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Foreign investment in Aotearoa/New Zealand

Overseas Investment Office - May 2011 Decisions

May was an extremely quiet month at the OIO with only three decisions released. Perhaps its staff needed a break after three busy months of rubber stamping!

Germans Continue To Buy Up Large In Southland

For the third month in a row, Aquila AgrarINVEST Investitions GmbH, D/S Neuseeland Milchfarm Investitions GmbH and Alceda Star SA Germany (100%) received approval to buy another dairy farm, this one a monster. Specifically they received approval to acquire rights or interests in up to 100% of the units of Glencairn Limited Partnership which owns or controls a freehold interest in 1,401.1737 hectares of land at 141 Glencairn Rd, Dipton. The vendor was Glencairn Land Company Limited New Zealand (100%); consideration was $33,000,000.

Aquila Agrar intends to merge the above two farms (which adjoin each other) into a larger dairy operation. The OIO states: "The relevant land is currently used as two separate dairy units. The Applicant proposes to convert the land into three dairy units and substantially increase the milking capacity through capital investment, sound farming practices and expert management". Given the number of properties this consortium is buying and the same OIO mantra spewed out each time, perhaps a genuine rubber stamp has already been commissioned for this applicant!

A summary of the above transaction was reported by Collette Devlin on Stuff.co.nz (1/7/11): "A German investment management company is now possibly the largest player in rural land in Southland after it spent $33million to buy a dairy farm at Dipton. Aquila AgrarINVEST Investitions Gmbh was granted approval under the Overseas Investment Act to secure the acquisition of rights or interests in up to 100% of the units of Glencairn Ltd Partnership, which owns or controls a freehold interest in 1,401ha of an existing dairy farm.

"The company plans to operate three dairy units to increase milking capacity on the farm. It now has interests in more than 2,458ha of land in the south and it has spent $79m buying six farms in the province during the past year. The vendor was Glencairn Land Company, which has four shareholders. MyFarm (which handled the sale) Director Grant Rowan said Glencairn was an exciting development project. Following development, Glencairn will employ four more people and during the next 12 months on-farm projects will create ten fulltime-equivalent jobs.

Key: Don't Worry, It's Only 3%

"Mr Rowan said it was the biggest sale in Southland their company had handled. A sale of this size for this type of property was rare and would happen only every five to ten years. He said he believed the German investment management company was coming near to the end of its search for land in Southland, but he could not confirm if more sales were pending. The company had sought land in Southland because it was attractive and gave good returns, he said. Southland District Mayor Frana Cardno said the investment was good for Southland. However, family farms were an integral part of Southland, she said. 'I'm nervous about big companies coming in and taking over the land and not looking after it. I hope they can prove to us that they are good community citizens because Southland is all about looking after the community'.

"The latest sale has come at a time when farmers nationally are questioning the levels of foreign ownership in the country. Prime Minister John Key, who spoke to farmers at Nokomai Station this month, said foreign investment in New Zealand land was worth more discussion. 'We've got to be careful of the levels of foreign land ownership in New Zealand', he said. 'We would [be] much better to seek foreign investment in productive assets. 'Foreign investment nationally was less than 3%, which is not that much', Mr Key said".

Mr Key might not think 3% is much, but that's 3% no longer under New Zealand's control! See our March 2010, December 2010, March 2011 and April 2011 commentaries for details of Aquila's previous land purchases in Southland. And despite Mr Rowan's belief that these German investors were nearing the end of their search for land, it appears this group has no intention of stopping here. As reported by Jonathan Underhill in the Press (10/9/11): "A German fund that has helped European investors acquire $111 million of New Zealand farm land, mainly for dairying, says there is no sign of their interest abating given the bullish outlook for agriculture and food production.

"Funds advised by Aquila Capital Green Assets, part of Germany's Aquila Group, have acquired interests in 3,983 hectares of farms in the past 12 months, according to approvals granted by the Overseas Investment Office. The Aquila-linked funds have been buying farms steadily since December 2010, taking the total to 11. That starts putting them close to the same league as potential buyers of the 16 former Crafar farms, which cover almost 8,000 hectares and have resulted in an outpouring of angst over whether it is in the national interest to cede ownership of rural land to foreigners.

"'I am bullish about the outlook and we are experiencing enormous demand for investment products related to agriculture and food', said Detlef Schon, Chief Executive of Aquila Capital Green Assets. Increasing wealth in developing economies was 'turbo-charging' demand, led by China, Brazil, India and Russia, Schon said. He does not have a target for how many farms could be bought in New Zealand. Rules for foreign ownership of New Zealand land have been tightened amid public unease at the process. One of the changes was meant to prevent foreigners building up large portfolios of land over time and below the radar. Schon denies that is Aquila's strategy. 'Absolutely not', he says. 'We are investment advisers - we raise funds from German mums and dads'. They are also assessing investments in Romania, Canada, Uruguay and Chile. All of the farm sales were arranged through Feilding-based farm syndication and management group AgInvest's MyFarm business, which specialises in tracking down farms with potential for improvement, which can be sold to syndicates typically for five to seven years".

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Contact Energy Buys More Land For Geothermal Reinjection

Contact Energy Limited Various overseas persons (24.3%), Australia Public (23.9%), various (19.1%), New Zealand Public (16.5%), United States Public (6.4%), Asia Public (3.4%), United Kingdom Public (3.4%), Asia Investors, Various (1.5%), Europe Public (1%), Europe Investors, Various (0.5%), and Middle East Public (0.1%) received approval to acquire a freehold interest in 417.1 hectares of land at Kinloch & Nukuhau, Taupo. The vendors were Receivers of Mercury Geotherm Limited (in receivership) and Poihipi Land Limited (in receivership) Auckland Energy Consumer Trust, New Zealand (75.1%), New Zealand Public (23.9%), and various overseas persons (1.0%); consideration was $7,506,000 plus GST (if any). The OIO states: "The Applicant is acquiring the property in order to support its geothermal power generation activities. In particular, it intends to use the land for geothermal reinjection, to provide greater operational flexibility for the Poihipi Rd power station and wider geothermal energy activities and to support the new Te Mihi power station currently under construction".

Geothermal reinjection is where waste water generated from a geothermal power plant is injected back into the ground. Reinjection started purely as a disposal method, i.e. where there was no suitable nearby river or lake, but has more recently been recognised as an essential and important part of reservoir management with the possibility of extending the useful life of a geothermal field. 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, July 2009, January 2010, and April 2011.

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Other May Decisions

And in the third decision released in May, Freshmax NZ Limited Australia Public (56%) and New Zealand Public (44%) received approval to acquire rights or interests in a further 25.1% of the ordinary shares of Agrilasia Farms Limited which owns or controls:

• a freehold interest in 56.4 hectares of land at Omahu Road and Hill Road, Hastings; and
• a leasehold interest in 5.3 hectares of land at 2 York Road, Hastings; and
• a leasehold interest in 15 hectares of land at 419 Te Aute Road, Havelock North; and
• a leasehold interest in 5.7 hectares of land at 263 Twyford Road, Hastings; and
• a leasehold interest in 13.8 hectares of land at 265 Twyford Road, Hastings.

Consideration was $251,000: no vendor was listed. The OIO states: "The Applicant currently owns 24.9% of a joint venture (Agrilasia Farms Limited) which owns the relevant land. The Applicant and Crasborn Limited (the other joint venture party) intend to further develop the land into a revitalised pip and stone fruit orchard".

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