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Foreign investment in Aotearoa/New Zealand
Overseas Investment Office - July 2021 Decision
Retrospective Consent; Pocket Money Penalty
This month it's worth highlighting that the OIO and/or the relevant Ministers routinely grant retrospective approvals. There were three in July alone. Let's look at just one, because it made the national media. The Minister for Land Information and the Associate Minister of Finance gave retrospective approval to Shanghai Yuehua-Kangjian Investment & Management Co Ltd to increase its shareholding in Shanghai CRED Real Estate Development Co. Limited (Shanghai CRED) from 40.13% to 63.35%; and for Gui Guojie to increase shareholding in Shanghai Bao Yang Asset Management Co Limited, from 33.85% to 60%, resulting in an increase in their indirect interest in approximately 1,118.75 hectares of sensitive land in Karikari Peninsula, Northland. The sum involved was "approximately $56.4 million".
To quote the OIO Decision summary: "The Applicants are an upstream shareholder (Shanghai Yuehua-Kangjian Investment & Management Co. Ltd) and the 83.34% ultimate owner (Mr Gui Guojie) of Shanghai CRED, the owner of Carrington Estate and Whatuwhiwhi Top 10 Holiday Park in Karikari Peninsula, Northland. Shanghai CRED Real Estate obtained consent under the Act and acquired its original interest in the sensitive land in 2013 and 2015. Shanghai CRED was, and is, an established real estate development company in the Asia-Pacific region".
"At the time, Shanghai CRED planned to continue to operate the existing resort on the land in a similar fashion to the vendors, and to further develop it pursuant to a long-term business plan. The investment was anticipated to generate additional tourism to Karikari Peninsula as well as sales from the winery, a significant level of additional investment into the business, increased processing of primary products through the vineyard, and environmental and historic heritage benefits through consultation with the Department of Conservation and Pouhere Taonga Heritage NZ".
"In July 2018, the Applicants notified the Overseas Investment Office that offshore changes in its ownership had occurred in November 2017, ultimately resulting in Mr Guojie's increasing his indirect ultimate ownership of the sensitive land from approximately 39.92% to approximately 83.34%. Subsequently, the Applicants sought retrospective consent for these transactions. The Carrington Estate land consists of a resort and golf course, vineyard and winery, wetlands, residential land comprising an accommodation facility, a disused quarry, and other non-productive land being held for further development".
"Ministers have granted retrospective consent because they were satisfied that the investment had, and was likely to, result in a benefit to New Zealand that was substantial and identifiable. The OIO imposed an administrative penalty of $20,000 for the retrospective consent. If consent had not been granted, the OIO intended to progress its investigation and determine whether or not to apply to the Court to require disposal of the assets acquired in breach and/or seek civil pecuniary penalties".
The New Zealand Herald headlined an article: "Shanghai Billionaire Gets $20,000 Penalty Over $56.4 Million Northland Investment" (1/9/21). "A company owned by a Shanghai billionaire has been fined $20,000 for failing to get consent after a shareholding change affecting ownership of the 1118ha Carrington Estate on the picturesque Karikari Peninsula in Northland".
"Damien O'Connor, Minister for Land Information and Associate Minister of Finance Megan Woods ruled in the matter, according to the Overseas Investment Office. Entities controlled by Gui Guojie got retrospective consent over control of the Carrington Estate and the Whatuwhiwhi Top 10 Holiday Park but had they not done that, the State was considering court action, possibly forcing sales. Ownership activity dates back to 2013 and 2015 when the billionaire's company got State consent and bought its original interest in the land, classified as sensitive so therefore needing State clearance for any foreign ownership".
"When the Chinese businessman's interests bought via Shanghai CRED last decade, plans were to continue to operate the existing resort on the land in a similar fashion to the party he had bought it from and to further develop it in a long-term business plan. That purchase was to generate additional tourism to Karikari Peninsula, sales from the winery, more investment into the business, increased processing of primary products through the vineyard and environmental and historic heritage benefits via consultation with the Department of Conservation and Pouhere Taonga Heritage NZ. But in July 2018, the OIO learned of ownership changes, which meant Guojie's indirect ultimate ownership shot from about 39.9% to about 83%".
The Herald asked my opinion of this retrospective consent and accompanying $20,000 administrative penalties (plus a couple of other such penalties) in the July Decisions. I described them as "laughable". (I can't cite the Herald article containing my reaction, because it's behind a paywall). Such sums are peanuts to those big boys, plus they get what they want retrospectively approved. They'd just factor it in as "the cost of doing business".
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