Overseas Investment In NZ – OIO Processes and Trends

BOPlentythe MountThe OIO screens all sizable foriegn investment in NZ but under the TPP the criterea for approval could change.

The Trans-Pacific Partnership could halve the number of major foreign investments in New Zealand which need to pass “good character” and business experience tests. With some recent developments Overseas Investors in NZ may be wondering if the landscape has changed. OIO Processes have been in the spotlight with some suggesting the office is overstretched and needing clarification and open audit of its methodology.

The Government requires foreigners who want to make an investment of more than $100 million to get approval from the Overseas Investment Office (OIO), which evaluates their record in business and their character. Under the Trans-Pacific Partnership (TPP), the threshold above which an investor will need this approval will double to $200 million.

  •  The threshold for screening foreign investment in New Zealand to be lifted from $100m to $200m
  • In the last 5 years, 87 applications have been made by investors above the $100m threshold
  • 52 per cent of those applications have been between $100m and $200m

 

The Overseas Investment Office is the organisation responsible for foreign investment in New Zealand. An application must be made to the OIC by non-residents planning to invest more than NZ$50 million establishing a business, or to purchase an equity share of greater than 25% in a New Zealand company worth more than $50 million. OIC approval is also required to invest in land over five hectares, islands, the foreshore or reserves.

The OIO

The OIO considerations are often the longest part of the approval process in what are sometimes lengthy and complex negogiations. Two such deals with Chinese partners, Shanghai Pengxin and Bright Dairy Foods, may have very different outcomes.

Shanghai Pengxin is challenging to government’s rejection of its Lochinver purchase. Shanghai Pengxin says it will seek a judicial review of the government’s decision to decline its $88 million purchase of Lochinver Station amid signs the investment group’s strategy in New Zealand is being thwarted by a new hardline approach to foreign land purchases. Labour points to the four year funding freeze as the cause for OIO delays.

The Overseas Investment Office (OIO) hasn’t received an increase in funding or staff for four years – causing long delays for sellers and buyers and tarnishing New Zealand’s good name as a place to invest, says Labour’s Land Information spokesman Stuart Nash.

“There is no doubt that both the whole Overseas Investment Act and the Overseas Investment Office need a real shake up because they are simply not delivering.”

“Answers to written questions show that in the 2011/2012 financial year the OIO received less than $3m – exactly the same as the 2014/2015 financial year. The Lochinver decision took over 12 months and the average time to process consents has jumped 30 per cent from 43 days in 2012 to 56 days in 2014. The process is long-winded, buyers’ funds have to be set aside as proof for the OIO and decisions are at the whim of the minister and focus groups. No wonder Shanghai Pengxin pulled out of the Northland Farms sale.

The Lochinver decision drew criticism from owner Stevenson Group, which said the government was trampling on its right to get the best possible price for the 13,843 hectare farm near Lake Taupo.

“The judicial review will seek to obtain clarity for all parties on what constitutes a viable counterfactual and this will, we believe, do a great deal to restore confidence and certainty amongst investors and sellers,” Lee said. Associate Finance Minister Paula Bennett and Land Information Minister Louise Upston last month went against advice from the Overseas Investment Office to approve the sale, saying they weren’t convinced it provided enough benefit to New Zealand. The ministers had sat on the OIO recommendation for some months before declining the deal. Another Shanghai Pengxin business, the 55 percent-owned Dakang New Zealand Farm Group, this week quit efforts to buy 10 farms in Northland, citing five months of silence from the Overseas Investment Office. Terry Lee, a director of Pengxin subsidiary Milk New Zealand, said the Chinese company’s Pure 100 Farm unit which was to have made the purchase, was seeking “clarity on the ‘counterfactual’ to be used when assessing sales of non-urban land of greater than 5 hectares to overseas investors.”

China’s state-owned Bright Food Group was favoured to win approval in a deal which saw it acquiring 50 percent of New Zealand’s biggest meat company.the transaction will be approved by the Overseas Investment Office in a process it expects will take six-to-nine months, said chief executive Dean Hamilton, who will stay on through the ownership change. Shanghai Maling also needs Chinese regulatory approval for an investment outside of China.

Hamilton said the lengthy turnaround time expected of the OIO, which exceeds its benchmark for applications, was more to do with the limited resources of the regulator and the size of the deal than any difficulties over the investment per se. He said the government’s decision to decline Shanghai Pengxin’s application to buy Lochinver Station didn’t suggest Shanghai Maling’s proposal would fail because the transactions were dissimilar.

New Zealand First leader Winston Peters said the threshold was already too low and the new policy would open New Zealand up to “dubious investment practices”.

“At a time when huge sums of ill-gotten money are transferred around the world, and our checks through the Overseas Investment Office are already weak, we should be raising the bar against unscrupulous money merchants, not lowering it,” Mr Peters said. Mr Joyce disagreed, saying that money-laundering and anti-corruption systems were already in place.”I don’t think it creates any risks for New Zealand,” he said.

Threats to Land ownership

Americans were the largest investors in New Zealand dairy farms in 2013 and 2014, according to analysis of Overseas Investment Office decisions by KPMG. New Zealand already has a higher threshold of $496 million for Australian investors as a result of its Closer Economic Ties agreement

US investors accounted for 54 percent of land sold and 27 percent of the total $297 million paid. While 26 OIO decisions were approved during the period, only 18 disclosed the consideration paid. China accounted for only one of the 24 transactions for dairy land approved by the OIO – that was Shanghai Pengxin’s acquisition of a controlling stake in Synlait Farms in Canterbury, which accounted for 12 percent of hectares sold and 21 percent of the consideration paid during the two-year period. Read More


Check out more stories on the OIO

OIO to be questioned over Shanghai Pengxin NZ farm deal delay

Stuff.co.nz11/10/2015
Six months on, the company said it had yet to receive advice that theOIO had considered the sale or made a recommendation to the …
Lochinver appeal shows OIO reform needed
Scoop.co.nz (press release)14/10/2015
Buyer ‘confusion’ reason for delay
Northern Advocate13/10/2015
Lochinver case goes to court
New Zealand Herald14/10/2015
Lochinver decision blamed for China pullout
Otago Daily Times11/10/2015
Scoop.co.nz (press release)13/10/2015
The Overseas Investment Office (OIO) hasn’t received an increase in funding or staff for four years – causing long delays for sellers and buyers …
Jiajiayue Group ties Cooks investment to OIO farm approvalScoop.co.nz-29/09/2015Although the OIO recommended the application from the Shanghai Pengxin subsidiary to buy Lochinver be approved, government ministers …

OIO application already in

Country Wide Northern-18/10/2015
Shanghai Maling lodged an application to buy half of Silver Fern Farms with the Overseas Investment Office (OIO) just hours after shareholders …
MIE’s future direction in the air
Stuff.co.nz-19/10/2015

Explore in depth (4 more articles)

Jiajiayue Group ties investment in Cooks Global Foods to OIO …

sharechat-30/09/2015
Although the OIO recommended the application from the Shanghai Pengxin subsidiary to buy Lochinver be approved, government ministers …
Chinese firm ties farm to Cooks deal
NZCity-29/09/2015

Explore in depth (2 more articles)

Legal challenge of Lochinver decision

New Zealand Herald-16/10/2015
Dakang New Zealand Farm Group, which is 55 per cent owned by Shanghai Pengxin, earlier cited OIO delays as one of the reasons for its …
3News NZ

US investors were the largest purchasers of NZ dairy land in 2013 …

sharechat-15/10/2015
For example, when KPMG analysed OIO approvals two years ago, Germans had bought a lot of dairy land in Southland, he said.

The Price of a Big Rubber Stamp

Scoop.co.nz (press release)-19/10/2015
… an end to rubber stamping applications,” says Mr Peters. The OIO has 15 staff, and assessed 151 applications in the 2014-15 financial year.”.

Fewer investor checks under TPP

Otago Daily Times-8/10/2015
OIO figures show there were 45 applications in the past five years of $100-$200 million that would not have required screening were the TPP in …
Country Wide Northern-15/10/2015
“However, to date we have not received any advice that the OIO has considered the sale and-or made a recommendation to the ministers,” …

Hubbard companies breach OIO rules

The National Business Review-3/08/2015
OIO manager Annelies McClure said the six syndicates, or their investors, breached the Overseas Investment Act 2005 and Overseas …
Farming syndicates penalised under overseas act
Timaru Herald-3/08/2015

Explore in depth (4 more articles)

Bright Food provides Silver Fern with letter of comfort over Shanghai …

sharechat-15/10/2015
The OIO consideration would be the longest part of the approval process. Shanghai Maling is expected to lodge its application either today or …

Shanghai Pengxin mounts legal challenge to government’s rejection …sharechat-14/10/2015

The ministers had sat on the OIO recommendation for some months before declining the deal. Another Shanghai Pengxin business, the 55 …
Stuff.co.nz

Live Nation NZ, MHC cleared by OIO to buy Vector Arena

Scoop.co.nz (press release)-30/08/2015
Aug. 31 (BusinessDesk) – Live Nation NZ and MHC Investments have been cleared by the Overseas Investment Office to acquire Auckland’s …
Vector Arena company sold – more big gigs promised
New Zealand Herald-30/08/2015

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Larger Japanese stake in Anzco gains OIO approval

Stuff.co.nz-29/05/2015
A Japanese company investing just over $40 million has won Overseas Investment Office approval to buy a larger stake in the major meat …