Goat Pass in Arthur's Pass National Park. Photo / Stephanie Holmes
Foreigners more than doubled their appetite for New Zealand land in the latest year, buying an area equivalent to a South Island national park.
The 111,674 hectares or 1116 square kilometres of land that overseas entities bought between September 2021 and August this year is about the same size as Arthur's Pass National Park, the rugged, 1185sq km mountainous area straddling the Southern Alps.
Toitū Te Whenua Land Information New Zealand provided details of the transactions approved by the Overseas Investment Office in the year to August.
In the previous year to August 2021, foreigners bought 46,000ha. The year before that, to August 2020, 70,148ha of land was bought. Now the numbers are up to 111,674ha.
The volume of overseas investment approvals showed a post-Covid bounceback: 122 applications were approved in the August 2020 year, remaining almost static at 124 for the August 2021 year, but rising to 152 applications approved in the latest year to August.
The value of the land sold also jumped: from $12.32 billion in 2019-20, to $15.17b in 2020-21, leaping to $37.95b in the most recent 12 months.
Only one application in the latest year was declined: Britain's Gresham House Forest Carbon (NZ) Ltd and Gresham House Forest Carbon (NZ) LP weren't allowed to buy New Zealand's NZCF (Invest Holdings) assets - more than 12,300ha of forestry land in various locations, which the would-be buyers intended to continue operating as permanent carbon forestry.
Cabinet ministers Damien O'Connor and Megan Woods were not satisfied that the sale of 12,356ha of land - 8871ha of it in forestry - would result in substantial, identifiable benefits to New Zealand.
In the August 2020 year 13 applications were declined, dropping to five declined in the following year.
The three biggest deals in the August 2022 year were all for forestry land.
But it remains unknown how much was paid to trade such vast tree-covered estates. The parties involved deliberately had sale prices and asset values kept confidential, keeping the public's gaze away from their dealings.
The deals weren't solely about New Zealanders selling land or other assets to foreigners. Some of the transactions involved foreign entities buying from other overseas owners.
In which areas are foreigners buying assets? The Linz information shows that 43 deals covered land in Tauranga City, 21 were in Auckland Council's area, 11 in the Gisborne district, seven in central Hawke's Bay, six in Southland and five in the Masterton area.
BIGGEST LAND AREA
From last September to August this year, the deals ranked by area were:
1. 28,000ha: Chinese sell forestry to Dutch/British interests
Taieri Forests (34 per cent owned by Netherlands interests, 28 per cent British) was granted consent to buy huge New Zealand forestry assets from China-owned Sinotrans (NZ), Sinotrans & CSC Holdings and ANZFF2 NZ.
The dollar amount was not revealed, so we don't know how this deal ranks on the list of largest sales by financial amounts.
The forestry estate is 5814ha of freehold land in Otago's Mount Allen Forest and two smaller forests and three forestry rights over 23,368ha of land - Otago Coast Forest, Berwick Forest and Saffill Forest, all down south.
Around 24,170ha is planted in pinus radiata and 598ha has been milled and is awaiting replanting.
2. 8500ha: Swiss interests consolidate forestry holdings
This deal, approved last September, was an overseas investment in sensitive land, being the acquisition by a Swiss applicant of up to 100 per cent of the limited partnership interests of Kauri Forestry LP which owns or controls about 8600ha of land used mostly for commercial forestry.
The sale price was suppressed, so once again, we don't know the asset value or sale price. However, the decision does note that approval would probably result in Kauri Forestry LP's assets exceeding $100 million.
A Limited Partner in Kauri Forestry LP (100 per cent Swiss) won consent for the deal with Kauri Forestry LP (93 per cent Swiss, 7 per cent German).
3. 3400ha: Kiwis sell forestry interests to Germans
Ponga Silva (49 per cent German, 18 per cent British) won consent to buy Mangatarata Forest, Mangatarata Station, Mata Forest, Onetohunga Forest and Te Rawhiti Forest - around Tauwhareparae in the Gisborne district - from Kiwi interests.
"The applicant is acquiring a freehold interest in approximately 3466ha of land comprising four adjoining forests, including several forestry rights registered over the freehold land," said the Overseas investment Office. Approval was granted last October, with the sale price suppressed.
LARGEST DOLLAR VALUE APPROVED
In all, the latest 12 months saw $37.95b of sales approved. Among those where the value of the deal is known:
1. $2.3b+: United States-owned Unity Software Inc and Unity Technologies was cleared to buy assets from Weta Digital, 68 per cent New Zealand and 32 per cent US-owned, reportedly swelling Sir Peter Jackson's wealth.
That was the largest deal in the latest year for which the value of the assets involved was declared. deal in the latest year.
Weta Digital's audio-visual effects development and management software tools, intellectual properties, goodwill, rights and claims were sold for some $2,3b.
Many other applications suppressed this figure, so it is unknown how the Weta deal compares with other sales approved last year.
The deal won approval because the new owners of Weta Digital will continue to provide visual effects services to movie, television, and other production studios. The owners will also keep production agreements, owned or leased property and other assets. Unity will also employ and have contracts with about 275 of Weta's existing employees and contractors who work in the digital activities division.
2. $1.96b: Australians sell Z Energy.
Extensive property was involved and the OIO consent approval for this deal listed addresses throughout New Zealand. Clearance was granted on April 11 this year for the deal, which was approved by two Cabinet ministers.
The Herald reported on the sale of 51 Z Energy service stations in August.
Australian fuel retailer Ampol, which acquired Z Energy for close to $2 billion in May, said it would sell the 51 freehold properties to an unlisted real estate vehicle in which Z Energy will own 51 per cent and Charter Hall Retail REIT will buy 49 per cent.
"Z Energy has an interest in sensitive land that consists of residential land sites - service station, fuel facilities, future development sites, and sites acquired in order to deal with historic contamination issues - a truckstop fuel facility adjoining Otago Harbour and a minority limited partnership interest in carbon forestry that may include some farm land," the OIO said.
3. $1.9b: Chinese sell Waste Management to Australians
The third largest deal, the OIO said, was Australia's Tui BidCo buying assets from China's Beijing Capital Group NZ Investment Holding. The deal involved Waste Management, New Zealand's biggest rubbish business. That transaction was approved in August and included many owned and leased refuse and recycling sites.
"The applicant will acquire all the assets of Waste Management New Zealand and WMNZ's 28 subsidiaries, some of which hold interests in sensitive land. The majority of the land comprises landfills and buffer land. It also includes farmland, residential land, and land containing fresh or seawater areas, public access, and areas of indigenous flora and fauna," the OIO said.
Asked about the pandemic's influence on foreign investment, LINZ head of regulatory practice and delivery Rebecca McAtamney said: "It has had an impact on the number of consents for residential property to live in under the One Home to Live In pathway. The key criteria for this consent is the consent holder's physical presence in New Zealand and living at the consented property as their main home."
WHY FORESTRY?
The Herald reported in March that a Gisborne farming leader had launched a petition to try to stop two stations being sold as carbon sinks -areas planted in pine trees, never to be harvested.
Many farmers and other rural residents fear the impact of livestock farms being converted to forestry, resulting in reduced farm output and fewer jobs, and making small communities less viable.
Gisborne-Wairoa Federated Farmers provincial president Toby Williams encouraged locals to sign his petition on change.org titled Help us save Huiarua and Matanui from offshore forestry interest.
In 2019, Tuscan Hills, a hill country farm in the Tararua district, was sold to New Zealand Carbon Farming and is now being planted in trees that may never be cut down.
Andrew Petersen, Bell Gully's chair and real estate partner, sees no loss of appetite from overseas investors.
"There's always been interest in New Zealand," he says. "Our lockdown made it more difficult for overseas investors to come here to see properties and assets and do due diligence.
"That certainly had an impact on numbers during the Covid period. But overseas investors see New Zealand as a good place. They continue to be interested in us and obviously, with interest rates increasing and putting pressure on prices across the spectrum, that creates opportunities for those offshore parties to look even more closely at New Zealand assets," Petersen says.
He can't see any downward trend in foreign entities buying here.
"Even with higher interest rates, it comes down to what price offshore parties are prepared to invest at. Often they're coming from jurisdictions which have a much lower cost of capital so they have a slightly different view on value compared to domestic investors," he says.
Warwick Searle, national forestry director at real estate organisation Colliers, is not surprised so many foreign deals have been in his sector in the past year.
"New Zealand is seen as a good, safe economy and forestry as an asset class is one that parties from overseas can invest in without having to do the physical inspection," he says.
But it's also quite a capital-intensive form of business.
"From a New Zealand perspective, not that many investors here have the capital required to put into forestry, so naturally, the assets do tend to fall to overseas buyers. You see a skew in the overseas stats towards foreign parties buying forestry rather than selling to New Zealanders. It's due to capital constraints on New Zealand businesses."
And they're not buying for carbon sinks either, he says.
"Most of the buyers are ultimately looking to get the fibre out by harvesting the trees, not using the assets as carbon sinks. A lot of the buyers are environmentally minded and they don't see permanent carbon sinks as fitting in their investment model," Searle says.
The largest forestry deal he's done in the past year was last spring - a 5000ha sale in Southland which went from a New Zealand business to a European timber fund.
Fears that high-profile station sales would result in the land being locked up in carbon sinks were often ill-founded and many buyers do not plan that use for the land, Searle says.
INFORMATION CHANGE
Asked about the number and value of deals in the latest year, lobbyist Murray Horton of the Campaign Against Foreign Control of Aotearoa says that is not so much his focus.
He did note that Linz may soon begin releasing OIO statistics quarterly. Peter Hill of the OIO wrote to Horton this week: "Following the launch we are now working with our digital communications team in defining our technical specifications and then will look to release quarterly data."
Horton says CAFCA has sought information about Russian investment in New Zealand. No Russian deals appear in the top three as measured by value or the area of land involved.
Linz says: "The Overseas Investment Office receives applications connected to Russian investors from time to time and these make up a very small proportion of overseas investment in New Zealand. Since 2003 there have been 14 investments involving Russian investors. Seven of these have since been on-sold. In detailing those Russian investments, Linz cited applications from:
• Alexander Abramov: Helena Bay Lodge, the Northland luxury retreat near the Bay of Islands
• Alexandre Germanovitch: Mt Potts Lodge in the Ashburton district
• PSA Capital: Porters Ski Field in the McKenzie area.
• Leonid Kiryakov: 5ha of sensitive land at 230 Whitmore Rd, Matakana.
"There may be other consents with very small Russian investments, such as where an investment fund includes individual Russian investors, but this is not recorded by the Overseas Investment Office. There may also be Russian ownership of properties not requiring Overseas Investment Office consent and these are also not recorded," the office says.
* This article has been amended to clarify that LINZ may soon be releasing OIO statistics quarterly, not OIO decisions as previously reported.
While interest rates may be positive, other factors could impact your purchases.