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Foreign investment in Aotearoa/New Zealand
Overseas Investment Office - January 2020 Decisions
This month, two property development companies get prosecuted, one gets declined, and others get standing consents. Mediaworks gets a partial change in private equity ownership. And Drylandcarbon gets its second new forest
Development Companies Fined For Failing To Get OIO Consent
The OIO reports that, following an investigation by the OIO, the Auckland High Court has fined overseas-owned companies FFG Investments Ltd and Grand Sky Ltd a total of $123,000, plus $10,000 in costs, for failure to get the required OIO consent to buy sensitive rural land for development.
Back to TopConsent Declined For Chinese Development At Lake Pukaki
The OIO declined consent for Lake Pukaki Development Ltd (Xu Qi Wu, NZ 25%; Jun Yang, China PR 25%, Hongbo Zhang, China PR 25%; Qimin Zhou, China PR 25%) for approximately 19.3446 ha. at 4587 and 4589 State Highway 8, Tekapo-Twizel Road, Canterbury. The vendor was Pukaki Village Ltd (NZ 100%) and the price $3.5 million.
The OIO states that Lake Pukaki Development is an NZ company incorporated for the purpose. It intended to develop an observatory and wedding chapel and subdivide part of the land into residential lots to be sold to third parties for holiday homes, which Lake Pukaki Development would manage. The OIO had concerns as to whether these developments would occur. The OIO needed to be satisfied of substantial and identifiable benefit to NZ and the business acumen of the applicant. The OIO was not satisfied that all the s.16 criteria of Act were met
Back to TopKiwi Property Gets A Rubber Stamp
Kiwi Property Group Ltd (KPGL) & associated entities (NZ Public 60.1%; North American Public 13.7%; Australian Public 17.2%; various overseas 9%) has been given a standing consent (increased housing & non-residential use) for 19 transactions involving up to six ha. in total of residential land in the Auckland area, within three years. The OIO states that Kiwi Property Group is a property developer and manager listed on the NZX. It intends to use the land primarily for construction of new residential dwellings, which will then be rented or leased out to non-associated third parties.
The OIO is satisfied that Kiwi Property Group has demonstrated the investor test is met and that it is likely to comply with the mandatory and additional conditions of consent as set out in Sch.4, s.2, having had regard to its financial strength, previous activity regarding residential land, and previous record in complying with consent conditions. Note that Kiwi Property, although more than 25% oversea-owned (the definition of foreign ownership), gets an advantage here in being allowed to continue to own these residential properties for renting, while exporting 40% of profits including capital gains.
Back to TopOceania Healthcare Gets A Rubber Stamp For Retirement Villages
The OIO has given a Standing Consent (Increased Housing and Non-Residential Use tests) to Oceania Healthcare Ltd (NZ 55.3%; Australia 42.2%; various 2.6%) under ss.12(a) and 23A and Sch.2 of the Act. The OIO states that Oceania is a publicly listed operator of aged care facilities and retirement villages in NZ. It acquires residential land to develop aged care facilities and retirement villages, which are defined as long-term accommodation facilities under the Act.
The OIO is satisfied that Oceania has demonstrated that residential but not otherwise sensitive land acquired under this standing consent is likely to be used in the construction of, or an increase of the number of dwellings in, a long-term accommodation facility. This standing consent is for a maximum of 12 transactions by 31 January 2023 and up to a total of 20 ha. residential but not otherwise sensitive land.
Oceania Healthcare's Website says that, formed in 2005, it is today NZ's third largest residential aged care provider and sixth largest retirement village owner with 25 villages. With the 2008 merger of Eldercare and Qualcare, who gobbled up homes formerly run by the Presbyterian Church and the Salvation Army, it has around 2,500 care rooms, 1,000 villas and apartments, directly employs over 2,500 staff and won NZ Aged Care Association awards for excellence in 2015, 2016 and 2017.
That's good, because not listed is the 2011 Roger Award in which it was second-equal for Worst Transnational in NZ for its exploitation of its rest home workers. See Alistair Duncan' article in Foreign Control Watchdog 126, May 2011. See May 2014 consents for Bupa's purchase of Oceania Healthcare's Invercargill retirement village.
Back to TopFletcher Residential Makes Its First Use Of Its Rubber Stamp
Fletcher Residential Ltd (NZ Public 52.8%; Australian Public 45.8%; various overseas 1.3%) was granted its standing consent in April 2019. Under ss.12(a) and 23A of the Act it can undertake a maximum of 12 transactions by 1 May 2022, for up to 200 ha. of yet to be identified residential freehold land in the Auckland, Canterbury and Waikato regions, in accordance with the Increased Housing and Non-Residential Use tests set out in Sch.2 of the Act.
This month Fletcher Residential used its first consent to acquire approximately 2.0806 ha. at 204 Hingaia Road, Karaka, Auckland, from Dawson Land Investments Ltd. Price withheld under s.9(2)(b)(ii) of the Official Information Act. The OIO states that Fletcher Residential is undertaking a staged residential housing development on current undeveloped land. It intends to construct approximately 85 new residential homes. Under the standing consent Fletchers must increase the number of dwellings on the land, or undertake supporting development works, and must divest all interests in the land within ten years.
The site is a block next to a large residential subdivision at Karaka Harbourside, south Auckland. At the time Fletcher Residential got its standing consent, NZ Herald (31/5/19) reported that the company, wholly owned by NZX-listed Fletcher Building, was building more than 1,000 homes a year, and its Fletcher Living Website listing Auckland projects at Beachlands, Hobsonville Point, Ormiston, Kōwhai Ridge, Stonefields, Swanson, Three Kings, Totara Heights, Waiata Shores, Red Beach and Whenuapai; and Canterbury projects at 350 Colombo, Atlas Quarter, Awatea Green and One Central.
NZ Herald (7/1/20) lists Fletcher Construction as the second largest residential builder after Ryman Healthcare, and Fletcher Residential as fifth largest builder of, specifically, houses. Maybe Labour's State housing programme will turn around the Fletcher group's finances; that's how they got their start in the 1930s.
Neil Construction (Tiong, Malaysia) Buys Whenuapai Land
Neil Construction Ltd (Malaysia 89%; Singapore 11%) has consent to acquire three parcels of land totalling approximately 15.69 ha. at Trig Road and Brigham Creek Road, Whenuapai, Auckland, from John Gionis and Daphne Gionis (NZ 100%), Paul Christopher Matthews, Kevin Richard Walker, David John Warwick Nicoll and Wendy Faye Matthews (NZ 100%), Trevor David Ridley, Caroline Anne Ridley and KW Ridley Trust Co. Ltd (NZ 100%). Price withheld under s.9(2)(b)(ii) of the Official Information Act.
The OIO states that Neil Construction is one of is one of NZ's oldest property development companies, operating since the 1950s. In 1993, it was acquired by a high net worth Malaysian family, the Tiongs. It carried out numerous beneficial residential and industrial property developments in NZ. It intends to combine, subdivide and develop this land, which is currently in lifestyle blocks, as new residential and industrial freehold lots to add to supply in the Auckland property market.
It intends to spend $18m developing the land. Its plans include creating 32-35 new jobs during the construction phase of the development, plus 300 new indirect roles in the Business Park that will ultimately be built on the land. It will create increased walking access on the land. This is not yet one of the Neil Group's standing consents - see commentary of September 2019.
Back to TopQuadrant Private Equity Buyout Of QMS Media/Mediaworks
Shelley Bidco Pty Ltd (Australia 44.8%; UAE 20%; USA 12.3%; Canada 4.4%; NZ 2.2%; various overseas 16.4%) has consent to acquire up to 100% of QMS Media Ltd from existing shareholders of QMS Media (Australia 79.7%; North America 7.7%; NZ 2.32%; UK 1.8%; Asia 1%; Europe 0.27%; various overseas 7.3%), for $441.6 million. QMS Media owns a 40% minority interest in MediaWorks Investments Ltd, which has indirect leasehold interests in:
- 4.4441 ha. at 200 Horokiwi Road, Horokiwi;
- 0.1153 ha. at 2 Johns Road, Belfast, Christchurch;
- 0.0940 ha. at billboard sites in Wellington;
- 1.1636 ha. at billboard sites in North Auckland; and
- 0.0678 ha. at billboard sites in South Auckland.
The OIO states that Shelley Bidco seeks to acquire QMS, an Australian outdoor media company which owns 40% of MediaWorks, a NZ outdoor advertising, radio and television business, which holds leases on several parcels of sensitive land in NZ, some of which are used for billboard advertising or radio telecommunications equipment. The OIO assessed the application having regard to the characteristics of the land and the nature of the interest being acquired (reflecting the proportional nature of the benefit test). Shelly Bidco has previous experience investing in New Zealand, in which it has demonstrated benefit. It intends to make capital available to grow the MediaWorks business.
The $441.6 million is to buy QMS shares; the OIO summary doesn’t mention what additional capital will be introduced to "grow the business" and how that will benefit NZ. Nor does it mention Shelley Bidco is a financial investment vehicle controlled by Quadrant Private Equity. This consent follows a July 2019 OIO consent for QMS and MediaWorks Investment to merge their NZ businesses - see our commentary on that in July 2019. MediaWorks is NZ's largest non-State broadcaster (including TV3), whose current ultimate owner is listed as Tokyo Opportunities BV, Amsterdam, which is funds managed by OakTree Capital Management.
So, this deal involving outdoor advertising is a partial shift of ultimate ownership between private equity funds - the swirling billions of the 1%. Wide Format Online Magazine reports that this Australian takeover was approved by the Australian Federal Court on 10/2/20. The scheme of arrangement at $1.22 per share values QMS Media equity at approximately $A420.6 million, and at an enterprise value of $A571.6 million.
Quadrant Private Equity (established 1996 in Sydney) has raised in excess of $5.1 billion and ten funds since its inception, completing 71 investments across sectors including retail, healthcare, media, consumer foods and financial services (see Wikipedia for well-known companies it has gobbled up). QMS Media is a leading outdoor media company in Australia, New Zealand and Indonesia, specialising in digital and static billboards, street furniture, and sport, airport and transit media. It has three business segments - QMS Australia, Mediaworks and QMS Sport.
Wide Format Online reports that, in November 2018, QMS Media completed a majority buyout of global sports media businesses TGI US and TGI Europe, gaining access to signage portfolios that include 1,750 international sporting events and leading sports associations. In December 2019, QMS addressed claims it was facing a $200 million lawsuit by John Singleton's outdoor advertising business Manboom over the alleged breach of a cooperation agreement.
Back to TopDrylandcarbon Buys Farmland For Forestry In Kaikoura
Drylandcarbon One LP (NZ Public 59.7%; Australian Public 14.4%; US Public 14.1%; various 11.8%) has consent to acquire 1,319.2665 ha. at 42 Wiffens Road, Kekerengu, Kaikoura, from Matiawa Ltd under the special forestry test in s.16A(4) of the Act. The OIO states that 872 ha. are currently being used as a sheep and beef breeding farm. Dryland proposes to plant approximately 850 ha. as a commercial rotation forest. The remainder is 170 ha. of native bush and 299 ha. of riparian land, reverting scrub and bush, a small exotic plantation and buildings and yards.
If assessed as safe and habitable, the dwellings on the land will only be used for forestry worker accommodation, in line with the Act. Drylandcarbon will continue to maintain relevant existing arrangements, including public access over the land for the School of Geography, Environment and Earth Sciences, Victoria University. It intends to harvest the existing crop of trees and replant. The OIO was satisfied this met the requirements of the special forestry test.
See November 2019 for Drylandcarbon's first OIO consent, and its background and purpose of generating forestry carbon credits for emissions trading. Its majority NZ ownership includes NZX-listed companies Z Energy and Contact Energy, as well as Air NZ and Genesis Energy, which are majority Crown owned.
NZ Herald (15/3/19) reported its portfolio will focus on permanent forests but include some rotation forests, acquiring land through purchase and through partnership with landowners. Its Chief Executive Officer (CEO) stated a preference for remote, difficult land as it's more cost effective, and said the initial plan is to plant exotics with the aim of transitioning to natives over time.
Back to TopNippon Paper Takes Over Orora Packaging In Aus And NZ
Opal Packaging NZ Ltd (Nippon Paper Industries Co. Ltd, Japan 100%) has consent to acquire significant business assets from Orora Ltd (Australia 100%) and Orora Packaging NZ Ltd (NZ 100%) for approximately $426 million. The OIO states that Opal Packaging is a subsidiary of Paper Australia Pty Ltd, both subsidiaries of the Nippon Paper Group, a diversified international timber, pulp, paper, paperboard packaging and chemicals business.
Opal Packaging is purchasing the NZ fibre businesses of Orora Packaging and intends to continue their operations in the ordinary course. Opal has satisfied the OIO that the individuals who will control the investment have the relevant business experience and acumen and are of good character, and has demonstrated financial commitment to the investment.
This consent is part of an Australian deal reported on by the Sydney Morning Herald (10/10/19). In October 2019 Nippon Paper Industries, one of the world's largest paper and packaging companies, bought ASX-listed Orora, one of Australia's biggest packaging businesses, for $A1.72 billion. Nippon Paper was one of Orora's suppliers.
Orora Packaging NZ Ltd was established in NZ in 1986 under the name Yadkin Investments, then Amcore - part of global packaging giant Amcor - from 1989 to December 2013. See OIO consents of October 2007 for Impress NZ Holding's acquisition of Amcor's food can and aerosol arm and of April 2012 for Amcor Australia acquiring Aperio Group which affected its NZ operations. Orora's Website says that in NZ Orora delivers fibre packaging through its corrugated packaging business, Orora Kiwi Packaging, with manufacturing operations in Christchurch, Hastings and Auckland. In July 2016 Orora described its NZ market as "core to its Australasian business growth strategy"
Back to TopLand Buffer For Waste Management's Dome Valley Landfill
Waste Management NZ Ltd (Chinese Government, China PR 50.2%; China Public 32.9%; Hong Kong Public 16.9%) has consent to acquire 4.7838 ha. at 1232 State Highway 1, Wayby Valley, Auckland, from Phillipa Doris Izard-Price, Kenneth Ian Price and James Sidney Wiles (NZ 100%). Price withheld under s.9(2)(b)(ii) of the Official Information Act.
The OIO states that Waste Management is one of the largest operators in the NZ waste industry. It is acquiring land to increase the buffer around its proposed landfill. This is likely to enhance the viability of its investments in its proposed landfill and buffer on adjoining land. Waste Management intends to provide walking access through the bush area on the adjoining buffer land. Waste Management is one of NZ's largest recycling and waste services companies and has undertaken investments to upgrade landfills. For example, it invested to improve the gas extraction system at Tirohia Landfill, increasing the rate of greenhouse gas capture from 15% to 52.1%.
Back to TopLand Buffer For Oceana Gold's Noisy Mining Waste Dump At Waihi
Oceana Gold (NZ) Ltd (US Public 49%; Canada Public 19%; UK Public 9%; Australian Public 9%; European Public 8%; Germany 4%; various 2%) has consent to acquire 19.5012 ha. at 682 Golden Valley Road, Waihi, from Beverley Anne Hall (NZ 100%) for $1.5 million. The OIO states that Oceana Gold is a wholly owned subsidiary of OceanaGold Corporation, listed on the Australian and Toronto stock exchanges.
It operates two major mining developments in New Zealand, the Waihi and Macraes (Otago) gold mines. This land is currently used for grazing stock and a domestic residence. Oceana Gold owns and wishes to develop an adjoining property constructing an artificial hill of rock excavated from its mines (a "rock stack"). The work will involve heavy machinery and vehicles such as diggers and bulldozers, which will generate a lot of noise.
The occupants of the neighbouring farmhouse could potentially limit the hours and extent of work by objecting to noise through the Resource Management Act process. The land is being acquired to create a "noise buffer". Oceana Gold will not change the use of the land; it will continue to lease the pastures to neighbouring farmers for grazing and will rent a farmhouse to tenants (who it expects to be either mine workers or locals). The main benefits of Oceana Gold's investment are that:
- the investment is likely to result in increased efficiency and a reduction in fixed costs due to the ore processor running at full capacity and over a shorter period
- Oceana Gold has made previous investments in gold mines at Waihi and Otago which have been beneficial to New Zealand;
- the investment is likely to enhance viability of existing infrastructure (but as the rock stack construction would occur anyway, this is a timing and scale difference only);
- a stream on the land has been offered for sale to the Crown; and
- Oceana Gold intends to plant native plants on the stream bank and fence a stream on the land.
The rock stack must be completed, stabilised and remediated (covered in topsoil and planted in grass or other suitable vegetation) by 31 December 2039 and the land must be sold within 18 months of the remediation being completed. What's this with the farmhouse? Since overseas-owned companies can't now own and rent out residential property "to mine workers or locals". Similar rural houses on forestry acquisitions are being allowed occasional use by forestry gangs or being removed.
Back to TopA Second Retrospective Consent For Zhang Zhou Family
Zhang Zhou Trustees Ltd as Trustee for the Zhang Zhou Family Trust (Jiankang Zhang, China PR 50%; Jianming Zhou, NZ 50%) has consent to acquire 6.5830 hectares of land at 164 Fitzgerald Road, Drury, from Kiwibank Ltd (The Crown, NZ 53%; NZ Superannuation Fund 25%; Accident Compensation Corporation 22%) for $1,930,000.
This is a retrospective consent. The OIO states the property was acquired in 2014, with the Zhang Zhou Family Trust nominated as purchaser. The property came to the attention of the OIO when Zhang Zhou Trustees entered into a contract to sell another property to another overseas person and it was found that that property was acquired without consent, along with this property.
All of the individuals with control of Zhang Zhou Trustees Ltd have residency in NZ, and only one was not yet ordinarily resident here as at the application date. The OIO is satisfied that all intend to reside in NZ indefinitely. Overseas persons intending to reside in NZ indefinitely are not required to show that their purchase of land is likely to benefit NZ; this supports migrants to make NZ their home. See September 2019 for the other retrospective consent.
Back to TopAustrian Billionaire Buys Another Property For Forestry, At Wairoa
Wolfgang Leitner (Austria 100%) has consent to acquire 799.7062 ha. at Ponui Station, 217 Ponui Road, Kotemaori, Wairoa, from Ponui Station Ltd (NZ 100%) for $8 million. The OIO states that Wolfgang Leitner has applied for consent under the special test for forestry activities in s.16A(4) of the Act. 713.8 ha. of Ponui Station are currently grazed by sheep and beef stock, with 14 ha of existing commercial forestry. Leitner will plant a further 640 ha. as a commercial forest. He intends to harvest the existing crop of trees and replant following harvest. The remainder includes 32.6 ha. of native bush and 113.1 hectares of unplantable land in boundary and riparian setbacks, ponds and infrastructure.
In September 2019 Leitner got OIO consent to buy land for forestry in Tohunga, Gisborne. He is CEO of Andritz, a plant and equipment manufacturer and one of Austria's largest companies. He is personally worth $US1.2 billion as of March 2020 according to Forbes.
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