Overseas investors fined $3m for illegal purchase of Auckland properties

Kourawhero Lodge was bought in July 2012 by two overseas investors for $2,550,000. Photo / Booking.com

The overseas owners of two Warkworth properties have been fined $2.95 million after an Overseas Investment Office (OIO) investigation found they were bought illegally.

The owners – Chinese businessmen Zhongliang Hong and Xueli Ke, and IRL Investment Limited and Grand Energetic Company Limited (which are owned by Hong and Ke) – were ordered by the court to sell the properties and pay penalties, costs and the gain made on the investment.

The two properties, 185 Sandspit Road and Kourawhero Lodge at 471 Wyllie Road, were purchased in 2014 and 2012 respectively.

Because both properties are rural land of more than five hectares, the owners should have applied to the OIO for consent to purchase them.

Vanessa Horne, Land Information New Zealand Group Manager, Overseas Investment Office, said the penalties recognised the significant breach of the Overseas Investment Act.

"Our rural land has special protections under the Overseas Investment Act to ensure that overseas investors meet certain requirements to be able to buy it.

"The OIO will continue to investigate people and companies that do not respect the safeguards the Act provides for this sensitive land."

IRL bought the land for 185 Sandspit Road for $4,480,000 in January 2014 and the property was sold for $10,100,000, following the OIO investigation. A gain of $2,335,256 was made on the sale after deducting expenses such as legal costs and interest.

Kourawhero Lodge at 471 Wyllie Road was bought in July 2012 by Hong and Ke for $2,550,000. In April 2014 they transferred the land to Grand Energetic Company (ultimately owned by Hong and Ke). The lodge is due to be settled on 16 September 2019 for $3,250,000. No gain will be made on the sale after deducting expenses.

During the investigation Hong and Ke applied for retrospective consent to buy the properties, which was denied by the OIO because the investment did not provide enough benefits to New Zealand under the test to buy rural land.