie Nielsen and family, New Zealand (50%). Heritage already manages the Heritage Villas Resort located on the site.
And finally for September, Timothy Joseph Garnett Brown Australia (100%) received approval to acquire a freehold interest in 3.2 hectares of land at 175 Kina Beach Road, Nelson, for $2,250,000 from Charmaine Yvette Grainger New Zealand (100%). Brown and his wife intend to live here in Aotearoa.
Campaign Against Foreign Control of Aotearoa,
P.O. Box 2258
Christchurch.